Just Style, Apr 18, 2017 by: Jeremy Mullins
America may have scrapped its major sanctions against
emerging outsourcing centre Myanmar, and brought back the
southeast Asian country's GSP (Generalised System of
Preferences) access to US markets, but the impact on the
clothing trade has so far been underwhelming.
Apparel factory owners in Myanmar say American buyers have
simply not materialised in the numbers that some expected. "We
welcome buyers from Europe and Japan into my factory nearly
every day," said one garment businesswoman, who requested
anonymity. "In fact, we are close to exporting as much to Europe
as to Japan. But I haven't had one American visitor since the
Speaking to just-style, U Aung Win, deputy chair of the
Myanmar Garment Manufacturers Association (MGMA), said it was
unclear why fewer US buyers than expected had come, though hoped
it would pick up in the future.
One reason why garment exports did not pick up immediately
may be because US sanctions have been rolled back over time, but
certain controls affecting key areas such as banking remained
until November. So, there has been no big bang of sanctions
abolition – with the European Union (EU) and Japan liberalising
trade relations earlier. As a result, European and Japanese
buyers have been busy making the relationships that are needed
in a new outsourcing country – and US companies have been far
less proactive, even though a few American brands, such as Gap
Inc, re-entered Myanmar ahead of the 2016 end of sanctions.
And while Myanmar factory owners speaking with just-style
said they were keen on GSP, formally granted to Myanmar in
November 2016, they stressed that there are few garment products
within the 5,000-plus list of goods affected, limiting its
impact on the clothing trade.
A good example of the tepid American appetite to buy and
invest in Myanmar can be seen from the fact that only 26% of
respondents to a 2016 United States Fashion Industry Association
(USFIA) benchmarking study said they had started to explore
sourcing opportunities in Myanmar, the same percentage that were
That said, the 2016 study was released in June before the
surprise end to sanctions and extension of GSP benefits to
The Association has not yet released its 2017 study, and it
remains to be seen whether it measures an increase in interest.
International trade data certainly bears out the current low
level of bilateral US-Myanmar clothing trading, indicating that
Myanmar garment exports to the US averaged about US$4m per month
in 2016's fourth-quarter. This is about one-tenth of the average
clothing exports from Myanmar to Japan of about US$44m per month
in 2016. Looked at another way, the US$4m per month exported to
the US is about 3% of Myanmar's total garment exports – a tiny
portion given the potential sales to the world's biggest
This stands in contrast to rapid growth in Myanmar's trade
with Europe. The European Union (EU) imported $260m worth of
garments from Myanmar in 2014 and $337m worth in 2015. Although
full-year 2016 figures have not been released, its 2016 figures
to the end of November totalled $462m.
Put another way, an average month in 2016 saw as many
European orders from Myanmar as from the US in an entire year.
Despite all of this, however, Myanmar will become an
increasingly attractive destination for American clothing
buyers, some say.
Eric Rose, lead director of HRMR (Herzfeld Rubin Meyer &
Rose), the first US law firm moving into Myanmar, and a founding
member of AMCHAM Myanmar (American Chamber of Commerce in
Myanmar), told just-style this growth would come for several
Myanmar allows 100% foreign ownership in the clothing
industry, which is naturally attractive to foreign companies
looking to base manufacturing operations in the country. The
Myanmar Garment Manufacturers Association (MGMA) has also been
moving the industry toward a 'free on board' value-added model,
including promoting the development, production and export of
The local market offers some advantages over its competitors.
Labour costs are about one-third of those in China, and 30% less
than in Cambodia and Vietnam. Productivity is also growing
partly due to the devaluation of the Myanmar Kyat. In April
2015, US$1 bought MMK1,067. Now it buys around MMK1,350.
Meanwhile, the new civilian government is working to improve
facilities and regulations that are of critical importance for
the growth in exports, such as export infrastructure (port
efficiency leaves much to be desired), developing production
hubs with efficient energy and transport infrastructure, and
improving the regulatory framework.
"Ultimately, the balance of overall costs versus
productivity, and capacity for growth offered by Myanmar will
inherently enhance the opportunities of 'Made in Myanmar'
brand-building for US importers," Rose said.
And the fact remains that before the introduction of
sanctions against the former military government in 2003, the US
had been the major buyer of Myanmar garments, purchasing about
two-thirds of the total. This portion evaporated overnight with
the 2003 Burmese Freedom and Democracy Act, which included bans
on the import of Myanmar products to the US.
Buyers from Asia, specifically Japan and South Korea, took up
some of the slack as American buyers vacated the market, but the
effects on the garment industry in Myanmar were far-reaching –
with capacity collapsing and investments falling away, just when
other Asian countries – notably China – were starting to tap an
outsourcing boom that has transformed their economies almost
unthinkable occurrence for much of the previous two decades,
when she had languished under house arrest.
While Daw Aung San Suu Kyi is forbidden by the
military-drafted constitution from becoming the country's
President, she created the position of State Counsellor after
her party's November 2015 electoral victory, and installed a
Myanmar's nascent democracy may not be perfect, but the US
evidently saw enough progress with the elections to roll back
what remained of the sanctions. Now it remains to be seen
whether the American clothing industry sees enough promise in
Myanmar as an outsourcing location to exploit this new
liberalised trading relationship
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