Cambodia , Apr 08, 2025
Cambodia’s garment industry—long the backbone of its export economy—is facing a deepening crisis as orders from the European Union dwindle. Thousands of workers have already been laid off in recent months, and industry experts warn that more job cuts are imminent unless new markets or reforms are introduced swiftly.
The textile and apparel sector accounts for more than 60% of Cambodia’s total exports, employing close to 800,000 workers, mostly women. However, with rising inflation and slowing retail demand across Europe, brands are pulling back on large-scale contracts that once provided a steady stream of income for Cambodian factories.
In Phnom Penh’s Special Economic Zone, several garment manufacturers have shut down operations or suspended production. One such company, employing over 2,000 workers, cited “a sharp drop in purchase orders from EU partners” as the reason for its closure. “I worked there for six years, and suddenly we were all told not to return,” said Sophea, a seamstress and single mother. “There was no severance, no warning—just job loss.”
The Garment Manufacturers Association in Cambodia (GMAC) confirmed that at least 30 factories have ceased operations since the beginning of the year, leading to the layoff of tens of thousands of workers. GMAC attributes the decline not only to EU demand but also to increased competition from Bangladesh and Vietnam, where production costs remain lower.
Adding to the pressure is the partial suspension of Cambodia’s duty-free access to the EU market under the Everything But Arms (EBA) scheme in recent years due to concerns about human rights and labor conditions. This has led to tariff increases on some Cambodian exports, further diminishing competitiveness.
In response, the Cambodian government has promised retraining initiatives for displaced workers and incentives to attract investment in light electronics, automotive components, and agri-processing. “We need to diversify our industrial base,” said Ministry of Commerce spokesperson Sok Chan. “Our overreliance on textiles has made us vulnerable.”
Still, for many on the ground, these promises ring hollow. Workers and factory owners alike say that without immediate relief—such as wage support, tax breaks, or new trade deals—Cambodia’s manufacturing economy could face long-term setbacks.
As global demand patterns shift and supply chains adapt, Cambodia’s textile-heavy economy is being forced to evolve—faster than many are prepared for.
