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Sep 17, 2013

The Garment Industry in Cambodia

by Tim Sinclair
Cambodia’s garment industry has seen significant growth recently. According to data from the Ministry of Commerce, exports of garment and textile materials rose by 17.5 per cent in the first quarter of this year. Similarly, imports to supply production increased by 18.3 per cent.  This sector, which represents roughly 80 per cent of Cambodia’s total exports, is the country’s main source of income.

The growth has been caused primarily by the low wages offered in Cambodia. With a young workforce and the lowest wage rate in Southeast Asia, many new factories set up every month and begin exporting quickly.  Meanwhile, rising minimum wages in other countries such as China and Bangladesh make Cambodia a particularly appealing location for manufacturing operations.

1. Land Ownership

-  Cambodian law prohibits the foreign ownership of land. As such, investors need to consider implementing suitable mechanisms to enable them to secure key property assets (whether leased or owned outright) and provide protection against business interruption associated with the loss of operating premises.

- Whether buying or leasing land, property due diligence is critically important in Cambodia.  The use of proper due diligence allows you to identify and avoid property issues before they become “your” property issues.

2. Labor Issues

All commercial enterprises must comply with the Cambodian Labour Law, together with the various regulations made for the Cambodian garment industry, or face fines and in some cases, criminal charges).

3. Business Licensing

All commercial enterprises operating in Cambodia must comply with local commercial, taxation and business registration requirements, or face fines (and in some cases, criminal charges).  Full compliance with local business licencing requirements can be used as a tool to mitigate risk and implement a structure which will enable tax efficient profit repatriation.

4. Investment Incentives

Some commercial enterprises may qualify for the investment incentives (such as import duty exemption and profit tax holidays) provided for in the Cambodian Investment Laws.

Our real estatecommerciallabor and taxation advisers have the experience and expertise to deal with all of these issues and are available to support your potential business activities in Cambodia.  For more information, please consult our guide:Doing Business in Cambodia.

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Sciaroni & Associates is a leading professional and investment advisory firm doing business in Southeast Asia since 1993. Based in Cambodia with legal offices in Laos and Myanmar, we provide experienced advice and business insights to many of the world’s leading companies, governments, economic think tanks, global development funds, international NGOs and the Royal Government of Cambodia in accordance with strict international standards.
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