Cambodia’s garment industry faces new threat from Vietnam’s entry into WTO
International Herald Tribune, France
PHNOM PENH, Cambodia: Cambodia’s garment industry is feeling a new threat posed by the imminent accession of neighboring Vietnam to the World Trade Organization, officials said Tuesday.
Last week, the WTO formally invited Vietnam to become its 150th member, paving the way for the country to join within 30 days of its National Assembly ratifying the accord.
While the news about Vietnam’s entry has been much anticipated, it is “actually an increased threat to the Cambodian garment industry,” Ken Loo, secretary-general of Garment Manufacturers Association in Cambodia, said Tuesday.
“We are so much alike in cost structure and geographical location, so we’re direct competitors,” he said.
The neighboring countries both have low-cost work forces and large garment sectors. Cambodia has been a WTO member since 2003.
Whether or not the Cambodian industry can maintain the pace of growth seen over the last five years “is going to be a huge question mark that I think nobody can answer” right now, Loo said, adding that there are currently some 320,000 garment workers employed in the country’s 286 factories.
The industry is Cambodia’s leading foreign exchange earner. Garment exports grew 10.6 percent last year to US$2.2 billion (€1.7 billion), largely because of restrictions imposed by the United States and the European Union on garment imports from China.
Last year, about 71 percent of Cambodian garments were exported to the U.S. and 23 percent to EU markets.
The World Bank, during a video conference Tuesday to release its update on economic growth for East Asia and Pacific, also noted the new threat to Cambodia’s garment exporters.
“It is likely that Vietnam, which is also a major low-cost garment producer, would compete with Cambodia” for market space, Homi Kharas, the bank’s chief economist for East Asia and Pacific, said during the video conference from Washington D.C.
Robert Taliercio, the bank’s economist for Cambodia, said any further expansion by the United States of the antidumping measures against China beyond 2014, when the measure is set to expire, “would continue to give some breathing room for Cambodia.”
Loo, of the garment makers’ group, described the safeguard measure as “one of the main contributing factors” to the recent successful growth of the Cambodian garment industry.
He said exports over the last nine months were worth about US$1.86 billion (€1.45 billion), a 16 percent increase from the same period in 2005.
But facing the new external factor posed by Vietnam, “we need to ensure that our house is in order internally,” he said.
He said Cambodia needs to improve further on its efforts to tackle corruption, bureaucratic hurdles and labor disputes for the industry to remain competitive.
