The Belt And Road Initiative: Focus On Cambodia'S Garment Export Market In Southeast Asia

For a long time, the global clothing industry has been an important engine to promote the economic growth of many developing countries, which is particularly prominent in Southeast Asia and South Asia. As a major garment importer, the US market provides a broad development space for Southeast and South Asian countries such as Cambodia, Vietnam, Bangladesh, etc. In this context, Cambodia's role as a clothing exporter has undergone many changes, and its competitiveness is deeply affected by multiple factors such as foreign direct investment, labor costs, trade policies, and social responsibility reputation.

1、 Cambodia is a new rising force in the garment export market of Southeast Asia

Recently, the Clothing Industry: Analysis of Export Competitiveness of Major Foreign Suppliers in the United States, released by the US International Trade Commission, deeply studied the competitive advantages of several supplier countries, including Cambodia. Through comparative analysis of Southeast Asian countries, the report reveals Cambodia's position in the global competition pattern, discusses its interaction with the United States and other major markets, and emphasizes Cambodia's huge potential as an emerging force in Southeast Asia's garment export market.

（1） Overview of Cambodia's clothing exports

As of 2023, Cambodia's clothing export performance is strong, with total exports to the United States reaching 3.4 billion US dollars, making it the sixth largest clothing supplier to the United States and 11th in the world. Cambodia's main export products include cotton trousers, knitwear and baby clothes. The United States is its largest single export market, accounting for 27.7% of the total export. Other important markets include the European Union and Japan. In the past decade, Cambodia's market share in the United States has increased from 3.2% to 4.3%, demonstrating its growing competitiveness in the field of global clothing exports. Although the import volume of the United States in Cambodia has remained relatively stable in recent years, due to changes in the global market environment, such as the epidemic situation and competitive pressure from surrounding countries, the import volume has shown some volatility.

（2） As one of the important fields to promote Cambodia's economic development, the clothing industry has four core competitiveness:

Foreign direct investment (FDI): In Cambodia, foreign direct investment almost dominates the clothing industry in the country. Many factories adopt the "cut, make, and polish" (CMT) model. Most of these factories are set up by foreign investors from mainland China and Taiwan. These investors not only brought technical knowledge, but also provided Cambodia with channels to connect with the global supply chain, making it an ideal choice for diversified procurement of many American and other international brands. Therefore, foreign direct investment has played a key role in promoting Cambodia's clothing export growth and improving international competitiveness.

Labor standards and social compliance: Cambodia's outstanding performance in labor standards and social responsibility is its significant competitive advantage. Especially under the promotion of "Better Factories Cambodia", export garment enterprises need to accept third-party labor standard compliance monitoring, which makes Cambodia an ideal choice for American buyers.

Sufficient labor supply: Although Cambodia's minimum wage level is relatively high in Southeast Asia, especially compared with Vietnam, its labor market is still sufficient, and labor costs are still competitive compared with other regions in the world. In addition, due to the low technical requirements for workers in garment production, workers can quickly start and adapt to the production process, providing stable and sufficient labor support for the labor-intensive garment industry.

Preferential investment policies and trade agreements: Cambodia has attracted foreign investment into export-oriented manufacturing industry through a series of preferential policies, including tax relief and tax exemption for imported raw materials. These measures have made it easier for foreign investors to set up factories and promoted the development of export business. In addition, Cambodia enjoys some preferential trade agreements (such as the "GSP"), which enables its products to enjoy preferential tariff treatment in the United States, the European Union and other markets, further enhancing its export competitiveness.

2、 Comparative analysis with other countries in Southeast Asia and South Asia

In Southeast Asia and South Asia, Cambodia faces fierce competition from Vietnam, Bangladesh and other countries, which have their own characteristics in export competitiveness.

Vietnam: As the second largest clothing supplier in the United States (second only to China), Vietnam has stabilized its market position with efficient supply chain management, large-scale production capacity and friendly business environment. In particular, Vietnam has attracted a large number of enterprises from China who want to reduce risks through diversified procurement strategies. Vietnam can produce all kinds of clothing from low-end to high-end to meet the diversified procurement needs of American brands.

