Kampuchea: China'S First Choice For Textile Enterprises

Van So Pors, 18, from a remote mountain village in Kampuchea, assembles bicycles for the European market in a Taiwanese capital factory in eastern Kampuchea and earns 50 dollars a month.

In the past 4 months, she sent home 20 dollars a month to her parents.

"My family is poor, so I decided to come here and find a job to subsidize my family."

Just as she spoke, half a bicycle assembled on the assembly line passed by her.

Pors and 600 other workers in this factory are the beneficiaries of Kampuchea's first operating special economic zone.

Manhattan-Svay Rieng Export Processing Zone (Manhattan Svay Rieng export processing area) was invested by Taiwanese businessmen in 2005.

According to the plan, the number of factories in the processing area will reach 30.

The bicycle factory and a nearby factory with 1200 workers, Clarks shoes, were built after EU imposed anti-dumping duties on shoes and bicycles in China and Vietnam.

They represent the hope of Kampuchea: through the establishment of special economic zones to attract urgently needed foreign direct investment, Kampuchea will be able to create the jobs needed and absorb nearly 300 thousand young Kampuchea people who join the labour force every year.

"The key to investing in Kampuchea is to reduce production costs," said Sok Chenda Sophea, Secretary General of the Kampuchea Development Council.

The committee is a national investment promotion agency in Kampuchea.

Kampuchea is one of the least developed countries in the world economy, and the poor account for 36% of the total population.

In Kampuchea, the road traffic is not developed, the power cost is high, the port is old and the efficiency is low, the red tape of the government is too much, and the corruption is widespread, but for Chinese enterprises, Kampuchea is still attractive.

Kampuchea has abundant and cheap labor force, among which garment processing industry has a minimum monthly wage of 50 US dollars.

Kampuchea enjoys the preferential tariff enjoyed by the "least developed countries", enjoying the most favored nation treatment in the developed countries such as Europe and the United States, and has no quota restrictions on the export of products, and most products enjoy zero tariff treatment.

For Chinese textile enterprises with huge capacity, they can avoid trade barriers due to textile quotas.

Kampuchea is located in the pportation hub of Southeast Asia. The Mekong river runs through the whole territory from north to south, and its natural resources are abundant.

At the same time, Kampuchea is a member of the ASEAN Free Trade Area. Entering the Kampuchea market means entering a large market with 560 million population in ASEAN.

Because of the RMB appreciation and labor costs rising, textile export quota restrictions and a series of adverse factors, domestic textile enterprises have accelerated the pace of Cambodian investment in the past two years.

In February 23rd this year, the Sihanouk Special Economic Zone, which was invested and developed by Jiangsu red bean group, was officially launched in the port city of Kampuchea, Kampuchea. The first phase of the planning and development area is 5.28 square kilometers.

The Sihanouk special economic zone is one of the first batch of 8 foreign trade cooperation zones approved by the Ministry of Commerce. After completion, it will become the largest economic development zone in Kampuchea.

Data show that in 2007, China's total investment in fixed assets in Kampuchea amounted to 461 million US dollars, ranking first in foreign investment.

In 2003, the figure was only 45 million dollars.

Feng Guoguan, managing director of Hongkong Lifeng group, the world's largest trading purchasing company, said: "China is no longer the lowest cost country in Asia."

Among these competitors from poorer areas, Kampuchea is a strong competitor, and the textile industry not only has not been hit by rivals such as China and Vietnam, but has increased by 20% in 2006.

However, Kampuchea's development relies heavily on the textile industry. Textile industry accounts for 96% of exports and 13% of GDP.

Moreover, the Cambodian textile industry relies heavily on the US market, and exports to the US occupy 70% of its total exports.

Textile exports in Kampuchea increased by 17% in the first half of 2007, but 22% in the fourth quarter, partly due to a 49% decline in exports to the US in December.

As the US economic slowdown has become a reality, garment manufacturers are preparing for a bitter life.

"Kampuchea's textile exports will decline," said Ken Loo, Secretary General of Garment Manufacturers Association in Kampuchea, referring to Kampuchea's textile export prospects. "How much is the decline now, not the problem of falling?"

Investors from home must take this risk into consideration.