Cambodia to guard garment exports amidst EU crisis

December 17, 2011
Fibre2Fashion

The Cambodian Government is worried that the Greek economic crisis could affect the country’s garment exports to the EU, and it will take measures to absorb external shock, Keat Chhon, Minister of Economy and Finance said at a trade exhibition in Phnom Penh.

The Government has expressed concern in spite of it upgrading the Kingdom’s gross domestic product outlook for 2011. The concern stems from the fact that EU is the second largest importer of Cambodian garments, and hence crisis in the EU countries could hurt our exports, the Minister said.

The Government will take measures to absorb external shock arising from the EU debt crisis. These will include those related to strengthening domestic laws, human resources and financial institutions, he added.

Economic crisis disastrous for world's poor [... but not in Cambodia, according to Dr Hun Xen]

March 10, 2009
ABC Radio Australia

The global financial crisis is fast becoming a disaster for the world's poor.

The World Bank has released a dire forecast for the international economy, saying it will shrink for the first time since World War two. It says falling trade will hit the East Asia region the hardest, with developing countries facing possible catastrophe. It means more poverty and hardship with governments likely to be starved of money. But there are a few glimmers sunshine in the gloom.

Presenter: Karon Snowdon
Speakers: Richard Martin, Managing Director of IMA-Asia; Ashok Sharma, the Asia Development Bank

Click here to listen to the audio program (Windows Media)

SNOWDON: The latest World Bank report is grim reading. The global economy will shrink for the first time since World War Two and trade will experience its biggest fall in eight decades. The greatest losses will be in East Asia. As if to highlight the speed of the turnaround - Japan the world's number two economy also just recorded its first current account deficit in 13 years. At almost two billion dollars in the red it's a massive fall from the 18 billion dollar surplus for the same period last year.

Richard Martin, Managing Director of IMA-Asia agrees the world faces recession.

MARTIN: We're expecting a contraction for the whole global economy of around one to two per cent this year. Most of that is going to occur in the northern hemisphere, but it will not miss Asia. Asia is still going to do better but the financial crisis we saw last year in the northern hemisphere becomes Asia's manufacturing crisis this year. And it'll certainly pull growth down in the region.

SNOWDON: The World Bank says developing countries, previously on the sidelines, could be facing crisis, especially where poverty is already high.

The most concern is for the poor in Africa but Asia is not immune. This latest report comes on top of one in February saying 53 million more people could be trapped in poverty as a result of the global slowdown. The examples are mounting...more than half a million jobs were lost in India in the last three months of 2008. Cambodia has lost 30,000 jobs in the garment industry, its only significant export.

The Bank says governments of developing countries could face the additional problem of not being able to raise money and experience a funding gap of between 300 and 700 billion US dollars as export income disappears. It says they'll face a credit squeeze as rich nations suck up scarce finance.

Ashok Sharma from the Asia Development Bank told Stephen Long some government bonds - that's the way governments raise money - will have no buyers.

SHARMA: In fact even in Germany which has about the most liquid bond market two bond issues of ten years have failed in the market so you can imagine what will happen to emerging countries.

SNOWDON: Richard Martin from IMA-Asia says Eastern Europe is in real trouble but the picture is more mixed in Asia.

MARTIN: The big picture is right now we have a US government rapidly ramping up its deficit and pushing up public debt towards 70 per cent of GDP. By contrast the picture across in Asia is we have China with relatively low levels of public debt 24-25 per cent of GDP and plenty of scope to fund its deficit out of its domestic market. And that's what makes people confident China will pull off quite a big fiscal stimulus this year. Elsewhere it's a bit patchy in the region. Most of Asia if we exclude Japan has done an excellent job of reducing public debt in the eleven years since we had the Asian crisis. So a lot of Asia or a fair amount of Asia is in a position to apply a fiscal stimulus now. And in that favourable group you'd put the two city states of Singapore and Hong Kong, Korea, Taiwan would fit in there, Australia and New Zealand will fit in there. Now the countries not in a position to do it are Vietnam, India, Philippines and Indonesia, though those last two seem to be getting through ok on their fiscal management.

