Covid-19 Is Affecting Garment Industry in Asia, including Cambodia
The decline in orders for clothing will cause many factory workers in Asia to lose their jobs and it may increase poverty rates again.
Many department stores such as J.C Penney and J.C Crew have filed for bankruptcy in the past few months due to the disruption of sales caused by the Covid-19 outbreak. This could mean that some companies may start to look at building their supply regions closer than the growing number of factories in the Far East. For many developing countries in Asia, this could be a massive hindrance to their economic growth since the garment industry is the backbone of their economy.
Garment manufacturing has been growing at a remarkable rate in the past decades in Southeast Asia and a key driving reason behind economic growth. Many suppliers are searching for labor workers in these countries because of low-skilled workers and low wages, meaning low costs of production.
According to the World Trade Organization's data in 2018, Bangladesh, Cambodia, and Vietnam are among the top ten clothing exporters to the rest of the world. Myanmar is growing in this sector starting in 2013. Clothes make up 85% of Bangladesh export revenues and employ about four million people.
In Cambodia, the garment sector accounts for 16% of the country’s gross domestic product (GDP) and 80% of the country’s export revenues in 2016. According to the International Labor Organization (ILO), the garment sector is operating in 643 factories and providing jobs to over 635,000 people in early 2017.
Many factory workers in countries such as Myanmar and Cambodia have lost their jobs after the shutdown of the factories to control the spread of the virus, but largely due to the cancellations of orders or demands by companies to lower the prices of goods.
In Cambodia, over 200 factories that produce clothing and footwear for H&M, GAP, or Adidas force to stop their operations. Because of the decline in orders, many factories could not operate with the ongoing fixed costs, so they have to shut down their factories and will not reopen soon.
The Garment Manufacturers Association in Cambodia (GMAC), the Cambodian Footwear Association (CFA), and the European Chamber of Commerce in Cambodia (EuroCham Cambodia) said that about 400 garments, footwear, and travel goods factories in Cambodia have suspended their operations, leaving over 150,000 workers jobless due to the COVID-19 pandemic.
“This number is likely to rise sharply in the coming weeks as numerous brands and retailers in Europe and North America have canceled or delayed orders as the result of the drop in retail sales in Europe from the pandemic,” the statement said.
The shutdowns of the factories will have drastic effects on factory workers, many of whom are low-skilled workers with little education coming from rural villages, where they can earn about $2 per day. Moving to work in the factories, they are able to use part of their wages to pay for their rent, food, children’s education, and other expenses.
In Cambodia, the government is providing a $40 stipend on top of the $30 stipend from factories. Despite these payments, they are still struggling to meet their daily needs. Losing jobs means they will have to move back hometown to barely earn enough or find any other jobs. Some safety concerns have not been fully addressed in some factories. The shutdowns of some factories mean that these workers will be forced to work at any conditions to earn their living.
Sources: The Wall Street Journal, khmertimes.kh, ASEAN Briefing, World Trade Organization, Open Development Cambodia, International Labor Organization
By: Noeut Sokhoeun