Cambodia: Garment Exports Surge up EU List

Cambodia's garment manufacturing industry has eclipsed rival Vietnam as a supplier of products to the European Union and is on course to overtake India.

In the space of five years, Cambodia has climbed from being the tenth-largest supplier of clothing to the European Union to become the fifth-ranked supplier, behind China, Bangladesh, Turkey and India.

Cambodia’s garment exports to the EU grew by 14 percent in 2016 to reach €3.8 billion ($3.8 billion), putting the country ahead of Vietnam. Given the industry’s pace of growth, it is  probable that Cambodia will overtake India within two years.

In 2016 Vietnam exported a total €3.2 billion ($3.6 billion) worth of garments, at a growth rate of 6.8 percent. Meanwhile, India exported a total of €5.6 billion ($6.3 billion) worth of garments last year with a negative growth rate of -0.7 percent.

Europe today takes up 43 percent of the Cambodian sector’s exports as opposed to 29 percent taken by the US market.

However, Cambodia’s push into the EU market was largely the result of preferential treatment under the “Everything But Arms” GSP agreement, which allows its garment products to enter the EU market duty-free. That preference is expected to end as Cambodia graduates out of Least Developed Country (LDC) status.

If this new ranking is confirmed by the United Nations, Cambodia will lose its status as LDC and will be excluded from preferential treatment. Cambodia will be allowed a grace period of about three years in order to adjust to its new status.

Competition from Vietnam

Another looming threat to the Kingdom’s garment sector is the implementation of the free trade agreement between the EU and Vietnam that is set to come into force by the end of this year, and which gradually reduces the current 12 percent import tariff to zero. 

Cambodia must find ways to remain competitive.

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