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Myanmar an option for Indian textile entrepreneurs
19
Feb '15
Favourable government policies, low wages, shorter sea route and growing garment exports make Myanmar an attractive option for Indian textile entrepreneurs, says Rajesh Kumar Shah

The garment sector in Myanmar has grown enormously since the lifting of economic sanctions by Western nations in 2012, after a gap of 15 years. Today, it employs over 250,000 people and accounts for 10 per cent of export revenues earned by the country.

In 2014, Myanmar’s garment exports were estimated at US$ 1.5 billion in terms of FOB value, which has doubled in the last three years alone. The National Export Strategy (of Myanmar) wants to increase the country’s garment exports to about $4 billion by 2020.

Like Vietnam, Myanmar too is not self-sufficient in raw materials and imports many of its garment sector requirements. Second, unlike Bangladesh which has strong knitwear and woven apparel segments, most of the apparel exported by Myanmar are non-knitwear.

On the other hand, India is rich in cotton, and manufactures various kinds of yarn and fabric in large quantities, which are both supplied to the domestic industry and exported. This presents an opportunity for India to export its textiles, and also to invest in the Southeast Asian country for setting up textile and garment manufacturing units.

India is the fourth largest trade partner of Myanmar (third largest export destination for Myanmar and fifth largest source of imports into Myanmar), according to data with the Embassy of India in Yangon. Trade between India and Myanmar also takes place via third country (Singapore) and across the 1,624 km land border, in addition to direct trade. However, textiles is certainly not among the top traded items between the two countries.

“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,” notes Jacob A Clere, project manager, Myanmar Garment Manufacturers Association (MGMA).

Why Myanmar?

Favourable government policies, low-wages, short sea-route between the two nations are some of the reasons that make Myanmar an attractive destination for Indian textile entrepreneurs. In November 2012, the Myanmar government passed a new foreign investment law, which increased the maximum shareholding of foreign parties in manufacturing to 50 per cent. The law allows foreign investors to lease land for an initial period of 50 years with an option to renew. In addition, foreign companies are entitled to tax exemption for the first five years; no tariff is levied on raw materials imported by these companies; and they are allowed to exchange and transfer investments.

In addition, both India and Myanmar have signed and ratified Bilateral Investment Promotion Agreement (BIPA) and Double Taxation Avoidance Agreement (DTAA). These agreements provide for free flow of bilateral investments, and business profits will only be taxable in the source state. Further, some banks like the United Bank of India have signed agreements with banks in Myanmar to facilitate trade between the two countries.

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