Cambodia economy: Exposure to US economy is a concern

September 6th 2011
FROM THE ECONOMIST INTELLIGENCE UNIT

As economic data coming out of the US continue to get worse, Cambodia's heavy exposure to the US economy represents a major risk to growth prospects. The US is Cambodia's most important export market by far—representing almost half of all receipts—and a US slowdown or descent into recession could substantially reduce Cambodian export revenue, with implications for the broader economy.

It is a cliché that when America sneezes the rest of the world catches cold, but in Cambodia's case the statement is apt. The US imports more Cambodian goods than any other country, making sales of key products such as garments vulnerable to fluctuations in American demand. In 2010 Cambodia's merchandise exports to the US amounted to US$2.2bn, equivalent to 47.1% of its total export earnings, according to IMF figures. Exports to the EU's 27 member states stood at US$1bn. Together these two markets accounted for 69.6% of Cambodia's exports in 2010. Although Cambodia's exports to mainland China rose by nearly 430% last year, they still stood at only US$86.1m, equivalent to 1.9% of total exports.

Cambodia is therefore substantially exposed, via the US and the EU, to the global economic cycle. It is little surprise that the 2008-09 global crisis took a heavy toll on Cambodia, which suggests that economic prospects could darken again if the US and/or the world head towards recession. The Cambodian government has tried to downplay the extent to which Cambodia was affected by the 2008-09 crisis—the Ministry of Economy and Finance maintains that the country escaped recession in 2009, stating that real GDP expanded by 0.1% in that year—but all other observers estimate that the economy contracted for the first time since records began in the early 1990s.

Cambodian garment industry remains wary despite export growth

May 10, 2010
Xinhua

Cambodian garment and apparel exports have increased 7.24 percent for the first quarter of 2010 compared with the same period last year, but remain below the pre-crisis levels of the first quarter in 2008, local media reported on Monday, citing the figures from the Ministry of Commerce.

Ministry of Commerce (MoC) figures value Cambodia's garment and apparel exports for the first quarter at 671 million U.S. dollars, up from 626 million U.S. dollars for the same quarter last year, the Phnom Penh Post reported.

According to a country by country breakdown, exports to the U.S. market went up 4.13 percent - from 395 million U.S. dollars to 411 million U.S. dollars - while the EU markets saw a 7.32 percent increase, and other foreign markets were up 20.12 percent.

Garment Manufacturers Association in Cambodia (GMAC) Secretary General Ken Loo was restrained in his response to the new figures, emphasising that the increase was from "the very low level of 2009 ", the Post said.

But MoC Secretary of State Ok Boung was more optimistic, saying he believed the sector would continue to recover thanks primarily to an improved economic outlook in the U.S., the biggest market for Cambodia's garment industry.

Total garment export dramatically fell more than 20 percent to 626 million U.S. dollars in the first quarter of last year, from 784 million U.S. dollars for the same period in 2008, according to MoC data.

Overall, the year 2009 saw Cambodia's garment and apparel exports sliced by 15.46 percent compared with 2008.

Cambodian garment workers facing uphill battle in global downturn – UN

Garment workers going home on motorcycles in Cambodia [File Photo]

Source: UN News Centre

25 March 2010 – Even those Cambodian garment workers who were able to hold on to their jobs in the face of global economic challenges have not escaped the current downturn unscathed, a new survey led by the United Nations International Labour Organization (ILO) has found.
Factory closures or cutbacks due to reduced orders forced many garment workers in the South-East Asian nation out of a job. One in 10 unemployed workers lost their positions two or more times last year, with most still looking for work.

A study assessing 1,200 employed and 800 unemployed workers in the capital, Phnom Penh, finds that many with work have had their salaries slashed and now feel as though they do not have enough money to cover remittances and basic needs such as food, health care and transport.

Many of those who lost their jobs but managed to find new ones are working under less favourable conditions, seeking assistance from trade unions for assistance on challenges such as asking for leave and late wage payments.

Even though laid-off workers have looked for jobs in other garment factories, only one third of them succeed in finding work.

Those looking outside the garment industry typically try to find jobs in the service sector to work as salespeople, tailors or food vendors.

Even though many would like to enroll in training programmes, the cannot, and the families of some workers, both employed and unemployed, have sent additional family members – mostly women – to find work to deal with the loss in income.

“The information we are gathering though the survey has been helpful in identifying action that can be taken by a range of stakeholders to help struggling workers, strengthen the garment sector, and better prepare the country to deal with future economic setbacks,” said Tuomo Poutiainen, chief technical adviser at ILO’s Better Factories Cambodia initiative.

Based on the survey results, ILO is calling for employment policies promoting productive employment, enhancing social protection and working with employers to be compliant with labour laws.

The study was commissioned by the ILO with the support of the UN Development Programme (UNDP), and was carried out by the Cambodia Institute of Development Study (CIDS).

Cambodia Ports See Traffic Drop by Double Digits in 2009

2010-01-04
Xinhua

Cambodia's three major ports saw shipments and revenues fall in 2009 as garment and construction trade slumped, local media reported on Monday, citing operators.

