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Fears Cambodian garment exports to be hit by US trade deal

CONCERNS has been raised that Cambodia's garment export industry may be impacted the inclusion of neighbouring Vietnam in the Trans-Pacific Partnership (TPP) accords, as factory owners look for other countries to manufacture their wares.

Damco area manager Marco Civard told London's Loadstar: "It is foreseeable that some low-end garment production will shift to Vietnam as factories rightfully want to benefit from TPP's reductions in duty and taxes."

After increasing the minimum wage in the textile sector, "it seems that Cambodia has at least partly priced itself out of low labour market", he said.

Cambodia's government has not ruled out joining the US-led TPP, which aims to lower trade barriers between 12 Pacific Rim nations. However, the trade agreement is yet to be ratified in the US.

According to Mr Civardi, the garment industry represents the largest portion of Cambodia's manufacturing sector, accounting for 80 per cent of exports.

But poor infrastructure and congested seaports have kept Cambodian logistics costs high, making air cargo the preferred option.

Mr Civardi said Damco's costs are high because most capacity is passenger bellyhold and limited to five air bridge terminals in Phnom Penh and 10 aircraft stands in Siem Reap.

"From our side, to be continuously innovative and cost-effective, we developed a land-air solution aiming to serve our clientele by trucking their cargo to either Bangkok or Ho Chi Minh City airports, where we can have access to a higher frequency of flights and greater freight capacity," he said.

Recent airline activity may help to bring down costs with Emirates, Raya Airways, Turkish Airlines, AirBridgeCargo and Thailand's K Mile all adding new dedicated freighter services into Phnom Penh since April.

Alternative shipping options, over land and by sea, bring their own challenges in Cambodia.

"Trucking costs are high also in comparison with Cambodia's neighbours," Mr Civardi said. "Unfortunately, such costs keep on increasing yearly, putting severe pressure on the profits of each logistics player, as it's not always possible to adjust prices to our customers proportionately."

At the same time, international container shipping services are infrequent and port congestion can be an issue.

"As of now there is only one weekly vessel departure and too frequently there are containers congested at the port of Sihanoukville," Mr Civardi said.

"As a result, container shipping services are not yet up to standards and the shipping cost not only has no sign of decreasing, but increases, especially during peak-season periods."