Business & Economy

Cambodia capitalizes on global demand for bikes due to pandemic

By Noel Caballero

Bangkok Desk, Aug 5 (efe-epa).- The growing global demand for bicycles as a result of the COVID-19 pandemic has become an unexpected lifeline for the economy of Cambodia, the main exporter to the European Union and the world’s fifth-largest exporter of the product.

Between January and May, the worst months of the pandemic in this small Southeast Asian  kingdom, Cambodia exported 876,612 bicycles, an increase of 26 percent over the same period in 2019, according to recent Department of Statistics data.

It is an increase that, according to Lim Heng, vice president of the Cambodia Chamber of Commerce, will continue throughout the year.

More than 70 percent of the bikes assembled in these first five months were destined for the EU, to which Cambodia exported around 1.52 million bicycles in 2018, a market valued at $331 million, representing 18 percent of the bloc’s bicycle imports, according to the latest data published by the World Bank.

With these figures, the kingdom, which also has important exports to the United States and Canada, has sneaked into the top five world exporters along with China, Taiwan, the Netherlands and Germany.

The COVID-19 pandemic has triggered a demand for bicycles worldwide and especially in northern Europe, which, according to EU analysts, will translate into greater demand in Cambodia, where other industries such as the important textiles sector have been hit hard by the global economic crisis stemming from the spread of the new coronavirus.

Taiwanese bicycle maker A&J, with an annual output of about 550,000 units, started work in 2006 from Cambodia’s Bavet Special Economic Zone, near the border with Vietnam and where it employs around 1,800 workers.

Seventy-five percent of its production is destined for the EU, while 20 percent goes to the US and Canada, with the remaining 5 percent going to other countries, A&J CEO Jon Edwards told EFE.

One of the incentives to establish itself in the Southeast Asian country is the tax-free imports that the European Union maintains with Cambodia thanks to the Everything But Arms program, Edwards said via email.

On Feb. 12 the EU revised this preferential trade deal, which guarantees duty-free access to the European market for exports, excluding weapons, in response to what it said is the deterioration of human rights in Cambodia.

Brussels in the end chose to limit its restrictions to the textile, footwear and sugar sectors, corresponding to a fifth of exports to the EU, and the flourishing bicycle industry was spared.

Production during early stages of the pandemic was initially disrupted “several weeks” due to supply chain problems. But despite the interruptions, work remained in factories where security measures have been put in place to combat the virus, such as wash stations at the entrance and exit and temperature checks for all workers.

“Demand fell at first due to the worldwide panic/shock, but now demand is good as people are coming back to cycling instead of public transport,” said the A&J CEO.

“People have been stuck at home and are now more able to exercise, and holidays have been canceled so cash is available,” he added.

Last year the Cambodian Ministry of Commerce announced a plan to promote the manufacturing of components used in the production of bicycles in the country. These components have in the past mostly come from Thailand and Vietnam, among other countries.

At least two other large manufacturers from Taiwan, Speedtech and Smart Tech, produce bicycles in this country, and producers have indirectly benefited from the commercial tension between China and the US.

Due to the trade war between the two world powers, several companies, such as the US’ Kent International, which until now maintained production in China, have decided to move their production to the Khmer kingdom, where manufacturing is key to its economy. EFE-EPA


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