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1 Countries» About» Contact us Cambodia Sourcing: Garments & fashion accessories Industry overview Cambodia Garments & fashion accessories This section discusses key issues affecting export manufacturers in Cambodia, offering insight into industry composition and important supply centers. All sourcing countries Sections Charts Philippines Vietnam India Nepal Myanmar Cambodia Sourcing: Garments & fashion accessories Garments Jewelry Headwear & neckwear Bags Download PDF of page Garments Silk fashion accessories Fashion bags Cambodia garment & fashion accessory suppliers Garment markets Garment production Garment & fashion accessory exports & markets Garment & fashion accessory production Fashion accessory markets Fashion accessory production Supplier locations map Click charts below to enlarge Featured export sectors Garments Highlights Cambodia garments exports Fashion accessories Highlights Fashion bags Highlights Cambodia fashion bags exports Garments Maintaining its status as Cambodia s leading source of overseas revenue, the garments industry continues to register strong export performance as demand from traditional markets rises steeply. Cambodia garments exports Overseas revenue grew 10 percent in 2013 to nearly $5 billion. The US and the EU combine for nearly four-fifths of exports. Makers are increasingly expanding their reach in the Asia-Pacific region. Rapid growth prevents suppliers from keeping up with demand. Emphasis on worker welfare remains insufficient. Low productivity due to inadequate training. Bulk of enterprises are foreigninvested. Industry employs over 700,000 people. The majority of makers are based in Phnom Penh and its surrounding provinces. The sector accounts for more than 80 percent of the country s total foreign shipments. With major destinations such as the US and the EU recovering from their respective financial difficulties, the industry has grown nearly 3 percent from January to March 2014 vis-a-vis the same period last year. This is on top of a 10 percent expansion recorded in 2013 equating to $4.96 billion, which is the highest level yet attained by the segment. Cambodia garments exports The sustained improvement of the US economy is the primary factor behind the sector s development as it takes up approximately 45 percent of output. Sales to the country have been steadily increasing every year since 2001, except in 2008

2 and 2009 when it was severely weakened by the global economic downturn. The US imported more than $2 billion worth of garments form Cambodia in The EU is another market that contributes significantly to exports, accounting for roughly 35 percent. Concerns related to the sovereign debt crisis have eased in the past 12 months, allowing revenue from the bloc to grow 8 percent in the first seven months of this year. In 2013, the association absorbed more than $1.75 billion in clothing from Cambodia. The industry s short-term prospects remain optimistic as suppliers forecast overseas shipments to keep rising in the next few years. Besides the US and the EU, a growing number of manufacturers are planning to expand their reach to the Asia-Pacific region, particularly Japan, South Korea, Singapore and Australia. Several enterprises are also preparing to penetrate new destinations in the Middle East. The sector continues to rely on low labor cost as its main competitive advantage in attracting buyers and foreign investment. With a minimum wage of $100 per month for the garment and footwear industries, Cambodia spends significantly lesser on manpower compared with China, which requires a monthly salary of at least $264. Even among neighboring countries in Southeast Asia, labor expenditure is much smaller in Cambodia. Remuneration in the Philippines, Indonesia and Vietnam is $329, $228 and $112 per month, respectively. The minimum wage was most recently adjusted in February 2014 to address worker demands. It was formerly $80 per month but has been increased to $100 with the addition of $5 for health care benefits. Despite the rosy outlook, the sector is hampered by a number of obstacles. The most critical of these is the lack of emphasis on suitable working conditions. A study conducted by the International Labor Organization reveals that industry-wide compliance is not broadly observed in several categories, including employee safety and health, and fire safety. In an assessment of 152 garment factories from 2012 to 2013, the ILO determined that only 82 percent adhered strictly to safety and health requirements. Among the respondents, 73 percent do not maintain acceptable heat levels inside workshops and 61 percent do not provide access to sanitary means for drinking water. In addition, 53 percent have obstructed pathways to main and fire exits and 45 percent do not perform regular fire drills. Besides worker welfare, the sector is confronted with significant difficulties in industrial relations. Although there have been fewer strikes over the course of the ILO s investigation, disruptions remain high at 59 cases. The major concerns resulting in stoppage are wage and bonus payments, disciplinary action and termination, and occupational safety and health. The rapid growth of the industry is identified as a key reason behind