Officials from the Kingdom's largest port, Sihanoukville Autonomous Port (PAS), were quoted by the Phnom Penh Post as saying that revenues declined an annualized 16 percent in 2009, from 28.8 million U.S. dollars to 24. 19 million U.S. dollars.

The gross amount of cargo going through the Sihanoukville fell by around 13 percent and the number of containers handled by around 20 percent, they said.

In the last 12 months, revenues at Phnom Penh Autonomous Port ( PPAP) fell 15 percent.

Oknha Mong Port, in Preah Sihanouk province, saw cargo shipments -- mostly construction materials, consumer goods and fruit from Thailand -- reduce by 10 percent.

Lou Kim Chhun, director-general of PAS, on Sunday blamed the slump on falling garment exports and construction imports.

According to statistics from the Commerce Ministry's Trade Preferences System Department, obtained last week, garment exports plummeted 20.83 percent to 2.14 billion U.S. dollars in the first 11 months of 2009, compared with 2.71 billion U.S. dollars in the same period of 2008.

But Lou Kim Chhun, who emphasized that PAS still operated at profit, remained hopeful about the year ahead. "We expect to see revenues return to 2008 levels due to increased output in agricultural products such as rice and corn. This will increase exports," he said.

Eang Veng Sun, deputy general of PPAP, was less positive, adding that he believed 2010 could be similar to last year.

Garment exports fall 26pc in first quarter, new data show

Monday, 08 June 2009
Written by Nathan Green
The Phnom Penh Post

Ministry of Commerce figures show fifth consecutive month of decline in March as exports fall 38pc, a sharper fall year-on-year than in February

GARMENT sector representatives are attending a regional trade fair in China this week in an effort to drum up orders and attract new investors as Commerce Ministry figures released Friday showed exports declined for the fifth straight month in March.

Exports were down 38 percent year-on-year to US$164.3 million in March, the latest month for which reliable figures are available, dragging exports for the first quarter down 26.4 percent to $534.6 million, according to the ministry's Trade Preferences Systems Department.

The department records all exports under the generalised system of preferences (GSP) and most favoured nation (MFN) schemes, through which Cambodia exports almost all its garments, textiles and shoes. The schemes allow the world's least-developed nations to avoid quotas imposed by richer countries on exports from developing countries.

Roger Tan, secretary general of the Garment Manufacturers Association of Cambodia (GMAC), said the official figures were not surprising. "Everybody expected a decline," he said. "It was just a question of how much."

He said he hoped delegates attending the China Kunming Import and Export Commodities Fair would return with fresh buyers and new investors after preaching the benefits of sourcing from Cambodia.

"We are there to expose our products to potential buyers and make people aware of Cambodia," he said. "We need to diversify our markets, but buyers also need to diversify their sources of garments and we need to show that we can compete for those orders."

About $25 billion in trade and investment contracts are signed each year in Kunming. The government and private sector delegation was led by Minister of Commerce Cham Prasidh and GMAC President Van Sou Ieng.
The March decline comes after garment exports fell 18.6 percent to $189.21 million in February, 20.89 percent in January to $181.09 million, 13.64 percent in December to $222.1 million and 0.89 percent in November to $218.3 million. Garment exports also fell in July and September last year.

The figures show that the United States is still the main destination for Cambodian garments, but its share fell from 72.6 percent in the first quarter of 2008 to 64.9 percent in the same period this year after exports fell 34.17 percent year-on-year to $347.2 million.

Europe's share of total exports increased from 17.3 percent to 20.3 percent over the same period after exports fell a more modest 15.2 percent year-on-year to $136.3 million.

Garment exports to Japan grew 91.51 percent in the quarter to $5.4 million, and Cambodia also continued to make gains in other markets with exports up 35.9 percent to $30.4 million to all areas other than the US, EU, Canada and Japan.

Shoe exports to these other countries, which include Russia and the Middle East, grew 513 percent to $6.5 million, while shoe exports to all countries climbed 28.3 percent year-on-year to $27.5 million.

The majority of shoe exports still went to the EU, which imported 3.8 million pairs of shoes worth $14 million over the first three months, though this was down 4.1 percent on the first quarter of 2008.

Textile exports were down 39.25 percent to $6.18 million compared to the first quarter of 2008.

Commerce Minister Cham Prasidh could not be reached in Kunming for comment over the weekend, but he told the Post last month that export orders over May and June would provide a strong indicator of the sector's prospects for the rest of the year as these coincided with the start of the "hot season" in the US and Europe.

However, official export figures for May will not be available until the end of July when the majority of garment exporters will have lodged certificate of origin applications with the ministry.

Mean Sophea, the director of the Commerce Ministry's Trade Preferences System Department, said early release of data can negatively skew the figures. This happened last month when the Post reported a 35 percent decline in garment exports for the quarter based on incomplete Commerce Ministry data supplied by GMAC that showed a 60 percent decline in March exports.