A total of 491 factories closed in Cambodia last year, leaving 59,000 workers without jobs, due to a drop in orders from Europe and the US, the Cambodia-China Times reported. Another 100 factories suspended production. Most of the factories that have closed or stopped production are garment factories, mainly because of falling orders in the U.S. and European Union and a lack of raw materials, according to Labor Ministry spokesman Hsing Sot.
In the first two months of this year, 71 factories suspended production
More than 30,000 workers were temporarily laid off
As of February 28, 71 factories had suspended production, leaving 32,023 workers temporarily unemployed, Cambodian Labor Ministry spokesman Hsing Sot told the Cambodia-China Times on Saturday.
Of the 32,023 workers, 81 percent, or 26,055, are women, Shinso told reporters. Of the 71 factories, 34 are in Phnom Penh, employing 10, 010 people, he said. 37 are in other provinces, with 20,013 workers.
Demand for finished clothes in the European Union and the United States is shrinking
Cambodian foundries were the first to be hit
A spokesman for Cambodia’s Labor Ministry said that weak demand in Europe and the United States has become an important trend affecting the global economy. In addition, the novel coronavirus outbreak and the uncertainties brought by the Russia-Ukraine conflict have affected the consumption willingness of European and American countries. Surging global energy prices are also pushing up production and transportation costs, adding to manufacturers’ production costs.
“It is normal for factories to close or stop production in major garment producing countries.” Weak demand in Europe and the United States has become an important trend affecting the global economy, he said, adding that several major garment producers, such as Vietnam, Bangladesh and Sri Lanka, are also facing the impact of the European and American market contraction. He pointed out that some garment factories, faced with a lack of raw materials, have decided to apply to the Labor Ministry to suspend production.
In the past decade, the middle and low-end industries in the mainland have been moving, mainly to Southeast Asian countries and regions, including Cambodia. In other words, Cambodia is doing well because of the spillover from the mainland.
According to public data, Cambodia’s garment industry has been developing rapidly in recent years, especially in terms of export. In 2022, Cambodia’s total export value of garment products exceeded 10 billion dollars. Among them, the total value of garment and textile exports exceeded 9 billion US dollars, up 13% year on year; Shoe exports were valued at $1.737 billion, up 25 percent year on year; The value of travel goods exports reached $1.777 billion, up 19 percent year on year.
In contrast, Cambodia’s annual GDP in 2022 is only 30.544 billion dollars. It can be seen that Cambodia’s garment export accounts for about 33% of the country’s GDP, which can be regarded as a pillar industry.
Cambodia’s garment manufacturers are reportedly expecting a 30% drop in the value of their garment exports in the first half of this year due to a decline in orders from international buyers. The decline in export orders has hit Cambodia hard.
Some analysts believe that the decline in Cambodia’s exports will usher in a further shift of the garment contract manufacturing industry in the future. If Cambodia fails to solve the current difficulties, more garment factories will close down, leading to a larger scale of social problems.
Weak demand in Europe and the US
The conflict between Russia and Ukraine is the main cause
Weak demand in Europe and the US: In recent years, Cambodia’s garment exporters have mainly been the EU and the US. As the economic cold wave sweeps across the world, the dollar has to raise interest rates to protect itself, which will trigger more international capital to move back into the dollar zone, resulting in a general decline in purchasing power and a prolonged weakness in demand. Cambodia’s garment industry, which is highly dependent on exports to Europe and the United States, is not immune to the economic cold wave.
In addition, the uncertain factors brought by the conflict between Russia and Ukraine have affected the consumption willingness of European and American countries; The global energy surge has also pushed up production and transportation costs, as well as raw material costs, adding to manufacturers’ production costs. In addition to the decline in orders, let the enterprise worse. As a result, many companies have to shut down or go out of business.
In any case, Cambodian garment manufacturers are expecting a 30% drop in the value of garment exports in the first half of 2023 due to a downward trend in orders from international buyers.
The Cambodia-China Times reported on March 6 that Hun Sen said at an event on the same day that the global economy was not optimistic, especially in European and American countries. Factories in Cambodia have seen orders fall, particularly for clothing and footwear, due to weak demand in Europe and the US.
Hun Sen instructed Finance Minister Umben Monillo and Labor Minister Justin Yi Sensing to discuss subsidies for workers who lose their jobs. Mr Hun Sen suggested that subsidies for workers be modelled on those introduced during the pandemic. “I don’t think the number of factories that will be hit by the reduction in orders will be as large as it was during the pandemic, so we can start from April,” Hun Sen said. “The government will pay $40 and the manufacturers will pay $30.”
During the epidemic, you shall wear Lanhine’s face mask.
Post time: Mar-10-2023