CMLV garment industry expected to be a coronavirus casualty

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Garment labourers assembling men's shirts at a factory in Phnom Penh.
SEPTEMBER 09, 2020 - 11:28 AM

The regional textile industry has come under near-term threat from the global Covid-19 outbreak, especially for key producer Cambodia.

Sian Fenner, lead Asia economist at Oxford Economics, noted in a recent report that lockdowns adopted to contain the spread of the virus “have had a severe impact on manufacturing and exports” in Cambodia, Laos, Myanmar and Vietnam (CLMV).

The textile industry was singled out as a casualty, as more than 55 per cent of the materials that go to clothes manufacturing in Cambodia, Myanmar and Vietnam come from their Chinese neighbour where factories were shuttered in early 2020.

“The slump in external demand has also led to cancelled orders,” Ms Fenner added.

Cambodia is expected to bear the brunt of the CMLV slowdown, since 66 per cent of its exports are generated by the clothing industry, which has historically reaped the benefits from foreign direct investment (FDI).

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Said Ms Fenner: “After reaching record levels in 2019, we expect FDI inflows to fall sharply this year and the recovery into 2021 to be muted amid weak global demand for apparel and the partial withdrawal from the ‘Everything But Arms’ scheme with the EU.”

She was referring to the European Union’s trade arrangement that grants developing countries duty-free access to the European market.

Cambodia was partially dropped from the scheme in mid-August over human rights concerns, which affects signature products such as clothes, shoes and travel goods.

Ms Fenner said that this partial withdrawal of trade privileges will stymie Cambodia’s post-pandemic export recovery, even as its high dependence on tourism and exports means that it will likely be the worst-hit CMLV economy during the downturn.

Still, the CMLV bloc is still tipped to turn in stronger growth than the Asean-5 economies of Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

CMLV economic growth is likely to average 5.1 per cent from 2020 to 2028, outpacing the Asean-5 estimated average of 4 per cent, according to Oxford Economics’ forecast.