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Myanmar makers confident despite sector slowdown

  • The Myanmar apparel export industry continues to grow, but at a slower pace than last year as a result of added political risk from the persecution and abuse against Rohingya Muslims on the border with Bangladesh, which has received widespread international condemnation.
  • Despite this, the sector is confident garment exports will likely exceed US$3bn in 2018, and footwear will exceed $400m.
  • It could also benefit from a shift in business away from China as US president Donald Trump steps up his tariff threats against the country.
  • Myanmar’s garment industry is likely to achieve exports of US$3bn for 2018, despite a slowdown in the growth of the sector amid huge ongoing social and environmental challenges in the country.

    The number of new garment, handbag and related sewn products factories setting up in Myanmar reached 18 in the first six months of the year, according to figures from the Myanmar Directorate of Investment and Company Administration (DICA). This is lower than the same period last year when 40 newly-invested factories were registered.

    Ongoing issues

    The persecution and human rights abuses by Myanmar’s military against Rohingya Muslims in conflict-torn Rakhine state has resulted in many investors putting projects on hold. Earlier this year the C&A Foundation also put its philanthropic work in the country on hold; while leading European and US apparel brands have expressed their concerns about the situation.

    The EU has also indicated it might not renew the Everything But Arms (EBA) trade preference arrangement that gives exports from Myanmar duty free treatment.

    The Southeast Asian nation’s legal minimum wage increased from MMK3,600 to MMK4,800 (US$3.5) per day in May, which reports suggest is also casting a shadow on growth in the country.

    Reports this week suggested 14 factories, mostly garment units, in Yangon’s industrial zones may shut down in the next two months due to rising cost of land and staff, leaving over 3,000 without jobs. The report cited rising production costs, particularly wages, as the primary reason behind garment manufacturers “giving up.”

    One local source, however, says the reports are false and that one of the companies named is still planning to expand further in Myanmar, while only six of the companies on the list of 14 are reportedly garment manufacturers.

    Optimism

    Despite this, the uncertain trade situation between the US and China could turn in Myanmar’s favour, with foreign manufacturers showing an increased interest in expanding footwear and handbag production in Myanmar due largely to President Donald Trump’s tariff plans and announcements.

    In 2016/2017, Myanmar exported over US$2.7bn worth of garments and over $300m worth of footwear, representing growth of 28% on the prior year. Jacob Clere, team leader for SMART Myanmar, is confident garment exports will likely exceed $3bn in 2018, and footwear $400m.

    In 2017, around 47% of garment exports went to the EU, 27% to Japan, and the rest to Korea, Canada, the US, China, Turkey and elsewhere, according to figures from SMART Myanmar – an EU-funded initiative aimed at promoting ‘Made in Myanmar’ garments and sustainable practices. 

    “One of the best things that could secure the future growth of the industry is a strengthening of the reputation and foundation Myanmar is achieving among European and North American buyers for safety and responsible production,” says Clere.

    “A majority of the factories in the industry here are now new, purpose-built production facilities. About one-third of production units in Myanmar’s garment industry are also now disclosed publicly by international buyers in their sourcing transparency pledges. In comparison, in 2013 only one factory in the industry was publicly disclosed by international buyers; now that number is 149 factories.”

    Clere says this represents real progress. “There are huge social and environmental challenges, to be sure, but we have seen immense progress during these past five years, and as long as that continues I think the industry can continue on a successful growth path.”

    SMART Myanmar launched a smartphone game in May to teach garment factory workers about workplace safety and labour laws.

    The uptake, Clere says, has been positive. The Satyone Superstar app has had around 3,338 users since its launch three months ago.

    “Both of these are targeted at spreading awareness on Myanmar labour laws and occupational safety and health,” Clere explains. “One of the great things about these apps is that they can cover parts of the country we cannot often directly reach. For instance, several hundred of our users have been in the smaller cities and towns of Myanmar.”

    According to an overview of Myanmar on re:source, the new online strategic planning tool from the team behind just-style, one of the reasons the country is now playing catch-up in key areas ranging from compliance and sustainability, to infrastructure and energy is its isolation from world trade for more than a decade. The country’s financial institutions are still in their infancy, and there remains a need for more training resources to help bridge the industry’s skills gap. 

    Source: Just-Style

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