Garment and footwear exports from Cambodia to the US fell by eight per cent during the first half of the year. Garments comprise the largest component of Cambodia’s export basket to the United States, the country’s biggest single country export market. In 2015, garment shipments accounted for $1.7 billion of the country’s total $3 billion exports to the US. It’s expected that the decline in exports would continue through the end of 2016 as garment and footwear manufacturers shift their production to more competitive countries such as Vietnam, China and Bangladesh.

Investors are wary of setting up factories in Cambodia. The country’s reputation as a low-cost production base has been deeply damaged by strikes, labor unrest and wage hikes. The garment sector employs about 7,00,000 workers. However, the US decision to grant Cambodia a tariff exemption on travel goods under its Generalised System of Preferences (GSP) program could boost its local garment industry.

Cambodia has a clear competitive advantage in terms of producing travel goods. The GSP expansion to include travel goods made in Cambodia has the potential to greatly increase exports to the US and create tens of thousands of new jobs for Cambodians.