Darning a tattered garment sector – Kingdom sees hope in Covid-19 vaccine
No doubt the vaccine’s arrival will indirectly restore manufacturing activity but industry players must make changes to adapt to a new normal in the global clothing market
EVEN as Cambodia’s garment customers – giant clothing chains and departmental stores in the West roil in financial doldrums, the nearly $10 billion export value sector is beginning to stitch itself together on hopes of the Covid-19 vaccine.
The sector had taken a beating after operations rumbled to a halt for the most of 2020, which according to the International Labour Organisation (ILO), resulted in an estimated 30 per cent drop in the industry’s business in Asia.
Closer to home, exports from the sector dipped 5.4 per cent to $3.8 billion in the first half of the year compared to 2019, clearly eliminating any chance of hitting previous years’ exceptional figures.
For the full 2019 year, industry exports climbed 11 per cent to $9.4 billion from 2018.
“[However] we already see promising developments regarding vaccines [hence, the reason why] I am sure the situation will get better in 2021,” said Garment Manufacturers Association in Cambodia (GMAC) secretary-general Ken Loo.
To date, he said, most shipments have been delivered and overdue payments settled.
Contributing 17 per cent to gross domestic product last year, much of the sector was in tatters in 2020, which forced the closure of hundreds of factories due to delayed or cancelled orders which resulted in massive lay-offs.
The latest data showed 110 garment factories have shut down from January to September this year, affecting more than 55,000 workers.
These figures are similar to the same period last year. The closure of factories are considered a norm, Loo indicated, saying that every year there will be new factories opening and some existing ones closing.
“We do not know of the actual number [now] but I am sure the government has measures to help as many factories as possible to survive,” he said.
End of UK brands
While recovery progress trudges along, close attention is being paid to possible impacts stemming from new developments, the latest being the debut of Covid-19 community transmissions in Cambodia.
Cases have risen by 24 to 356 since the first locally transmitted case was detected on November 28, as 49 undergo treatment. The rest have recovered.
Schools have been ordered shut, as are business outlets patronised by Covid-19 patients amid stern calls by Prime Minister Hun Sen and health officials to wear masks, maintain hygiene and avoid mass gatherings.
The government continues to stave off declaring a state of emergency which it said could devastate people’s livelihoods, commerce and the economy.
This decision, which showed control over the situation, has gained the confidence of the
industry players.
“The situation is constantly changing but because the control of Covid-19 is better in Cambodia than some of our competitor countries, the industry is surviving,” GMAC’s Loo said.
He equally seemed unperturbed by the headwinds
from the West where global retail clothing chains are carrying out corporate exercises to cut back losses.
One of UK’s oldest clothes retail chains Arcadia Group Ltd, whose brands such as Topshop and Dorothy Perkins were once valued around £800 million, has gone into
administration.
Another British icon, 240year-old departmental store chain Debenhams Plc, has filed for bankruptcy.
For nearly 120 years, Arcadia, owner and operator of eight brand outlets, and Debenhams held sway through two world wars, the Great De
pression, and economic crises although their profits began narrowing in recent years.
Already at the edge, Covid19 simply tipped them over after numerous lockdowns and reduced footfalls.
Similarly, Swedish-owned Hennes & Mauritz AB’s clothing line H&M and Spanish brand Zara SA, owned by Industria de Diseno Textil SA, are reducing stores globally to slash losses.
European clothing emperors are large customers for garment manufacturers, representing 75 per cent of exports to the European Union (EU) in 2019.
It is a huge jump from 45 per cent in 2018 where total exports amounted to € 5.4 billion, data from the European Commission (EC) showed.
The UK market constitutes 10 to 12 per cent of total orders.
Therefore, any rationalisation by retail clothing moghuls in Europe could cause an impact on the industry.
It did not help that the EU removed 20 per cent tariff on exports from August 12 this year, which might ring up an estimated € 1 billion loss to Cambodia.
GMAC filed legal action against the EC at the European Court of Justice on July 16, 2020, but there has been no update.
Source: General Department of Customs and Excise (National Bank of Cambodia Annual Report 2018)
Source: Ministry of Industry and Handicraft (National Bank of Cambodia Annual Report 2018)