Myanmar's textile industry is thousands of years old. It is a land rich in culture, with abundant natural resources, situated in Southeast Asia with China, India, Bangladesh, Laos, and Thailand as its neighbors. The garment industry of Myanmar has the potential to significantly contribute to national economic growth by providing substantial employment opportunities and attracting foreign investment. However, to realize its full potential, the garment industry must address several significant challenges.

History of Myanmar's textiles:

Agriculture serves as the backbone of Myanmar's economy. The government is engaged in agricultural development projects that will lay the foundation for the all-round development of other sectors. Traditional weaving is one of Myanmar's most popular handicrafts. Historical evidence, such as medieval wall paintings, palm leaf writings, and literature, suggests that the weaving industry has thrived since the Bagan period (9th to 13th centuries). Ancient wood carvings, sculptures, and mural paintings in ancient pagodas also indicate the high quality of apparel woven during those times. Even though traditional weaving tools are hand-operated, they are still capable of producing excellent clothing.

In the 19th century, local factories were established that produced 'lun taya acheik longyi,' featuring patterns of horizontal wavy lines. Pure silk threads were used for both weft and warp, with more than 100-200 shuttles utilized depending on the design. This traditional weaving technology has become a national treasure, passed down from one generation to the next. The government of Myanmar is actively working to preserve this heritage and support local weavers.

Textile industry: The recent past:

Between 1962 and 1988, all major industries in Myanmar were nationalized, requiring the garment industry to develop with the support of the Ministry of Industry. During this period, the garment and textile production sectors received foreign investment, primarily from China, Japan, and Germany. The Foreign Investment Law enacted in November 1988 allowed foreign companies to operate in the country, which significantly boosted the development of the modern garment industry in Myanmar.

From 1990 to 2001, garment exports grew from 2.5 percent of total exports to 39.5 percent, making it the largest export industry in the country. The sector had approximately 400 factories employing around three lakh employees and generating $600 million in revenue by the early 2000s. The majority of exports went to the United States (over 50 percent), European Union countries (40 percent), with the rest going to South Korea, Malaysia, Canada, Singapore, and Australia.

Unfortunately, Myanmar's garment industry faced challenges in 2003 due to changes in trade regulations and sanctions, resulting in the loss of the US market. Additionally, alterations in taxation, regulations, the phase-out of the international agreement on textiles and clothing in 2005, the emergence of China and Bangladesh as leading garment exporters, limited access to finance, and global isolation led to the closure of hundreds of factories and unemployment for over a lakh of workers.


Textile industry: The present

From 2005 to 2010, around 130 garment factories which survived the downfall started exploring new markets in Japan and Korea. In 2011, the new government took up a series of reforms and changes to facilitate trade and foreign direct investment (FDI). The government lowered export duty, reduced restrictions on the financial sector, revised the foreign investment law, and executed currency reforms. All these factors greatly improved the political and business conditions in Myanmar and the garment sector is rapidly growing today. At present, two new garment factories open every week in Myanmar. The Myanmar Garment Manufacturer's Association (MGMA) looks after the development and productive growth of this sector. Today, many garment factories are operating in Bago, Pathein, Hpa-An and Greater Yangon. More than 50 new apparel factories have come up in these areas in 2014 alone.

 

Myanmar is not self-sufficient when it comes to raw materials, and imports many garment production products. Also, the major part of Myanmar's apparel exports is non-knitwear. In spite of these factors, Myanmar is becoming an attractive destination for textile entrepreneurs. The two main reasons are favourable government policies and cheaper labour compared to other countries in the region. Myanmar can reap benefits of low wage as the wages are going to remain relatively low compared to other competing nations at least for the next few years.

 

In Myanmar, more than 90 per cent of the total garment manufacturing is dominated by woven products. The majority of garment factories take care of the domestic market and needs improvement with regards to efficiency, processes, quality and compliance. The main garment export destinations are Japan, Korea, Spain, Germany, UK and Turkey. They account for 85 per cent of total garment exports.


Favourable destination for Indian textile entrepreneurs

Since the lifting of economic sanctions by Western nations after a time lag of 15 years in 2012, the garment sector of Myanmar has grown tremendously. Cheap labour, supportive government policies and short sea route between India and Myanmar are few reasons that make Myanmar a good option for Indian textile entrepreneurs. A new foreign investment law was implemented in 2012, which allows foreign investors to lease land for 50 years with an option to renew along with tax exemption for the first five years. Also, no taxes are levied on raw materials imported by foreign companies. Further, the maximum shareholdings of foreign investors in manufacturing were increased to 50 per cent.

 

India is rich in cotton and manufactures various fabrics and yarns in huge capacities. These textile products are used domestically as well as exported. The new reformed laws of Myanmar give India an opportunity to export textiles and invest in setting up textile and garment manufacturing units there.

 

According to data with the Embassy of India in Yangon, India is the fourth largest trade partner of Myanmar and third largest export destination for Myanmar. However, import or export of garment and textiles between the two countries are negligible. According to Jacob A Clere, project manager, MGMA, "Trade (between the two) has been small. Almost no garment exports go to India and not too many textiles are imported from India. The vast majority comes from China."

 

Apart from providing raw materials, India has another door opened for setting up garment training institutions to increase the number of skilled workers in Myanmar. The skill development will help Indian companies investing in Myanmar for exports to other countries. At present, Japan and South Korea are the major importers of Myanmar clothing. They account for 48 per cent and 33 per cent of imports respectively.

