Cambodia: RCEP, FTA boosts growth in manufacturing sector

The Regional Cooperation Economic Partnership (RCEP) and the Free Trade Agreement with China have increased manufacturing factories in Cambodia.

Cambodia has a total of 1,947 factories with a registered investment value of $15.7 billion as of June this year, the Ministry of Industry, Science, Technology, and Innovation’s report said on Thursday.

The manufacturing factories produced products worth $7.57 billion in the first half of 2022, a significant rise of 75 percent year-on-year, stated the report, citing that the products worth $5.26 billion were exported and the rest were sold domestically.

From January to July of this year, 112 new factories opened while 47 factories closed down.

FTA with China, RCEP, and strong demand for Cambodia-made products in the US and Europe, which are Cambodia’s main markets, have built confidence in investors to  invest in Cambodia, Secretary of State and spokesman Heng Sokkung said.

“Purchase orders in the US and EU and new markets under the RCEP and with FTA with China and Korea are potential in attracting new investment to the country,” Sokkung told Khmer Times on Thursday.

Securing sufficient raw materials to local production chains is another factor in building bold confidence in investors, he said, citing that those raw materials are imported mainly from China.

The manufacturing sector is estimated to contribute 39.9 percent of the Gross Domestic Product (GDP) in 2022, he said, adding that the sector has created some 1.04 million jobs.

Lim Heng, vice-president of the Cambodia Chamber of Commerce, attributed the growth in the manufacturing sector to peace, effective pandemic crisis management, regional trade pacts and FTA with China.

“The free trade agreement with China and soon with Korea and the RCEP attracted new investors to inject investment in Cambodia while Cambodia controlled Covid-19,” Heng said on Thursday.

Increasing global demand is also giving a big boost to the growth of the sector, he said.

Among the manufacturing plants in Cambodia, 1,100 are garment, footwear and travel goods factories, and the rest are food and beverage, automotive assembly, cement, electronics, and pharmaceutical factories, among others.

The garment, footwear and travel goods industry is the largest foreign exchange earner for Cambodia.

However, the non-garment manufacturing products are significantly increasing in value export.

Sokkung said the government was diversifying from garment production to non-garment sectors.

“We are now boosting investment in the non-garment and textile sector due to its value-addition, pushing technology-based production chains to increase quality and quantity to meet demand,” Sokhung said.

New non-garment manufacturing factories that have started operations lately are vehicle tire producing plants and vehicle assembly plants.

The non-garment industry product export was $1,520 million in the January-July period of this year, which is a 58 percent increase compared to the same period last year.