Rising demand from the US has contributed to faster growth of the travel goods (TG) industry in Cambodia in comparison to the garment industry for some time, reveal recent estimates.
According to the Garment Footwear and Travel (GFT) Goods Brief jointly released recently by the European Chamber of Commerce (EuroCham) and the Textile, Apparel, Footwear & Travel Goods Association in Cambodia (TAFTAC), 80 percent of Cambodia’s overall TG exports were shipped to the US in 2021, compared to only 20 percent in 2012.
This equates to an average growth rate of 102 percent per year in exports to the US over the 2017-2021 period. Compared to this, only six percent of TG exports were destined for the European Union (EU) in 2021, with the remaining 14 percent exported to other markets.
In 2021, relative to 2020, overall GFT exports increased by 15 percent, while TG exports alone increased by 55 percent, data from the General Department of Customs and Excise (GDCE) showed.
Thanks to the comparably low export share of Cambodian TG to the EU, the partial withdrawal of the EU’s Everything But Arms (EBA) initiative in 2020 had a relatively small impact on Cambodia’s TG sector as a whole, the sector brief pointed out.
However, the EBA withdrawal did decrease the share of Cambodian TG products destined for the EU. With five product tariff lines affected by the partial withdrawal, the EU went from being the destination of 12 percent of Cambodia’s TG exports in 2019, to just six percent in 2021 (or seven percent when including the UK).
TG sector growth was also accompanied by an expansion in the number of officially registered travel goods factories, as well as an increase in the number of workers employed.
While in 2019, 46,207 TG workers worked in 91 factories, in 2021, that number increased to 84,686 workers across 121 registered factories.
The year 2022 has seen somewhat of a consolidation period. Although there was a slight decline in the number of registered TG factories to 114 in 2022, the number of employees has increased to 98,282.
TG factory payroll also increased in line with export value and the number of employees. The annual payroll of the travel goods sector rose from $130 million in 2019 to $285 million in 2021.
Both nominal and real average monthly earnings (including overtime and allowances) of workers in the TG sector have also grown gradually over this period. The nominal monthly earnings of Cambodia’s TG workers rose from $235 in 2019 to $238 in 2020 and further to $278 in 2021. They decreased slightly to $276 in Q1, 2022.
Looking forward, the government’s swift and competent management of the pandemic has undoubtedly supported a faster recovery than otherwise might have been expected, the sector brief noted.
The expansion of the US trade preference programme, the Generalized System of Preferences (GSP), in 2016 has been a major contributor to the exponential growth of Cambodia’s travel goods sector, as it rose from a 0.02 percent global market share in 2012 to a 1.6 percent share in 2021.
Although these preferential treatments may lead to short- and medium-term economic growth (and have indeed led to long-term economic growth in the past), they also leave Cambodia’s GFT sector vulnerable to external shocks such as the non-renewal of GSP.
Speaking to Khmer Times, recently, senior economist and Director General of the Institute of China Studies at the Royal Academy of Cambodia, Ky Sereyvath, too echoed these sentiments saying that diversifying the export markets and products is key for Cambodia to remain competitive in the world market.
This article was first published in Khmer Times. All contents and images are copyright to their respective owners and sources.
