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Myanmar becoming strong in global apparel business

Myanmar is coming up as a major competitor of Bangladesh in the global apparel markets. The country has really developed a lot in a short span of time.

The export volume till the end of August in 11 months of FY 2018-19 was worth $4.37 billion compared to the $3.2 billion figure in the same period a year ago—an increase of $1.17 billion, according to the Commerce Ministry of Myanmar.

Myanmar targeted to export $10 billion worth of garment items by 2024 and the creation of more than one million jobs for the unskilled and semi-skilled workers.

Myanmar strong global apparel business
Figure 1: Myanmar targeted to export $10 billion worth of garment items by 2024 and the creation of more than one million jobs. Courtesy: ctvnews.ca

Export figures rose from $800 million in 2015-16 to over $4 billion in the current fiscal.
The rise of export figures indicates Myanmar’s faster rate of garment export.

Almost every year Myanmar’s garment export grew by $1 billion after 2015. So it would not be difficult to reach the target of exporting $10billion worth of garment items by Myanmar by 2024.

Export scenario of RMG Myanmar
Figure 2: Export scenario and target of RMG set by Myanmar.

Myanmar’s garment sector has been growing at a faster rate mainly because of investment by China and Vietnam.

Recently China and Vietnam have been relocating their garment and textile sector to Myanmar because of trade privilege and cheap labor.

The European Union (EU) has allowed zero duty benefit on export goods from Myanmar to the EU under its Everything but Arms scheme in 2013.

As a result, both the Chinese and Vietnam investors are setting up factories in Myanmar. If they can produce the goods in Myanmar and send those to the EU, they get zero duty benefits.

Moreover, the cost of production at the factory level has really gone high in China. China is no more competitive in labor-intensive mass garment production.

Chinese manufacturers cannot make big profits by making and exporting garment items.
As a result, a big number of Chinese entrepreneurs have shifted their industrial production base.

For instance, most Chinese companies now like to produce electronic goods, mobile phone technologies, home appliances, automotive parts and cars and some other industries which are not related to the garment.

So there is a big shortage of workforce. The Chinese garment factory owners have been suffering from the shortage of workforce at affordable rates.

So the garment industries have started relocating to nearby countries like Myanmar, Vietnam, Bangladesh, Cambodia and Thailand.

Why in Myanmar?

Geographically and culturally Myanmar is very close to China. These are the two main reasons for the relocation of Chinese garment factories to Myanmar. Moreover, Myanmar labor is cheaper than in China.

Myanmar has the zero duty benefit on export of goods to European Union nations.
Myanmar has a lot of seaports from where goods can be shipped easily at cheaper rates to anywhere in the world.

Myanmar has been developing a lot of industrial zones and facilitating foreign investors. The logistics and transportation costs are also lower in Myanmar than in China.

So Myanmar has been becoming a strong global apparel manufacturer soon. Currently, Myanmar has been producing basic garment items as the manufacturers do not have a lot of skilled workforces and do not have strong backward linkage integration supports.

Moreover, as a new player in the markets, Myanmar manufacturers did not install very sophisticated machinery to cater to high-end value-added garment items.

So they are still making like cutting sewing and packing. Maybe in the near future, they can also produce better price high end and complex types of garment items like suits and jackets.

Many renowned international retailers and brands like H&M and Marks & Spencer have been encouraging the manufacturers to set up factories and to produce goods for them at cheaper prices.

So the Myanmar garment factories are receiving work orders of basic garment items those which are shifting from China and Bangladesh. Recently garment export from Bangladesh has been declining to a bit.

Why Myanmar is suitable for RMG investment

One of the main reasons is the diverting of work orders from Bangladesh to Myanmar as micro, small and medium factories either closed down or cannot take the orders because of little or no profit. The large and medium-large factories in Bangladesh are less interested to cater to the basic work orders. As a result, those work orders of basic garments are shifting to Myanmar to produce at cheaper labor costs.

What Bangladesh needs to do at this stage

Although Bangladesh is in the middle of high-end value-added garment production now after a journey of four decades of garment business, still Bangladesh needs to continue catering to basic garment items for more years to maintain the steady growth of export earnings.

Production of basic garment items especially in the micro small and medium factories is necessary for creating new entrepreneurs in this sector, making the workers skilled and supporting the bigger units.

However micro small and medium factories cannot maintain strict compliances set by the buyers due to their shortage of funds and less capital. As a result, some of these factories have already faced closure recently leaving some 30,000 workers jobless.

So the government, brands, retailers, union leaders, leaders of Bangladesh Garment Manufacturers and Exporters Association, Bangladesh Textile Mills Association, Bangladesh Garment Buying House Association and Bangladesh Garment Accessories Association should come forward to formulate a guideline for assisting the micro small and medium factories so that they can also run their business to be bigger in future.

In most of the cases, the micro small and medium factories fail in compliance. So for their survival, there should have separate guidelines so that they can run their factories to cater to the work orders.

As the number of factories increased last year, export volumes increased as well, according to Myanmar exporters.

The 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 centers 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.

On the other hand, 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.

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