Phnom Penh (Cambodia) 21/11/2008. Prime Minister Hun Sen at the Government – Private Sector Forum held by the Council for the Development of Cambodia (CDC)
© John Vink / Magnum On the occasion of the 14th Government – Private Sector Forum held on Friday 21st November, Prime Minister Hun Sen announced a 10% rebate on Export Management Fees (EMF) as a response to the concern expressed once again by Van Sou Ieng, chairman of the Garment Manufacturers Association of Cambodia (GMAC). The measure comes as a helping hand to the sector, already suffering from the first consequences of the world economic crisis and witnessing an important fall-off in its orders from the United States, one of Cambodia's main clients in the garment industry. But Van Sou Ieng's request was only partially met. Indeed, the latter was asking for a rebate “of at least 30% on EMF and other governmental charges, in order to sustain the durability and competitiveness of the industry”. Yet, the big boss of the Cambodian textile industry did paint a negative picture of the current situation and perspectives for 2009 so as increase the chances of being heard.
Unprecedented challenges
Van Sou Ieng, who is also the co-chairman of the Export Processing and Trade Facilitation Working Group, declared in the introduction to his speech at the Government-Private Sector Forum, a biannual event during which entrepreneurs voice their demands to members of the executive power, that “At the moment, the challenges that the textile industry is faced with could not be greater, because the whole world is now crisis-stricken and Cambodia has not been spared.”
“Every day, it is said that companies lose millions of dollars and that some of them go bankrupt. But what is most worrying is the fact that many of them are Cambodia's clients. This is particularly the case of Gap, Macy's, Levi's, Kohl's, Liz Claiborne, Mervyn's, etc. Not a single one has been spared and all have suffered heavy losses”, Van Sou Ieng reported. “America, the main market for Cambodia's garment exportation, is cutting its expenses. In the month of November, companies usually have their order books filled in until the month of April. Right now, they still have no idea of what they will be doing in January 2009 and most of them are running on 70% of their production capacity.”
The battle of prices
The president of the GMAC also deplored an increased competition which does not leave Cambodian entrepreneurs much leeway in their actions. “'Low prices' is the ruling expression now. The lowest price is the one which will generate orders – and nothing else”, he declared, urging “the government, unions and any NGO who would be keen to improve Cambodia's industrial situation to consider [their] actions with utmost caution before implementing them, so as to make sure they will help supporting our market shares if possible, and that they will not dampen the growth of the textile industry”.
 Phnom Penh (Cambodia), 21/11/2008. An entrepreneur at the Government-Private Sector Forum held by the Council for the Development of Cambodia (CDC)
© John Vink / Magnum
Although the Prime Minister did evoke “a period of incertitude in the world” in his opening speech, his stance was generally more optimistic as he reckoned Cambodia's situation was “generally good” in the “three sectors of agriculture, industry and services”, compared with other countries.
The IMF branded too “conservative”
The head of government even quoted predictions for the country's economic growth that were superior to the International Monetary Fund's ( IMF) figures, thought to be “conservative”. According to Hun Sen, the Gross Domestic Product (GDP) corresponding to the first three quarters of the year 2008 registered an 11.2% increase compared with the figures registered at the same period of time in 2007. Generally speaking, despite the decrease in orders made by America in the garment industry and the bad weather conditions which cut down agricultural productivity, the economic growth rate is situated, according to the Prime Minister, in the region of 7%, whereas the IMF's predictions are more around 6.5%. “The IMF predicts a growth rate of 5% in 2009 [4.75% according to the predictions published by the institution at the beginning of November]. But these estimates are more conservative than realistic. We will be able to achieve 5%”, the head of government insisted, and acknowledged that it was “better having conservative estimates than setting impossible goals”.
In response to Van Sou Ieng's concern, right after the latter's speech, Hun Sen claimed he “also shared his worries”. “The crisis, small or big, will affect us”, he admitted, pointing out that “the bedrock of economic growth is not wide” and that the country depends too much on the textile and tourism industries. “This is why the government opened another door there so as to strengthen the farming sector”.
When the American elephant squashes the Asian goat
The prime Minister claimed to be conscious of the ongoing crisis. “The [1997] Asian crisis was not as serious as the current one. It only affected a small goat, and the big elephant [the United States] was then able to save it. But today, the elephant is in a bad way, and by falling, the elephant squashes the goat...”
Having made the zoological observation, the head of government refused to fully accede to the garment industry entrepreneurs' request about a 30% rebate on exportation fees and reminded the audience that they had already been granted a 10% rebate on the occasion of the 11th Government – Private Sector Forum in January 2007. “We can decide at present to extend the rebate [on those fees] by 10%. But we cannot go any further, because the State cannot go bankrupt like the private sector!”
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