Over 140 Cambodian garment factories shut shop

30 Dec '15

3 min read

Almost 150 garment and footwear factories shut down this year, while more than 50 new ones opened, according to a report of the Cambodian Commerce Ministry. The Cambodian garment industry has recently been rocked by strikes by workers demanding higher wages.

According to the report, 982 garment factories and 90 footwear manufacturers were registered with the ministry. Of these, 130 apparel factories 14 footwear factories shut down this year. Another 53 garment factories and five footwear factories registered with the ministry.

For now, the Government is not particularly bothered about the closures.

Ho Sivyong, director of the import and export department at the ministry, said that even though more factories closed than opened he was optimistic that the production would increase next year, citing pledges that some global brands had made to buy more products from Cambodian factories, one of the country's leading newspapers reported.

But Sivyong conceded that strikes for higher wages were deterring new investment, and a shift in production to Myanmar was underway. “Demonstrations and demands for higher wages from workers are a challenge for investors considering investing in Cambodia,” he said, adding that some companies that had shut factories here have shifted production to Myanmar.

Some factory closures reflected expansion at other factories. In some cases, “companies that closed production in one place opened in a new location or merged with another factory,” Sivyong said.

Economist Srey Chanthy said that trade data remained promising. Exports of garments and footwear is increasing remarkably compared to last year, he said. If companies that closed are merging with other factories this will translate into efficiency gains, Chanthy said.

Some companies that are closing may shift production to countries where wages are lower, such as Myanmar and countries in Africa, or to countries that will be part of the planned Trans-Pacific Partnership (TPP). The TPP aims to create a free trade zone among 12 countries spanning North America and countries in South America and Asia. Cambodia is not part of the TPP and garment producers are concerned that they would not be able to compete with Vietnamese exports in the US market once the TPP takes effect since Vietnam is a member of the TPP.

An unnamed executive from the Garment Manufacturers Association in Cambodia (GMAC), said some garment and footwear companies had shut production because they are losing confidence in investing in Cambodia due to demonstrations by workers, such as those that occurred in special economic zones earlier this month near Bavet town close to the Vietnam border. Police had to use water canon to break up the strike.

Investors are looking for new locations in neighboring countries to ensure safety, he said, adding that conflicts in the sector have become commonplace.

Garment factory owners in Cambodia have said the labour action is damaging the investment climate for the industry, the country's main source of exports. (SH)

Fibre2Fashion News Desk - India

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