This article examines the competitiveness of Cambodia's garment export industry, on which the country's recent and successful economic development has depended to an unusually heavy extent. Using primary interviews and drawing on a wide range of secondary sources, it documents how Cambodia was drawn into garment global value chains, based almost entirely on inward investment. Despite its expansion in the face of strong Chinese competition, since the end of the Agreement on Textiles and Clothing in December 2004, the industry remains vulnerable as a result of deficient infrastructure, labour unrest, official corruption and the absence of an adequate domestic textile industry, all of which serve to diminish its attractiveness to global buyers.
Cet article a pour but d′examiner la compétitivité de l′industrie d′exportation du vêtement au Cambodge, dont le développement économique récent du pays a été particulièrement dépendent. À partir d′entretiens primaires ainsi que diverses sources secondaires, nous montrons comment le Cambodge s′est inséré dans les chaînes de valeur internationales de la confection en s′appuyant presque entièrement sur des investissements internes. Malgré une croissance économique qui en dépit de la forte concurrence chinoise se poursuit depuis la fin de l′Accord sur les Textiles et les Vêtements, en décembre 2004, l′industrie reste vulnérable en raison d′infrastructures déficientes, de conditions ouvrières instables, de la corruption ainsi que de la faiblesse de l′industrie domestique du textile, qui sont tous des facteurs qui nuisent à son attractivité auprès des investisseurs internationaux.
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See sources cited in our section ‘Overview of the Cambodian economy and its garment industry in the world economy’.
Strictly, the MFA was replaced by the ATC in 1994 under the General Agreement on Tariffs and Trade (GATT) Uruguay Round agreement. However, most people in the industry continue to refer to the ‘MFA’, and we do too.
Author interviews in Mauritius in June 2009. Mauritius was not so vulnerable as Cambodia, though, as it has substantial locally owned garment production.
Information from a major trading company in Hong Kong interviewed in 2008.
In their example, a plush toy sells at $1 ex-factory and retails at $4 (Fung et al, 2008, p. 145), but we have added an extra dollar as stated in the text.
Also, interview, 1 September 2008.
Hatsukano survey in late 2004 in 10 factories, structured into three size categories, face to face with questionnaire; ADB (2004) sample in 2003–2004 of 15 000 garment employees from 10 representative factories.
We examine issues of labour standards in our ‘Labour standards’ subsection.
See more details in EBA, www.ec.europa.eu/trade/issues/global/gsp/eba/index_en.htm, accessed 25 February 2009.
This obviously would apply more to the minority of domestically owned firms in Cambodia than to foreign firms, which are more tightly constrained by their parent company.
Calculations from UNIDO's (2009) 2-digit industrial database show non-wage value added per worker in 2000 (the latest year available) was only $1067 per worker in textiles (ISIC17) compared to $2788 in apparel (ISIC18) in Cambodia, a surprisingly low figure suggesting backwardness, as normally textiles are considerably more capital-intensive than garments (Thoburn, 2009b, n.11). Trade statistics are from WTO (2008), which show no textile exports from Cambodia. In 2009, exports of textile products to the United States were only $17 million (www.otexa.ita.doc.gov), a negligible figure that does not change the import penetration figure by even a percentage point.
See Jenkins’ (2004, pp. 200–201) study of productivity growth in Vietnam in the 1990s and its impact on employment generation, where labour productivity is measured by output per worker.
Rasiah (2009, pp. 157–158) notes the low technological level of Cambodian garment firms. He indicates the influence on this of poor infrastructure and lack of human capital, but does not discuss the impact of choice by the parent companies about the technological level at which to produce.
Interview with a former garment technical expert in Cambodia, 3 March 2009, although the figure seems rather high to us.
Survey in 2003 covering 84 per cent of members of GMAC, to which most garment firms belong. See Table 3 for total numbers of active garment companies.
Although the Korea International Cooperation Agency (KOICA)/Korea Institute for International Economic Policy (KIEP) study does not say so explicitly, these comparisons can be assumed to be with foreign-owned firms in those other countries, since the KOICA/KIEP interviewees are unlikely to have experiences of state-owned enterprises’ productivity levels in China and Vietnam or domestic companies in Bangladesh.
As we have observed in Vietnam.
Again, we think that these comparisons are with foreign-owned companies, with which our foreign-invested firms in Cambodia would be familiar.
See more details for the website of Better Factories Cambodia: http://www.betterfactories.org, accessed 26 August 2008.
‘Garment Sector in the End of the Multi-Fiber Agreement’, speech by Jennifer Spande (US Embassy Economic Officer) on the18 May 2006, available at http://cambodia.usembassy.gov, accessed 26 August 2008.
An illegal strike means a strike which does not use formal resolution procedures. According to GMAC, there were over 100 illegal strikes in 2007 (Interview, 1 September 2008).
For instance, issues of economic freedom in Cambodia were emphasised at Cambodian Investment Seminars in Japan in October 2008. On the relationship between economic freedom and economic growth, see Gwartney et al (2006).
China is ranked at 72, India at 85, Vietnam at 121 and Bangladesh at147. See the website of Transparency International: www.transparency.org/policy_research/surveys_indices/cpi/2008, accessed 18 March 2009.
According to a former garment technical expert in Cambodia, the rejection rate is estimated to be approximately 15 per cent in Cambodia (Interview, 3 March 2009).
This is because of Euro depreciation against the dollar over this period (Thoburn, 2009b, Section 4). EU-27 figures, from Eurostat, are for January–June 2009/2008 only. US figures from Otexa online database and Japanese figures from Japan Customs online.
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We are grateful to Ritsumeikan Asia Pacific University in Japan and the Japan Society for the Promotion of Science for research finance. We also thank two referees for very full and constructive comments.
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Natsuda, K., Goto, K. & Thoburn, J. Challenges to the Cambodian Garment Industry in the Global Garment Value Chain. Eur J Dev Res 22, 469–493 (2010). https://doi.org/10.1057/ejdr.2010.21
- global value chains