Angkor Temples: Tickets now allow more visiting flexibility

05 March 2009
By A.N.
Cambodge Soir Hebdo
Translated from French by Luc Sâr
Click here to read the article in French

There’s no longer any need to speed up your visit at Cambodia’s past jewels. The validity length of the visiting tickets has been changed.

At least the economic crisis allows some flexibility to the visit of the unavoidable Angkor temples. At the request made by tourist professionals, and based on a decision made by Hun Sen, the ministry of Tourism asked the Sokimex concession company to bring some changes to the visit tickets.

Although there is no change to the daily visit tickets ($20), the $40 tickets for 3 consecutive days visit can now be used for visiting the site up to 3 (non-consecutive) times, but the three visits must be done during one week. That was what one official from the Apsara authority indicated while assuring that these measures will allow a better planning for tourists visiting the site, as well as flexibility in their visits.

As for the $60 weekly visit tickets, they can now be used to access the temples for 7 days, but over a period of one month.

Nothing has been decided yet for expats, especially those residing in Siem Reap, the location of the temples. They were considered as any other tourist, even for those who are married to local people, and they have children who are half-Cambodians. The idea of a yearly pass, even a paying one, never came to fruition in spite of the demands made by these expats.

These new measures, which are already pleasing tourism professionals, will come into effect as soon as the new tickets are printed.

Also according to the Cambodian ministry of Tourism, the country welcomed 2.1 million tourists in 2008, i.e. an increase of 5.5% over 2007.

Cambodian Garment Workers Face Poor Prospects [-Will Samdach "Hanoi PhD" keep on denying this looming economic crisis?]

The Whtex Garments factory in Phnom Penh, Cambodia, employs about 1,300 workers and mainly makes underwear. More than 90 percent of its products goes to the U.S. But orders are off about 30 percent in the past few months as U.S. buyers scale back, and that has workers worried. (Michael Sullivan/NPR)

February 10, 2009
By Michael Sullivan
National Public Radio (USA)

Click here to listen to the audio program in English

The impoverished Southeast Asian nation of Cambodia is another victim of the global economic slowdown.

Two-thirds of Cambodia's export earnings come from the garment industry, which employs about 360,000 people — almost all of them women. Most earn less than $100 a month. But in a country as poor as Cambodia, every little bit helps.

Now, even that little bit is under threat.

Even makers of such seemingly recession-proof garments as underwear are feeling the pinch.

Take, for instance, Whtex Garments in Phnom Penh. Six months ago, the factory had more than 500 workers in the packing department alone, manager David Teo says. Now, there are fewer than 300.

Whtex Garments supplies underwear for Wal-Mart, Kmart and Disney, among others. Teo says more than 90 percent of his production goes to the U.S. But orders in the last few months, he says, are down 30 percent.

Six months ago, the factory packed more than 100,000 pieces a day.

"Now, we hardly pack 60,000, 70,000 a day," he says. As for the future, Teo says that he doesn't know what will happen next month — and everyone is worried.

It's repetitive, mind-numbing work. And it doesn't pay much, either. Workers here bring home between $70 and $100 a month — with overtime. Nobody pretends to like the job, but many are grateful for it.

Pou Chan Thon, 28, has been working at the Whtex factory for three years and says she is worried about losing her job. Her parents are farmers, and she sends them about $30 a month. Without that money, she says, they literally couldn't survive.

A few miles away, Sin Sary, 23, irons and folds track suits at Global Apparels. There are more than 3,000 workers at this factory, which manufactures sports clothes for Adidas and Puma.

I'm worried, the young woman says, because there are rumors going around that the factory will be closed or suspend production for a time. She says she doesn't know what she or her family will do if she's laid off.

But she better start thinking fast. Management hasn't told the workers yet, but about 800 are to be furloughed for the next two months, maybe longer. And these two factories aren't isolated examples.

