The Cambodian government has adopted a new strategy for the garment, footwear and travel goods (GFT) sector that focuses on strengthening human resources, improving working conditions, promoting investment in high-value industries, and attracting investment in supportive industries.
The Industrial Transformation Map for the Textile and Apparel Industry (T&A ITM) 2023-2027 strategy was released in late-March and serves as an important roadmap for the GFT sector to maintain competitiveness and ensure sustained growth.
The GFT sector is a major contributor to the Cambodian economy, making it essential that it remains competitive. The new strategy addresses a number of challenges facing the sector, including rising wages, low productivity and a lack of interest among young people.
The National Employment Agency has conducted a survey that found the textile and apparel (T&A) industry will need more low-skilled workers as the Covid-19 pandemic recovery continues. However, current methodologies in Cambodia are outdated and stringent, which makes it difficult to train workers in the skills they need.
The major issues with current skilling methodologies are long and traditional courses, and a lack of industry interactions and awareness among youth.
Cambodia's T&A industry is largely foreign-owned, and foreign investors prefer to hire their own nationals for high-skilled and value-added jobs. This leaves a shortage of skilled technical staff, designers, merchandisers, sales and marketing staff, business analysts, and strategists.
“Middle and senior management positions constitute roughly 10 percent of the total workforce in the Cambodian T&A industry, and more than 90 percent of the T&A manufacturing facilities in Cambodia are owned by foreign investors.”
The statement reported, “Cambodian human resources lack soft skills, such as problem-solving, decision-making and customer management.”
In this regard, the formulation and implementation of T&A ITM 2023-2027 is necessary for the Cambodian T&A industry to increase competitiveness and ensure its sustainable growth.
“The objective for Cambodia’s T&A ITM 2023-2027 is to build a competitive T&A industry, with an increased focus on value addition, sustainability, technology adoption, skills, and entrepreneurship.”
It has four levers: product mix and international trade, skilling and productivity, technology and sustainability, and infrastructure and governance.
The Cambodian T&A is facing a number of challenges, including a lack of diversification in terms of products and markets, high reliance on imported raw materials, and a need to transform its business model from cut-make-trim (CMT) to free on board (FOB).
The Cambodian government has identified the first of strategic levers to address these challenges, including aligning product mix with international sourcing trends, promoting backward integration into the textile ecosystem, promoting business transformation, developing the market, and supporting new entrepreneurs and start-ups.
Cambodia's garment industry is dominated by the CMT model, which is a low-value-added process that involves only cutting, sewing, and finishing garments.
These strategic levers are important for the Cambodian T&A industry to remain competitive and ensure sustained growth.
The Cambodian government plans to increase the production of high-value-added garments, such as those made from man-made fibers, encourage investment in the manufacturing of finished fabrics and yarn, and support the development of fashion institutes and design studios.
Other institutions can help the industry develop new products and designs, promote cooperation between local entrepreneurs and established fashion houses, and encourage the establishment of buying and sourcing offices in Cambodia.
These are committed to ensuring that the country's T&A industry has the skills and technology necessary to succeed in the global marketplace.
About 70 percent of Cambodian apparel production capacity is focused on low-value-added CMT garments. Moreover, in 2019, nearly 90 percent of fabrics were imported from other nations, including China and Vietnam.
The Government has been working to address the challenges facing the industry, such as rising wages, low productivity, and a lack of attention to environmental sustainability.
The second strategic lever to improve the T&A industry includes developing a skills framework, creating digital learning platforms, promoting internships and experiential learning, enhancing job portals, and establishing a Sector Skills Council for the industry.
These initiatives are intended to help the T&A industry in Cambodia achieve lasting growth, become more competitive, and create a database of skills that are in demand in the sector.
“The goal is to improve the visibility of job opportunities online, making it easier for workers to find employment, thus promoting the growth and success of the Cambodian T&A industry.”
The T&A sector is the largest employer in Cambodia, employing more than 800,000 people, of which more than 80 percent are women.
The sector has helped many Cambodians alleviate poverty through direct employment and by increasing other economic activities that cater to workers living around the T&A factories.
The third strategic lever has taken steps to ensure the sustainability and innovation of the T&A industry. Measures include strengthening environmental and social compliance laws, developing capacities, adopting sustainable practices, and creating a machinery leasing mechanism.
The fourth strategic lever is taking steps to improve the T&A industry's infrastructure and governance to promote competitiveness in the global marketplace. Initiatives include building new and improving existing industrial parks, encouraging renewable energy use, developing transportation and logistics systems, and creating warehouse facilities. These efforts aim to help the industry achieve sustained growth.
The T&A industry accounted for 57 percent of the country’s total merchandise exports in 2019 and one-third of the manufacturing activities. In 2019, the T&A exports of Cambodia stood at $8.5 billion.
Cambodia enjoys market and tariff preferences under trade agreements with some developed and developing countries in the region and across the globe.
This ITM will transform the T&A industry into a sustainable, high-value, and skilled workforce industry with improved productivity, integrated supply chains and a supportive business environment.
It also aims to enhance competitiveness and economic diversification, and achieve milestones for the 2030 and Cambodia Vision 2050, with strong partnerships between the government, employers, unions and stakeholders.