Garment sector riding rough seas

(Photo: DR, Cambodge Soir Hebdo)

20 Jan 2009
By Ky Soklim
Cambodge Soir Hebdo
Translated from Khmer by Luc Sâr
Click here to read the article in French

Factory closures, financial problems, these are some of the concerns faced the GMAC boss.

The President Garment Manufacturers Association of Cambodia (GMAC) is worried, Van Sou Ieng told unions and government representatives during a crisis summit held on Tuesday 20 January.

In 2008, textile exports rose only by 1 to 2% as opposed to 10 to 15% in the years before, and 25,000 factory workers were fired from their jobs.

The beginning of 2009 does not look rosy either. “During the first trimester of 2009, we will surely see a drop in production and other factories will be closing,” Van Sou Ieng predicted.

The culprit? “Buyers are no longer buying, and orders are less than before,” he indicated. Furthermore, buyers also demand a lowering of the cost by about 10% as well. They asked to maintain a credit line for their purchases and this situation leads to a cash flow problem for factories.

Should there be an interruption of orders between April and May, Van Sou Ieng estimated that 50 to 60,000 additional workers will be laid off.

Cambodian garment industry needs to survive crisis

PHNOM PENH, Jan. 9 (Xinhua) -- Garment, the foremost pillar industry of Cambodia, has an urgency to survive its crisis in the upcoming days, amid the ongoing global financial crisis and the recession of traditional demand from the U.S. market.

LESS EXPORT IN 2008

At an annual meeting of the Association of Southeast Asian Nations' Federation of Textiles and Apparel (AFTEX) which was held here on Thursday, Cambodian Commerce Minister Cham Prasidh said that the garment industry saw a 2 percent decrease in its export in 2008 over 2007.

"This is better than my own expectation. I thought that it would have been down 5 to 7 percent," said Van Sou Ieng, chairman of the Garment Manufacturers Association in Cambodia (GMAC).

Previous local reports have attributed it to the withering demand of traditional client countries.

Around 70 percent of Cambodia's garment products were sold to the United States, 4 percent to Canada and the rest mainly to European countries.

The export volume of the garment industry used to account for over 70 percent of the country's total annual export volume.

In 2007, garment export earned 2.93 billion U.S. dollars for Cambodia, according to official figures.

CRISIS AHEAD

The garment industry of the kingdom will face a 6- to 9-month-long crisis in 2009, due to lack of profitable orders, Van Sou Ieng said at the AFTEX meeting.

"I think that we will have a crisis 6 to 9 months long this year," he said.

Due to the global financial crisis, especially the U.S. economic recession, most garment factories could not secure new worthy orders and the current orders could only sustain them until March, he said.

"The crisis has propelled some buyers to give prices too low to be acceptable for the producers, so they have no choice but shut down their factories," he said.

Over 20 or even more out of the 400-strong garment factories of the kingdom have closed, leading to the unemployment of some 25,000 workers, he added.

Meanwhile, suspension of bank credit also spilled oil over the troubled water of the manufacturers, he said.

ALTERNATIVE MARKET

Japan might become the alternative market for the garment producers of Cambodia, as the demand of traditional purchasers has sharply sagged, said the chairman, adding "currently, Japanese orders are few, because their quality demand is so high that we can hardly meet it."

Fortunately, Japanese buyers have already listed some suggestions which could help Cambodia improve product quality, he said.

"Two directors, rather than one, supervise the operation of every 10 workers. This is the open sesame that they give us," he said.

The United States, as the largest buyer of Cambodian garment products, may need 2 to 3 years to cope with its economic recession, so it has become ever more urgent for Cambodian garment producers to find new markets, he added.

The garment factories of Cambodia used to employ some 300,000 people and have been the largest foreign currency contributor for the kingdom.

Garment, as a labor-intensive industry, is well-rooted in Asian countries, which still encompasses China, Vietnam and Indonesia.