[Analytics] Myanmar garment workers caught in global tug-of-war

The garment sector in Myanmar faces challenges to its commercial survival, with the possibility of losing tariff-free status in the European Union just the latest blow, a new report has noted. While Myanmar could benefit from export-oriented manufacturers’ flight to third countries amid a US-China trade war, development consultant Nick Freeman has pointed out barriers to taking a longer-term approach to investment in the garment industry, such as quality and standards, reported The Business Times.

The garment sector now employs about 700,000 people, mostly women, who are estimated to earn close to the minimum wage of 4,800 kyat (S$4.30) for an eight-hour day.

The prevailing cut-make-pack or cut-make-trim industry model – where labour makes up about 70 per cent of sewing production costs – “is certainly better than having no garment sector at all”, said Mr Freeman, an associate fellow at Singapore’s Iseas-Yusof Ishak Institute think-tank. “But it hardly evokes the image of a robust and vibrant manufacturing sector that amply remunerates its employees.”

Mr Freeman cited how price pressures and contentious working conditions have precipitated a spate of labour disputes in Myanmar, in a recent report published as part of the think-tank’s “Trends in South-east Asia” series.

“One major international garments buyer to which this author spoke stated that it had tried to begin sourcing from Myanmar some years ago, principally as a means to reduce its exposure to Bangladesh, and to a lesser extent Cambodia,” he added. “However, it promptly discovered that not one of the domestic firms it surveyed met the minimal standards that it required of its suppliers.”

On top of that, the EU is now poised to suspend Generalised Scheme of Preferences (GSP) status for Myanmar exports, under its the “Everything But Arms” (EBA) trade scheme. The European bloc is pointing to human rights violations in key states with ethnic minority populations, as well as labour rights issues, as the reasons for its withdrawal.

But Mr Freeman said that the loss of GSP privileges would put Myanmar’s garment industry “at a distinct competitive disadvantage with rivals in producing garments for the EU market that are also part of the EBA scheme”, such as Bangladesh, Cambodia, and several African countries.

“Despite already operating at wafer-thin margins, a large part of Myanmar’s garment sector is at the mercy of the whims of overseas policymakers and their willingness to provide trade preferences, or not,” wrote Mr Freeman.

“This does not seem like a sustainable platform on which to develop a robust and vibrant garment and textile sector in Myanmar.”

He noted that the garment sector is highly export-dependent, with the industry having picked up on newly established export-oriented factories centred around Yangon’s industrial zones, which are fuelled by in-flows from East Asian manufacturers – notably the Chinese and South Koreans.

Meanwhile, there has been a sharp drop in domestically-owned garment companies, as they cannot compete for exports, he said. “Most are typically left supplying cheap garments and uniforms to the relatively modest domestic market.”

Mr Freeman suggested that companies team up with the local agricultural and textile industries to develop products such as freight-on-board clothes made from locally sourced organic cotton, since improved sourcing and operations “could also stimulate the appetite of international buyers, as well as potentially generate new operational efficiencies for these manufacturers”.

“Garment sector development initiatives co-funded and implemented by development partners, including the EU, and collaborating closely with the major international garment companies, could play a key role in underwriting some of that investment cost, and sharing some of that risk, as well as provide the necessary technical Inputs,” he also suggested.

Still, international partners must also guarantee garment makers that there will be requisite product demand at prices “that merit the investment and risks undertaken”, Mr Freeman added.

He also warned that if Myanmar’s Rohingya minority – who have been subject to what observers termed ethnic cleansing, including by the armed forces – face a deteriorating human rights crisis, “development partners, international buyers and retail customers alike may conclude that clothing with a ‘Made in Myanmar’ tag is just too toxic, and should be avoided”.