The garment industry in Cambodia saw its start in the mid-1990s, with the passage of the 1993 Constitution of the Kingdom of Cambodia (the “Constitution”) – which established a free-market economy in Cambodia – and the 1994 Law on Investment, which provided significant incentives for investors in the garment industry. In 1999, Cambodia signed the Textile and Apparel Trade Agreement (“TATA”) with the United States (“US”), under which the US imposed quotas to imports from Cambodia. Under TATA, Cambodia’s import quotas were to be increased annually in exchange for a gradual improvement in working conditions in the factories, in compliance with domestic and international labor laws and standards. In 2001, in order to monitor compliance with TATA, the International Labour Organization (the “ILO”) created Better Factories Cambodia (“BFC”) to monitor garment factories in Cambodia. Under this scheme, garment factories requiring an export license were mandated to accept unannounced exhaustive inspections by BFC inspectors.

These factors led to a rapid expansion of the Cambodian garment industry, with Cambodia quickly standing out among other Asian countries with large garment manufacturing sectors, such as China, Bangladesh and Sri Lanka. As Cambodia’s reputation for having a socially responsible manufacturing sector grew, an increasing number of international brands began to source from Cambodian factories, and soon the country and the industry became a model for other developing countries in Asia. After TATA expired in 2004, the RGC continued to use the ILO’s BFC program for monitoring compliance with labor laws and standards within the garment industry. As such, although factories no longer enjoyed the TATA-derived benefits of complying with labor standards, working conditions nevertheless continued to improve in the immediate years following the expiration of TATA.

Today, the garment industry remains a key pillar of Cambodia’s economy. There are approximately 558 garment factories operating in Cambodia, employing over 475,000 people. The garments are almost all destined for export, accounting for almost 80% of Cambodia’s merchandise exports, with the US, the European Union and Hong Kong as the main markets. Statistics released by the Ministry of Commerce for the first half of 2013 showed that garment and textile exports amounted to $1.558 billion – or 32% more than the same period in 2012.

For further details, please read our Policy Brief: Garment Industry in Cambodia.