Korea-Myanmar venture to build 500-acre garment zone

A Korean firm and a local company have teamed up with a view to building free-on-board (FOB) garment factories on 500 acres of land through a 50-50 joint venture.

Myanmar-based Olympus Asia Group and Korea’s Panko Corporation signed a memorandum of understanding on August 20 and are looking for land in Yangon, Bago or Ayeywarwady regions.

Olympus Asia Group CEO U Okkar Zaw Naing said the factories would operate under the FOB model, and would focus on creating jobs for local people.

The vast majority of Myanmar’s garment factories operate under the cut-make-pack system, according to the Myanmar Garment Manufacturers Association.

Under the CMP model, a foreign buyer with financial backing and technical expertise will contract a garment factory, usually in an emerging market, to carry out their labour-intensive work.

Under the FOB system, on the other hand, foreign retailers place orders from well-financed factories with technical expertise. Most factories in Myanmar lack access to financing and do not have enough skilled workers to operate under the more profitable FOB model.

The project will start within one year and it will take three years to build the required infrastructure, said U Okkar Zaw Naing.

This timeframe is based on the time it took for Panko Corporation to build a similar zone in Vietnam, which was launched in 2013 and completed this year, he said.

The project will include an international-standard wastewater treatment plant; generate its own electricity; and include dormitories for employees. The companies will produce their own cotton and buttons in Myanmar, as well as producing clothes for export.

U Okkar Zaw Naing believes the integrated factories will create between 40,000 to 60,000 job opportunities for Myanmar people. The company will also offer training and competitive salaries, he said.

“Now we have signed, the project can start within one year. We are looking at three places for the project, in Yangon, Bago and Ayeyarwady regions, but have not yet made a decision,” he said. “It will depend on which place is best in terms of electricity, employees and logistics costs.”

Myanmar’s garments industry has great potential, but its development will require foreign investment, he added, and without good local businesspeople, foreign companies cannot invest.

The industry is growing fast, and is a priority sector for the government. However, for foreign companies sourcing from Myanmar, there are a host of challenges including underage workers, unsafe factories and high logistics costs.

For companies building new factories in Myanmar, infrastructure is a major challenge.

“Our partner company has asked us to build our own substation for electricity, because power here is not reliable,” said U Okkar Zaw Naing.

Choi Yung Joo, chair of Panko Corporation, said, “Myanmar has the potential to develop its textile industry and we are sure this project will contribute to development.”

The government welcomes foreign companies that can create job opportunities while protecting employee rights, said U Phyo Min Thein, chief minister of Yangon Region.

Speaking at a press conference to announce the investment he said, “Industries create job opportunities … We will support opportunities for all people according to the rule of law.”

Olympus Asia Group, which was formed in 2010, is also working on a wastewater management project in Mandalay.

 

Source: Myanmar Times

 

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