these problems. Owners and managers find it hard to keep up with swelling demand and increasing customer expectations while ensuring working environments that meet regulations. To cope, the ILO has recommended to the government to strengthen enforcement systems that promote labor laws. It has also advised trade associations such as the Garment Manufacturers Association in Cambodia to adopt the principles of compliance and provide incentives to those that meet them. Unions are enjoined to lobby the national administration in crafting rules aimed at protecting the well-being of workers. Low labor productivity is another challenge being faced by the industry. Many makers conduct inadequate training to their personnel and utilize poor methods to help them function more efficiently. Because the majority of companies are foreign-invested, managers, supervisors, and design and technical workers generally come from abroad. Most of them are hired from mainland China, Taiwan and South Korea, resulting in hampered transmission of information between high-level and skilled employees. Domestically owned enterprises, on the other hand, usually implement outdated and unsuitable management practices. Another aspect behind lost productivity is the lack of attention to equipment used. Machines are not operated efficiently and maintenance is not conducted sufficiently and in a timely manner. Deficient investment in spare parts and information systems are also contributing factors. According to the Ministry of Commerce, as of July 2014, the garments sector in Cambodia is composed of nearly 560 suppliers and employs about 733,300 people on permanent or part-time basis. An estimated 90 percent of manufacturers are foreign-owned,

3 with the rest either operated privately or by NGOs. Of the former, 25 percent are infused with the capital from Taiwan, 27 percent from China, 16 from South Korea, 14 percent from Hong Kong, 5 percent from Malaysia and 4 percent from the US. Foreign-invested companies mostly have their own market networks overseas, which allow them to have an export ratio of 100 percent. Small enterprises have up to 30 full-time workers and factories not exceeding 150sqm. They have a monthly capacity of less than 3,000 pieces and annual turnover of below $5,000. Midsize makers are staffed by as many as 110 people and operate workshops covering an area of up to 750sqm. They can produce 15,000 pieces every month and generate $8,000 in foreign sales every year. Large companies have a workforce reaching 6,500 personnel and factories with a floor area totaling 250,000sqm. They can turn out 3 million pieces every month and can record as much as 12 million in total annual revenue. Seventy percent of garment manufacturers in the country have established their factories in the capital, Phnom Penh, and in the surrounding provinces of Kandal, Kampong Speu and Sihanouk Ville. These locations provide favorable conditions for the procurement of different fabric types, particularly silk. They also have reliable access to land and air transport, which helps makers in sending samples and shipping products. Consistent power and water supply are other important advantages of these sourcing centers. In addition, Phnom Penh is a major tourist destination that allows enterprises to display their designs to prospective buyers. Silk fashion accessories The production of silk fashion accessories in Cambodia is an emerging industry characterized and guided by traditional designs unique to the country. Products reflect innovation and creativity, which are the hallmarks of handmade items produced by skilled artisans and home-based craftsmen. Besides strong design capability, the line also boasts other key advantages. These include broad experience in supplying custom-made items and accepting low minimum order requirements. Products are generally made by beneficiaries of social organizations. Livelihood programs are targeted at people with no reliable means of employment. NGOs provide training to ensure product quality and consistency. Inadequate supply of raw materials, particularly silk. Low production capacity among manufacturers. Outlay for manpower has increased over the past year. Most makers are smallscale. Phnom Penh is the main production hub. Retail outlets are set up near manufacturing facilities. Although the sector is small, it is showing great potential for development as one of Cambodia s major export industries. One important driver of growth is the existence of NGOs that provide employment opportunities for many disadvantaged citizens. The total consolidated data in 2013 for garment and textile exports is $4.96 billion which is an increase of 11 percent over the previous year. There are no official export figures for the silk fashion accessories industry. The primary reason for this is that most products are shipped in small quantities via informal channels, mainly through expatriates and tourists. Another factor is that most items are made by NGOs, who are not required to acquire Country of Origin documentation. The long history of conflicts in Cambodia has affected many people not just personally but also economically. Not only were numerous citizens left without a stable source of income, many also suffered physical, mental and emotional injury.

