Heightened export restrictions—especially towards textiles and garments that are important to Cambodia's economy—have forced Cambodia to diversify the export sector and elevate the manufacturing sector. Efforts have been made to attract foreign direct investment (FDI), especially from Japan, into other manufacturing segments, mainly electronic components for automobiles as well as other automotive parts. Moreover, Cambodia's manufacturing sector has been linked to regional production networks, while surplus labor within the agricultural sector— the largest sector there—will receive skills development training under a government initiative in preparation for growing employment needs for new manufacturing work.
Such progress will inevitably bring about diversification within the export sector. KResearch, therefore, expects that Cambodia's 2025 outbound shipments of electronic components, as well as bicycles/auto parts will increase to 10.0 percent and 14.0 percent of total exports, respectively, versus 4.0 percent and 6.0 percent in 2015. Meanwhile, textiles and garments will continue to be major export categories in Cambodia's outbound trade, since the value of these items is poised to surge.
Expansion in Cambodia's electronic component manufacturing, mostly for automobiles, along with other auto parts, remains mainly reliant on manufacturing facilities in Thailand because their development is an offshoot of relocated labor-intensive work per the Thailand+1 strategy, seeking to meet Japanese car manufacturers' goals towards lower production costs. Such adjustments have caused Thai operators to encounter increasing pressure vis-à-vis cost management. As a result, they need to readjust, or consider investing in Cambodia to benefit from the cheaper labor costs there, as well as to retain existing customers who may seek to invest more in Cambodia in the near future.
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