The Garment Industry in Cambodia:
It’s Role in Poverty Reduction through Export-Oriented Development
1. Introduction
The garment industry has led the Cambodian economy since the mid-1990s. Garments are the country’s biggest export making up about three-quarters of total exports, and the industry is a symbol of the country’s dynamism in the world economy. The industry is also the main non-farm formal sector creating employment opportunities for the poor. The greater part of the workforce is female; less educated, and has migrated from rural areas. Thus, the garment industry is seen as contributing to poverty reduction in Cambodia by providing employment opportunities with higher wages for the poor who would otherwise be engaged in low-wage economic activities in rural areas. There was lively discussion about the survival of Cambodia’s garment industry prior to the final phase out of the Multi-Fiber Arrangement (MFA) on 1 January 2005 which was expected to greatly intensify competition in the international garment market. One of the most influential forecasts was that of a WTO discussion paper (Nordås [2004]), which predicted that that only China and India would gain from the MFA phase out and that Cambodia and other smaller suppliers of garments would lose out. Fortunately, there was no immediate collapse of the industry in Cambodia. Garment exports to the United States grew over the whole of 2005, while those to EU declined only slightly. However, the prospects for the industry in Cambodia are not certain and the future trend in garment exports needs to be watched. Despite its importance and predominance as the leading modern and internationalized industrial sector in Cambodia, there has been little research done on the garment industry at the firm level, while that on garment workers has attracted the most attention (Engquist [2001], Forder [1999], Hall [1999]). Bargawi [2005], Hach, Huot and Boreak [2001], Knappe [2002], and Konishi [2003] have analyzed the structure and features of production in the industry by surveying some factories. However, the coverage of the sample firms in these research works has been limited, therefore they do not provide a comprehensive picture of the structure of garment factories based on a substantial sample size.
This paper is based on a firm survey conducted from August to October 2003 covering 164
export-oriented garment-manufacturing firms. The sample size represented 84 percent of the total number of 3 members firms in the Garment Manufacturers Association in Cambodia (GMAC), which is the sole industrial association of export-oriented garment manufacturers in Cambodia. Although the total membership of GMAC is 196 firms, this figure includes those that have closed down, but remained registered members. Therefore, the data set covers most of the export-oriented garment-manufacturing firms operating in 2003. Thus, this data set can provide comprehensive statistics on Cambodia’s export-oriented garment industry which have been derived from the information of individual firms not available in the existing literature. With this data set we can analyze more thoroughly the impact of the garment industry’s development on poverty reduction in Cambodia by examining such factors as: worker remuneration based on sex, job category and experience; female workers as a share of the labor
Force; the frequency of promotion; the required level of education; and hours worked. Moreover, the prospects for the industry can also be examined by investigating firm profitability; the characteristics of managers; sources of capital; and the scale of firms. The main conclusions of this study confirm the substantial impact that employment in the garment industry has had on poverty reduction in Cambodia. Firstly, female workers, especially in certain job categories, make up the predominant share of the labor force, and workers earn wages that are far higher than the poverty line. Secondly, barriers to employment and promotions up to a certain level of job categories are not high in terms of educational attainment and experience. Thus, employment in the garment industry is a wonderful job opportunity for rural women who otherwise would be engaged in low-wage economic activities. Another finding concerned the profitability of the export-oriented garment firms. The profitability of a typical firm in the sample was high, although the variation in profits-to-sales ratio was also great. This high average profitability could help the industry to survive the intensified competition that has come with the end of the MFA. The remaining sections of paper are as follows. Section 2 looks at the institutional background of the garment industry in Cambodia. Import restrictions imposed by the United States and Canada were critical determinants of the quantity of garment exports from Cambodia, while labor standards supported by the United States and the International Labour Organisation (ILO) dictated wage and working conditions. Section 3 forms the core of this paper, presenting the statistical results derived from the field survey. The final section summarizes the main findings and provides some interpretations of them.
Posted by seangkhun
on 5:19 AM. Filed under
CASE STUDY
.
You can follow any responses to this entry through the RSS 2.0.
Feel free to leave a response