4 Recognizing the need to uplift people from such circumstances, social and civic organizations have established developmental projects and outreach programs that offer educational and livelihood assistance, skills training, and microlending services. NGOs mainly target underprivileged groups, who have limited or no access to reliable sources of employment. These include landmine and polio victims, people with disabilities, victims of human trafficking, widows, orphans, out-of-school youth, and the poor. Some social and civic organizations have commercial departments in charge of providing services. Individuals are accepted and trained for six to 12 months at no cost. To ensure quality and consistency, they are only allowed to make products upon completion of the training course. Sales from these items not only serve as income for workers but also support and promote NGOs programs. Networks of social-civic enterprises have been set up to further strengthen each individual NGO s efforts. One such example is Artisans Association of Cambodia, an organization of 50 NGOs that manufacture fashion accessories and handicrafts. Aside from offering training and employment, AAC assists its members by coursing orders and accepting payments from buyers, and sourcing and distributing qualified products from affiliate groups. Aside from the disadvantaged, NGOs also subcontract work to home-based artisans who reside in communities that specialize in handicrafts. Organizations also provide supplemental income opportunities to families that have farm-based livelihood. They are able to accept simple production processes such as weaving and sewing when intensive work in the fields is not needed. Two or more family members usually take part in this undertaking. Payment is based on the number of semifinished items made. Organizations that subcontract to farm-based families usually work with coordinators who live in the same village as the workers. Raw materials may be provided by the coordinators, depending on agreements with the NGOs. Due to its very nature, the industry is facing a number of challenges, some of which are crucial factors that may impede its development. The short supply of materials, particularly silk, is one such challenge. Although Cambodia has a long history of silk production, availability is less than demand. Because of this discrepancy, 98 percent of silk requirements are imported from China, Vietnam, Thailand, India and South Korea. This equates to annual expenditure of at least $10 million, which fluctuates from year to year. This has, in turn, resulted in higher prices of finished products. To address this issue, the government is spearheading the industry s growth by developing the local sericulture sector. It also provides assistance for product development and business management. Another key concern facing the line is low production capacity. Compared with Vietnam and China suppliers that mostly use machines and other modern equipment, Cambodia makers generally continue to employ traditional manual processes. These include weaving, reeling, dyeing, knitting, sewing, embroidering and beading. As such, more time and manpower are required, limiting efficiency. Higher labor cost is another issue facing the industry. Suppliers have been compelled to raise salaries as the government increased the minimum wage for certain consumer goods industries to $100 per month. Residual effects of the global economic crisis also continue to affect the industry. With buyers veering away from upscale models that boast intricate adornments, some suppliers turned their focus to lower-end designs. Others shifted from fashion accessories to small gift items such as keychains since these are cheaper to produce. Silk fashion accessory manufacturers in Cambodia are generally small-scale enterprises. Although the industry is dominated by NGOs, there are also a handful of privately owned companies. Joint ventures and foreign-invested companies make up a small portion of the supplier base. North America is the primary overseas market, taking up 42 percent of exports of featured suppliers. The EU

5 and the Asia-Pacific region account for 30 and 27 percent of shipments, respectively. One major draw for Cambodia suppliers is their ability to accept small orders. Some do not impose MOQ, while others allow as few as three pieces per transaction. This strategy creates a worry-free investment environment for buyers, especially those that would like to try a few items before procuring in bulk. Phnom Penh is the main production hub. In fact, close to twothirds of suppliers in this report have set up head offices and manufacturing facilities in the capital. Other key supply zones are the provinces of Siem Reap, Battambang, Kandal, Pursat, Kampong Chhnang and Kampong Thom. Home- and farm-based workers are generally located in Banteay Meanchey, Siem Reap, Battambang, Kandal, Kampong Speu, Takeo, Prey Veng and Svay Reang provinces. To generate more income, many suppliers maintain retail outlets within or close to their production facilities. These shops also shore up local tourism by attracting visitors who may be prospective bulk buyers in the future. Fashion bags The fashion bags industry in Cambodia is mainly characterized by handcrafted models made through smallscale production processes. Similar to other export sectors in the country, the segment relies on manufacturing, promotional and shipping methods that are generally below par compared with competitors from neighboring emerging markets in Southeast Asia. Cambodia fashion bags exports No official export figures are available although revenue is expected to increase in the next 12 months. Trade agreements with the EU and ASEAN are seen to further expand revenue. Improvement of local tourism is expected to enhance sales. Low level of development results in inadequate skills and knowledge in conducting business. Sector is highly dependent on imported inputs. Employing product designers entails high costs. Small suppliers take up 90 percent of the line. Phnom Penh is the main sourcing center. Many enterprises have retail stores in areas frequented by tourists to improve sales. The industry possesses a few strengths despite its low level of development. Most fashion bag suppliers in Cambodia are established as social