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

• Abundant labour supply: Myanmar has abundant labour supply with a high literacy rate and low average age, which acts as the selling point for the country in becoming a garment manufacturing hub. If backed by financial and technological support from foreign investors, Myanmar can transform itself into a relatively cheap garment manufacturing destination.
• Cheap labour: Low wages is the chief element in making business decisions in the garment industry. At present, Myanmar has the lowest minimum wage when compared with leading garment hubs like China, Thailand, Vietnam, India and Cambodia. It is very close with the wage rate when compared with Bangladesh. Labour costs contribute to 15-20 per cent of the total garment costing. This advantage will directly help Myanmar to win over the other garment manufacturing hubs.
• Shorter sea route: Yangon, the main shipping port of Myanmar is close to the port of Singapore. The port of Chennai too is close to Yangon port which means that goods from Myanmar can reach India approximately in five days through the sea route. This can be explored for quicker shipping of goods in a cost-effective manner. Considering these advantages, the development of the shipping industry and port facilities must be prioritised for the expansion of internal and external trade.

• Favourable government schemes: The current Myanmar's Foreign Investment Law (FIL) is liberal compared to the laws of the developed ASEAN countries. The FIL also gives several benefits like three year income tax exemption, relief from custom duty and other internal taxes on machinery, equipment and spare parts, allowance of accelerated depreciation. Such government schemes will boost the growth of garment industry and invite more foreign investments.
• Duty-free trade pacts: Myanmar has been granted an LDC (Least Developed country) status by Japan. This gives tax exemption up to 10 per cent. Such preferential treatment makes a big difference in garment trade where competitive pricing is crucial. In 2012, the EU granted duty and quota free access to the European market for clothing as it placed Myanmar in its GSP (Generalized System of Preferences). With continuous economic reforms and improved relations with chief garment markets (US and Europe), the US is also taking steps to be liberal with its import ban.
• Strong sourcing base for retailers and brands in Myanmar: Garment retailers and brands are facing the issue of increase in labour cost in other clothing supplier countries. Retailers and brands can use this opportunity to develop Myanmar as a strong source base for garment manufacturing.

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.

• Economic and political stability: According to the International Monetary Fund (IMF), the lending rates in Myanmar are as high as 13-15 per cent which is two and half times more than China's lending rates. This is one of the hindrances while making investment in the RMG sector.
• Lack of skilled labour: Majority of the workforce (about 70 per cent) is employed in the agriculture sector; only seven per cent is working in the industry sector. Skill development and training of the workforce will bring in more foreign investors to Myanmar.
• Weak supply chain: Currently, one cannot find domestic suppliers of fabrics, packing material, trims and very few washing facilities. If these are made available, garment factories can fulfil their requirements and promote maximum utilisation of investment and technical expertise.
• Low productivity: Garment producers are not used to taking large orders and produce in large quantities. They deliver orders in small quantities. As the garment industry is labour-intensive in nature, exchange of knowledge, skill and technology is important for increasing productivity. With limited interaction with the international market, development in terms of technology and skill has also been restricted. This has adversely affected the productivity.

• Poor infrastructure and technology: Poor infrastructure in terms of transport, telecommunication, port facilities and electricity is hindering the economy of Myanmar particularly the garment manufacturing industry. Moreover, irregular and costly supply of electricity is a matter of concern for the labour-intensive garment sector. Limited transport facilities and lack of good port facilities needs immediate attention as they are essential for garment exports. The government of Myanmar needs to collectively address these concerns to build and improve its infrastructure.
• Complicated and inefficient laws and regulations: Oppressive and inefficient laws and regulation is another big challenge to be dealt with. Most garment manufacturing companies accept cut, make, pack (CMP) orders because the law restricts direct buying from Myanmar. There is difficulty in obtaining letter of credit and lack of banking support also limits doing FOB (free on board) business. Special sanction is required to invite foreign investment and assist them in executing investment plans. Now, as economic sanctions have been removed and there is an increased support from banking sector, doing FOB business may soon become a reality.

Future prospects

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.

References:

1.      Technopak.com

2.      The Stitch Times