Garment orders plunge 40 percent

Employees leave a garment factory in Phnom Penh on Thursday. (Photo by: AFP)

Monday, 16 March 2009
Written by Chun Sophal
The Phnom Penh Post

PRODUCTION DECLINE

• 40pc decline in garment production orders for the first two months of 2009
• Drop by more than two thirds in January exports, from $250m to $70m, said Commerce Minister Cham Prasidh
• More than 50,000 laid off since the downturn began last year
• About 70 factories closed since crisis began

Industry says that falling overseas orders could lead to more factory closures and layoffs, but hope remains for second-quarter recovery.

GARMENT orders were down 40 percent in the first two months of 2009 compared to the same period last year, Van Sou Ieng said Sunday after re-election as president of the Garment Manufacturers Association of Cambodia.

The latest figures suggest more layoffs and factory closures could be on the way for the already battered sector even if they paint a more positive figure than government data. Last week Minister of Commerce Cham Prasidh said exports had declined from US$250 million in January 2007 to just $70 million in the same period in 2008.

About 70 factories have shut their doors since the economic crisis started to hit Cambodia last August, and more than 51,000 workers have lost their jobs or seen their contracts suspended, say industry officials.

"We have received only 60 percent as many orders as last year, and that figure may continue to decrease without urgent measures," said Van Sou Ieng.

"I will encourage buyers to increase orders of textiles from Cambodia because they have already recognised the reputation of our country for respecting labour standards," he added.

He said local factories were improving their quality standards and were capable of competing with producers in Bangladesh and Vietnam.

GMAC, which represents the majority of the country's factories, said it plans to meet with buyers from Hong Kong on March 26 to press for orders.

"We must help garment factories to increase quality so that they are able to compete with other countries. That means improving transportation and reducing bureaucracy," he said.

The GMAC president said he hopes the industry will recover this year.

"I think in the second quarter we will be able to maintain orders at the current level if we make factories more competitive," he said.

The sector has been hit hard by the global economic slowdown and is heavily dependent on the crisis-hit American and European markets.

Garment makers have had limited success diversifying into the Middle East, Japan and Eastern Europe. The Commerce Ministry said export sales were down $60 million in February compared with last year, with $337 million in sales in 2009.

The monthly payroll for January and February was down $1.1 million from last year.

"In the second quarter, we will ... maintain orders at the current level."

Commerce Minister Cham Prasidh said he is optimistic that tourism and agriculture will stay strong, but added construction investment had fallen 40 percent.

From 2004 to 2008, total investment was $1.96 billion, with $1.17 billion in foreign investment and $7.880 million in local investment.

Mean Sophea, director of the Trade Preferences System Department of the Ministry of Commerce, said Sunday that the government has been encouraging more investment in the garment sector.

Union strikes

But a Commerce Ministry spokesman said worker unions and GMAC could help stimulate the sector.

"I think that GMAC can help make buyers feel confident in buying garments from Cambodia," Mean Sophea said.

Van Sou Ieng called Sunday for the country's 1,000 unions to limit their activities while the sector faces problems.

"Some union activities are leading to fewer orders and are leading to thousands of job losses, so [unions] must be careful with their actions," said Vann Sou Ieng. "I would like to publicly announce to the world that no matter what obstacles we face, Cambodia will not die. I will try to look for new markets and new buyers."

Chea Mony, president of the Free Trade Union of Cambodia, rejected the GMAC accusation, saying that many of the factories closing down were simply avoiding taxes.

"This is just GMAC's accusation," he said. "GMAC cannot blame strikes - there have been no strikes in the first two months of 2009, but 70 factories closed."