Bangladesh: As a low-cost clothing producer, Bangladesh has occupied a place in the US market with its huge production capacity and low labor costs. In 2023, Bangladesh's clothing export to the United States will reach 7.1 billion dollars, becoming the third largest clothing supplier to the United States. Its main cotton products (such as trousers and knitwear) and constantly improving social compliance have won an important share in the competitive market.

Indonesia and India: These two countries have certain advantages in providing value-added services and vertical integration, but they are facing difficulties such as wage increases and logistics challenges. Although Indonesia enjoys the same good reputation as Cambodia in terms of social responsibility, its high production costs limit its competitiveness.

3、 Challenges and opportunities faced by Cambodia

Although Cambodia enjoys a high reputation in terms of labor standards, its high production costs and dependence on imported raw materials have become two major obstacles to its development. Compared with regional competitors, Cambodia has higher minimum wage standards and energy costs, which weakens its price competitiveness. In addition, Cambodia mainly relies on the "cutting, manufacturing and finishing" (CMT) model, which means that garment factories need to purchase fabrics from outside, and then cut and assemble them, which not only increases production costs, but also limits the flexibility of production and control over the supply chain, further affecting its competitiveness.

The US market is still a key target market for garment exporters in Southeast Asia. The trade relationship between Cambodia and the United States has benefited to some extent from preferential tariff schemes such as the Generalized System of Preferences (GSP), which have lowered trade barriers and promoted exports of Cambodia and other least developed countries. However, recent political and human rights issues may have a negative impact on future trade agreements.

In addition, American consumers and brands are increasingly focusing on purchasing products from countries that meet high labor and environmental standards. This trend coincides with Cambodia's good reputation in terms of social responsibility, providing it with space to further exert its advantages. However, Cambodia still needs to continuously improve working conditions and increase investment in labor force to maintain its competitive advantage in this field.

4、 Conclusion

Despite the challenges of high production costs and dependence on imported raw materials, Cambodia's outstanding performance in labor standards and social responsibilities has kept it competitive in the global market. However, if Cambodia wants to maintain and expand its share in the US market, it must enhance its competitiveness by improving production efficiency, reducing costs and strengthening domestic raw material production capacity. As the US market gradually reduces its dependence on China, Cambodia and other Southeast Asian countries have ushered in new development opportunities. However, Cambodia needs to take more flexible and innovative measures to maintain and expand its dominant position in this competitive market environment.

In contrast, Vietnam and Bangladesh continue to dominate the garment export market in Southeast Asia with their cost advantages and large-scale production capacity. If Cambodia wants to stand out in this competitive environment, it must continue to consolidate its good reputation in social responsibility while reducing its cost structure.

　 Additional messages

1. In the first 10 months of this year, Cambodia's clothing and footwear exports exceeded 9.3 billion US dollars, up 23% year on year

According to the statistics of the General Administration of Customs of Cambodia, from January to October this year, Cambodia's exports of clothing and footwear products reached 9.33 billion US dollars, up 23% year on year. Among them, the export volume of clothing and apparel products reached US $8 billion, up 23.6% year on year; The export volume of footwear products reached 1.33 billion US dollars, up 22% year on year.

The report shows that the export volume of knitted and apparel products (HS61) was US $5.47 billion, up 20.5% year on year; The export volume of non knitted clothing (HS62) was 2.52 billion US dollars, up 31% year on year.

According to the customs report, from January to October this year, Cambodia's international trade reached 45.06 billion US dollars, up 16.5% year on year. The export volume reached 21.57 billion US dollars, up 16% year on year; The import volume reached 23.49 billion US dollars, up 17% year on year.

2. Cambodia's clothing and footwear exports soared, exceeding US $8.7 billion in the first nine months of this year, up 24.5% year on year

According to the Cambodian customs report, the export of Cambodian clothing and footwear products reached 8.76 billion US dollars in the first nine months of this year, up 24.5% year on year. Among them, the export volume of clothing and apparel products reached US $7.54 billion, up 24.8% year on year; The export of footwear products reached US $1.22 billion, up 22.4% year on year.

The report shows that the export volume of knitted and apparel products (HS61) was US $5.03 billion, up 21.5% year on year; The export volume of non knitted clothing (HS62) was 2.35 billion US dollars, up 31.9% year on year; The export volume of other textiles (HS63) was US $160 million, up 37.7% year on year.