Exporting Garment and GDP
Pat M Beck II
24 June 2018
This research paper is about the study between Cambodia’s GDP and Cambodia’s exporting garment to foreign countries. The hypothesis is the increasing of exporting garment leads to increasing GDP. The research to prove hypothesis will be by comparing the value of exporting garment to the percentage of Cambodia’s GDP. After the comparison between two variables, the result shows that the higher value of exporting garment the higher Cambodia’s GDP.
Keywords: Exporting Garment, GDP, Cambodia.
Export happens when one country produced goods and ships the goods to another country for trade or sale. Exporting goods to foreign country means that the income of nation’s GDP will be increased and it will bring money to the government (Investopedia, 2018). Also according to Investopedia 2018, believe that the four Asian tigers that are South Korea, Hong Kong, Taiwan and Singapore, their economic are strong enough to deal with the Asian financial crises of 1997 and global shocks. Those four economics are all focus and depend on export as a part of their economic growth.
Meanwhile for Gross domestic production as known as GDP is the total market value of all goods and services produced within an economy in a given period of time (Sparknotes, 2018). When the GDP is increasing, it shows an economic growth in nation. So when the GDP is high, the economy will be strong, then there will be less unemployment, higher salary payment for workers and leads to higher consumer for goods and services (Stats S.A, 2013).
As we can see, Cambodia is a developing country that has improving their country through trade and investment. CITATION Kin14 l 1033 (Cambodia, 2014). Cambodia’s trading system has gone through a few changes over the last three decades, from a regime controlled by the state to a modern trade regime based on a liberal policy paradigm. Also Cambodia successful trade policy transition has been through three major phases such as transitional, economic reintegration and post-WTO. The transition phase is in 1980s to early 1990s aimed to creating more open market-driven economy with outward-looking development. As for the second phase of trade policy starts in 1994 with a goal to gain more liberal trade and investment policy in order to reduce the poverty and increase economic growth. Meanwhile for the third phase starts in 2004, investment, private enterprise and trade are starting to grow rapidly for the economy. Also the trade policy is aims for three main points, first increasing the participation of sub-regional, regional and global economic cooperation. Second, is to encourage more goods of product to export and third is to encourage investment for export CITATION Hin13 l 1033 (Vutha, 2013).
According to the Alexander Simoes, states that export economy in Cambodia is 69th largest in the world and 123rd as the most complex economy. Cambodia top export products are knit sweaters, knit women’s suit, non-knit women’s suit, precious metal scraps, gold, footwear, rice, cassava, and leather. Also Cambodia top export partners are United State, United Kingdom, Germany, Japan, Canada, China, Vietnam, Thailand, Netherland, Belgium, and France.
Increasing in exporting garment will lead to increasing in GDP.
We’re going to prove the hypothesis by comparing a graph that showing a data of Cambodia exporting garment and Cambodia’s GDP. The data of exporting garment will be taken from a report called Cambodia Trade Integration Strategy 2014-2018. Meanwhile for Cambodia’s GDP data, it will take the source from a website called Trading Economic. Then we will record the data of the two variables and create a graph in excel to compare the data. The data will be analyzed by compare the value of Cambodia garment export each year to the percentage of the Cambodia’s GDP each year. If the higher value of exporting garment increases the percentage of GDP, this will prove that the hypothesis is supported.
Two paragraphs below are the review of studies that we found and are related to export and GDP correlation. There are many studies related to export and GDP throughout various countries. However, there is no proof that Exporting is the main cause that drives economic to growth dues to the different outcome of the result in the study.
Source: CITATION Muk14 l 1033 (Mukherji Ronit, 2014)The studies research about India’s GDP and export are a lot, but most of the researches are fail to prove about the relation between those two variables. In 2011, P.K. Mishra proves that causality runs from growth in GDP to growth in export. He uses the techniques of co-integration and vector error correlation estimation to analyze the data of exports and GDP from 1970 to 2009 (Figure 1). He also shows the evidence to prove that there is a long run relationship between two variables and rejects the hypothesis of exports led to growth in favor of growth led to exports CITATION Muk14 l 1033 (Mukherji Ronit, 2014).
