7. Cambodia

CAMBODIA

Chapter Highlights

• 73% of garment workers experienced employment shocks either in the form of layoffs or terminations.

• The pre-existing gender pay gap of 12% (33 USD) in January-February increased to 16% (37 USD) in July and worsened to 21% (53 USD) by the end of the year.

• Total consumption reduced by 10-15% over the course of the year, falling from an average of 351 USD prior to the pandemic, to an average of 296

USD in August 2020. By the end of the year, consumption increased to an average of 309 USD but remained significantly below the pre-pandemic levels.

• The average size of debt for garment workers increased more than two-fold, from 628 USD pre-pandemic to 1390 USD by the end of the year.

Section 1: Introduction

Cambodia is one of the few garment production countries that had low Covid-19 infection rates and no related deaths in 2020. However, Cambodian garment manufacturers faced two main issues during the pandemic: (a) interrupted supply of raw materials from China, and (b) falling demand in the consumer markets of the European Union (EU) and the United States (US). This combination of supply and demand side disruptions resulted in order cancellations and reduction in new orders, as well as delayed payments and demands for discounts by brands, leading to severe crisis in Cambodia’s garment industry in 2020.

Cambodia drives economic growth and employment through its garment exports. In the past five years, garment exports from the country grew in double digits, capturing 2% of the global market share.1 The garment industry has relied heavily on foreign investments and trade since its inception in the 1990s, with the majority of garment factories having offshore ownership concentrated in mainland China, Hong Kong and Taiwan.2 Cambodia benefited from the relocation of garment manufacturing due to rising labour costs in China, along with trade privileges for export to the EU and US through the Everything But Arms (EBA) initiative and the Generalised System of Preferences (GSP).3 Access to supply of raw materials from China and ports in Vietnam has also played a role in boosting Cambodia’s garment exports.

The pandemic wreaked havoc on Cambodia’s economy and workforce because of its over-reliance on low-value garment exports for economic growth and employment generation. The country participates in garment supply chains through basic CutMake-Trim (CMT) operations carried out