Cambodia’s garment exports grew just four per cent in the first six months of the year. In the same period last year, growth was nine per cent. The slowdown may be due to a 2.3 per cent drop in exports to the United States amid stronger competition from Vietnam and Myanmar.
Increases in Cambodia’s minimum wage were also a factor, leading to higher production costs. Cambodia’s new minimum wage is more than double the minimum wage for garment workers in Bangladesh. Cambodia’s exporters may face more challenges ahead. With the World Bank’s upgrade of the economy last year to lower-middle income country status, Cambodia will no longer receive preferential trade access in the European Union over the next three years.
Foreign direct investment in the garment sector dropped by about 30 per cent in the first quarter of 2017 compared to a five per cent drop in the same period last year. Cambodia is the fifth biggest supplier of garment and textile products to the European Union. It’s behind China, Bangladesh, Turkey and India.
Cambodia’s garment exports to the EU grew by 14 per cent in 2016. The country’s growth in the EU market was largely the result of preferential treatment under the Everything But Arms agreement, which allows its garment products to enter the EU market duty-free due to its status on the list of least developed countries.