Garments and footwear made up about 52 per cent of Cambodia’s exports last year, down from about 70 per cent a decade ago as the country seeks to diversify. - The Phnom Penh Post/ANN
PHNOM PENH: Cambodia expects investment to keep flowing into labour-intensive industries across South-East Asia despite US tariffs due to the cost-competitiveness of the region’s workforce.
"US reciprocal tariffs yield significant impact on the overall supply chain, but in South-East Asia, the trend will not be much affected,” Penn Sovicheat, secretary of state and spokesperson for Cambodia’s Ministry of Commerce, told Bloomberg News.
"We expect to see investment of labour-intensive industry and semi-skilled industry still flowing into the region, including Cambodia,” he added. South-East Asia could boost exports to Western markets, even if consumers pay more for its low-cost goods.
The US last month imposed a 19 per cent tariff on Cambodian goods as part of sweeping levies on dozens of nations. Phnom Penh initially faced a 49 per cent rate when President Donald Trump unveiled the plan in April - among the highest in Asia - raising concern about jobs in the garment industry, which makes up more than half of Cambodia’s exports.
Several South-East Asian countries also saw tariffs reduced after negotiations with the US, while Trump has since imposed 50 per cent tariffs on exports from India in response to oil purchases from Russia.
"This rate shows competitive advantages for Cambodia among our competitors in the garment supply chain,” Sovicheat said, of its tariff rate. "Our garment industry remains strong due to cheap labour, better working environment, better incentives for investors.”
Garments and footwear made up about 52 per cent of Cambodia’s exports last year, down from about 70 per cent a decade ago as the country seeks to diversify, National Bank of Cambodia Governor Chea Serey said this month.
Still, Cambodia’s real GDP growth is projected to slow to four per cent this year amid global trade policy shifts, heightened uncertainty and slower global growth, according to the World Bank. The US is Cambodia’s largest export destination, accounting for 39 per cent of total shipments and 29 per cent of GDP.
In an effort to narrow its trade gap with the US, Cambodia scrapped tariffs on American goods earlier this year and pledged to buy up to 20 Boeing Co. 737 Max aircraft. Total two-way trade reached an estimated US$13 billion last year, 97 per cent being exports from Cambodia.
Purchase orders for the US market remained strong in the first six months of the year, as are investment approvals in the garment sector, Sovicheat said without providing figures.
"Therefore, garment trade will still flowing from specialised manufacturing countries like Cambodia,” he said. - Bloomberg