Van Sou Ieng, chairman of the Cambodian Garment Manufacturers Association, says factories are losing orders from a host of U.S. companies — among them, Gap, Levi's, Wal-Mart and Nike. "Everywhere, actually," he says.

He says about 90 factories have already closed or curtailed production in the past few months, and he predicts another 30 will close by the end of March.

But union leader Chea Mony is skeptical. He says unscrupulous manufacturers are using the crisis as an excuse to close factories and move them elsewhere — without compensating workers.

Van Sou Ieng admits a handful of manufacturers have done just that — but only a handful, he says.

Meanwhile, economist Kang Chan Dararot worries about what will happen next. The Cambodian economy, he says, simply can't absorb those now being laid off from the country's two biggest industries.

"Poor families [are] very deeply involved in these two sectors — construction and garment industry. And now, so many people have been laid off. There [are] very grave prospects for … 2009," he says.

It's a future that may involve risky choices for laid-off workers desperate for cash.

Some out-of-work garment workers are already finding their way into karaoke parlors and go-go bars.

On a recent night, two young women working at a go-go bar in Phnom Penh say they were laid off last month. They haven't told their parents — and don't plan to, either. They are hoping to make enough working at the bar to continue sending money back home.

Many in Cambodia believe there will be more women in the same situation if garment orders are reduced further. Some worry the entire industry may be at risk if buyers — and manufacturers — decide to go elsewhere, like Bangladesh, where prices and wages are lower and labor standards weaker.

After months of official denials and upbeat forecasts, Hun Sen admits that Cambodia is not immune to the rising global financial and economic crisis

Cambodia shares the pain

Feb 10, 2009
By Stephen Kurczy
Asia Times (Hong Kong)

"Hun Sen's government should move to stimulate the economy through fiscal outlays towards agriculture, infrastructure and social safety nets" - Stephane Guimbert, country economist for the World Bank, making a statement similar to Sam Rainsy's

PHNOM PENH - After months of official denials and upbeat forecasts, Cambodian Prime Minister Hun Sen said for the first time last week that the country's economy is not immune to the rising global financial and economic crisis. As key business sectors, including garments, tourism and construction, all show signs of weakness, the premier finally said the government must do more to stave off a crisis.

"It is clear that if the [government fails] to take timely and appropriate measures to manage the crisis, the effects of the global financial crisis and economic downturn will become a real cause for Cambodia's financial system and economy to fall into a dangerous crisis," Hun Sen said during an address to the Cambodian Economic Forum. He also took the occasion to lower the government's 2009 gross domestic product (GDP) growth forecast to 6% from 7% previously.

Although still higher than most outside projections - including the International Monetary Fund's 4.75% growth forecast - economists say the premier's disclosure represents a significant policy shift. The day before the February 5 forum, Cheam Yeap, a lawmaker from Hun Sen's ruling Cambodian People's Party and the chairman of the National Assembly's Finance Commission, said the global financial crisis would have "no impact" on Cambodia.

Those denials, however, had become statistically difficult to defend. The Economic Institute of Cambodia, an independent think tank, showed that exports in the first half of 2008 grew by only 6.7%, or about half the 12.6% rate recorded over the same period the previous year. That included a severe downturn in the crucial garment export sector: at least 22 garment factories were closed by the end of last year, shedding over 20,000 jobs in the process.

Tourism also saw declining growth in the second half of 2008, with arrivals dampened by an armed border dispute with neighboring Thailand and the closure of Bangkok's Suvarnabhumi Airport, through which many tourists transit to Cambodia. Tourism arrivals were up a mere 5.5% year on year, the first time annual growth was below 18% since the 2003 severe acute respiratory syndrome (SARS) scare of that year. It was also the first year since then that visits to Angkor Wat dropped, with visitor numbers down about 50,000 visitors to 1.05 million overall.

