Written by: Fibre2Fashion
Written by: Fibre2Fashion
Myanmar's textile industry is thousands of years old. It is a land rich in culture, and with abundant natural resources; situated in Southeast Asia having China, India, Bangladesh, Laos and Thailand as neighbours. The garment industry of Myanmar has a huge potential to contribute to national economic growth as a substantial employment giver, and attract foreign investment. Nevertheless, to achieve its full potential the garment industry needs to overcome some major challenges.
History of Myanmar's textiles
Agriculture is the backbone of Myanmar's economy. The government is carrying out development projects for agriculture which will also be the foundation for the all-round development of other sectors. Myanmar's most popular handicraft is traditional weaving. Medieval wall paintings, palm leaf writing and literatures show that since the Bagan period (9th to 13th centuries), the weaving industry had flourished. Ancient wood carvings, sculpture and mural paintings of ancient pagodas clearly indicate the high quality of apparel woven during those times. Even though traditional weaving gears are hand operated, it is still possible to produce excellent clothes.
In the 19th century, local factories were set up that produced 'lun taya acheik longyi' (one hundred shuttle wave) with patterns of horizontal wavy lines. Pure silk threads were used to weave for both weft and warp, and more than 100-200 shuttles were used depending on the design. The traditional weaving technology has become a national treasure, a legacy that has been handed from one generation to another. To promote the traditional weaving and revive local weavers, the government of Myanmar is trying its best to preserve traditional weaving heritage.
Textile industry: The recent past
During the years from 1962-88 all major industries were nationalised. Therefore, any development in the garment industry could happen only with the support of the Ministry of Industry. During this period garment and textile production received some foreign investment mainly from China, Japan and Germany. The Foreign Investment Law was enacted in November 1988, which allowed foreign companies to start business in the country. This gave a major push towards the development of modern garment industry in Myanmar.
During the period 1990-2001, garment exports increased from 2.5 per cent of total exports to 39.5 per cent. This meant that it became the largest export industry in the country. There were around 400 factories with three lakh employees in early 2000 generating revenue of US$ 600 million. Most exports went to US (more than 50 per cent), countries in EU (40 per cent), and the rest to South Korea, Malaysia, Canada, Singapore and Australia. Unfortunately, the trade regulations and sanctions in 2003 greatly impacted the garment industry of Myanmar. Instantly, the US market was lost. The garment industry was adversely affected due to the changes in the country's taxation and regulations, besides the international agreement on textiles and clothing being phased out in 2005. Other reasons such as emergence of China and Bangladesh as leading garment exporters and limited access to finance also stopped many producers from expanding or renovating the factories to become more competitive. This made Myanmar's garment factories less competitive and globally isolated. As a result, hundreds of factories closed down and more than a lakh of workers became unemployed.
Textile industry: The present
From 2005 to 2010, around 130 garment factories which survived the downfall started exploring new markets in Japan and Korea. In 2011, the new government took up a series of reforms and changes to facilitate trade and foreign direct investment (FDI). The government lowered export duty, reduced restrictions on the financial sector, revised the foreign investment law, and executed currency reforms. All these factors greatly improved the political and business conditions in Myanmar and the garment sector is rapidly growing today. At present, two new garment factories open every week in Myanmar. The Myanmar Garment Manufacturer's Association (MGMA) looks after the development and productive growth of this sector. Today, many garment factories are operating in Bago, Pathein, Hpa-An and Greater Yangon. More than 50 new apparel factories have come up in these areas in 2014 alone.
Myanmar is not self-sufficient when it comes to raw materials, and imports many garment production products. Also, the major part of Myanmar's apparel exports is non-knitwear. In spite of these factors, Myanmar is becoming an attractive destination for textile entrepreneurs. The two main reasons are favourable government policies and cheaper labour compared to other countries in the region. Myanmar can reap benefits of low wage as the wages are going to remain relatively low compared to other competing nations at least for the next few years.
In Myanmar, more than 90 per cent of the total garment manufacturing is dominated by woven products. The majority of garment factories take care of the domestic market and needs improvement with regards to efficiency, processes, quality and compliance. The main garment export destinations are Japan, Korea, Spain, Germany, UK and Turkey. They account for 85 per cent of total garment exports.
Favourable destination for Indian textile entrepreneurs
Since the lifting of economic sanctions by Western nations after a time lag of 15 years in 2012, the garment sector of Myanmar has grown tremendously. Cheap labour, supportive government policies and short sea route between India and Myanmar are few reasons that make Myanmar a good option for Indian textile entrepreneurs. A new foreign investment law was implemented in 2012, which allows foreign investors to lease land for 50 years with an option to renew along with tax exemption for the first five years. Also, no taxes are levied on raw materials imported by foreign companies. Further, the maximum shareholdings of foreign investors in manufacturing were increased to 50 per cent.
India is rich in cotton and manufactures various fabrics and yarns in huge capacities. These textile products are used domestically as well as exported. The new reformed laws of Myanmar give India an opportunity to export textiles and invest in setting up textile and garment manufacturing units there.
According to data with the Embassy of India in Yangon, India is the fourth largest trade partner of Myanmar and third largest export destination for Myanmar. However, import or export of garment and textiles between the two countries are negligible. According to Jacob A Clere, project manager, MGMA, "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."
Apart from providing raw materials, India has another door opened for setting up garment training institutions to increase the number of skilled workers in Myanmar. The skill development will help Indian companies investing in Myanmar for exports to other countries. At present, Japan and South Korea are the major importers of Myanmar clothing. They account for 48 per cent and 33 per cent of imports respectively.
Opportunities of Myanmar garment industry
Textile industry: The challenges
Myanmar faces challenges like poor infrastructure, weak banking system, lack of skilled labour, training, technology, economic and political stability, low productivity, under developed supply chain, laws and regulations. It needs a comprehensive strategy and support of the government to overcome these challenges.
According to media reports, Myanmar will expand its textile and garment industry under its new export strategy to boost economic growth. It has set a target of earning US$2 billion through garment export for the 2015-16 and reach US$4 billion by 2020. According to MGMA, with 90 per cent foreign investment, the sector created 100,000 jobs in 2014-15. Garment exports of Myanmar have taken a big leap as exports have almost doubled from $900 million in 2012 to $1.7 million in 2014. Official statistics show that since 1988, when the country opened to foreign investors, foreign investment in the manufacturing sector reached $5.46 billion.
Myanmar has the potential to attract business from neighbouring countries where manufacturing costs are high. Bringing transparency in laws and regulations, improving the infrastructure, efficient shipping connectivity, development of skilled manpower, increased productivity, economical and reliable energy and telecommunications will automatically boost the growth of garment industry. Today, the garment industry of Myanmar is rapidly developing. It is at a juncture where it has an opportunity to rise and transform itself into a leading garment manufacturing hub in the world.
2. The Stitch Times