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Web Exclusive | January 2017

ILO fears fall in Cambodia’s apparel export

Cambodia’s apparel and footwear industries are thriving, but that could change in light of several factors related to Brexit and the country’s overall economic growth, according to a bulletin by the International Labor Organisation. Cambodia’s garment and footwear industries accounted for 11 per cent of the economy in 2015. And 80 per cent of its merchandise exports were apparel and shoes. Together the industries were valued at $6.8 billion that year. And the sector experienced 10.8 per cent growth in the first half of 2016, according to Cambodia’s Department of Customs and Excise. 

The EU and the US are its biggest export markets (43 per cent and 29 per cent, respectively). Sales to the EU were facilitated by the “Everything But Arms” agreement, which gives all countries identified by the UN as Least Developed Countries (LDC) full duty-free and quota-free access to the EU. Of EU countries, the UK is the top importer, receiving nearly one third of total exports to the EU. Given its importance to the sector, Cambodia could be particularly vulnerable to the fallout of Brexit. In fact, the ILO report states the country is already feeling some effects. 

Further complicating matters is a change in status for Cambodia. As a result of the country’s growing economy, the World Bank changed its rating to lower-middle income in July 2016. The upgrade from a low income country is positive, except it could threaten the country’s status as an LDC. If the UN similarly decides to upgrade the country, it would mean Cambodia would no longer enjoy its duty-free status after a three-year grace period ends.
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