Moreover in 2014, a research paper published by Dreger and Herzer show the impact of export-growth on the GDP growth of developing countries around the world. The method of researching is really interesting, they take the data of export-growth and compare it with the non-export GDP. The result shows that the short run of export-growth does not have an impact on GDP and the long run export-growth tend to have a negative effect on GDP.
Source: CITATION Tra18 l 1033 (Economic, 2018)
Source: Cambodia CTIS 2014-2018
In graph figure 2 shows about the data of Cambodia’s GDP compare with the data of Cambodia garment exporting from 2008 to 2012. As we can, in 2008 the value of garment exporting is 3 billion dollars meanwhile the GDP is 10.35 percent. However in 2009, the exporting of garment value lower to 2.4 billion dollars, which decreased by 0.6 billion dollars due to the economic crisis. As for GDP in 2009 has slightly increased by 0.5 percent, which is 10.4 percent. Move on to 2010, Cambodia is able to raise the economic back to normal, so the exporting value for garment is slightly increased by 0.6 billion dollars to 3 billion dollars and for the GDP is increase quite a lot, which is from 10.4 to 11.24 percent, which increased by 0.84 percent. As for 2011, we can see that the value of exporting garment starts to increase higher to 4 billion dollars, as for GDP also increase to 12.83 percent. Lastly for 2012, the exporting garments also improve their value to 4.4 billion dollars, which makes the GDP to increase from 12.83 percent to 14.04 percent.
From the result on the paragraph above, we can see that the variables have a significant relation with each other. As we can see that if the values of garment exporting increase, the percentage of GDP is increasing as well. Based on the pattern described on the paragraph, we can see that the two variables have a positive correlation between each other. Therefore, we can say that the higher value of exporting garment can leads to higher GDP.
In conclusion, the research paper has show that exporting and GDP have a positive correlation with each other by comparing the value of variable one and the percentage of variable two. However, the research is still lacking in many ways. Firstly, It’s not flexible enough to prove that the GDP is really improving solely dues to the higher value of exporting garment. Secondly, since GDP usually includes exports and there are many type of exports in Cambodia, so there might be a chance that GDP will still rising even without the distribution of exporting garment. Lastly, as we can see on the graph figure 2 in 2009, the value of exporting garment is decreasing, but the GDP is still rising. Therefore, the hypothesis might not be 100% true.
Although the research paper has a bit of mistake, we believe that our purpose is nearly achieved. This paper shows that there is a positive correlation between Exporting and GDP, when the exporting value is increasing then the percentage of GDP will increase as well. However there are some limitation while doing this researching such as there is not enough of data of exporting garment in Cambodia and some data are not matched. For further research, they should focus more on the data of Cambodia’s exporting garment and put more gap between the year that they are doing research on.
BIBLIOGRAPHY Africa, S. S. (2013, July 30). What is GDP and its impact? Retrieved from Statistics
Cambodia, K. o. (2014). Cambodia trade intergration strategy 2014-2018.
Dreger Christian, D. H. (2014). A further examination of the export-led growth hypothesis. Empirical Economic .
Economic, T. (2018). GDP. Retrieved from Trading Economic : https://tradingeconomics.com/cambodia/gdp
Investopedia. (2018). Export. Retrieved from Investopedia: https://www.investopedia.com/terms/e/export.asp
Investopedia. (2018). Four Asian tigers. Retrieved from Investopedia: https://www.investopedia.com/terms/f/four-asian-tigers.asp
Mukherji Ronit, P. D. (2014, June 30). The relationship between the growth of exports and growth of gross domestic product of India.
Simoes, A. (n.d.). Cambodia. Retrieved from OEC: https://atlas.media.mit.edu/en/profile/country/khm/
South Africa: http://www.statssa.gov.za/?p=1143
Sparknotes. (2018). Sparknotes. Retrieved from Sparknotes: http://www.sparknotes.com/economics/macro/measuring1/section1/
Vutha, H. (2013, June). Leveraging trade for economic growth in Cambodia. CDRI .