China,Vietnam, Bangladesh and some of African countries seem to be losing their attraction as an apparel sourcing hot-spots. Burma or Myanmar is fast coming up for more than one reason. The first and the primary reason being the lifting of sanctions against this country that had been imposed by a number of countries, including member-nations of the European Union. The second, evermore important reason is the cheap labour, which has been the advantage of mostof the LDCs as also highly advanced developing countries like China. Wages of US$1.1 per day in Burma compare with $2.48 in Vietnam, $4.99 in Indonesia, $9.84 in Thailand, $7.13 in the Philippines, and $17.62 in Malaysia.


In its constant search for cheaper and cheaper production bases around the world,there are few places the apparel and textile industry has left untouched. But could Burma - also called Myanmar - be the next frontier? "We are all searching for the next China," admits Henry Tan, CEO and president of Hong Kong's largest listed garment manufacturer Luen Thai Holdings Ltd. "There is a lot of talk about Burma," he told delegates at the recent Prime Source Forum in Hong Kong, adding: "In the last ten weeks there has been more talk about Burma than in the last ten years."


And discussions are likely to intensify even further following the recent decision by the European Union (EU) to suspend most of its sanctions against the country for the next year. The move is in recognition of the "historic changes" that have taken place over the past 12 months and is also aimed at encouraging the reforms to continue. But while the EU's decision is likely to open up Burma to renewed scrutiny from fabric and garment firms, industry executives seem to agree it is unlikely to present a major sourcing opportunity in the short term. Indeed, the US continues to impose a total ban on the country's imports.


However,there are  problems too. "The leash holding it back is not only the sanctions, but also the business environment and the infrastructure," says Michael Blakeley, Executive Director at the Source ASEAN Full Service Alliance(SAFSA), an initiative helping manufacturers in Southeast Asian nations collaborate by creating virtual vertical factories. Henry Tan, too, believes"it will be a risk to go in. The infrastructure in Burma is a problem; there needs to be investment in infrastructure, ports, power supplies,roads, trucks, banks." But he concedes that "over the longer term Burma could be big."

Likewise, Blakely adds: "You cannot ignore a country in this region that officially has 60m people, but unofficially some think closer to 80m, and wages of $1 a day. "For some of the customer members of our organisation, that's got their interest, but they've got to balance that out with all the other challenging things like social compliance, infrastructure etc.


"But Asean investment into Myanmar is happening, and rapidly. The Thai government is encouraging its garment industry to make those investments in Myanmar, and they're encouraging them sooner rather than later. "So with that increased investment, and foreign investment that hopefully brings with it norms and standards of operating in other regions of the world, there is great potential in Myanmar."


Benign EU


The European Union (EU) has suspended most of its sanctions against Burma/Myanmar for the next year in recognition of what it says are the "historic changes" that have taken place in the country over the past 12 months and in a bid to encourage the reforms to continue. The decision announced recently by the European Council, which has since taken effect and include trade and economic sanctions, but will not include the embargo on arms sales, which will be retained.


The Council also said it would continue to "monitor closely the situation on the ground, keep its measures under constant review and respond positively to progress on ongoing reforms." Noting the "vital contribution" the private sector has to make to the development of Burma, the EU said it would welcome European companies exploring trade and investment opportunities in the country. The Council also voiced its support for reinstating the Generalized System of Preferences (GSP) for Burma "as soon as possible" once the International Labour Organization (ILO) has assessed its labour standards. If GSP tariff preferences were reinstated, products such as clothing made in Burma would be eligible for duty-free access to the EU. However, while acknowledging that progress has been made in Burma, the EU still acknowledged the need for further reforms, including freeing remaining political prisoners and removing restrictions on those already released. There are also ongoing concerns about human rights abuses.


It is also worth noting that the EU has suspended - rather than ended - sanctions, which suggests they could be re-imposed if reforms stall. But a trade group representing European retailers, brand companies and importers, says the European retail sector is strongly interested in strengthening commercial links with Burma - especially when it comes to sourcing. "The Burmese leaders need to shape a conducive framework to attract investment and accelerate the opening of the domestic industry," said Jan Eggert, Director General of the Foreign Trade Association (FTA).


"Then Burma could become an interesting sourcing country for European retail again."

And if GSP tariff preferences were reinstated, that would mean products such as clothing made in Burma would be eligible for duty-free access to the EU. At the moment, though, the EU imposes full import duty on Burmese products, while it offers duty-free access to the world's other 48 poorest countries, such as Cambodia and Laos.


US Moves Slowly on Sanctions


The US - which has imposed a total ban on imports from Burma since 2003 - is moving even more slowly. Earlier this month it said some travel restrictions would be relaxed, and that there would be a targeted easing of the ban on the export of US financial services and investment. "Burma, right now, is a very long way from meeting the conditions the US Administration has laid down for trying to persuade Congress to withdraw the sanctions that really affect our industry," Flanagan writes.


"There appears very little likelihood a US President will propose lifting import sanctions against Burma before Burma's full elections in 2015. Even then, I wouldn't put money on Congress agreeing open trade with yet another Asian low wage economy - unless its current anti-trade mood changes radically." According to information presented at this year's SAFSA Member Conference in Hong Kong, Burma's garment exports have soared 45.5% in the last five years, from US$418m in 2007 to $608.3m in 2011.The main export markets are Japan (with a 57% share), South Korea (38.2) and Turkey (1.5%). Other destinations include Malaysia, Colombia, South Africa, Australia, Switzerland, Serbia and France. These are likely to undergo change sooner than later once Burma picks up on its Achilles heels.


This article is originally published in "The Stitch Times", June, 2012.