enterprises, practically all of which serve as or are supported by NGOs. These groups employ underprivileged people who have limited or no access to stable sources of income. As such, manufacturers not only provide buyers with designs unique to the country, they are also able to play a philanthropic role in communities where they are set up. Product style is another strong point enjoyed by the industry. Models are typically created using native techniques done by hand and featuring indigenous design elements that reflect the country s cultural and artistic influences. Low MOQ is another competitive advantage held by the industry. In contrast to makers in other markets that require orders of hundreds or thousands of pieces, Cambodia suppliers generally send shipments containing 30 pieces or less. Some even allow transactions of only one item. Manufacturers ability to accept small purchases can benefit customers by minimizing risk, especially in models to be offered for the first time in new overseas destinations. Cambodia fashion bags exports There are no official export statistics for the fashion bags industry in Cambodia. This is due to the fact that most products are shipped in small quantities through informal channels, largely by tourists and expatriates. In addition, the bulk of the sector s output comes from NGOs, which are not required to obtain Country of Origin documentation. Despite the absence of authoritative data, various trade associations and NGOs estimate that total overseas

6 revenue for the silk handicrafts industry, under which most fashion bags are classified, ranges anywhere between $3 million and $5 million every year. Over the next 12 months, exports are predicted to increase by an average of 10 percent. Growth is seen to be driven by sales to customers in the US, France and Australia, especially as many local social enterprises receive sponsorships from NGOs in those overseas markets. These foreign-based nonprofit institutions have established strong relationships with retail shops and individual buyers in their respective countries, as well as with producers in Cambodia. Because it is classified by the UN as one of the 49 least developed countries in the world, Cambodia has entered into several trade agreements designed to help boost its exports. One such accord is the Everything but Arms initiative of the EU, which is a part of its Generalized System of Preferences. Under the EBA, sales of handicrafts and other products not related to armaments are not imposed any duties and quotas. In addition, shipments to buyers in EU member-states are not subjected to import taxes if the goods are valued below 6,000 euros. Cambodia benefits from the ASEAN Free Trade Area as it is a member of the regional bloc. The AFTA is an agreement among the area s member countries to eliminate tariffs when trading among themselves. By 2015, the nation will also be included in the ASEAN-China Free Trade Area, an arrangement that expands the tariff-free zone to China. Other factors are seen to help expand export turnover. One of these is the continued improvement of the local tourism industry, which has seen an increase of about 20 percent from 3.5 million foreign arrivals in 2012 to 4.2 million in Through its Cambodia: Kingdom of Wonder campaign, the government is able to promote domestic tourist attractions and, by extension, handcrafted products to a broader audience overseas. Direct flights from France have been launched to provide travelers from the EU easier access into and out of Cambodia. Later this year, direct trips from other countries such as Germany are also set to become available. The majority of fashion bag suppliers in Cambodia are supported by NGOs. Serving as social enterprises, these nonprofit groups offer developmental projects and outreach programs to locals who were adversely affected by the country s long history of conflicts. Organizations provide educational assistance, skills training and microlending services to many of the country s disadvantaged people. They include landmine and polio victims, individuals with disabilities, persons living with HIV/AIDS, widows, orphans, out-of-school youth, ethnic minorities and the poor. Aside from the underprivileged, NGOs extend assistance to farm-based households. By subcontracting some production processes such as weaving and sewing, organizations are able to give supplemental income to families that do not have reliable access to employment after harvest time. NGOs typically work together to further strengthen the capability of each individual institution. An example of this is the Artisans Association of Cambodia, an umbrella organization composed of about 50 NGOs that make various types of handicrafts and fashion accessories. Apart from providing access to training and livelihood, the AAC assists members by coursing orders and accepting payment from buyers, and sourcing products from suitable affiliates. Due to its underdeveloped state, the industry faces several difficulties that could further delay its expansion and wider acceptance of its products in the global market. Small-scale manufacturing and low-level development are rooted primarily in suppliers inadequate skill and knowledge in terms of management, production and promotion. Eradicating this problem involves macroeconomic solutions that are not readily available. To help offset these obstacles, the government and trade associations have spearheaded programs that aim to minimize the detrimental aspects of the sector s current state. To reach more markets, the administration organizes the One Village One Product trade show, which focuses on locally made handcrafted items. Although domestic buyers are the main audience, foreign clients also have the opportunity to source from exhibitors. The Buy Cambodian Products trade show is another avenue through which models are promoted. It is managed by several NGOs in partnership with international developmental agencies. The creation of new models is a major challenge among suppliers. Hiring dedicated product designers entails high costs and would put pressure on makers budgets. As a result, enterprises choose to come up with new styles sporadically. Many of them launch less than 10 new items every year. Others take more than 12 months before releasing a new set of products.

