Textile imports reach $1b

Photo by: Heng Chivoan
Cambodia's garment industry spent $1 billion on textile imports - $200 million more than in 2007 - mainly from China, but also from South Korea and Taiwan, which means the Kingdom is not taking advantage of EU trade preferences for the Asean region, sector analysts said.

IMPORT Burden
$1 billion in textiles imported from China, South Korea and Taiwan in 2008
$200 million increase on 2007 raw material imports for the industry
Nearly 40pc of garment export revenue in 2008 absorbed by cost of imported textiles

The Phnom Penh Post

Written by Chun Sophal
Wednesday, 18 March 2009

$1 billion bill for textile imports in 2008 raises questions on spending in the industry as critics suggest Cambodia should produce raw materials at home.

CAMBODIA'S garment industry imported US$1 billion in raw materials last year, according to the Garment Manufacturers Association of Cambodia, leading to calls for more local production to cut costs and improve access to Western markets.

"Cambodia imports a lot of materials for the garment sector compared to other countries in the region," said Van Sou Ieng. "Importing too many raw materials reduces our competitiveness and tax revenues," he added.

Kaing Monika, external affairs manager at GMAC, said on Tuesday that 66 percent of garment components were imported from China, with the remainder from Taiwan and South Korea.

He said that importing all of the components raises the price for Cambodian products and affects Cambodia's country-of-origin status.

"In our meetings to discuss trade, some countries that import garments from Cambodia demanded that we import cloth from Asean countries in exchange for tax favours," said Kaing Monika.

GMAC said in 2007 that Cambodia spent $800 million importing cloth, $531 million of which was from China.

"The EU gives Cambodia trade preferences on the condition that we use cloth imported from Asean, so we are at a disadvantage importing from China," said Kaing Monika.

"If Cambodia is allowed to import cloth from China, it means that the trade agreement is not helping the country, it is helping China," Kaing Monika said.

He said that high start-up costs are a barrier to new investment and that government assistance should be the catalyst for new projects.

"GMAC hopes to see more local cloth production, but the government has not been supporting us to attract investment to the country," Kaing Monika said.

"I think the plan to produce cloth locally cannot happen soon because building a cloth plant costs as much as $15 million, and investors must be very confident," Kaing Monika said.

"I believe that we will earn a lot of profit if we can produce cloth in Cambodia and do not need to import from other countries," Kaing Monika said.

But Mao Thora, a secretary of state at the Ministry of Commerce, said on Tuesday that imported raw materials made up a small percentage of costs for locally produced garments.

"I think our imports are still low compared to the $2.6 billion of garments we export," he said.

"We are trying to persuade investors from China and Korea to build a factory to produce cloth in our country," he added.

"Cambodia also needs to improve the quality of local garments, and that means producing high quality cloth," said Mao Thora.

Cambodia has one cloth factory in Kampong Cham province owned by Chinese investors, but it only produces fabric for the medical industry, he added.

Natural development

Kang Chandararot, director of the Institute for Development and Study, said that reliance on imported materials is natural for a country of Cambodia's low stage of development.

"Cambodia must balance the producing of materials by itself and importing of raw materials. I think we must not absolutely use our own materials for everything," Kang Chandararot said.