The booming construction sector, which had been driven largely by South Korea investors, has also been hit by the global turmoil. Douglas Clayton, chief executive of Cambodia's first investment fund, Leopard Cambodia, warned last September that local land values would fall as Korean investors pulled out of ventures because of sub-prime loan related problems back home.

By November, South Korean developer GS Engineering & Construction announced it was halting for at least one year construction on its US$1 billion, seven-skyscraper complex, and that it would scale back its original plan to only three buildings. With the economy slowing and South Korean investors heading for the exits, it's increasingly unclear from where the high-spending expatriates will arise to fill the high-end, high-rent complex.

Economically linked

Some analysts and commentators had earlier suggested that small, financially undeveloped Asian economies like Cambodia, which lacked exposure to toxic subprime products and had diversified their past reliance on exports to US and European markets, might "decouple" from deteriorating financial conditions in the West and maintain strong growth momentum.

But recent statistics show that "we can't say anymore that Cambodia is decoupled" from the wider global turbulence, said Stephane Guimbert, country economist for the World Bank. "Since we prepared [our 4.9%] projection [for Cambodian 2009 growth] in November 2008, most of the developments in the global economy have pointed to a deeper crisis than expected at that time," he said.

In part that's because Chinese demand for the region's products, many of them intermediate goods destined finally for Western markets, is not holding up as strongly as some had hoped. The IMF recently halved its 2009 growth forecast for Asia to 2.7%. During a February 2 teleconference announcing the Asia revision, IMF managing director Dominique Strauss-Kahn referred to the previous decoupling theory as "a funny story". "We have always been arguing here that there was not such a thing [as decoupling]," Strauss-Kahn said.

John Nelmes, the IMF's local resident representative, predicts Cambodian GDP growth will likely fall below 4.8% in 2009 and only recover to 5% to 6% next year if larger global economies implement well coordinated fiscal and monetary policies. If accurate, Cambodia's growth is expected to fall by half of recent trends; between 2004 and 2007, GDP growth averaged 11.1% annually.

"Looking forward to the near term, the global crisis is likely to take a heavy toll on Cambodia," Nelmes told Asia Times Online.

Until now, integration with global markets had buoyed the Cambodian economy. With the implementation of more market-oriented reforms, including measures to lure foreign investment, average per capita annual income more than doubled to $593 in 2007 from $285 in 1997. Now many fear a reversal of fortunes that could drive more Cambodians, already estimated at 35% of the population, back under the poverty line. Cambodia's poor were already hard hit by last year's spike in inflation, which soared to 25% last May before moderating to an overall annual rate of 13.5%.

Guimbert and others say Hun Sen's government should move to stimulate the economy through fiscal outlays towards agriculture, infrastructure and social safety nets. The World Bank also recommends more structural reforms so that Cambodia will be better-positioned to benefit when the global economy rebounds. Those suggestions include streamlining export processes and the establishment of a national arbitration center to allow foreign investors to bypass the country's notoriously corrupt courts for business disputes.

The World Bank ranked Cambodia 135 out of 185 countries surveyed for their overall business climate and in mid-2008 ranked it below every other Association of Southeast Asian (ASEAN) nation except Myanmar in three main categories: control of corruption, government effectiveness and rule of law.

That assessment was echoed last week by the United Kingdom-based environmental watchdog Global Witness in a new investigative report that accused Hun Sen's government of cornering and "pillaging" the country's growing mineral and petroleum industries. [See accompanying story]

Hun Sen says such assessments represent a double standard in light of the recent incompetence and corruption witnessed in the Western financial industry. "Rich countries are only blaming poor countries for corruption - they never blame one another," Hun Sen was quoted saying in the local media. "Powerful nations no longer have the right to advise small countries."

Stephen Kurczy is a Cambodia-based journalist.

Increasing Cambodia’s Competitiveness [-All grandiose talk but no real action?]

