Cambodia’s Garment Industry

Cambodia’s Garment Industry

Cambodia’s garment industry is one of the most vital sectors of its economy, contributing significantly to GDP, employment, and exports. Since the 1990s, the industry has grown rapidly, transforming Cambodia into a major global player in apparel manufacturing. Today, it remains the country’s largest foreign exchange earner, accounting for over 80% of total exports.

The industry mainly produces garments, footwear, and travel goods for international brands such as H&M, Adidas, Nike, and Gap. These products are exported primarily to the United States, the European Union, and Japan. Cambodia’s strategic location in Southeast Asia, combined with low labor costs and trade preferences under schemes like the Everything But Arms (EBA) initiative, has helped attract foreign investment in the sector.

Garment factories in Cambodia are mostly foreign-owned, with investors coming from China, South Korea, Taiwan, and Malaysia. They are often located around the capital Phnom Penh and in special economic zones. The sector employs around 700,000 workers, the majority of whom are women from rural areas. This employment has provided a lifeline for many families, lifting them out of poverty and giving women greater economic independence.

Despite its success, the industry faces several challenges. Working conditions in garment factories have long been criticized. Many workers endure long hours, low wages, and inadequate safety standards. While the government has increased the minimum wage regularly—from around $45 in 2008 to $204 in 2023—many workers argue it still falls short of a living wage.

Labor unrest is not uncommon. Workers frequently organize strikes and protests to demand better pay and working conditions. These movements have prompted some improvements, including the establishment of the Arbitration Council and better union representation. However, concerns remain over labor rights, especially in relation to freedom of association and the treatment of union leaders.

Environmental sustainability is another challenge. The industry consumes large amounts of water and energy and generates textile waste. Pressure from international buyers and environmental groups has led to some improvements, such as factory upgrades for energy efficiency and waste management programs, but more work is needed to align the sector with global sustainability goals.

Global factors, such as shifts in trade policy, rising competition from countries like Vietnam and Bangladesh, and automation, also impact the industry. In 2020, the EU partially withdrew Cambodia’s duty-free access under the EBA agreement due to human rights concerns, affecting garment exports. Moreover, the COVID-19 pandemic disrupted global supply chains, leading to factory closures and job losses.

Looking ahead, Cambodia’s garment industry must focus on improving labor rights, upgrading skills, and embracing technology and sustainability to remain competitive. Efforts to diversify into higher-value products, improve productivity, and ensure compliance with international labor and environmental standards are crucial.

In conclusion, the garment industry remains a cornerstone of Cambodia’s economy, offering employment and development opportunities. However, to ensure long-term growth and resilience, it must address pressing challenges related to labor rights, environmental impact, and global competition. With the right reforms and support, the industry has the potential to continue driving Cambodia’s economic development while improving the lives of its workers.