New exports vital to aid sluggish garment sector

Written by Ngoun Sovan and Hor Hab

Monday, 08 September 2008 Courtesy of Phnom Penh Post

As increased competition and a shortage of workers continue to affect garment exports, some see diversity of trade as key to economic growth Tracey Shelton Cashew farmers weigh their crop in Ratanakkiri province in this file photo. TEXTILE TURMOIL Garment exports dropped 46 percent in the fourth quarter of 2007, capping off a dismal year in a key sector, according to figures from the Ministry of Commerce, which is pushing the US, Cambodia’s largest customer, to lower import tariffs. Cambodia must diversify its exports to compensate for an ailing garment sector ravaged by competition from Vietnam and China, Sok Hach, president and research director of the Economic Institute of Cambodia (EIC), told the Post last week. "As we see greater competition in the region, products such as organic rice, cashew nuts, rubber and tourism will be vital to generating alternative employment for affected garment workers," Sok Hach said. "We want to promote these products as a means of diversifying Cambodian exports," he added. Robust foreign trade will play a critical role in Cambodia's economic growth in coming years, Sok Hach said, adding that trade already comprises some 50 percent of current fiscal expansion. Mao Thora, undersecretary of state at the Ministry of Commerce, agreed that the agriculture and tourism sectors should be a priority for diversification, but denied the garment sector was weak. "It is still strong and continues to rank fourth or fifth in the US market," she said. "But we are facing a shortage of nearly 20,000 workers as agricultural profits continue to rise. Some workers are choosing to grow crops rather than remain in the garment industry." Cambodia's garment industry is the country's largest source of income, generating 80 percent of all foreign exchange earnings and employing an estimated 350,000 workers. However, Cambodia exported US$1.16 billion in garments to the United States in the first quarter of 2008, an increase of 2.2 percent over the same period last year. Moreover, garment exports for all of 2007 showed an annual rise of only 2.2 percent, representing $2.9 billion in trade revenue, compared with previous averages of around 20 percent. Targeting new markets Ricarda Rieger, deputy country director of the UN Development Program, told a group of about 50 trade specialists from Cambodia, Bangladesh, Laos and Nepal at a workshop last week that the country has the potential to boost economic growth by targeting new international markets. "Cambodia has a vast assortment of natural resources that can be used to support a diversified export economy," she said. "Oil and gas holds considerable potential, the mining industry is on the rise and forestry and agriculture are also interesting sectors," she said. However, sustaining trade development in Cambodia will require strict adherence to government standards, Sok Hach said. "The rules and regulations must be respected and promoted," he said.