Cambodia year-end review 2023: A sight on future

Globally, Cambodia is the world’s ninth-largest exporter of garment, footwear and travel goods (GFT) which is a major economic pillar that accounts for more than a third of the country’s GDP. The sector employs about 750,000 workers, mostly female, across 1,100 factories and branches.

March 17 roadmap

Cambodia launched a new roadmap on March 17 to revamp its textile and apparel industry. The Industrial Transformation Map for the Textile and Apparel Industry 2023-2027 aims to transform and shift more of the country’s skill-based technology resources to build a globally competitive and sustainable industry. The road map will attract more investment to help implement the Cambodia GFT Sector Development Strategy 2022-2027, which aims to make the sector environmentally sustainable, resilient and high value to drive Cambodia’s economic diversification and competitiveness. The new road map includes provisions to help manufacturers meet the ministry of labour and vocational training’s new industry requirements. It outlines strategic measures; assigns responsibilities to various ministries and government organisations; and includes sections on international trade, skills and productivity, technology and sustainability and infrastructure and governance. It also seeks to upgrade Cambodia’s apparel production models, diversify raw material sourcing, broaden exports to other markets and boost skill development and productivity. Additionally, it incentivises research and development and technology adoption; promotes investment in technology and infrastructure; upholds environmental, social and governance standards; and elevates Cambodia’s place in the textile and apparel value chains.

January to March (Q1) decline

Cambodia’s GFT sector is the largest foreign exchange earner for the country. It recorded a 22 per cent decrease in exports falling from $3.12 billion in Q1, 2022 to $2.42 billion in Q1, 2023.

In Q1,2023, apparel exports decreased 22.56 per cent to $1,654.632 million against a 12.69 per cent increase in Q1, 2022, accounting for 30.7 per cent of total foreign income. Exports of Chapter 61 (knitted apparel and accessories) items were $1,047.137 million (down 27.3 per cent), and Chapter 62 (non-knitted apparel and accessories) items were $607.495 million (down 12.8 per cent). In March alone, the apparel exports declined 15.78 per cent to $571.187 million ($678.263 million in March 2022) inclusive of 19.1 per cent and 8.8 per cent drops in Chapter 61 and 62 items, respectively. The summary of imports during the quarter was: Chapter 60 (knitted or crocheted fabric) items worth $591.904 million (24 per cent down), Chapter 55 (man-made fibre) items worth $269.846 million (down 18.9 per cent), and Chapter 52 (cotton and cotton yarn) worth $129.145 million (down 7.3 per cent).

The government was concerned about the global economic situation, particularly in the US and Europe. The declining income in those countries affected purchase orders, causing a ripple effect on the global economy through inflation. Cambodia’s apparel exports to Europe amounted to $733.268 million, accounting for 35.49 per cent of its total shipments in Q1,2023. The share of exports to North America was 32.16 per cent, with shipments valued at $664.494 million. The outbound shipments to the Asia-Pacific region were valued at $570.343 million, representing a 27.60 per cent share of the total.

Decline continued in April too

In April 2023, apparel exports declined 32.65 per cent to $494.924 million compared to the shipment of $735.35 million in the corresponding month of 2022. The shipment of apparel and clothing accessories (knitted) slipped 31.8 per cent to $347.692 million from $510.021 million. The exports of apparel and clothing accessories (not knitted) dropped 8 per cent to $147.232 million in April 2023.

Cumulative for January to April period, apparel exports to the US were $643.886 million, which represented a 50.32 per cent drop from the same period in 2022. Trousers and shorts were the leading export items, accounting for 31.39 per cent of total garment exports. Despite the decline, US remained the primary market for Cambodian exports, particularly textiles.

Half-year and beyond

Between January to June, apparel exports decreased 18.98 per cent to $3,654.411 million, constituting 31.87 per cent of total foreign income. Exports of Chapter 61 items were $2,477.936 million (21.5 per cent down from H1, 2022), and Chapter 62 items were $1,176.475 million (13 per cent down). The significant drop in the initial months of the first half of the year marked a slowdown in apparel exports. However, the decline was arrested to some extent as the year progressed.

The country’s Chapter 60 (knitted or crocheted fabric) imports during the period were $1,329.329 million (21.7 per cent down), Chapter 55 (man-made fibre) were $689.878 million (15 per cent down), and Chapter 52 (cotton and cotton yarn) were $277.828 million (2.6 per cent up). Cambodia imported fabrics worth $51.7 million from Thailand in the first half of 2023, which was a decrease from $88.95 million in the same period last year. Despite the decrease in imports, the average import price rose to $9.52 per kg from $8.74 per kg in 2022. The Thai fabric constituted only 2.9 per cent of the country’s total fabric imports during the period.

A General Department of Customs and Excise’s report indicated that Cambodia exported GFT products to the international markets worth $6.36 billion in the first seven months (January-July) of 2023, down 20.4 per cent from $7.99 billion in the same period last year.

A step towards circularity

In June, an EuroCham-hosted event titled ‘Textile Waste Opportunities for Circular Textiles, Garments and Footwear in Cambodia’ was organised by Global Fashion Agenda (GFA), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), and Responsible Business Hub that gathered over 100 experts and stakeholders. The event marked the start of an initiative called ‘Circular Fashion Partnership Cambodia’, aimed at establishing circular systems in Cambodia that would begin by supporting the pilot project focusing on the proper sorting and recycling of textile waste, diverting it from landfills and incineration. GFA and GIZ were engaging stakeholders to establish this initiative as an integral part of the Global Circular Fashion Forum (GCFF). It aimed to accelerate and scale the recycling of post-industrial textile waste in textile manufacturing countries, thereby promoting local action. The event garnered significant participation from representatives of manufacturers, brands, recyclers, recycling technologies, textile waste handlers, and government officials.

According to GFA, Cambodia’s textile, garment, and footwear industry generates approximately 140,000 tonnes of textile waste each year, most of which undergoes unregulated downcycling, and incineration, or ends up in landfills, which have detrimental effects on the environment and population.

ALCHEMPro News Desk (WE SB)