Garment firms shifting base from China to Cambodia

January 23, 2012 (Cambodia)
Fibre2fashion News Desk - India

Abundant supply of labour coupled with preferential market access to several markets is making the Southeast Asian nation of Cambodia one of the preferred alternatives for garment companies wishing to shift their manufacturing base outside China.

Wages in China have risen by 18-20 percent annually during the past three years, leading to an increase in the cost of production, and making several units less competitive in the international market. This has induced many garment companies to search for alternative bases outside China.

On the other hand, Cambodia’s garment industry has grown substantially over the last year. Around 300 licensed garment firms in the Kingdom exported US$ 3.3 billion worth of goods in the initial 10 months of 2011, a jump of 35 percent year-on-year, according to Garment Manufacturers Association of Cambodia (GMAC).

Mr. Ken Loo, Secretary General of GMAC, told fibre2fashion, “Cambodia is well positioned to take advantage of the exodus of investors and buyers looking to exit China. Firstly, there is an abundant supply of labour and there are no other industries in Cambodia that would compete with the garment industry for absorbing labour.”

“Secondly, Cambodia enjoys excellent preferential market access to most markets in the world. In particular, apparel produced in Cambodia enjoys duty free access to the EU, Canada, Japan, China, etc.,” he adds.

Informing about potential buyers and investors in Cambodian garment sector, he says, “There is much interest from buyers in EU, Japan and Canada, mainly because of the preferential market access. As for the investors, they come from all over the world.”

He mentions that the apparel sector in Cambodia employs approximately 350,000 workers.

One of the companies to recently relocate its garment production base from China to Cambodia is the Hong Kong-based innerwear manufacturer Top Form International Ltd.

The company is setting up its garment factory in the outskirts of Phnom Penh and it plans to employ 1,200 workers by the end of the current year. It proposes to produce 80,000 innerwears a month for export to the US and European markets. The Cambodian unit would account for about one-third of Top Form’s total production.

Explaining the rationale for shifting the base, Top Form’s Chairman Mr. Willie Fung says, “We took a decision to shift our manufacturing base to Cambodia for two reasons. It is an investment in low cost production outside of China, and we will be able to provide operational support from our established manufacturing base and management in Thailand.

Listing the benefits to Top Form, he says, “This will revitalize our company’s competitiveness in the price sensitive business in the global market. Moreover, it will also provide us with a growth opportunity outside of China.”