ILO: Cambodia’s footwear sector ripe for investment

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Shoes on display at a shop in Phnom Pen. post pix

Cambodia's footwear sector will provide more opportunities for investment and production than the garment sector due to significant growth over the last five years, said an International Labour Organisation (ILO) research bulletin on Cambodia’s garment, textile, and footwear (GTF) industry.

The bulletin said the footwear sector has grown more rapidly than the garment sector in recent years, adding Cambodia to the list of top 10 footwear export countries in 2016 for the first time.

 

Between 2013 and last year, it said, the footwear sector’s share in Cambodia’s total GTF export value has grown by 4.4 percentage points, while the garment sector’s share has decreased by almost 10 percentage points.

“This development raises the question of whether the footwear sector offers new opportunities for investment and production in Cambodia and invites further research,” the bulletin said.

Though the global export value of footwear declined between 2015 and 2017, it said, production in the Kingdom increased steadily at an annual average of 27 per cent during the same period.

The Kingdom remained in the top 10 footwear exporters, with its exports valued at more than $1 billion last year, a 19 per cent increase from 2017.

Cambodia’s main export markets for shoes are the EU (46 per cent), the US (17 per cent), Japan (12 per cent) and Canada (five per cent).

The UK, Germany and France are the main importers of the Kingdom’s footwear in the EU.

 

The EU and the US will remain very important export destinations for Cambodia due to current tariff exemptions, and based on interviews, workers and managers in the Kingdom seem confident in the footwear sector’s future profits and orders, said the ILO.

Cambodia’s main regional competitors for footwear production are Vietnam and Indonesia. The three countries have similar minimum monthly wages in the sector.

Minimum monthly wages in the Kingdom stand at $182, while they range between $171 and $180 in Vietnam and $193 and $272 in Indonesia.

Ministry of Commerce data shows that approximately 14.5 per cent of workers in the GTF sector (112,589) were in footwear last year, of whom 87 per cent are women – two percentage points higher than in the garment sector.

The National Bank of Cambodia’s 2018 report said the Kingdom’s garment and footwear exports were valued at $10 billion, up 24 per cent from $8 billion in 2017.

Collective Union of Movement of Workers president Pav Sina also noted that the Kingdom’s footwear sector presented more opportunities for investment than the garment sector, due to higher demand.

He said that keeping the EU’s “Everything But Arms” (EBA) trade preferences would further boost the sector.

“Footwear products are mainly exported to European, US and Japanese markets, though the production is still limited in Cambodia.

“Uncertainty surrounding EBA could impede footwear investors from investing in the Kingdom,” he said.