GENEVA — Despite Cambodian exports of garments and footwear posting a robust 7.2 percent increase to $7.3 billion in 2016, the number of exporting factories registered in the sector fell by 10.4 percent and the number of workers employed in those plants declined by 2.9 percent compared to 2015, a report by the International Labour Organization said.

The ILO report reveals apparel accounted for the bulk of exports, up 6.3 percent to $6.5 billion, with the European Union the biggest destination, with shipments valued at $2.6 billion, up from $2.5 billion a year earlier, followed by the U.S. with $1.7 billion, down from $1.8 billion posted in 2015.

ILO analysts said the divergence is likely due to a rise in industry productivity and an increase in subcontracting factories.

“A rise in employment and production in subcontracting factories could be a concerning development if subcontracting is used as a way to undercut regulations, including labor law and the minimum wage, ” said Maurizio Bussi, director of the ILO country office for Thailand, Cambodia and Laos.

The report highlights that, unlike registered exporting factories, subcontractors are not monitored by the ILO-IFC Better Factories Cambodia, and may also receive less attention from national law enforcement agencies.

“The situation should be carefully monitored by stakeholders and relevant agencies of the government of Cambodia,” Bussi said.

The report says export-oriented factories have been “cognizant of the need to further boost productivity, given that wages have been increasing and garment prices have not.”

The minimum monthly wage in the garment and footwear sector, it said, increased from $80 in 2013 to $128 in 2015, to $140 in 2016 and $153 from Jan. 1.

The report estimates that in 2016, the productivity growth rate increased by about 9.3 percent in the sector, after falling by a compound rate of 3.4 percent a year from 2012 to 2015.

But the ILO report also outlines a larger share of the garment industry’s output is being produced in subcontracting factories that are not registered as exporters.

The report points out the difference in the numbers between the National Social Security Fund, which registers all garment factories, whether exporting or non-exporting or subcontracting establishments, and the Ministry of Commerce, which lists only export-oriented plants, rose from 82 factories in 2014 to 106 in 2015 and 244 factories last year — 800 under NSSF compared to 556 registered with the MOC.

The MOC registered garment factories are monitored by the ILO-IFC Better Factories Cambodia program.

The ILO said that while the EU and the U.S. remain the top export destinations for Cambodia’s exports of garments and footwear, there is “an emerging sign of strong growth” to other markets with preferential access terms such as Japan, which accounted for 9 percent share in 2016, up from 2.7 percent in 2010; Canada, with a nearly 8 percent share in 2016, up from 0.5 percent in 2010, and China, with 2.3 percent, and where shipments were virtually zero in 2010.

With regards to foreign investment in Cambodia in 2016, the ILO report said, 121 new projects approved by the country’s investment board worth $3.2 billion, which included 41 garment projects valued at $175 million in fixed assets, represents a marked decline compared to 57 garment projects valued at $225 million in 2015, and 72 new garment projects valued at $408 million in 2014.

In 2016, the biggest investors in the sector were from mainland China, with a 36 percent share, followed by investors from Hong Kong, at 17 percent; Taiwan, 15 percent; the U.K., 6 percent, and Japan, with 2 percent.

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