The World Bank recently forecast that the Burmese economy would grow by 6.3% during the 2012-13 financial years, compared with 5.5% the year before. Theoretically,the garment industry Burmas only industry presently connected to international trade networks has huge potential to contribute to national economic growth, both as a foreign exchange earner and a massive job provider.However, in order to achieve its full potential, the sector needs to overcome range of obstacles, a few of which are outlined below.


Mismatch between Power Supply and Demand


There is a serious mismatch between availability and demand of electricity that drives the garment manufacturers in Burma have to resort to meet its power requirements through diesel. According to a JETRO enquiry, total energy costs for garment factories in Burma amount for 30-40% of total labour costs. And ontop of this, the country's unstable electricity voltage accelerates the depreciation of machinery.


Lack of Government Vision and Help


Even basic information like the number of garment companies, employment, salaries,productivity and export performance, domestic production and consumption of cotton/yarns/fabrics/garments, is difficult to find in Burma. Official figures often differ greatly from estimates made by researchers.


According to the estimate floating around in Burma, there are currently more than 200garment exporting companies, nearly all of them private companies; together they employ more than 100,000 people, garment exports increased from US$ 490min 2010 to US$770m in 2011; in 2012 garment exports may have exceeded the all-time high of US$ 868m reached in 2001. Japan, the EU and Korea are the main destination countries. However, it can be expected that the US the top importer of Burma-made garments before 2003 will re-take this position. FDI in the garment industry mainly originates from South Korea, Taiwan, Hong Kong and China.


Burmese Government has been charged with lack of vision to develop garment manufacture and exports, but the basic issue is that Bangladesh does not have any reliable data, on which any programme of development can be based. There is a need for sectoral vision to be developed and strategic choice made. For instance, does it make sense (or not) to create special incentives or adaptations to import duties in order to favour investments in spinning/knitting/weaving/dyeing units, in industrial laundries (there are only two washing facilities in Burma), in the manufacturing of trims and packaging materials? Perhaps a first step here is the recent decision by the Ministry of Commerce to pass a bill that will allow all imports and exports to proceed without licenses from 1 April.

 

Social Compliance


Burma is still on the watch list for child labour. The withdrawal of American apparel companies following the US import ban in 2003, as well as many European ones (among them Triumph, C&A, Arcadia Group, British Home Stores), means the countrys manufacturers have little knowledge about international standards for social compliance. So there is a lot of catching up to do in educating, training and auditing.


Red Tape, Corruption


The last annual Corruption Perception Index (Transparency International, December 2012) listed Burma as 172nd of 176 countries reviewed. Notoriously corrupt countries like Bangladesh (144th position) and Laos (160th) did better than Burma. The military rulers has already started building a new capital Nay Pyi Taw (Royal City) some 320km north of Yangon (formerly called Rangoon), thus creating a dysfunctional split between Yangon the industry and business centre of the country, including the textile and garment industry and the official decision-making centres.


At 3% of GDP, tax revenue in Burma is extremely low. However, levying export taxes, as the Government did for some time, restrained export growth. Burma should increase its tax revenue by other means. The big problem is that many businesses are unregistered and, according to the weekly newspaper Eleven, only half of registered firms pay taxes.


This article was originally published in the Stitch Times magazine, April, 2013 issue.