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Apparel Exports Fuel Cambodian Economy

International Monetary Fund report notes sector accounts for 80 percent of country's exports of goods.

GENEVA — The Cambodian economy is forecast to grow 6.7 percent in 2013, up from last year’s 6.5 percent, driven by resilient exports, largely of apparel, an International Monetary Fund report said.

The report said apparel exports “continued to expand by 10 percent (year-to-year) during the first three quarters of 2012, in part thanks to improved access to the European Union.”

Apparel accounts for more than 80 percent of Cambodia’s exports of goods. Overall, the IMF projects exports to grow 10.7 percent in 2013 to $6.3 billion and inflation to average 3.8 percent.

The IMF country assessment cautions the outlook is subject to considerable risks stemming from the fragility of the world economy, and from some domestic factors, including potential labor unrest. In a risk assessment, the IMF said, “Prolonged labor disputes and strikes could erode Cambodia’s competitiveness over the medium term.”

It also warns that spillovers from a deterioration of the euro zone financial crisis could be significant for the Southeast Asian nation of 14.5 million people. But the IMF noted that the impact, so far, “has been relatively contained, given Cambodia’s special zero-tariff access to the European Union.”

The IMF concluded that growth in Cambodia could reach 7.5 percent by 2017, but said this depends on a pick-up in the global economy and continued structural reforms, including the modernization of infrastructure.

Der Jiun Chia, a member of the IMF executive board from Brunei, in a presentation on behalf of Cambodia, said 1,015 megawatts of electricity generation capacity would be added in 2012-13 from the operation of six hydro power projects. The provision of more affordable electricity would also help boost export growth, especially in the manufacturing and apparel sectors, the official noted.

The Garment Manufacturers Association of Cambodia has often singled out higher electricity costs, along with lower productivity, as key factors why total manufacturing costs in the country, despite lower wages, are about 20 percent higher than in neighboring Vietnam.