Kampong Som (Cambodia). 04/07/2008. Truck going to the container port © Vandy Rattana
KA-SET
By Ros Dina and Stéphanie Gée
12-01-2009
Looking back at 2008, the extent of the catastrophe was finally not as disastrous as it was going to be. Indeed, according to figures published by the Ministry of Commerce, the production of textile goods simply proved alarming predictions wrong, with records of a mere 2% decrease after a 15-20% increase in the previous years. Van Sou Ieng, president of the Garment Manufacturers Association of Cambodia (GMAC), expressed his satisfaction in front of such results. On the occasion of the 26th Council Meeting of the ASEAN Federation of Textile industries (AFTEX), held on January 7th in Phnom Penh, he said, relieved but without however letting out too much enthusiasm, that “if 2009 could witness the same progression, then it would be fine!” The global financial crisis is forcing the garment sector to rethink its fundamental strategy by fully integrating the Cambodian textile industry within the ASEAN competitive market
Pistol at head
In Cambodia, out of the existing 400 factories, some twenty have recently had to close down due to a lack in order placements, and the next few months should equally see others shutting down in turn, Van Sou Ieng warned. The economic downturn in the United States, which up until now soaked up two thirds of Cambodia's textile exports, can now be felt not only through plummeting demand but also through new requests on the part of customers, who in that context go for whatever is cheaper, since they cannot afford expensive items.
According to the boss of all textile industry bosses, requiring lower prices and important discounts from retailers forces factories to produce at a great loss and eventually be faced with only two choices, either going bankrupt or accepting new conditions while awaiting an upturn in economy. The problem is, Van Sou Ieng stresses, that factories are not allowed any access to bank loans and not all of them have enough liquidities as a backup. In that perspective, he raised the idea stating that clients, in exchange for a buying price that would not favour the producer, could lend them loans to allow them to survive. He continued, arguing that “the matter must be properly thought through: ordering to cease trading has a cost! We must calculate whether closing down will make us lose more than deciding to produce at a loss for a certain period of time...”
Initiating changes
Times of crisis remind industries of their need to diversify their markets and jump on new opportunities. In December, a delegation of Cambodian textile manufacturing industry managers went to Japan with this aim in mind. The process was launched but will be “very slow, Van Sou Ieng predicted.
“Japan is interested in buying in Cambodia but they still find the quality of our goods insufficient. As a consequence their orders only come in small quantities, but they choose high quality products.They also advocate that a factory foreman should be in charge of ten workers, when our foremen are currently in charge of twenty... Increasing their number comes to a cost and on top of that, trade unions are opposing such reforms. Union representatives came with us to Japan and understood that this requirement did not come from management but from clients themselves”, the GMAC president detailed.
Besides, he adds, in order to keep the market shares they gained in the United States, employers are actively lobbying the American government into obtaining the elimination of customs barriers, since Cambodia is listed as a Least Developed Country. This approach also consists in reminding America of its commitments, i.e. encouraging the trade of products coming from developing countries on developed countries' markets, as agreed at the Doha Development Round organised by the World Trade Organisation.
Boosting the establishment of an ASEAN economic marketThe industry of textile and textile-manufacturing is among the ASEAN's top priority sectors and to Cambodian Minister of Commerce Cham Prasidh, the only solution for ASEAN members to survive the world financial crisis is to act and speak “with one voice”, a strategy which would first require harmonisation of textile industry standards and a facilitation and simplification of exports and imports through the fast-track Green Lane system.
“In a context of high petrol prices (they went down but will go up again...) and expensive food, people and goods will not travel far. So, instead of looking for markets situated tens of thousands of kilometres away, we should find markets which are nearby and explore for instance markets in Japan, Korea, China, Australia, and maybe even India...”, the Minister suggested.
“Things have evolved and we must not fight each other but try and secure better positions from our neighbours within the ASEAN” and develop trade between ASEAN members, Cham Prasidh urged, adding that ASEAN members, on an individual basis, could not afford to compete with China or India, a lot “bigger” than them. Cham Prasidh thus put forward the need for unity and the building of a sense of complementarity among ASEAN country-members, who represent together all the different steps and specialities of the garment sector production.
