Cambodia's boom depends on USA

The streets of this riverside capital are thick with traffic, sport-utility vehicles favored by foreign aid workers as well as the more modest cars piloted by locals. Scaffolded construction sites dot the dusty downtown and locals spy Western investment bankers with the enthusiasm reserved elsewhere for celebrity sightings.

"It seems like a frontier town, with all of the excitement, all of the energy," says Nisha Agrawal, the World Bank's country manager.

The notion of a Cambodian boom may seem incongruous, if not slightly absurd. This remote corner of Southeast Asia, after all, remains best known for its "killing fields," where the genocidal Khmer Rouge slaughtered or starved at least 1.5 million of their countrymen.

But after a generation spent slumbering in the shadows of its fast-rising neighbors, Cambodia is on the move. The economy this year is expected to expand at a robust annual rate of 9.5% after three consecutive years of double-digit growth, the World Bank says.

U.S. brands fuel boom

Americans have fueled the boom with their purchases of Levi jeans, Gap gps clothes and Nike nke athletic shoes, all bearing made-in-Cambodia labels. Whether consumers will continue doing so, however, now depends on the complexities of U.S. trade law.

Cambodia's thriving garments industry has been protected since 2005 by U.S. restrictions on imports of clothing from China. But those limits expire by the end of 2008, potentially opening the door for China to seize market share at the expense of Cambodian producers.

China could grab 68% of the world apparel market, up from 50% today, says Roland Eng, the country's leading diplomat and a former Cambodian ambassador to the United States. "They will kill everybody," he says.

The government here is pinning its hopes on proposed U.S. legislation that would eliminate tariffs on products from the world's poorest countries, including Cambodia. This year, Cambodian clothing shipments to the USA are running at an annualized value of $2.6 billion, about twice the 2003 level, according to Commerce Department data. Without preferential access to the U.S. market, orders for Cambodian goods will plunge 35% as Chinese shipments soar, says Van Sou Ieng, chairman of the Garment Manufacturers' Association in Cambodia.

Factories here supply clothing to some of the USA's best-known brands, including Disney, dis Sears shld and Wal-Mart. wmt They've been drawn to Cambodia, despite sky-high electricity costs, inadequate roads and pervasive corruption, because of an innovative program promoting good labor standards that began nine years ago with U.S. help.

The United States guaranteed Cambodia a specified amount of sales every year, encouraging the country's push to position itself as the sweatshop-free producer in a fiercely competitive global clothing market. "Cambodia is a special country," says Michael Kobori, vice president for global code of conduct at Levi Strauss, which buys its Signature model jeans from a Cambodian producer.

The San Francisco-based clothing company, which plans to continue relying on local suppliers after the limits on Chinese products are lifted, supports the tariff-elimination bill.

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