Cambodia: Textile industry needs to align product mix

• Apr 28, 2023

The Cambodian textile and apparel industry needs to align its product mix as per the international sourcing trends, backward integrate to reduce dependency on import and diversify its market mix, according to the objectives of the government’s Industrial Transformation Map for Textile and Apparel Industry 2023-2027 (T&A ITM).

The map was designed and formulated based on the evaluation of the global and Cambodian T&A sector and the government’s Cambodia Garment, Footwear and Travel Goods Sector Development Strategy 2022-2027.

While pointing out the significance of the development map, Minister of Economy and Finance Aun Pornmoniroth said in the report: “This ITM set out four levers including product mix and international trade; skilling and productivity; technology and sustainability and infrastructure and governance. This ITM was designed in alignment with Cambodia’s development context and changes in global and regional economic architecture.”

“The implementation of T&A ITM will contribute to addressing structural challenges in this industry and enable Cambodia to be ready to seize opportunities to promote sustainable and inclusive development of this industry as well as the economic growth and socio-economic development,” he added.

The objective is to build a competitive T&A industry with an increased focus on value addition, sustainability, technology adoption, skills and entrepreneurship, according to a government report.

It has four levers including product mix and international trade, skilling and productivity, technology and sustainability, and infrastructure and governance.

The development strategy identified some focus areas for the short to medium term. It includes strengthening human resources to increase productivity and create career paths for workers-employees, improving working conditions and welfare of workers-employees, promoting domestic and foreign investments in high-extra value industries, and focusing on expensive and unique products.

It also aims at attracting investment in supportive industry and promoting marketing diversification of garments, footwear, and bags.

The transformation map identified that trade developments such as the partial withdrawal of Cambodia’s EBA trade benefits by the EU and Vietnam-EU free trade agreement are also expected to have a significant impact on the Cambodian T&A trade.

It also pointed out that the challenges include internal factors such as rising wages, low productivity, low level of interest among young people to join the T&A industry and limited focus on sustainability parameters.

While mentioning that the business model needs to transform from the present cut-make-trim (CMT) to a more value-added Free on Board (FOB) format and policy reforms are required to improve the business environment, it suggested some strategic measures for the crucial industry, which is mainly manufacturing simple knitted apparel for major exporting destinations such as the EU, US, and Japan.

It said the product mix needs to be aligned with the international sourcing trends, such as MMF-made garments, which are high value-added products and in high demand in the international market instead of cotton garments. “Cambodia’s top three apparel markets destinations, namely the USA, Japan and Germany, account for 47 percent of its apparel export share while the top 10 markets round up 81 percent of Cambodia’s apparel exports. This indicates a concentrated market mix for the country which needs to be widened/diversified for better integration with the global value chain and internationalization. In this regard, Cambodia will promote the development of the textile and textile industry through the implementation of product development strategy and leveraging its present product strengths for market diversification,” the report observed.

It also suggested that the backward integration for the manufacturing of finished fabrics and yarn needs to be encouraged.

Source: https://www.khmertimeskh.com/501280698/textile-industry-needs-to-align-product-mix/