Saturday, 7 February 2009
Press Release: UNDP
Cambodia Economic Forum

• Increasing Cambodia’s Competitiveness
• For Growth and Poverty Reduction in the Face of the Global Financial Crisis

PHNOM PENH, 5 FEBRUARY 2009: Despite remarkable recent economic growth and steady progress towards reducing poverty, the effects of the global financial crisis are now being felt in Phnom Penh. The question of what Cambodia can do to mitigate the effects of this crisis is becoming increasingly urgent as tourism numbers taper off and garment factory orders dwindle. Key Cambodian policymakers, development partners and private sector stakeholders met today at the Third Cambodia Economic Forum (CEF), hosted by The Supreme National Economic Council (SNEC), to debate possible rapid policy responses that could prevent Cambodia’s recent gains from being eroded.

This year’s forum focused on “Increasing Cambodia’s Competitiveness for Growth and Poverty Reduction in the Face of the Global Financial Crisis” and was presided over by Prime Minister Samdech Hun Sen. A range of policy perspectives and options on how to improve Cambodia’s competitiveness and sustain its rapid economic growth in the context of the worldwide economic situation were today presented to the Royal Government of Cambodia, the private sector and development partners. Discussion focused on policies to firmly regain macroeconomic stability, diversify sources of growth, increase productivity, expand market access, and enhance trade while continuing to reduce poverty.

“The Government is fully committed to systemic measures to limit the impacts of the global financial crisis on Cambodia’s financial system and its economy”, said Prime Minister Samdech Hun Sen in his keynote address at the forum as he elaborated key measures taken by the government covering different aspects of macroeconomic, structural and sectoral policies.

“As Cambodia takes its place on the international stage – with its accession to the World Trade Organisation, taking a stronger role in the UN and sending peacekeepers to Sudan – it also grows more susceptible to the economic shocks affecting the rest of the world,” said UNDP Resident Representative Douglas Broderick at the event. “Integration with regional and global economies exposes Cambodia to new risks along with new opportunities.”

Four groundbreaking studies were presented by SNEC with the support of UNDP, the World Bank and the Asian Development Bank. Cambodia: Key Aspects of Competitiveness, identifies sectors where Cambodia has the potential to gain competitive advantages. Cambodia: Sustaining Rapid Growth in a Challenging Environment identifies the main sources of growth, the key binding constraints to growth, and strategies to alleviate those constraints and to manage rapid growth. The Financial Crisis and its Impact on Cambodia’s Sustainable Economic Development and Explaining Inflation in Cambodia provide the context essential for related research and analysis aimed at addressing the impacts of the crisis on Cambodia and improving lives in the country.

“Today’s [forum] provides a useful spotlight on the current economic challenges facing Cambodia, and on ways to counter the worsening impact of the global financial crisis and ensure long-term sustainable and equitable growth that results in a better life for all Cambodians," said World Bank Country Manager Qimiao Fan

"A rigorous assessment of the vulnerabilities the Cambodian economy experienced as a result of the economic shocks of 2008 can help provide a sharper focus on the priorities which need to be addressed for Cambodia's future competitiveness and sustainable growth," said Arjun Goswami, ADB Country Director.

The CEF is an annual conference organised by SNEC with support from UNDP and aims to present concrete, well-researched policy perspectives, to discuss Cambodian economic policy options with the Royal Government of Cambodia and to open dialogue with key experts and stakeholders on specific and practical recommendations for policy formulation and implementation. The CEF provides an opportunity to collect feedback and input from partners and experts, enriching the analysis and policy making process.

Today’s participants included senior government officials from both ministerial and provincial levels, diplomats, development partners, and representatives from the private sector, national and international NGOs, civil society and academia.

The first CEF, held in January 2006 and presided over by the Prime Minister, focused on an analysis of the Strengths, Weaknesses, Opportunities and Threats (SWOT) of the Cambodian Economy and on sharing international experiences for emerging petroleum and mining producing countries. In May 2007, the second CEF focused on Agriculture and Rural Development, specifically on pro-poor growth policies for the improvement of rural livelihoods.