Where Should Kampuchea Textile And Garment Industry Go Under Double Test?

Kampuchea has attracted a number of labor-intensive industries on its own edge. The textile and garment industry is one of the representatives. The industry has boosted textiles and garments and become the highlight of Kampuchea's export earnings. However, this year, the industry has suffered from the new crown pneumonia epidemic and the European Union's withdrawal of some EBA treatment. In this context, how can Kampuchea survive the crisis?

Various preferential policies to promote Kampuchea's shoes to the world

After experiencing a turbulent era in Southeast Asia, peace and development have become a common understanding. Among them, Kampuchea advocates economic development, promotes the process of opening to the outside world, and has undertaken a considerable portion of China's textile industry. In addition to policy factors, low manufacturing cost is another major reason why Chinese companies favor Kampuchea.

After cultivation, the textile and garment industry has become one of the four pillar industries in Kampuchea, and China is the largest source of investment. Many international brands such as UNIQLO, Adidas, Gap, H&M and so on are all set up in Kampuchea. By the beginning of 2020, there were about 1100 garment processing plants in Kampuchea. At present, clothing accounts for more than half of Kampuchea's national merchandise exports, mostly exported to the United States, Europe, Canada and other western countries and regions. In 2019, the export volume of clothing, footwear and tourism products in Kampuchea amounted to US $9 billion 300 million.

In order to dredge exports of textiles and garments, the Kampuchea government has opened the green light. In early 2019, Prime Minister Hong Sen of Kampuchea approved the import and export of garments, shoes and travel articles without the need for inspection by the cargo inspection bureau. In foreign countries, Kampuchea enjoys preferential treatment for special and differential treatment under the free trade agreement (FTA) and the World Trade Organization (WTO). It enjoys preferential tariffs such as the United States GSP. Kampuchea's 4800 products exported to the United States enjoy low tariffs or zero tariff treatment, and textiles and clothing are impressively listed.

Cambodian production difficulties encountered by China

At the beginning of 2020, the new coronavirus pneumonia first attacked China, which was also implicated in the close cooperation of Kampuchea's textile and garment industry.

On the whole, Kampuchea's clothing trade structure is single, exports are mainly clothing, and imports are mainly fabric. Garment processing is the main direction of the country's garment processing industry. The industrial chain gap is large, and the supporting industries such as cloth and garment accessories production are not available. It is necessary to import more than 60% of the surface accessories from China to meet the production needs of downstream enterprises, which leads to the weak ability of Kampuchea garment factories to resist external risks. After the outbreak, Chinese factories postpone the resumption of production, and the supply chain of clothing materials is suspended. From the end of February to the April Cambodian new year, about 80% factories were faced with the risk of "cooking away".

In February 11, 2020, the Kampuchea Garment Manufacturers Association (GMAC) announced a notice explaining the lack of raw material production in the textile and garment factories. It indicated that the raw materials for clothing and shoemaking in Kampuchea were only enough for 1~2 weeks of production. After the raw materials were exhausted, the factory had no choice but to suspend production temporarily. These enterprises may need 1~2 months to resume production. Zhongzhi (Kampuchea) Garments Co., Ltd. employs about two thousand employees. Its general manager, Wang Zhilan, is worried: "behind the more than 2000 workers, there are more than 2000 families. If factories shut down, their lives will be difficult. "

As of March 6th, 40 garment factories in Kampuchea had applied for stoppage and 20 thousand employees were unemployed. Seeing that the garment material is no longer "blood transfusion" for the factory, the number of unemployed will rise. China and Kampuchea actively coordinate, and the first batch of textile materials arrived in Kampuchea after transporting the Chinese New Year in March 9th. The 63 containers loaded with cargo appeared at Kampuchea port in Kampuchea that night. A spokesman for the Ministry of industry and handicrafts of Kampuchea said that Kampuchea's various departments jointly worked together to open up a "green channel" for the related material transportation, including improving the efficiency of the process of liner docking, unloading, picking up, customs clearance and transportation, so as to ensure the timely delivery of raw materials to the factory.

