Measuring Competitiveness and Labor Productivity in Cambodia's Garment Industry

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MEASURING COMPETITIVENESS AND LABOR PRODUCTIVITY IN CAMBODIA'S GARMENT INDUSTRY

JUNE 2005 This publication was produced for review by the United States Agency for International Development. It was prepared by Nathan Associates Inc. and its partner organizations.

Measuring Competitiveness and Labor Productivity in Cambodia’s Garment Industry

DISCLAIMER The views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

Sponsored by the Economic Growth office of USAID’s Bureau of Economic Growth, Agriculture and Trade (EGAT), and implemented by Nathan Associates Inc. under Contract No. PCE-I-00-00-00013-00, Task Order 013, the Trade Capacity Building (TCB) Project helps developing countries assess their trade constraints and prioritize their traderelated technical assistance needs. The project provides trade experts for short-term technical assistance in developing countries and assists USAID missions in designing, implementing, monitoring, and evaluating technical assistance that will stimulate economic growth and reduce poverty. Electronic copies of reports and materials related to trade needs assessments, resource guides, and trade training workshops are available at www.tcb-project.com. USAID Missions and Bureaus may seek assistance and funding for activities under this project by contacting John Ellis, USAID/EGAT, TCB Project Task Manager at jellis@usaid.gov.

For further information or hard copies of TCB publications, please contact Erin Endean Nathan Associates Inc. Chief of Party, TCB Project eendean@nathaninc.com

The authors of this report are Lynn Salinger of Associates for International Resources and Development; Sok Hach, Chea Samnang, and Neou Seiha of the Economic Institute of Cambodia; and Mauro Pereira, Heinz Reich, and Jan Urlings of Werner International.

Contents
Executive Summary 1. Why This Study? 2. Cambodian and Global Industry Shifts 3. Description of Cambodian Garment Industry and Sample Survey Sample Survey Design and Implementation Description of the Industry 4 Defining and Measuring Labor Productivity Measuring Labor Productivity Determinants of Labor Productivity 5. Benchmarking Productivity Factors Benchmarking Parameters General Observations Benchmarking Results International Benchmarking Comparisons 6. Conclusions and Industrywide Recommendations Conclusions Recommendations Bibliography Appendixes Appendix A. Detailed Survey Findings Appendix B. Regression Analysis of the Determinants of Labor Productivity Appendix C. Garment Industry Training v 1 3 9 9 10 17 17 18 19 19 19 23 25 31 31 32 37

II

CONTENTS

Illustrations
List of Tables

Table 2-1. Evolution of Cambodia’s Garment Industry Table 2-2. U.S. Import Duties on Key Clothing Categories Imported from Cambodia, 2004 Table 2-3. U.S. Apparel Imports 1995–2005: Evolution of U.S. Market Share of Top 10 Suppliers Table 2-4. Comparison of Year-to-Date Growth Rates of U.S. Textiles and Apparel Imports Table 2-5. Comparison of Volume of Cambodian and Chinese Imports to United States for Key Clothing Categories, Year-to-Date Table 3-1. Garment Industry by Number of Employees Table 3-2. Garment Industry by Owner’s Nationality Table 3-3. Garment Industry by Product Manufactured Table 3-4. Garment Export Market Share by Value (%) Table 3-5. Year of Establishment of Garment Factories Table 3-6. Factory Owners’ Garment Industry Experience Table 3-7. Imports of Fabric by Country Table 3-8. Imports of Accessories by Country Table 3-9. Factory Intentions to Invest Table 3-10. Factory Investment Objectives Table 5-1. Benchmarking Parameters Table 5-2. Characteristics of Cambodia’s Factories by Quartile List of Figures

4 5 6 6 7 10 11 12 12 12 13 13 13 14 14 20 24

Figure 5-1. Quartile Benchmarking of the Cambodian Garment Industry, 2005 Figure 5-2. Factor Benchmarking of the Cambodian Garment Industry 2005 Figure 5-3....
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