The nascent garment industry in Myanmar has grown significantly in the past five years, from an export value of US$900 million in 2012 to $2.7 billion in 2017.
Europe is the most important market for Myanmar-made garments. According to figures compiled by SMART Myanmar, hotspots include Germany, which accounted for $519 million worth of exports in 2017 and the United Kingdom, which bought garments worth $213 million in the same year. Projections for full-year 2018 are higher, with $930 million worth of garment exports forecast to Germany alone.
The growth of Myanmar’s garment sector has taken place at a time when wages in other regional production hubs such as Vietnam have become increasingly expensive. Meanwhile, other centres including Bangladesh have suffered safety and security issues.
Over 1.1 million workers are currently employed in garment, textile, footwear and accessories factories in Myanmar. Additional tens of thousands indirectly work in the industry through logistics and transport services. Research commissioned by C&A Foundation in 2017 predicted that the sector could employ over 1.5 million people by 2020.
Factory expansion has slowed this year due to the political risk stemming from the crisis in Rakhine State. Nevertheless, SMART Myanmar, a project funded by the European Union, recorded 19 factories that have registered so far in 2017 for garment or footwear production.
The industry’s rapid expansion in the coming years depends in part on the continuation of trade privileges granted under the EU’s Generalised System of Preferences in 2013. On November 2, the EU warned that Myanmar could lose its tariff-free access to the European market if it does not address concerns about human rights violations.
The removal of EU trade preferences would not spell doom for the market; Japan and Korea are the second and third largest trading partners for Myanmar’s garment factories.
New opportunities in the garment industry
Factories in Myanmar are primarily set up for cut, make, pack (CMP) contract manufacturing. Under this model, a foreign buyer pays a factory to carry out the labour-intensive aspects of garment production including cutting fabric and sewing garments together according to a template design.
However, an increasing number of factories are now adopting various forms of wet processing, such as dyeing, washing and printing, according to Mr. Jacob Clere, team leader for SMART Myanmar.
Clere said there has been investment into new product lines such as the production of handbags and footwear, creating new skillsets in Myanmar. Tens of thousands of workers are now also skilled in athletic footwear production, hiking boots, slippers, and various other product lines, he said. “Factories have invested untold millions in training up a pool of 500,000 or so workers in the garment and footwear industries.”
Publicly and privately financed vocational training centres are also being opened in Yangon. For example, several training centres offer sewing operator courses that collectively train up about 500 new operators each month, though there is still a need for more such centres.
In one of the training centres run by Aung Myin Hmu, a consortium including CARE Myanmar, BusinessKind Myanmar and Pyoe Pin, supervisors are taught how to manage deadlines, as well as communication and quality control.
One of the directors, Ms. Suzanne Tym, believes investment in line supervisors will be key, as factories expand across Myanmar and businesses seek to improve workers’ skills.
As workers become more skilled, Myanmar’s minimum wage has also increased, rising in May from 3,600 kyats per day to 4,800 kyats, following a year-long national consultation by a Tripartite National Minimum Wage Committee.
While the garment industry is concentrated mostly in Yangon’s Hlaing Tharyar township, there are other growth centres including the Thilawa Special Economic Zone, a 2,400-hectare area beside a deep-sea port some 25 kilometres south of Yangon.
There are also promising garment production centres in Bago, two hours’ drive north of Yangon and Pathein in Ayeyarwady Region, according to the Myanmar Garment Manufacturers Association. Incentives to set up factories in these two cities include 50-year leases for foreign investors.
One downside to building a factory in Pathein according to the MGMA is that goods must be transported to and from the region by truck, but the regional government is planning to build a deep-sea port in the region – which would make Pathein an attractive investment destination.
Several garment factories are also being set up in the Kayin State capital of Hpa-an, near the Thai border, where labour costs are cheaper than in Yangon, and new tax structures under the Myanmar Investment Law provide five and seven-year tax holidays for factories in less developed cities and towns.
In Mandalay, Myanmar’s second-largest city, factories mostly cater to the domestic market. The city is a centre for textile production and there are hundreds of workshops and small factories around the city that produce and dye cotton textiles.