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Future Prospects of the Garment Industry of Cambodia

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Abstract

This paper examines the impact of the participation of Vietnam to WTO as well as of the abolition of restrictions on Chinese exports of textiles and clothing to the US and EU on the Cambodian Economy, by using a computable general equilibrium model. A seminal aspect of this paper is that this paper has succeeded in constructing a Cambodia specific computable general equilibrium model by using one of the first ever input-output tables of Cambodia with 35 different production sectors. One of our most striking simulation results is that the welfare loss would be about 905 million US dollars when either the amount of exports of apparel products from Cambodia or the amount of imports of textiles to Cambodia decreases by 30 percent caused by the participation of Vietnam to WTO as well as the abolition of restrictions on Chinese exports. Another striking result is that the government should reduce the production tax rate for the apparel sector by 68.1 percent in order to keep the welfare of Cambodia unchanged when exports of apparel products decreases by 30 percent. Our simulation results predict that the Cambodian economy has substantially been damaged by the participation of Vietnam to WTO as well as the abolition of restrictions on Chinese exports to EU and the US.

Suggested Citation

  • Sak Sambath & Ryuta Ray Kato, 2009. "Future Prospects of the Garment Industry of Cambodia," Working Papers EMS_2009_12, Research Institute, International University of Japan.
  • Handle: RePEc:iuj:wpaper:ems_2009_12
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    File URL: http://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2009_12.pdf
    File Function: First version, 2009
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    References listed on IDEAS

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    1. John Whalley, 2006. "The Post MFA Performance of Developing Asia," NBER Working Papers 12178, National Bureau of Economic Research, Inc.
    2. G√ľnseli Berik, 2009. "Labour Standards," Chapters,in: Handbook of Economics and Ethics, chapter 41 Edward Elgar Publishing.
    3. N/A, 1985. "General Policy," India Quarterly: A Journal of International Affairs, , pages 74-79.
    4. Montfort Mlachila & Yongzheng Yang, 2004. "The End of Textiles Quotas; A Case Study of the Impacton Bangladesh," IMF Working Papers 04/108, International Monetary Fund.
    5. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521266550, December.
    6. Ballard, Charles L. & Fullerton, Don & Shoven, John B. & Whalley, John, 2009. "A General Equilibrium Model for Tax Policy Evaluation," National Bureau of Economic Research Books, University of Chicago Press, edition 0, number 9780226036335.
    7. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "A General Equilibrium Model for Tax Policy Evaluation," NBER Books, National Bureau of Economic Research, Inc, number ball85-1.
    8. Yamagata, Tatsufumi, 2006. "The Garment Industry in Cambodia: Its Role in Poverty Reduction through Export-Oriented Development," IDE Discussion Papers 62, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    9. N/A, 1985. "General Policy," India Quarterly: A Journal of International Affairs, , pages 112-117.
    10. Yana van der Meulen Rodgers & Gunseli Berik, 2006. "Asia's Race to Capture Post-MFA Markets: A Snapshot of Labor Standards, Compliance, and Impacts on Competitiveness," Working Paper Series, Department of Economics, University of Utah 2006_02, University of Utah, Department of Economics.
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    Cited by:

    1. Pisey Khin & Ryuta Ray Kato, 2010. "The Impact of the Global Economic Crisis on Cambodia," Economics Bulletin, AccessEcon, vol. 30(3), pages 2346-2370.

    More about this item

    Keywords

    Cambodia; Computable General Equilibrium (CGE) Model; Garment Industry; WTO; Textile; Clothing; Apparel; China; Vietnam; Safeguard Restrictions; Multi-Fiber Arrangement (MFA);

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D60 - Microeconomics - - Welfare Economics - - - General
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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