[Cambodia] Garment sector economics

[News_Editor]

In this week’s interview, the Post’s Hor Kimsay sits down with Hiroshi Suzuki, chief economist at the Business Research Institute for Cambodia (BRIC). Suzuki discusses the debate about minimum wages in the garment sector, strikes and whether increases will hurt Cambodia’s competitiveness.

How much of an effect will the combination of garment strikes, violence and political tensions have on economic growth?
From my point of view regarding macroeconomic growth, the effect is not so big. The economy is driven forward by several kinds of engines, including the garment sector, tourism, agriculture, construction and real estate. The tourism industry is enjoying an increase in visitors. The agriculture and construction sectors are also performance well. Having a look at all these things, we can see that growth in these sectors will support the fundamentals of Cambodia’s economy.

What about the garment sector?
Of course, some of it is affected, because many factories were closed and they could not produce to meet deadlines. Some were damaged. It also could affect the volume of orders from the buyers. But, Cambodia is not alone. Bangladesh, a garment industry country, is facing a big fight because of its recent election. It is fortunate that the economy of the US and EU are recovering.

Better economic performance in Cambodia’s two major markets means the demand will increase. I know that this week, 80 per cent of workers are coming back to their jobs.

Cambodia has attracted investors because of cheap labour. Will the decision to increase the minimum wage to $100 make Cambodia lose its competitive advantage?
We should also consider facilities and the infrastructure of a factory. For instance, if a factory makes an investment on more modern technology and better machinery, the productivity of workers will improve.

Regarding the minimum wage, even if it is increased to $100, Cambodia won’t lose its low-cost advantage.

Workers are still demanding that the government raise their wage to at least $160 per month. Do you think it’s feasible?
It is a sensitive question. Based on total payment, China and Thailand have much higher wages than Cambodia.

So, even if Cambodia’s garment workers receive a wage increase to $160, it is still much less compared to them.

However, we need to consider our competitors, like Myanmar, Laos and Bangladesh. Maybe Cambodia could be affected.

This interview has been edited for length and clarity.

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Hor Kimsay

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