Garment industry fails to find new markets

Photo by: HENG CHIVOAN
A garment factory in Phnom Penh. The garment industry remains unable to find new markets.

Letter of the LAW
SEVEN American clothing companies have written to senior members of the government urging them to abandon proposed changes to Cambodia’s labour law they claim would jeopardise workers rights. In a statement issued via San Francisco-based Business for Social Responsibility, Gap, Levi Strauss, Wal-Mart – among others – said that the amendments would threaten workers’ job security and right to join unions.
KAY KIMSONG

The Phnom Penh Post

Written by NGUON SOVAN AND GEORGE MCLEOD
Thursday, 12 March 2009

After suffering a huge drop in demand from its main markets the US and EU, the garment industry is struggling to diversify its customer base

CAMBODIA has made little progress in its drive to diversify garment exports to new markets, with the industry blaming poor quality goods and a worsening global downturn.

The Garment Manufacturers Association of Cambodia (GMAC) sent a delegation to Japan last October and announced that Cambodia hopes to export 10,000 jackets and 100,000 pairs of shoes to Japan at the beginning of 2009. But GMAC said sinking demand and failure to meet Japan's quality requirements has prevented market access.

"So far, we haven't exported any clothes to Japan because the country has very strict quality standards for garments," said Kaing Monika, external affairs manager of GMAC.

"We need to do more to build confidence with Japanese buyers if this is going to become a future market," he said.

Van Sou Ieng, president of GMAC, said last year he met 150 Japanese buyers and that two had agreed to buy clothes and shoes from Cambodia. But those deals fell through due to quality concerns and sinking Japanese demand.

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We [Cambodia] need to do more to build confidence with Japanese buyers.
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The Japanese market has been especially badly hit by the global economic slowdown, and retail sales have fallen sharply this year. One industry report said some retail store sales were down 9.4 percent in December compared with the same period a year earlier, with clothing sales falling more sharply at 13.4 percent. A separate industry report said sales at Japan's top five department stores fell 12 to 15 percent in February.

An effort to access Japan is part of an industry drive to broaden Cambodia's garment export markets beyond the United States and Europe after declining demand saw export revenues crash to US$70 million in January compared with $250 million for the same period last year, the Ministry of Commerce said Tuesday.

Sixty-two percent of garment revenue comes from the US market and 20 percent from the European Union. GMAC says it is also examining Russia as a potential target for Cambodian clothing and apparel.

"There are discussions among the GMAC board members about Russia, but nothing has happened yet because there is no relationship," said Kaing Monika.

However, Commerce Minister Cham Prasidh said Tuesday that Japan still has potential and that exports could grow despite the recession. "Garment exports to Japan hit about $30 million a few months ago," he said. Currently, Japan buys about 90 percent of its garments from China.

A manager at one of Cambodia's largest garment factories, who wished to remain anonymous, said that the industry is having trouble broadening outside of the traditional markets. "Japan gets most of its garments from China because their quality standards are higher. The Middle East is also being looked at, but their main source is Bangladesh," he said.

He added that garment makers are in talks with the Japanese chain UNIQLO and that several factories are considering a roadshow to the Middle East and Russia.