Cambodia Garment Sector Small Fry for Suppliers

GMT 11:42 2015 Monday ,16 March

Sriyadithatextile - Cambodia Garment Sector Small Fry for Suppliers

In Cambodia, where the garment sector accounts for 80 percent of exports, hundreds of thousands of people depend on their slice of the $5 billion industry to survive. But for suppliers currently exhibiting their wares at a trade show this weekend on Phnom Penh’s Koh Pich island, Cambodia’s garment industry represents a tiny fraction of their total sales, and is something of an afterthought for powerhouses such as Bangladesh, India and China. And although Cambodia accounts for roughly four percent of the global garment industry, a number of the exhibitors were uncertain about the country’s investment environment. The 4th Cambodian International Textile and Garment Industry Exhibition, and the concurrently held 4th Cambodian International Machinery Industrial Fair, are together billed as the largest industrial event in the country with 260 exhibitors from 21 countries. Speaking at the event on Friday, Andy Laycock—the international business director for British firm Supercrease, which sells technology to keep permanent creases in clothing—was blunt about his company’s entry into the Cambodian market. “It’s not important for us, it’s not one of our biggest markets because we’ve only got three factories here,” he said. However, Mr. Laycock said his company, which works with brands such as U.K. high street retailer M&S, was looking to increase its presence in Cambodia to take advantage of favorable export conditions and a “nicer working environment.” “Bangladesh is more cutthroat [but] unfortunately Bangladesh is our biggest market because it’s cheap, dirt cheap, compared to Cambodia,” he said. “Vietnam is much more geared up than here but it’s more expensive. Here it’s much cheaper but costs are increasing.” Mr. Laycock said the quality of garments being made in Cambodia is much better than in Bangladesh, “where they often strike and throw stones.” Asked about Cambodia’s own industrial strife, which peaked in January when five garment workers were shot dead by military police, Mr. Laycock said he was unaware of the clash. Markus Naumann, the regional vice president of Groz-Beckert, a German company that provides parts for textile and sewing machines, described Cambodia as akin to “a province in China” in terms of the global supply chain. Mr. Naumann said the country’s relatively small garment industry—which includes almost 500 exporting factories—was now oversaturated with factories churning out cheap products. “Here, the current model with a few big factories and many small ones feeding off the overflow…will eventually change. It will be a survival of the fittest,” he said. It is common practice in the garment industry for major factories with an international reputation to outsource their orders to smaller factories, a practice that labor activists say often obfuscates the actual conditions in which global brands are having their clothes produced. Mr. Naumann said that so-called “fast fashion” brands, such as H&M and Gap, were chasing cheaper production costs across the region, and now had their sights set on Burma. “[Brands] are moving from country to country but they are now being more careful about the effect of moving,” he said, noting that, despite its rising labor costs, brands are still attracted to China for the higher productivity and skills of its workforce. “They are looking for more than just cheap labor, [brands] have learned from the experience in Vietnam and Cambodia,” Mr. Naumann said. Chhoun Dara, a secretary of state at the Commerce Ministry, said in a speech to open the exhibition that the trade show was aimed at promoting industrial development in the country. “Cambodia needs to diversify the economic activities and promote exports to achieve a sustainable high economic growth and higher value-added products, and the exhibition is in no doubt the ideal and useful platform for Cambodian traders and businessmen,” he said. However, a number of representatives from exhibiting companies, such as Masato Ishii, executive director of Japanese industrial hand tool supplier Top Kogyo, were wary about trying to tap into Cambodia’s garment sector. “As I know a little about Cambodia investment and business investment, this country sounds favorable like investment laws and gross domestic product,” he said. “However, what I see is that the market is still very small and I think that the people cannot afford this kind of hand tools products made by Japan because they are more expensive.” Errick Yeo, the international sales director of Taiwanese firm Cosen Mechatronics, which sells specialized building equipment for the construction of factories, was also cautious about entering the Cambodian market. “We see through the Internet that there is more construction of buildings in Cambodia now, but I am not sure whether the market is big enough for our products actually,” Mr. Yeo said. “That’s why we need to see the reaction from the market first, and then if it is good, we would consider setting up a warehouse to store our products here.” Koichi Ataka, chief sales clerk at Japanese firm Sabun Industrial, which produces sewing machine parts, said the company was making limited sales in Cambodia and was not content with the situation. “We are not satisfied with our sales in the Cambodia market at this moment because our sales have been stable [but] at a very low level [because] the market is very small compared to Vietnam, Indonesia and Bangladesh,” he said.

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