The garment manufacturing industry in Cambodia has outpaced Vietnam to become the fifth largest apparel supplier to the European Union (EU) and may soon overtake India. “In the space of five years, Cambodia has climbed from being the tenth largest clothing supplier to the EU to become the fifth-ranked supplier, behind China, Bangladesh, Turkey and India,” averred Michael Scherpe, CEO, Messe Frankfurt, a German-based firm that organizes worldwide trade fairs for the garment sector. According to EU figures, Cambodia’s garment exports to the region grew by 14 per cent in 2016 to reach € 3.8 billion, which puts the country ahead of Vietnam. “It is now probable that Cambodia will overtake India within two years,” added Scherpe.

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EU Directorate-General of Trade in its trade figures for 2016 states that Vietnam exported a total € 3.2 billion worth of garments at a growth rate of 6.8 per cent. India, in the meanwhile, exported a total of € 5.6 billion worth of garments to EU last year with a negative growth rate of (-) 0.7 per cent. “I think it worthwhile to emphasize that Europe today takes up 43 per cent of the Cambodian sector’s exports as opposed to 29 per cent taken by the US market,” mentioned Scherpe.

Scherpe, however, warned that Cambodia’s push into the EU market was largely because of preferential treatment under the Everything But Arms Agreement, which allows its garment products to enter the EU market duty-free; this preference is expected to end as Cambodia graduates out of Least Developed Country (LDC) status. This, in addition to the implementation of the FTA between the EU and Vietnam which is set to come into force by the end of 2017, are some of the looming threats for Cambodia. FTA, when it happens, will reduce the current 12 per cent import tariff to zero. With Vietnam set to take full advantage of the falling tariffs, Cambodia should find ways to stay competitive.