An ASEAN brand
Material producers like Indonesia or the Philippines could then sell to countries like Cambodia and Laos, who for their part are more specialised in the manufacturing of clothes and could benefit from certain privileges like low customs tariffs regarding exportation to markets in developed countries, on account of their status as Least Developed Countries. This would eventually lead to products 100% “made in ASEAN”.
“Buyers must understand that we are coming from the ASEAN and that we will negotiate as a block. Leaders of the ASEAN repeatedly expressed the desire for all of us to start an ASEAN brand and promote it. But can we do it? Selling our products under one same name and one origin, the ASEAN?This would increase our competitiveness... A country on its own cannot do this, but several countries united together can achieve that!”, the Cambodian Minister of Commerce estimated. He expressed his determination as to the fact that this strategy would reduce countries' dependence on external buyers and should consequently and also make them less permeable to shocks coming from outside the ASEAN regional area. This 26th AFTEX Council Meeting also saw other representatives suggest, in the same spirit of unity, the creation of a fashion line and products that would be peculiar to the ASEAN and would be a concrete example of the synchronisation of efforts and energy deployed by all country-members.
Economic cooperation under way
“If we can buy our material from other ASEAN countries, this will mean quicker delivery, and cheaper too, since transportation will be shortened and smaller in quantities. As a consequence, our products will be less expensive and we will be more competitive” Van Sou Ieng insisted, arguing that some clients requested Cambodia to buy their material from suppliers within the ASEAN.
A few of the ASEAN countries have already passed duty-free bilateral agreements on the import of some of their products and reduce administrative customs paperwork. The idea put forward by all is therefore to see the development of a unique market peculiar to Southeast Asia and promoting the free circulation, exportation and importation of goods within the region, following the model of the European Union in building a strong economic block.
At regional level, ASEAN countries have already reached arrangements, such as a cooperation regarding the exchange of information – the AFTEX has already set up its own website in order to become better known and present factual information about the garment industry in each AFTEX country – and cooperation regarding the training of human resources, as reminded by the Vietnamese outgoing AFTEX chairman Le Quoc An, who will be replaced by Van Sou Ieng.
The AFTEX, with such ambitious strategies, hopes to become one of the world leaders in the textile industry.
By Ros Dina and Stéphanie Gée
12-01-2009
Looking back at 2008, the extent of the catastrophe was finally not as disastrous as it was going to be. Indeed, according to figures published by the Ministry of Commerce, the production of textile goods simply proved alarming predictions wrong, with records of a mere 2% decrease after a 15-20% increase in the previous years. Van Sou Ieng, president of the Garment Manufacturers Association of Cambodia (GMAC), expressed his satisfaction in front of such results. On the occasion of the 26th Council Meeting of the ASEAN Federation of Textile industries (AFTEX), held on January 7th in Phnom Penh, he said, relieved but without however letting out too much enthusiasm, that “if 2009 could witness the same progression, then it would be fine!” The global financial crisis is forcing the garment sector to rethink its fundamental strategy by fully integrating the Cambodian textile industry within the ASEAN competitive market
Pistol at head
In Cambodia, out of the existing 400 factories, some twenty have recently had to close down due to a lack in order placements, and the next few months should equally see others shutting down in turn, Van Sou Ieng warned. The economic downturn in the United States, which up until now soaked up two thirds of Cambodia's textile exports, can now be felt not only through plummeting demand but also through new requests on the part of customers, who in that context go for whatever is cheaper, since they cannot afford expensive items.
According to the boss of all textile industry bosses, requiring lower prices and important discounts from retailers forces factories to produce at a great loss and eventually be faced with only two choices, either going bankrupt or accepting new conditions while awaiting an upturn in economy. The problem is, Van Sou Ieng stresses, that factories are not allowed any access to bank loans and not all of them have enough liquidities as a backup. In that perspective, he raised the idea stating that clients, in exchange for a buying price that would not favour the producer, could lend them loans to allow them to survive. He continued, arguing that “the matter must be properly thought through: ordering to cease trading has a cost! We must calculate whether closing down will make us lose more than deciding to produce at a loss for a certain period of time...”
Initiating changes
Times of crisis remind industries of their need to diversify their markets and jump on new opportunities. In December, a delegation of Cambodian textile manufacturing industry managers went to Japan with this aim in mind. The process was launched but will be “very slow, Van Sou Ieng predicted.
