07 Oct Textiles industry is a powerhouse
The Cambodian textiles industry is one of the fastest growing in the world with Western and Asian countries establishing trade relations with it. Cambodia’s top goods exports are ready-made garments and footwear. It grew rapidly to become a powerhouse of the Cambodian economy, producing US$7.97BN of exports in 2019. Cambodia is currently among the top ten exporters of clothing in the world today.
Export-orientated manufacturing is expected to be the bright spot in the economy in 2021.
In total, ready-made garments and footwear categories accounted for 42.6% of goods exports in 2020. In 2020 37.3% of exports were shipped to the US and more than one-fifth to the EU.The EU’s decision in August 2020 to start imposing standard tariff rates on certain Cambodian goods, including garments, has weakened the country’s competitiveness in that market and will continue to weigh on the sector’s performance in 2021. However, as per EIU estimates, economic recovery in the US will support demand for Cambodian-made garments.
Cambodia’s exporting factories mainly operate to the cut-make-pack (CMP) model. They produce relatively low value-added garments, with the design and production decisions made in other countries. In most cases raw materials are imported, from mainland China, Hong Kong, Taiwan, Japan, Vietnam and Korea. Cambodia’s proximity with Vietnam is one of the major contributing factors to the development of its textile industry. China is the biggest investor in the Cambodian textile industry. Japan and Vietnam are also major investors.
Other than inexpensive labour and abundant natural resources, there are many factors that contribute to the development of the Cambodian textile industry including high government support. FDI is encouraged and has led to many foreign companies investing large scale in Cambodia. The Cambodian textile industry, in comparison to the Chinese textile industry and Indian textile industry, is less developed. But rising labour costs in China are making textile manufacturers from the West shift their focus towards other countries with cheaper labour costs. Cambodia has remained successful in reaping benefits from this scenario.