Jin Yongyi, the head of the new Haifeng container transport Kampuchea branch of Haifeng logistics group, said: "we have one hundred percent guaranteed shipping space for the textile raw materials to Kampuchea. In recent years, China's domestic textile industry has resumed production and gradually resumed production, and the volume of goods sent to Kampuchea has soared. If there is demand, we can also add ships. "

On March 10th, Prime Minister Hong Sen of Kampuchea said on social media that she was grateful to her great friend, China, and all the relevant Chinese enterprises and investors, and to take an active part in promoting the timely and rapid delivery of raw materials to Kampuchea, so as to alleviate the urgent need of Kampuchea's factory.

Part of the EBA treatment was withdrawn from Cambodian enterprises or moved to other countries?

In 2020, the development of Kampuchea's textile and garment industry can be said to be bumpy and difficult, but the new crown pneumonia epidemic is only one of them. To make matters worse, Kampuchea had bad news in February 12th: the EU decided to withdraw some tariff preferences enjoyed by Kampuchea under the policy of "all except weapons" (EBA), and the affected commodities accounted for 20% of the total merchandise exported to Kampuchea by the European Union. This decision will come into effect in August 12, 2020.

According to the Kampuchea textile and Apparel Association, Kampuchea is the sixth largest source of textile and clothing imports from the European Union. The EU's abolition of the treatment will lead to a 12% increase in the tax rate of textile and clothing exports to the EU in Kampuchea and 8% to 17% of the footwear industry tariffs. These products will be subject to tariffs on the "preferential country" (MFN) policy. This is undoubtedly a heavy blow to the shoe making industry in Kampuchea.

In fact, Kampuchea has been raising the minimum wage for many years, which has made the cost of labour higher than that of Vietnam and Bangladesh. After the Levy of tariffs, the country's low value-added clothing and footwear products have lost the competitive advantage of exports to the EU. Liang Wei, Assistant Research Fellow of the Southeast Asian Research Institute of the Guangxi Academy of Social Sciences, told an interview with this reporter: "at present, there is a voice inside Kampuchea, that is to say, should we move the factory to Burma where the workers are paid less?" In order to reduce the cost of production and offset the interests of the textile and garment industry, Kampuchea set up a small and medium-sized enterprise policy committee, led by the Deputy Prime Minister and Minister of economy and finance, to study and formulate the development strategy of small and medium enterprises, and support the relevant enterprises through preferential policies such as rent reduction and tax reduction. "

In fact, the EU still allows high value-added clothing shoes to continue to enjoy tariff free and quota preferences, so manufacturers can take this opportunity to upgrade equipment, introduce skilled talents and high-quality textile raw materials, and turn the EU market crisis into a turning point. Wen Shuyang, chairman of the Kampuchea Garment Manufacturers Association, said frankly: "what we need to consider now is how to improve our output, quality and efficiency. 15 years ago, we could not export EBA to the EU market. "

Liang Wei believes that seeking new market is also a way out of the predicament. Kampuchea has discussed with Asian and European 5 countries (Russia, Kazakhstan, Armenia, Kyrgyzstan and Belarus) about export textiles. Wen Shuyang said that the 5 countries in Asia and Europe spend about $700 million a year to order cold clothing from China, Italy and Egypt. "If we can share part of the market share, I mean, as long as 10%~20%, we can earn one hundred million or two hundred million dollars a year. Basosa, Minister of Commerce of Kampuchea, said that the withdrawal of part of the EBA treatment may speed up the pace of negotiations between Kampuchea and the relevant countries and find new buyers for goods.

Hong Sen is optimistic about EBA. He said Kampuchea plans to become a middle-income country in 2030 and become a high-income country in 2050. "Losing EBA does not mean that Kampuchea will lose the market. Kampuchea's economy is growing rapidly. We expect to lose EBA treatment in 2025 anyway. "