Can Myanmar emerge as threat to SE Asian garment sector

June 25, 2012 

(Myanmar)

 

Can Myanmar emerge as the next low-cost destination for global apparel brands and retailers, following China losing its sheen as a cheap production hub? Should this new development also worry garment makers in other South East Asian countries? 

 

The vibes emerging from leaders in countries like Bangladesh, Cambodia and Pakistan seem to indicate that Myanmar could emerge as a potential destination for sourcing clothing for worldwide retailers and brands. However, they do not see Myanmar as a threat to their country’s apparel sector in the immediate future. 

 

It is a known fact that garment brands are in constant search for low-cost production hubs and in their quest, production hubs have moved from US and Europe to China, Bangladesh, India, Vietnam, Cambodia, Sri Lanka and Pakistan. This year in April, in a historic decision, the European Union (EU) suspended most of its sanctions against Myanmar, due to the sweeping democratic changes adopted by the present government and also in an effort to encourage further reforms. 

 

However, the biggest clothing and textiles importing country – US has still not lifted sanctions. It is also worth noting that the EU has not lifted sanctions, but only suspended them for a year. As recently reported on fibre2fashion, global apparel brands are gradually moving out from China, due to its rising costs. Domestic Chinese brands and suppliers to global brands too are looking at overseas destinations to cut costs. 

 

China’s loss could be Myanmar’s gain if it is able to attract the investments flowing out China or other high cost production bases, if it adopts correct investment policies and initiates sweeping reforms. Although, overall garment exports to top ten overseas destinations adds up to just around US $608 million in 2011, the pace at which these shipments are growing will make one sit up and take notice. 

 

For instance, apparel exports to Japan, Myanmar’s bigger buyer of garments, nearly doubled from $181.57 million in 2010 to $349.30 million in 2011. Likewise those to South Korea also nearly doubled in the same period from $123.89 million to $232.42 million. Likewise, apparel exports to the Latin American country of Colombia have skyrocketed from a measly $8,000 in 2007 to $435,000 in 2011, which again zoomed more than five times to $2.74 million in 2011. 

 

However, on the flipside, clothing exports too have declined in the last two years to major destinations like South Africa, France, Australia who are among the top ten buyers of made in Myanmar garments. Shipments to France have crashed from a high of $13.35 million in 2007 to just $500,000 in 2011. Those to South Africa have plunged from a peak of $136.72 million in 2007 to only $2.48 million, better than those to France.

Similarly, Turkey which ranked third among top most export destinations for Myanmar clothing in 2010, saw shipments slipping from $196.6 million in that year to a measly $9.42 million in 2011. 

“However, to achieve a meaningful integration in to the global business and trade, the Myanmar government would need to concentrate on development of much needed infrastructure, initiatives toward good governance, better economic & trade policies, a congenial investment & business climate”, says Mr Shafiul Islam – President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA). 

 

Mr Shezad Salim, President of Pakistan Readymade Garment Manufacturers and Exporters Association (PRGMEA) also avers, “Prior to the sanctions, Myanmar’s garment industry was very vibrant and many western companies had their production units there. 

 

“I have visited Myanmar prior to these sanctions and have witnessed some of their production facilities, first hand. In those days also they had very low cost and efficient labor available. The western companies may have left due to sanctions but the labor force is still there and therefore I feel western countries will definitely look at Myanmar again”.

 

Mr Van Soe Ieng, Chairman of the Garment Manufacturers Association of Cambodia (GMAC) sounded more optimistic when he said, “Yes, Myanmar will become one of the exporters and one of the destinations for sourcing of garments and textile not only because they have lower wages but also because they have ample workers”.

 

When quizzed if Myanmar could emerge as a competitor to Bangladesh, Mr Shafiul Islam said, “The emergence of Myanmar as a low-cost production destination could create an option for the buyers looking for China-plus. Bangladesh holds only 4.6% share of the global clothing exports, whereas China serves more than 36% of it. 

 

“So an emerging producer like Myanmar can take benefit of this opportunity, rather taking from the pie of Bangladesh. Moreover, we are putting relentless efforts to explore new markets and have already started growing in Latin America, South Africa, Russian, even East and South Asian countries, like Japan, Korea, China and India. 

 

“Therefore, we do not see Myanmar as an immediate competitor for us based on all these considerations. But at the same time, we will not take lightly, the potential of Myanmar emerging as our competitor in the near future”. 

 

Mr Shezad Salim is of the opinion that, Myanmar will be viewed sympathetically by the western nations because of Aung San Suu Kyi’s struggle for democracy spanning over two decades, and that developed countries will give Myanmar concessions. 

He said, “If sanctions are fully lifted, Myanmar will not only be competing with Pakistan but also India and Bangladesh and other regional garment producing countries. Myanmar has the advantage of low cost trained labor availability and the infrastructure which was available previously. Moreover, the energy crisis, law and order situation and political instability in Pakistan may drive away business from here to Myanmar as well even if concessions are not forthcoming”.“Myanmar may become one of the competitors for Cambodia’s garment sector but not now may be after 7-8 years. However, 7-8 years from now, Cambodia will have moved to a higher level by churning out better and higher value added products. The industry in Myanmar is still at a very nascent stage and it will need time to build its infrastructure and emerge as a competitor”, Mr Van Soe Ieng opined.

“They will need another 3 years to stabilize their policies, then garner investments, enhance production capacities, establish export markets, by which time 7-8 years would have passed. A lot of potential buyers from Europe and Japan are already visiting Myanmar and showing inclination towards garment sourcing. Even some manufacturers from Cambodia are looking forward to set up their production units in Myanmar in the next 5-6 months”.

 

Considering the positive vibes generated from experts, even from other competitor countries, Myanmar seems on its way to emerging as a competitor for other garment hubs in South East Asia, but maybe not, in the immediate future. 

Fibre2fashion News Desk - India