 

Opportunities of Myanmar garment industry

  • Abundant labour supply: Myanmar has abundant labour supply with a high literacy rate and low average age, which acts as the selling point for the country in becoming a garment manufacturing hub. If backed by financial and technological support from foreign investors, Myanmar can transform itself into a relatively cheap garment manufacturing destination.
  • Cheap labour: Low wages is the chief element in making business decisions in the garment industry. At present, Myanmar has the lowest minimum wage when compared with leading garment hubs like China, Thailand, Vietnam, India and Cambodia. It is very close with the wage rate when compared with Bangladesh. Labour costs contribute to 15-20 per cent of the total garment costing. This advantage will directly help Myanmar to win over the other garment manufacturing hubs.
  • Shorter sea route: Yangon, the main shipping port of Myanmar is close to the port of Singapore. The port of Chennai too is close to Yangon port which means that goods from Myanmar can reach India approximately in five days through the sea route. This can be explored for quicker shipping of goods in a cost-effective manner. Considering these advantages, the development of the shipping industry and port facilities must be prioritised for the expansion of internal and external trade.
  • Favourable government schemes: The current Myanmar's Foreign Investment Law (FIL) is liberal compared to the laws of the developed ASEAN countries. The FIL also gives several benefits like three year income tax exemption, relief from custom duty and other internal taxes on machinery, equipment and spare parts, allowance of accelerated depreciation. Such government schemes will boost the growth of garment industry and invite more foreign investments.
  • Duty-free trade pacts: Myanmar has been granted an LDC (Least Developed country) status by Japan. This gives tax exemption up to 10 per cent. Such preferential treatment makes a big difference in garment trade where competitive pricing is crucial. In 2012, the EU granted duty and quota free access to the European market for clothing as it placed Myanmar in its GSP (Generalized System of Preferences). With continuous economic reforms and improved relations with chief garment markets (US and Europe), the US is also taking steps to be liberal with its import ban.
  • Strong sourcing base for retailers and brands in Myanmar: Garment retailers and brands are facing the issue of increase in labour cost in other clothing supplier countries. Retailers and brands can use this opportunity to develop Myanmar as a strong source base for garment manufacturing.


Textile industry: The challenges

Myanmar faces challenges like poor infrastructure, weak banking system, lack of skilled labour, training, technology, economic and political stability, low productivity, under developed supply chain, laws and regulations. It needs a comprehensive strategy and support of the government to overcome these challenges.

 

  • Economic and political stability: According to the International Monetary Fund (IMF), the lending rates in Myanmar are as high as 13-15 per cent which is two and half times more than China's lending rates. This is one of the hindrances while making investment in the RMG sector.
  • Lack of skilled labour: Majority of the workforce (about 70 per cent) is employed in the agriculture sector; only seven per cent is working in the industry sector. Skill development and training of the workforce will bring in more foreign investors to Myanmar.
  • Weak supply chain: Currently, one cannot find domestic suppliers of fabrics, packing material, trims and very few washing facilities. If these are made available, garment factories can fulfil their requirements and promote maximum utilisation of investment and technical expertise.
  • Low productivity: Garment producers are not used to taking large orders and produce in large quantities. They deliver orders in small quantities. As the garment industry is labour-intensive in nature, exchange of knowledge, skill and technology is important for increasing productivity. With limited interaction with the international market, development in terms of technology and skill has also been restricted. This has adversely affected the productivity.

 

  • Poor infrastructure and technology: Poor infrastructure in terms of transport, telecommunication, port facilities and electricity is hindering the economy of Myanmar particularly the garment manufacturing industry. Moreover, irregular and costly supply of electricity is a matter of concern for the labour-intensive garment sector. Limited transport facilities and lack of good port facilities needs immediate attention as they are essential for garment exports. The government of Myanmar needs to collectively address these concerns to build and improve its infrastructure.
  • Complicated and inefficient laws and regulations: Oppressive and inefficient laws and regulation is another big challenge to be dealt with. Most garment manufacturing companies accept cut, make, pack (CMP) orders because the law restricts direct buying from Myanmar. There is difficulty in obtaining letter of credit and lack of banking support also limits doing FOB (free on board) business. Special sanction is required to invite foreign investment and assist them in executing investment plans. Now, as economic sanctions have been removed and there is an increased support from banking sector, doing FOB business may soon become a reality.

 

Future prospects

According to media reports, Myanmar will expand its textile and garment industry under its new export strategy to boost economic growth. It has set a target of earning US$2 billion through garment export for the 2015-16 and reach US$4 billion by 2020. According to MGMA, with 90 per cent foreign investment, the sector created 100,000 jobs in 2014-15. Garment exports of Myanmar have taken a big leap as exports have almost doubled from $900 million in 2012 to $1.7 million in 2014. Official statistics show that since 1988, when the country opened to foreign investors, foreign investment in the manufacturing sector reached $5.46 billion.

 

Myanmar has the potential to attract business from neighbouring countries where manufacturing costs are high. Bringing transparency in laws and regulations, improving the infrastructure, efficient shipping connectivity, development of skilled manpower, increased productivity, economical and reliable energy and telecommunications will automatically boost the growth of garment industry. Today, the garment industry of Myanmar is rapidly developing. It is at a juncture where it has an opportunity to rise and transform itself into a leading garment manufacturing hub in the world.

 

References:

1.      Technopak.com

2.      The Stitch Times