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Global downturn threatens Cambodian garment success

March 25, 2009
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Many garment factories in Cambodia are closing as shoppers in the United States, Europe and elsewhere cut back on clothing purchases due to the global financial crisis, according to Reuters. Garments are Cambodia''s biggest export earner and its economy may shrink this year due to the drop in demand. Many factories have already shutdown. At its peak, Cambodia''s garment sector boasted almost 300 factories employing 340,000 workers, many of them women from the countryside. Foreign companies started moving into Cambodia after U.N.-sponsored elections in 1993. The monitoring of work conditions by the International Labor Organization helped lure brands such as Adidas, Nike and Gap, keen to avoid bad publicity from sweatshops. Cambodia''s membership of the World Trade Organization from 2004 provided another boost. Factories sprang up where once there were green rice fields around the capital and garments became Cambodia''s biggest export earner. They brought in $2.78 billion in 2008, but that may drop about 30-percent this year according to a spokesman with the Garment Manufacturers Association in Cambodia (GMAC). Exports of garments to the U.S. market dropped nearly 40-percent in January compared with a year earlier. Some 70-percent of the clothes go to the United States, 25-percent to Europe and the rest mainly go to South Korea and Japan. So far about 20 out of 291 factories, owned mostly by Taiwanese, Chinese, South Koreans and Malaysians, have closed their doors. Other factories, at best, are running at 70-percent of capacity now. Some have no orders at all. Some 70,000 workers have been laid off since last year and another 100,000 jobs are under threat over the next two years, according to the country''s leading labor union, Chea Mony. The sector represents about 16-percent of Cambodia''s GDP, so the factory closures will hurt, with a ripple effect in the countryside as the money sent home by garment workers dries up. People surviving on less than $1 a day are deemed to be living in poverty. Garment workers earn on average $2.7 a day so the loss of these jobs will hurt. Historical data is lacking in Cambodia, but the World Bank says about 50-percent of the people lived in poverty in 1994. Prime Minister Hun Sen says that was cut to 30-percent by 2008 thanks to the garment sector, tourism and agriculture. Analysts doubt the job losses will undermine the grip on power of Hun Sen, who has run the country for 23 years, but some are worried about social problems. And he foresaw land disputes as people returned to the countryside. Hun Sen called on aid donors at a meeting on March 12 to join with the government to provide a social safety net to help workers who had been laid off. He also said the government would try to find new export markets in the Middle East and elsewhere.

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