7 To cope with this problem, suppliers seek assistance from trade associations that hold workshops on product styles, with an emphasis on emerging trends. Illegal copying of models is rampant among local manufacturers because of lack of knowledge on intellectual property rights. To address this issue, makers display prototypes only in showrooms or head offices. Promotion through online and printed catalogs is kept to a minimum to avoid unnecessary exposure of new items. Dependence on imported materials is another challenge confronting the sector. According to the Economic Institute of Cambodia, 5 tons of silk are produced in the country every year. Demand, however, reaches 400 tons annually. The shortfall is covered by purchases from China, Vietnam, Thailand, India and South Korea, which are also the main sources for the industry s cotton and plastic requirements. Although regarded as one of the sector s strengths, reliance on manual production is also considered to be a liability. Low manufacturing capacity hinders suppliers from competing effectively even with similar sourcing centers in Southeast Asia such as Vietnam and Indonesia. Furthermore, consistency is difficult to ensure when almost all processes are carried out by hand. An estimated 90 percent of fashion bag suppliers in Cambodia are classified as small. Although the industry is dominated by social enterprises, there are a handful of privately owned and foreign-invested companies. A few are state-owned producers. With suppliers featured in the report as basis, the sector is generally export-oriented as roughly 60 percent of output is sent to overseas destinations. Fourteen percent ships their entire output abroad. Among enterprises interviewed for this report, North America is the largest overseas market as it takes up about one-half of revenue. The Asia-Pacific region and the EU are other significant destinations. Phnom Penh is the main sourcing center in Cambodia. At least 90 percent of all makers have head offices and manufacturing facilities in the capital. The province of Siem Reap is another significant supply zone. Many enterprises have set up workshops and retail outlets here because of its proximity to various tourist attractions, most notably Angkor Wat. Other important hubs are the provinces of Kandal, Takeo, Kampong Thom and Svay Rieng. Supplier locations map Cambodia garment & fashion accessory suppliers Click company names below marked Active to view verified suppliers and products featured on Global Sources Online. Companies marked Listing have basic information on Global Sources Online.

8 Suppliers featured on Supplier Status Garments Silk fashion accessories Fashion bags 3 Sisters (Cambodia) Enterprise Listing Artisans d Angkor Listing Bunrany Hunsen Development Center Pursat Province Listing Cambodian Craft Cooperation Listing Cambodian Handicraft Association For Landmine & Polio Disabled Listing Colors of Life Listing Daisy Boutique Listing Fine Arts Association Listing Guoxing Garment and Knitting Factory Co. Ltd Listing Happy Silk Listing Khmer Life Listing Lady Penh Designs Listing Lotus Silk & Boutique Listing Nyemo Cambodia Listing Peace Handicrafts And Silks Listing Phaly Craft Listing Rajana Association Cambodia Art & Craft ACTIVE SB Garment Group Ltd Listing Sentosasilk Listing Sobbhana Women s Foundation Listing The Cambodian Center for the Protection of Children s Rights Listing Villageworks Listing Watthan Artisans Cambodia Listing 2012 Hinrich Foundation All Rights Reserved. Contact Us