Cambodia’s garment sector is expanding, though productivity is yet to see a sharp increase. Investors require certain returns on their invested capital—if they do not obtain this, they may reconsider further investments in the Cambodian garment sector. There is some scope for productivity gains, but the prospects of dramatic acceleration in productivity growth do not appear strong in the short term.

Factories that are unable to ramp up productivity will simply have to shut down. Low productivity is due mainly to poor working conditions and improvements would depend on increased investment. Also global brands have yet to significantly raise prices they pay manufacturers. The prices being paid by buyers—mostly brands in the US and Europe—have stagnated, largely because of an increase in supply from countries including Vietnam and Bangladesh.

The benefits of flat, and sometimes falling, garment prices have been enjoyed in part by consumers. In both the US and EU, the cost of apparel rose by just 5.4 per cent between 2006 and 2015. Global brands can help reduce the financial burden on factories by paying higher prices. However, Cambodia’s garment sector continued to show strong growth this year, with revenue increasing by 14.5 per cent in the first quarter.