Officials in Phnom Penh believe the new USTR ruling on duties on Cambodian bag exports could spur a doubling in the industry.

Officials in Phnom Penh believe the new USTR ruling on duties on Cambodian bag exports could spur a doubling in the industry.

Shutterstock / Dorason

PHNOM PENH, Cambodia The U.S. Trade Representative’s recent expansion of duty-free benefits for travel bags imported from Cambodia is a major coup for the country’s fledging industry and has the potential to double exports to $100 million in two years, manufacturers said.

The USTR’s ruling on travel bags — which includes luggage made with fabrics, backpacks, handbags and wallets — means that Cambodia, classified as a Least Developed Beneficiary Developing Country, would be able to export these products without having to pay taxes as part of the Generalized System of Preferences.

Neighboring Southeast Asian countries — such as Thailand, Philippines and Indonesia — missed out on the expansion, despite lobbying from various brands such as Tumi and Michael Kors that source from them.

The manufacturing of travel bags is a niche part of Cambodia’s $6.2 billion garment sector. It has about 15 factories producing them, but only roughly 10 of them are eligible for duty-free export according to USTR’s criteria, said Kaing Monika, deputy secretary general of the Garment Manufacturers Association in Cambodia.

“I think [the industry] might double in the next two or three years, and we would expect the generation of jobs to be about 20,000 workers more,” Kaing said. “There could also be an expansion of 10 to 15 factories within a year.”

As one of the 18 petitioners for this expansion, GMAC secretary general Ken Loo is pleased by the USTR announcement and said that Cambodia’s potential for growth in this area can be great.

Before being included in the GSP program, taxes for travel bags destined for the U.S. ranged from 8 to 30 percent of export costs, depending on the material of the products, Loo said. He added that last year’s exports were $50 million, more than double 2014’s exports of $20 million.

“With this, we can expect more investments and more factories to come to Cambodia that are producing bags,” he said.

This ruling is a sunny spot amid a year of troubling news for Cambodia, which has been roiled by industrial action and political conflict. Most recently on Sunday, a prominent political analyst, Kem Ley, was gunned down in broad daylight and killed. Civil society workers have been arrested in connection to a tenuous case against opposition leader Kem Sokha — a case that many in Cambodia believe to be politically motivated.

In response, the U.S. Senate Appropriations Committee approved a bill that threatens $77.8 million in aid for Cambodia in the fiscal year of 2017, and it is now awaiting passage in Congress. According to the bill, receiving this sizable aid would be contingent on the Cambodian government end the harassment and violence against civil society and political opposition.