The value of Cambodia’s international trade surged to $22 billion last year on double-digit growth of both imports and exports, according to newly released data from the Ministry of Commerce.

The figures show total exports topped $10 billion in 2016, an 18 percent increase over a year earlier, while imports grew to $12.3 billion, a 16 percent year-on-year increase.

Ministry officials declined to comment yesterday on the factors driving trade growth. However, the ministry’s data point to continued expansion of the Kingdom’s garment and footwear sector, which accounts for over two-thirds of the country’s exports by value.

A total of $8.9 billion of goods – nearly 90 percent of all exports – were shipped under the Generalised System of Preferences (GSP) and Most Favoured Nation (MFN) schemes, which allow many Cambodian products to enter markets with reduced tariffs or duty-free. Of these, garments accounted for $6.3 billion and footwear for another $656 million, with another $88 million in textile products. The remainder comprised $322 million in rice and $1.54 billion of other, unspecified products.

Total exports to the European Union, Cambodia’s biggest market, rose by percent last year to top $4 billion. Strong growth was also recorded in exports to Japan, increasing by 45 percent to $827 million, and China, rising by 50 percent to $609 million. By contrast, exports to the United States – traditionally a key market for Cambodian garment exporters – remained flat at $2.1 billion.

Meanwhile, leading imports included raw materials to feed the garment industry, vehicles and fuel products. Imports from China – the largest supplier of goods to Cambodia – rose by 16 percent last year to $4.5 billion. Imports from Thailand and Vietnam increased by 22 percent to $1.9 billion and 53 percent to $1.4 billion, respectively.

Mey Kalyan, senior adviser to the Supreme National Economic Council, said the strong growth in trade was a positive sign for Cambodia, indicating its efforts to diversify products and markets was succeeding.

“The garment sector is still the main player, but it is transforming its value-added exports from low-end to high-end,” he said. “At the same time, Cambodia is not relying on one market anymore, and [is looking beyond] the US and EU.”

Ministry of Commerce data show last year’s faster export growth helped trim Cambodia’s trade deficit to $2.3 billion, or 10.2 percent of total trade, from 11 percent in 2015. Kalyan said the Kingdom would need to speed up implementation of its 2015-2025 Industrial Development Policy (IDP) if it hopes to shift the balance of trade into its favour.

“We need to speed up the implementation of the IDP in order to push exports to be larger than imports,” he said.

While the Kingdom’s agricultural sector has taken on an increasingly marginal economic role in recent years, with government analysts forecasting the sector will expand by just 2 percent this year, it remains a crucial source of income for the country’s rural poor.

Hun Lak, vice president of the Cambodia Rice Federation (CRF), said rice exports – which first broke the 500,000 tonnes a year threshold in 2015 – provide deceptively small profits to both farmers and millers.

“If we look at the [trade volume] figures, they are positive, but that’s because we have expanded to a lot of new markets, such as China, the biggest market in the world,” he said. “However, that doesn’t mean the private sector is making a lot of profit.”

He explained that even with preferential trade privileges that have helped swell rice exports to the European market, Cambodian producers must improve quality and slash production costs to remain competitive.

“We need to build up our quality and reduce the cost of production in order to get into niche markets,” he said.

Ngoun Meng Tech, director general of the Cambodia Chamber of Commerce, said the country’s $2.3 billion trade deficit was not a concern, and should be expected for a country in the throes of rapid development.

“Exports will balance out in the coming five to 10 years, but for now we still need a lot of imports such as machinery and construction materials, which are required for the construction of manufacturing facilities and other business operations.”