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from China. Furthermore, Vietnam, a main competitor of Cambodia, continued to be subject to quotas after 2004 as it only became a WTO member in January 2007. Phase 3: Global Economic Crisis
Due to the global economic crisis global demand for clothing products sharply declined in 2008 and 2009. The crisis has affected many countries around the world. Cambodia’s clothing sector has been one of the hardest hit in the region. GMAC reported that the slowdown in orders started in the second half of 2008 and continued in 2009. Looking at import data by Cambodia’s trading partners, total clothing exports increased by 7 percent in 2008, which is considerable lower than growth rates in previous years (see table 4.1). Clothing exports to the United States fell by 2 percent in 2008 and 21 percent in 2009 and clothing exports to the EU increased by 6 percent in 2008 and declined by 3 percent in 2009 (see tables 4.6 and 4.7). Looking at Cambodia’s export data, total export increased by 4 percent in 2008 and decreased by 19 percent in 2009. Exports to the United States decreased by 2 percent in 2008 and 26 percent in 2009; exports to the EU increased by 4 percent in 2008 and decreased by 13 percent in 2009. Not only have orders decreased but prices have been affected considerably, in particular in the second half of 2009. All firms interviewed reported that the pressure on prices from buyers has increased due to the crisis and that they had to reduce prices on average by 5 to 10 percent (which, however, varies significantly from product to product). Unit value analysis for U.S. and EU-15 exports of Cambodia shows that unit values have generally declined for woven and knit products since 2000.3 For the United States, unit prices for knit and woven products (where volumes are reported in dozens4) declined in 2008 and 2009, as well as post-MFA in 2005 and 2006. For the EU, unit values of knit and woven exports declined in 2008; however, unit values of woven exports increased in 2009.5 Data from Cambodia’s Ministry of Economy and Finance shows that unit prices of Cambodia’s total clothing exports declined by 10 percent in the first half of 2010 compared to the previous years—to the United States by 11 percent and to the EU by 8 percent (Seiha 2010). Figure 4.1 shows a decline in unit prices since 2004, in particular for exports to the United States. Besides prices, lead times also have been reduced
Figure 4.1. Unit Prices of Cambodia’s Clothing Exports
US$/dozen
50
30
United States
EU
Total
02 De c-0 2 Ju n03 De c-0 3 Ju n04 De c-0 4 Ju n05 De c-0 5 Ju n06 De c-0 6 Ju n07 De c-0 7 Ju n08 De c-0 8 Ju n09 De c-0 9
nJu
De c-0
1
10
Source: MEF; Seiha 2010. Note: Export price in US$/dozen.