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Garment Sector Leads Growth in Cambodia

IndustriAll Global Union Cambodia minimum wage strike

Cambodia hasn’t taken a hit considering the challenging global environment. The country’s economy grew an estimated 7 percent last year, mostly because of its garment sector.

This year that growth is expected to remain relatively flat at 6.9%, which the World Bank said would make Cambodia one of the fastest growing nations in East Asia.

Growth in East Asia overall is expected to ease slightly from 6.5% last year to 6.3% in 2016. The Philippines have the greatest growth prospects as both are expected to see jumps upwards of 6 percent.

“Developing East Asia and Pacific continues to contribute strongly to global growth,” World Bank East Asia and Pacific Regional VP Victoria Kwakwa said. “The region accounted for almost two-fifths of global growth in 2015, more than twice the combined contribution of all other developing regions.”

But sustaining that growth will mean structural reforms.

After a slowdown early last year, Cambodia’s garment exports picked up, ending 2015 with a 12.3% growth in exports over last year, compared to 9.2% growth at the end of 2014.

However, World Bank explained, “Given the narrow production and export base and concentrated exports markets in the European Union and U.S., the country is exposed to increased competition, which gradually constrains growth.”

In 2015, 30 percent of Cambodia’s garment and footwear exports, valued at $6.3 billion, went to the U.S., and 46 percent went to the E.U. Europe took in 31 percent more apparel from Cambodia last year, according to the Textile and Clothing Information Centre (CITH).

“Scaling up public investments to address key infrastructure bottlenecks and further improving the business climate will be important for Cambodia to remain competitive,” Alassane Sow, the World Bank’s country manager for Cambodia, said.

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And the Trans-Pacific Partnership (TPP) will only increase Cambodia’s competition. The country’s neighbors, Brunei, Malaysia, Singapore and Vietnam are already a part of the major U.S. trade deal, and Vietnam is the designated biggest winner. Cambodia said last month that it will start charting a path to joining the agreement.

The country’s garment sector has been a little unsettled of late as the government recently passed a draft trade law that could violate labor rights by instituting new rules that could shut down unions for subjective reasons or temper a union member’s rights.

Violence broke out, but was quickly quelled, when workers tried to protest, and union leaders are planning their next steps as the draft law moves onto the Senate and then to Cambodia’s King Norodom Sihamoni.