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Cambodia’s earnings from garments and footwear remains strong

Cambodia’s garment and footwear industry generated over $6.5 billion last year while providing jobs for about 7,00,000 workers. Improving workers’ wages, health care, transport and working environment is likely to benefit employers by resulting in increased worker efficiency.

Improving labor productivity would be fundamental for Cambodia to remain competitive, given rising competition from other low-wage garment exporting countries. Cambodia wants preferential trade terms for its footwear exports from the United States.

Preference systems let developing countries export certain goods to donor countries at reduced tariff levels. Cambodian footwear, textiles and garments are excluded from the US GSP. Cambodia’s footwear and garment industry exports under the US’ most favored nation program are taxed by the US, which wants to protect its local industries. Cambodia’s real growth is projected to remain strong, expanding at 6.9 per cent in 2017 and 2018.

Risks to this outlook include the fallout from further rises in US interest rates, a slower-than expected economic recovery in Europe, and uncertainties over global trade. US monetary policy tightening is expected to result in the dollar appreciating vis-a-vis the euro and other currencies, which would make Cambodia’s exports and tourism relatively more expensive for the rest of the world, and therefore less competitive.