Here is Why Myanmar Garment Industry Sets to Takeoff
Myanmar has all the hallmarks of becoming a new garment manufacturing hub. In fiscal 2015, Myanmar exported some $900 million worth of sewn products. That only represents around one-thirtieth of the amount exported by Vietnam and one-sixth the figure for Cambodia. Today, Export earnings from cutting, making and packaging clothing manufacturing is expected to reach up to US$3 billion this year.
The abundance of low cost labour has long been attributed to the rise of Myanmar garment industries. According to Nikkei Asian Review , for the time being, however, monthly wages in Myanmar’s garment industry stand at around 200,000 kyat ($147), lower than in Bangladesh, Vietnam, and China.
Foreign clothing manufacturers are now heading to Myanmar in droves to capitalize on the cheap labor. The Myanmar Garment Manufacturers Association, comprising both domestic and foreign makers, now has some 400 members, up by around 100 since 2015.
However, labour costs in the Southeast Asian country are also now beginning to see an upward trend and its first legal minimum wage was introduced in 2015. The skill levels within the workforce have also risen markedly.
"We used to see productivity [at the plant] decline every time a new product was introduced," said Takeshi Iguchi, head of the Japanese clothing retailer Honeys's local unit in Myanmar. "Now, we can even handle trench coats, which require the highest level of skill."
In 2012, Honeys became the first Japanese manufacturer to start production in Myanmar. It now operates two plants in the country, churning out around 18,000 pieces of clothing a day, accounting for 20-30% of the company's sales in its home market. Honeys is now considering the construction of a third Myanmar plant.
The Lift of Economic Sanction
In 2003, the U.S., the largest market for clothing exports, imposed a total ban on imports from Myanmar. Many European countries also took punitive measures against the military junta, stripping the country of its Generalized System of Preferences status.
For a long time, this meant Japan and South Korea were the only major markets for Myanmar exports.
A decade on, Europe reinstated Myanmar as a GSP beneficiary country in response to the start of the democratization process. Washington followed suit in October 2016, fully lifting sanctions against the country.
This led to a rush of Chinese and South Korean contract clothing manufacturers expanding into Myanmar. The likes of Hennes & Mauritz and other major global brands started paying visits to find local contractors.
“In the past, Japan was the biggest market but it has been overtaken by the European Union. Every month, four to six companies invest in the garment industry. The massive inflow of investment is coupled with high orders,” said Soe Myint, the chair of the Myanmar Garment Entrepreneurs’ Association to Eleven Myanmar.
Last year, the export earnings amounted to US$2.2 billion, exceeding estimates of US$2 billion.
The Myanmar Investment Commission had approved numerous applications, according to the Directorate of Investment and Company Administration. Sector insiders say document processing, customs and licences ran smoother than before.
Today, thirty-three per cent of clothing exports go to Japan, 25 per cent to the EU, especially Germany, 25 per cent to South Korea, 2.4 per cent to the US and about 2.4 per cent to China.