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to be dyed and washed, which requires secure availability of water. Fourth, the textile sector is more knowledge and skill-intensive than the clothing sectors. The availability of labor with appropriate technical, design/fashion, and management skills is limited in Cambodia and there is a limited supply of formal training facilities (see below). Fifth, some regional competitors such as China are highly competitive in fabrics production with regard to price, quality, lead times, and availability and it will be difficult to match those countries. Thus, even though lead times and production flexibility would be improved by locally producing yarns and fabrics, this may not be the most cost effective means of production. Although these challenges have to be taken seriously, backward integration will be central to increase competitiveness with regard to lead times, production flexibility, and costs (that is, transport, port, and customs clearance) as well as to increase domestic value added and local linkages and spillovers. Moreover, preferential market access to the EU requires a two-stage transformation. The biggest advantage of local input production is lead times. For individual firms it is too costly to maintain an inventory of fabrics and more importantly production needs to be in accordance with the specification of buyers. Thus, fabrics can generally be only ordered after buyers have placed the orders. Lead times for input sourcing are, at the minimum, reduced by the shipping time when sourced locally, which on average accounts for 30 days from East Asia (from the mill to the factory). But due to closer relationships with local textile mills or even vertical integration, the time reduction is probably even higher. This is a crucial saving of time and money in a context where lead times become increasingly important in buyers’ sourcing decisions and it is particularly important for Cambodia, which has long lead times compared with competitor countries. For woven clothing items, firms in China are able to deliver clothing faster (40 to 60 days) than all other Asian countries. India is second (50 to 70 days), and Sri Lanka and Vietnam offer lead times comparable with Malaysia, Indonesia, and Thailand (60 to 90 days). Cambodia (80 to 110 days) lags significantly. Bangladesh needs even 90-120 days in woven. For knit clothing Bangladesh has integrated operations and Vietnam goes in the same direction. Cambodia has nearly no integrated operations in woven or knit. China, Malaysia, and Thailand have the same lead time for knit clothing, 50 to 60 days. Sri Lanka and Vietnam offer the same lead time as Indonesia—60 to 70 days. India has also 60 to 70 days. Bangladesh has lead times of 60 to 80 days in knits and Cambodia is last with 80 to 110 days (see table 4.12; Rasiah 2009). Thus, among competing countries in Asia, Cambodia’s lead times are relatively Table 4.12. Lead Times in Days for Woven and Knit Clothing, 2008 Country
Woven
Knit
China India Thailand Malaysia Sri Lanka Vietnam Indonesia Bangladesh Cambodia
40-60 50-70 60-90 60-90 60-90 60-90 60-90 90-120 80-110
50-60 60-70 50-60 50-60 60-70 60-70 60-70 60-80 80-110
Source: Gherzi Textile Organization, cited in Rasiah (2009).