"Extract from the intervention of H.E. Meng Saktheara, Director General of Industry, during the Annual Review Meeting on Performance in 2009 and Directions for 2010 of the Ministry of Industry, Mines and Energy."

In recent past decade, Cambodia industry and SME sector enjoyed a strong and high growth and prosperity and contributed to high growth rate of the economy. But with the global crisis in 2008-2009, the sector is severely affected.

The most affected sector is garment industry, the main basis of the Cambodia's industry. The era of garment industry may be ended. To sustain high economic growth rate and cope with external risks, the government is looking at possible diversification of current industrial basis and promotion of local SMEs.

There is a strong hope for Cambodia to re-stimulate its industry growth rate, using its great potentials in natural resources and cultural values. The industry sector growth rate increased from its shared value in GDP of 5-6% in late 1993 to 26-27% in 2008. The sector is also the main source of Foreign Direct Investment (FDI) attraction. In 2009, the share of industry sector in term of total FDI attraction was about 36.5%. Currently the industry provides about 500,000 jobs to local people.

Despite significant growth, the industry basis remains narrow, mainly based on few sectors such as: export garment industry and construction, and highly exposed to external risks. The recent global crisis, thus, began to severely impact Cambodia industry since late 2008 and continued its harshest effects throughout 2009. This effect causes very significant contraction of the sector, due to lower competitiveness and fewer stimulus resources.

In 2009, the total number of large size manufacturing industry rose about 2.6%, comparing to 17.2% in 2007. The total number of large size factories registered with the Ministry of Industry, Mines and Energy in 2009 is 556 establishments, of which 422 establishments are garments. The contraction of large size industry sector is more significant in term of its shared values in GDP. The overall total product value of dropped by 8.8% comparing to year 2008, and in which the value in garment sector dropped by 11.8%. This contraction results in a significant negative growth rate in the overall industry sector, despite other manufacturing sectors remain strong.

In contrast with the large size factories, the small and medium size factories showed a remarkable growth rate in 2009. This is mainly due to the sector's close links with agriculture and domestic markets. The most significant growth is observed in food and beverage sector. In 2009, the total number of small and medium factories and handicrafts registered with MIME is 35,560 establishments. This figure shows a growth rate about 8.4% comparing to 2008. In term of product value, this sector is estimated to have a growth rate of about 9.3% comparing with the value in 2008.

Although there is strong growth in the small and medium sector, its value could not off-set the contraction of the large scale factories. The drops in growth rate in industry sector resulted in a shifting of labor from this sector to other sectors such as agriculture and services.