PHNOM PENH : Cambodia will extend a tax holiday for its garment sector until late next year to protect it from Vietnamese competitors and the expiry of US and EU safeguards in 2007, an official said.
Neighbouring Vietnam will become a stronger competitor if it joins the World Trade Organisation later this year as expected, broadening its access to Western markets, Cambodian government spokesman Khieu Kanharith told AFP.
"Their workers are skilful, their salaries are low and they have no worker riots or demonstrations," Khieu Kanharith said.
"The only way that we can attract (garment companies) is to allow them not to pay tax on their profits...otherwise they will go to Vietnam or elsewhere."
The spokesman said the tax break aimed to protect 300,000 jobs in the Cambodian garment industry, which accounts for 80 percent of the impoverished country's export earnings. Most workers are poor women from rural areas.
The Cambodian textile industry was thought doomed after January 2005 when an international quota system ended that had given Cambodia special access to the US market in return for improved labour conditions.
Instead, business has picked up, helped by continued US and European Union safeguards set to expire at the end of 2007.
Exports from some 240 factories last year rose 10 percent to almost 2.2 billion dollars, said the UN International Labour Organization.
Khieu Kanharith said the government would grant the extended tax holiday to those garment companies which applied for business licenses before June 2005.
