CMP garment exports drop by $176 mln in first month of 2020-2021FY

Myanmar’s garment export sector, which constitutes over 20 percent of overall export value, showed a steep drop of US$176 million in October of the current financial year, according to the data released by the Ministry of Commerce. In October of FY2020-2021, the country exported $203.95 million worth of garments to foreign countries. The figure plunged from $384 million registered in October of the 2019-2020FY.

At present, over 100 CMP garment factories temporarily shut down on the reason for the lack of raw materials and slump in demand due to the coronavirus negative impacts, leaving thousands of workers unemployed. Sixty-four factories have been permanently closed down during the pandemic, compensating about 25,000 workers. The data does not include those factories which have not resolved worker payments, the Ministry of Labour, Immigration and Population stated.

The coronavirus impacts badly batter the labor-intensive enterprises according to the Directorate of Investment and Company Administration. “Myanmar mainly exports the garments to Japan and European countries, especially Germany. The US has also purchased the garments made in Myanmar. Some western countries canceled orders amid the pandemic. That’s why we need to focus on market diversification. Myanmar Garment Manufacturers Association (MGMA) requested the ministries concerned to deal with changing and cancelling order to keep the business alive. Myanmar’s garment factories have been complying with the COVID-19 health guidelines, and the buyers recognized this. If the factories can prevent from spreading the virus, it will not affect the production,” MGMA General Secretary Daw Khaing Khaing Nwe shared at the virtual conference held on 11 December 2020.

Under the EU Myan Ku Fund, we have now distributed K5.2 billion in support across 67,810 payments to unemployed garment factory workers as of 12 October. Workers in all the states and regions of Myanmar have received this financial assistance, Jacob A. Clere, Team Leader for EU Myan Ku Fund said Aung Myin Hmu, the garment industry training centre is working together with the EU Myan Ku Fund to train over 400 workers who are recently out of the jobs, affected by the COVID-19 impacts, as per the 12 October press release of Aung Myin Hmu.

The plan is designated to train the trainees for ten days, with 18 batches, in a bid to upgrade the existing skills and make them more readily employable. Next, foreign direct investments flow into many types of businesses, including garment enterprises. The foreign investors are not bothered by the disputes between employers and employees and the closure of some CMP businesses during the mean times, the Myanmar Investment Commission affirmed.
Of the investment proposals, the manufacturing and labor-intensive businesses are prioritized by the commission.
The commission is planning to accept investment projects in manufacturing masks, pharmaceuticals and others which can contribute to the fight against the coronavirus in the country at the soonest. Myanmar mainly exports CMP garments to markets in Japan and Europe, along with the Republic of Korea, China, and the US.

The garment sector is among the prioritized sectors driving up exports. The CMP garment industry has emerged as a promising one, with preferential trade from Western countries. Myanmar’s garment factories operate under the CMP system, and those engaged in this industry are striving to transform CMP into the free-on-board (FoB) system. As the factories cannot enter into a contract for FoB, Own Design Manufacturing (ODM) and Own Business Manufacturing (OBM), the income is limited, according to the MGMA.

Exports of garments manufactured under the cut-make-pack (CMP) system were valued US$4.798 billion in the last financial year 2019-2020, according to the data from the Ministry of Commerce. Although the sector is facing hardships because of the cancellation of orders from the European countries and the suspension of the trade by western countries amid the pandemic, export values rose in the previous FY. The export value of CMP garments was only $850 million in 2015-2016FY, but it has tripled over the past two FYs. In the 2016-2017FY, about $2 billion was earned from exports of CMP garments. The figure increased to an estimated $2.5 billion in the 2017-2018FY and $2.2 billion in the 2018 mini-budget period (from April to September). It tremendously grew to $4.6 billion in the 2018-2019FY, according to the Commerce Ministry.

Since an outbreak like COVID-19 might happen in the future, it is necessary to prepare for a sufficient supply of raw materials. The public and private sectors will cooperate in setting up the supply chain on our own sources, including weaving, knitting, dyeing, and sewing factories. The MGMA has more than 500 members, and garment factories in Myanmar, employing more than 400,000 workers. Investors prefer to invest in countries with inexpensive labour, such as Myanmar.—Ko Htet (Translated by Ei Myat Mon)

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Source: The Global New Light of Myanmar

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