Thailand
Labour, strategic location, FTAs give Cambodia edge in electronics sector
The Kingdom has a young and highly cost-competitive workforce ideal for manufacturing various types of electronics components. Sixty-four percent of its 16 million population is under 35 years of age, with minimum wages in the country currently set at $194 per month, which is at least 10-20 percent lower than other major manufacturing hubs in the region
Cambodia has already identified the potential of the electronics sector in exports as well as attracting foreign direct investments into the country.
It has also prepared a roadmap for the sector, highlighting the goals to be achieved in the future. While looking at the various aspects of developing the industry, the roadmap also earmarks the country’s competitive advantages.
Its major advantages in the electronics sector include a cost-competitive labour workforce, strategic location, and favourable trade agreements with top electronics export markets. The country has FTAs with Asean, China, Japan and the US.
“Cambodia has a young and highly cost-competitive workforce ideal for manufacturing various types of electronics components. Sixty-four percent of its 16 million population is under 35 years of age, with minimum wages in the country currently set at $194 per month, which is at least 10-20 percent lower than other major manufacturing hubs in the region,” the Cambodia Electronics Roadmap (Draft) pointed out.
Besides, the adult literacy rates have also improved rapidly from 78 percent in 2008 to 88 percent in 2019, indicating a clear advantage for the country in selecting the workers for the industry. The literacy rate is even higher among the younger generation of workers.
Another major advantage is its workers’ considerable experience in working in the textile and garments industry, catering to the export market.
“Cambodia also has the advantage of hosting a major textile and garments industry, which employs a million workers whose dexterity and work ethic are transferrable to manufacturing micro-components in the electronics sector,” it said.
Another advantage for the country is its strategic location. It is strategically located at the heart of the Asean region, and deeply connected to regional value chains through the Southern Economic Corridor of the Greater Mekong subregion.
“In particular, Cambodia sits in close proximity to fast-growing Electronics hubs in Thailand and Vietnam, making Cambodia an ideal location for satellite plants supplying sub-assembly and various electronics components,” the project noted.
Another factor that makes the country an attractive destination for investment in the electronics sector is its open economy with favourable trade agreements with primary electronics export markets. “Cambodia enjoys tariff-free access to the US, UK and EU markets for Electronics exports. Cambodia is also part of the ASEAN Free Trade Area as well as ASEAN+1 FTAs with Australia, China, India, Japan and the Republic of Korea. Cambodia continues to take steps to facilitate its integration into regional value chains, including through new bilateral FTAs with China and the Republic of Korea, as well as the Regional Comprehensive Economic Partnership agreement, all of which come into effect in 2022,” the project indicated.
The country will look to focus on leveraging these strengths to unlock its opportunity. As per the roadmap, the Kingdom’s focus for the near-term (next five years) will be on expanding its base of electronics manufacturers. It will focus on producing less complex components and sub-assembly, such as cables and connectors, and PCB assembly.
“This approach aims to build upon Cambodia’s current foundation of electronics manufacturers, who are already equipped with fundamental experience in these segments. Currently, Cambodia offers a significant cost advantage for the production of simpler components and sub-assembly. This is particularly driven by competitive labour costs and favourable trade agreements with key markets,” it said.
Besides, these components are relatively lightweight, making them suitable for export, in line with Cambodia’s goal of building an export-oriented electronics sector.
“These components can also be fed into many different end products with varying degrees of complexity, and thus would make Cambodia’s electronics sector more resilient to external demand shocks, and can be a stepping-stone for Cambodia to capture Electronics segments with higher complexity,” the project said.
It also focuses on the EMS companies in the near term. “The targeted players of Cambodia’s interest are EMS companies that have a diverse range of product portfolio, as well as electronics manufacturing capabilities and experience, including manufacturing of less complex components, sub-assembly and more.”
Source: https://www.khmertimeskh.com/501065841/labour-strategic-location-ftas-give-cambodia-edge-in-electronics-sector/