THE IMPACTS OF GLOBAL FINANCIAL CRISIS ON CAMBODIA’S GARMENT SECTOR

In the new millennium, Cambodia has put an end to its past miserable history of devastation due to war, anger, revenge, hostility and malevolence (Hing, 2003). Cambodia has undergone a difficult transitional period as the command economy moved into a free-market economy.  The integration of Cambodia into the regional framework and normalization with the international community improve its ability to attract foreign direct investment for development. Foreign direct investment has been a catalyst for the globalization process, which characterizes the economy of the modern world. 

The global financial crisis really started at the beginning of 2008 (CDW, 2009). Many stock exchanges around the world have fallen down and large financial institutions have collapsed or bankrupted. Many countries around the world received the bad impact from this crisis not only developing countries nor developed countries such as United State, European Union and some Asian countries.

The bad phenomenon from inter-connected business led to the economic slowdown and unemployment and led the developing countries into poverty. Cambodia is one of the countries which impacted from global financial crisis, and Cambodia has suffered so much from it. The financial crisis affected in both on micro-economic and macro-economic and also affected on social problem and poverty too (CDW, 2009). Four main pillars are affected from the crisis such as garment industry, construction, tourism, and agriculture.  The garment sector is one of the most important tools for Cambodia economic development, so it plays a vital role in providing jobs and benefits to Cambodia.

Export-oriented garment manufacturing emerged in Cambodia after the restoration of peace and resumption of normalized political and economic relations with the global community in the mid 1990s (MCLPCGI, 2005).

According to the Economic Review (GSWSAQ, 2009), the garment industry currently contributes more than 85% of Cambodia's exports, and the two major export markets for Cambodia garment are the United States and the European Union (EU).

Garment sector is a very important factor for Cambodia economy. As we can see, Garment export has grown dramatically over the past decade, from $26 million in 1995 to $1.6 billion in 2004. Also one-third of Cambodian labor is employed by this garment sector (MCLPCGI, 2005). The unemployment rate of Cambodian’s citizen decreased, and the Cambodian’s real gross domestic product (GDP) has grown sharply at about 9.1% per year on average. 

The purpose of this project is to find out the impacts of global financial crisis on Cambodia’s economy, unemployment and standard of living, especially on garment sector.