Cambodia’s garment and footwear exports may grow five per cent this year compared tp seven per cent in 2016. Apparel and footwear sector accounts for more than 70 per cent of the country’s total exports, with the vast majority of its products destined for the EU, US and Canada.

The country’s garment sector is expected to grow at a slower pace owing to increased competition from neighboring countries. However, preferential US trade access for specific travel-related items could help prop up the sector in the near term. Cambodia’s advantages remain its abundance of cheap labor and preferential trade status under the EU’s Everything But Arms scheme and duty-free access to the US for travel goods.

However, minimum wage hike may jeopardise the sector if worker productivity does not increase. Productivity remains a paramount concern. On paper monthly salary is 60 per cent cheaper in Cambodia compared to China. But the production speed in Cambodia is only 35 per cent compared to 75 per cent in China, which at the end of the day only makes Cambodia 30 per cent cheaper, when efficiency is factored in.

Cutting electricity costs or lowering import and export fees can lighten the burden on factory owners. If that doesn’t happen, production will suffer.