Cambodia’s Challenge to Boost Trade

By Wendy Laursen 2015-07-23 01:59:36

Chinese shipping companies CSCL and COSCO are making a deal with Cambodia’s Sihanoukville Autonomous Port. The deal will enable exports directly from Cambodia to China, without the need to ship them via Vietnam.

It’s a positive sign for Cambodia. Sihanoukville Autonomous Port is Cambodia’s main deep water port, and the move is anticipated to boost industry in Cambodia and pave the way for direct exports to other countries as well.

According to the World Bank, Cambodia is experiencing economic growth, with real growth in 2014 estimated to have reached seven percent. The garment industry is key. However, Cambodia is facing strong competition in garment exports from Vietnam, and, behind the scenes, the country faces an internal battle to boost productivity.

Anemia Rife

Cambodia has a high rate of fainting in garment factories, something that some attribute to poor working conditions and malnutrition.

At the end of 2014, a study conducted by the International Labour Organization’s Better Factories Cambodia project, together with the Agence Française de Développement and Angkor Research and Consulting, found high levels of food insecurity and anemia among Cambodian garment workers.

According to the study, 43.2 percent of the workers surveyed suffered from anemia and 15.7 percent were underweight.

Malnutrition and poverty affect much of the population. For example, about 42 percent of children under five are malnourished.

Working for Change

Image source: The Lucky Iron Fish

The problem has drawn global attention, and a range of initiatives are underway. At a grass-roots level, The Lucky Iron Fish is focusing specifically on anemia by enabling people around the world to purchase an iron fish that can be used in cooking to help reduce iron deficiency.

The International Labor Organization (ILO) independently monitors and reports on working conditions in Cambodian textile factories. Better Factories Cambodia is a unique program managed by the ILO and supported by the government, trade unions and the industry employers’ association. Most recently under the initiative, the ILO has been working to boost minimum wages in the industry.

Cambodia’s garment and footwear exports grew by 10.6 per cent over the year to the first quarter of 2015, reports the organization. The number of factories operating and the number of workers employed in the industry have also grown.

The growth of the industry compares favorably against predictions that the new minimum wage levels of $100 (effective February 1, 2014) and $128 (effective January 1, 2015) would lead to a contraction of export volumes with direct implications on employment levels, states the ILO.

Industry Growth

The industry now employs around 600,000 workers. Meanwhile, the number of factories operating in the sector reached a record number of 640 in March 2015, compared to 528 in late 2013.

This week, local media sources report Lou Kimchhun, director general of Sihanoukville Autonomous Port, saying that the rising level of exports drew the attention of the shipping companies CSCL and COSCO.

The two companies already ship over 1.2 million teu from Cambodia annually, although, currently, exports are shipped via Vietnam’s Cai Mep port.

More Challenges

Despite recent successes, Cambodia still faces a number of development challenges including effective management of land and natural resources, environmental sustainability and good governance, says the World Bank. Corruption and weak public service delivery continue impede development, it says.


ASEAN Trade Barriers Curb E.U. Interest

By Wendy Laursen 2015-07-22 21:56:31

European investors are looking to ASEAN countries after the Greek crisis and slowed growth in China have reduced market stability.

“There’s now a moment where companies realize there’s Asia beyond China,” said Michael Pulch, the European Union’s ambassador to Singapore in a recent interview.

The E.U., the world’s largest economy, is already ASEAN’s second most important trading partner after China, accounting for 13 percent of ASEAN’s trade in goods with the world.

Singapore is the E.U.’s most important trading partner in ASEAN, accounting for 25.1 percent of ASEAN-E.U. trade in goods. Malaysia is second, with 18.8 percent of trade, followed by Thailand and Vietnam with 17.3 percent and 15.8 percent respectively.

Pulch says that the E.U. is seeking to boost cooperation with ASEAN countries, and he believes that maritime transport and aviation are areas of potential expansion.

However, there are challenges to further trade developments, according to a position paper launched this month by the E.U.-ASEAN Business Council. The paper recommends ways to increase trade and investment between Europe and ASEAN countries. Top of the list is the elimination of non-tariff barriers to trade. The paper highlights a number of market access issues across ASEAN, including:

1. Cumbersome customs procedures with little harmonization across ASEAN;

2. Unpredictable application of regulations and procedures, impacting the ability of businesses to make informed long term investment decisions;

3. Restrictions on foreign ownership and foreign competition;

4. Lack of harmonized standards or the lack of mutual recognition of such standards across the region.

These four broad themes limit the ability of businesses, from ASEAN or elsewhere, to trade effectively with partners across South East Asia. They also limit the ability of businesses to make long term investment decisions, states the report.