“Japan is interested in buying in Cambodia but they still find the quality of our goods insufficient. As a consequence their orders only come in small quantities, but they choose high quality products.They also advocate that a factory foreman should be in charge of ten workers, when our foremen are currently in charge of twenty... Increasing their number comes to a cost and on top of that, trade unions are opposing such reforms. Union representatives came with us to Japan and understood that this requirement did not come from management but from clients themselves”, the GMAC president detailed.
Besides, he adds, in order to keep the market shares they gained in the United States, employers are actively lobbying the American government into obtaining the elimination of customs barriers, since Cambodia is listed as a Least Developed Country. This approach also consists in reminding America of its commitments, i.e. encouraging the trade of products coming from developing countries on developed countries' markets, as agreed at the Doha Development Round organised by the World Trade Organisation.
Boosting the establishment of an ASEAN economic marketThe industry of textile and textile-manufacturing is among the ASEAN's top priority sectors and to Cambodian Minister of Commerce Cham Prasidh, the only solution for ASEAN members to survive the world financial crisis is to act and speak “with one voice”, a strategy which would first require harmonisation of textile industry standards and a facilitation and simplification of exports and imports through the fast-track Green Lane system.
“In a context of high petrol prices (they went down but will go up again...) and expensive food, people and goods will not travel far. So, instead of looking for markets situated tens of thousands of kilometres away, we should find markets which are nearby and explore for instance markets in Japan, Korea, China, Australia, and maybe even India...”, the Minister suggested.
“Things have evolved and we must not fight each other but try and secure better positions from our neighbours within the ASEAN” and develop trade between ASEAN members, Cham Prasidh urged, adding that ASEAN members, on an individual basis, could not afford to compete with China or India, a lot “bigger” than them. Cham Prasidh thus put forward the need for unity and the building of a sense of complementarity among ASEAN country-members, who represent together all the different steps and specialities of the garment sector production.
An ASEAN brand
Material producers like Indonesia or the Philippines could then sell to countries like Cambodia and Laos, who for their part are more specialised in the manufacturing of clothes and could benefit from certain privileges like low customs tariffs regarding exportation to markets in developed countries, on account of their status as Least Developed Countries. This would eventually lead to products 100% “made in ASEAN”.
“Buyers must understand that we are coming from the ASEAN and that we will negotiate as a block. Leaders of the ASEAN repeatedly expressed the desire for all of us to start an ASEAN brand and promote it. But can we do it? Selling our products under one same name and one origin, the ASEAN?This would increase our competitiveness... A country on its own cannot do this, but several countries united together can achieve that!”, the Cambodian Minister of Commerce estimated. He expressed his determination as to the fact that this strategy would reduce countries' dependence on external buyers and should consequently and also make them less permeable to shocks coming from outside the ASEAN regional area. This 26th AFTEX Council Meeting also saw other representatives suggest, in the same spirit of unity, the creation of a fashion line and products that would be peculiar to the ASEAN and would be a concrete example of the synchronisation of efforts and energy deployed by all country-members.
Economic cooperation under way
“If we can buy our material from other ASEAN countries, this will mean quicker delivery, and cheaper too, since transportation will be shortened and smaller in quantities. As a consequence, our products will be less expensive and we will be more competitive” Van Sou Ieng insisted, arguing that some clients requested Cambodia to buy their material from suppliers within the ASEAN.
A few of the ASEAN countries have already passed duty-free bilateral agreements on the import of some of their products and reduce administrative customs paperwork. The idea put forward by all is therefore to see the development of a unique market peculiar to Southeast Asia and promoting the free circulation, exportation and importation of goods within the region, following the model of the European Union in building a strong economic block.
At regional level, ASEAN countries have already reached arrangements, such as a cooperation regarding the exchange of information – the AFTEX has already set up its own website in order to become better known and present factual information about the garment industry in each AFTEX country – and cooperation regarding the training of human resources, as reminded by the Vietnamese outgoing AFTEX chairman Le Quoc An, who will be replaced by Van Sou Ieng.
The AFTEX, with such ambitious strategies, hopes to become one of the world leaders in the textile industry.
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