Presentation on developments in the garment industry in Cambodia and RGC’s policy responses

By H.E. CHAM Prasidh
Senior Minister and Minister of Commerce
At the 14th Government-Donors Coordinating Committee (GDCC)
Phnom Penh – April 28, 2009


Cambodia’s total textiles and garment exports to the various markets (2004-2008)
Value in US$ million

Source: MOC March 27, 2009 Total exports: $552.2mn – Data of April 27, 2009



Monthly Cambodian Garment Exports to the World (2006~2009)


Source: MOC April 27, 2009


Number of textile and apparel factories in Cambodia
(Jan 2008 – Dec 2008)


Number of textile and apparel factories in Cambodia
(Jan 2009 – Dec 2009)

Source: MOC/DTPS April 2009


Workforce monthly evolution in the garment sector
(Jan 2008 – Mar 2009)             
(1,000 persons)

Source: MOC April 2009


Payroll monthly evolution in the garment sector
(Jan 2008 – Feb 2009)

Source: MOC April 27, 2009


RGC’s Policy Responses

  • Fiscal measures

  • Streamlining of procedures

  • Trade financing and guarantees

  • Labor relations

  • Others

Note: These measures are applicable to garment sector and footwear sector


Based on the results of a joint meeting of the Economic and Fiscal Policy Committee and the Private Sector Development Steering Committee, chaired by DPM and MEF Minister H.E. Mr. KEAT Chhon on February 11, 2009

H.E. Samdech Akka Moha Sena Padei Techo HUN SEN, Prime Minister of the Kingdom of Cambodia has agreed as follows:



1. Fiscal measures

  • 1% Advanced Profit tax: RGC since last year has decided to waive this measure for 2009 and 2010 for the garment sector in order to ask the GMAC to raise wages – now GMAC is asking to abolish that measure – this is part of the Law on Taxation, and is related to all types of companies, not just for the garment sector – the suspension for garments sectors is a loss of 50bn Riels for the RGC based on 2008 data – we ask the garment sector to understand and as a compromise, the Royal Government agrees to further waive the collection of the 1% Advanced Profit Tax for 2 more years (2011 and 2012).

  • Safety net pensions (Factory management is required to secure 0.8% of wage per month) the Royal Government agrees to reduce factory management’s burden to 0.5% of wage per month while RGC pay 0.3% to help complement the payment of those pensions for the period 2009-2010.

[Productivity of the workers need to be enhanced – need forengagement from factories – in the medium term, we suggest that each factory join RGC in training program for senior and middle managers and unions (possible deductible expenses, not charged into profits tax) – ongoing USAID project]

  • The Royal Government agrees to create a Fund for vocational training for laid off workers ( not just to cope with current unemployment/purchasing orders drop problems, but to increase productivity in the sector, too). MEF and MLVT are tasked to prepare a formal request to the Prime Minister.

  • We shall look for a more permanent mechanism in which the garment/footwear management can contribute on a proportional basis of each factory’s size or on a voluntary basis. This expenditure can be profit tax deductible.



2. Streamlining procedure

[Reduction of costs of transactions (not business as usual) – find immediate "lower hanging fruits and quick win" such as online approval]

  • The Royal Government agrees to push for a speedy and complete implementation of ASYCUDA World for imports and exports customs clearance

  • The PSD Steering Committee and its 3 Sub-steering Committees as well as the 8 Government-Private Sector Working Groups shall meet more frequently and more efficiently to streamline procedures and to reduce formal and informal transactions costs.




3. Trade financing and guarantees

  • The private sector is looking for export credits but:

  • locally the cost is higher and the risk is higher

  • difficult to guarantee on a higher risk sector

  • Global Trade Financing Facility of IFC does exist (ACLEDA is the last resort) – need more study- no immediate action possible – GMAC may jointly study with IFC and come out with findings for our purview

  • The Royal Government agrees to commission further study on possible government’s involvement while bearing in mind the need to secure a healthy banking sector in Cambodia.

Note: Maybe the forthcoming implementation of the ASEAN+3 project called “Chiang Mai Initiative” could be an opportunity to tap on the pledged $120bn Fund.



4. Labor relations

  • The Royal Government agrees to call for further tripartite meetings (Government-Workers-Unions) and the 8th WG on Industrial Relations to stress the role and responsibility of each key player.

  • The Royal Government will push for a quick resolution on the issue of unions’ representativeness in the factories and “collective agreement” between unions and managers.

  • The Royal Government urges MLVT to speed up with drafting of the Law on Unions (based on current provisions in the Labor Law and without waiting for the arrival of a Labor expert)



5. Other measures

  • The Royal Government calls on all government entities and local authorities to help combat garment products’ pilferage for the sake of IPR protection and keeping purchasing orders.

  • The Royal Government calls on factory management to enhance management’s capability and internal governance.




Thank you for your attention




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