A Positive Outlook for the Myanmar Garment Sector
Release Date: July 6, 2017
Garment sector export revenues are increasing significantly each year and the continued growth of the industry will surely create hundreds of thousands of new jobs in years to come. It has great potential and, currently, sustained growth as international investors and retailers see their investments making returns. The Gap clothing company officially announced the volume of products it was sourcing from Myanmar had tripled in the period from June 2014 to June 2015. Famous international brands including H&M and Marks & Spencer have shown a growing sourcing interest in Myanmar following the easing of sanctions.
Myanmar’s garment sector began rather humbly back in the early 1990s and reached its best stretch of steady, profitible production between 1998 and 2001. It was one of the few industries in Myanmar that did well over the period. But, when new U.S and European sanctions were imposed on Myanmar in 2001 in response to reported crimes against humanity it tremendously effected the sector. According to International Labour Organization (ILO) data, in 2000, garment export value reached $817 million (second largest export industry in Myanmar) and the US market made up about 65 per cent of the garments shipped. At the same time, 38 per cent were shipped to Europe while the remaining 7 per cent went to other countries
Following the lifting of European and American export sanctions on Myanmar the country’s garment sector is now experiencing new levels of growth. Amongst Myanmar’s export sectors, the garment sector is ranked fourth, according to DICA. According to World Trade Organization (WTO) statistics, Myanmar’s total export value of garments reached $986 million (8.9 per cent of the economy’s merchandise exports) in 2014, nearly triple that of 2010 ($337 million or 3.9 per cent of the economy’s total merchandise exports). According to the MGMA (Myanmar Garment Manufacturing Association), garment exports jumped to $1.46 billion in 2015 and accounted for 10 per cent of the country’s export revenues. At the end of December 2016, the export value is expected to be over $2 Billion. Myint Soe, Chairman of the MGMA, predicted garment export value will reach up to $3 million in 2017 if the sector can reach a production situation similar to that circa the millennium.
The Myanmar Garment Industry 10 year Strategy
In 2015, with the assistance of the International Labour Organization (ILO) and the British Council’s Pyoe Pin program, the Myanmar Garment Manufacturers Association (MGMA) was launched under the “Myanmar Garment Industry 10 year Strategy”. The strategy aims to create abundant job opportunities, to gear up export volume and create a sustainable manufacturing industry in the country. The strategy set out various goals over the next decade and detailed what needs to be accomplished and the expectations of Myanmar’s garment sector should have about market growth in the near future. To achieve this vision, the industry needs to change the way it works – moving from Cut-Make-Pack (CMP) to Freight on Board (FOB) and, ultimately, Own Design Manufacture (ODM)/Own Brand manufacturing (OBM). Education and training must be provided along with supply-chain growth and the development of key existing markets: Japan and the Republic of Korea and the EU (the United Kingdom, Germany and Spain) and new markets: the US, other EU members, Canada and the Russian Federation.
Currently, almost all factories in the Myanmar garment sector are operating under the Cute-MakePackage (CMP) system.
According to their business models, Garment factories worldwide fall into four primary categoreis; (1) Cut, Make and Package system, (2) Original Equipment Manufacturer (OEM) system, (3) Original Design Manufacturer (ODM) system and (4) Original Brand Manufacturing (OBM) system.
The Cut, Make, and Package (CMP) system is usually the entry stage for a manufacturer in the garment value chain. Foreign buyers with financial backing and technical expertise will negotiate with garment factories to carry out their labour-intensive work. Garment factories operating with this production system are found in Cambodia, Sub-Saharan Africa, the Caribbean, Vietnam and Myanmar.
Under the Freight-on-Board system, foreign retailers place orders from well financed factories with technical expertise. Countries whose garment factories operate following this production system include Bangladesh, Indonesia, Sri Lanka and Mexico.
As the saying goes, “Rome wasn’t built in a day” but the stronger the foundations, the more powerful the industry will be. As like other industries in Myanmar, the garment sector is also facing a lack of skilled labour (particularly middle-management) in Myanmar. For this reason, the first few years of development concentrate on training (raising the level of knowledge within the existing industry), worker engagement and advocacy to put the best tools in place to enable development. Vocational training schools dedicated to the garment sector will be established in every industrial zone.
There are six strategies of the 10 year plan; (1) Improve the competitive advantage of the Myanmar garment industry (2) Ensure that full social compliance and social dialogue is practiced at all levels of the industry (3) Build an Apparel Training sector that supports the industry as it develops (4) To build the image, position and brand of the Myanmar garment industry (5) To inform on policy changes which will improve the environment for positive sustainable growth of the textile and garment sector (6) Increase the service potential of trade associations.
Moreover, there are still many challenges to overcome including an underdeveloped supply chain and a lack of access to finance.
The Myanmar banking sector is vastly under-developed even compared to neighbouring countries. But, positively, the banking sector has taken two crucial steps. In January this year a new financial institutions law was passed to pave the way for mobile banking. Myanmar’s banking system was closed for decades to foreign banks. In May 2016, the Government gave the green light to 13 foreign banks to operate in Myanmar and began providing credit to local banks and financial institutions as well as foreign companies. To boost the smooth transition from CMP to FOB, MGMA is urging for changes in government policies which will improve the enabling environment for positive, sustainable growth of the textile and garment sector.
In March 2015, the first National Export Strategy (NES) was launch by the Ministry of Commerce, with technical assistance from the International Trade Centre (ITC) and financial support from Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) and implementation support from the German Agency for International Cooperation (GIZ). It was designed to fuel the country’s sustainable development through export promotion by securing public policies, improving critical infrastructure, adopting worker protection and encouraging environmentally-friendly practices. Government policy changed through efforts from key financial and technical partners including the MGMA.
Myint Soe, Chair of the Myanmar Garment Manufacture Association said the process of transition from Cut, Make and Package (CMP) to Freight-on-Board (FOB) is between 50 per cent almost 75 percent complete. He anticipates that the Myanmar garment sector will reach $10 Billion in sustainable growth over the coming years and will create around 1.5 million new jobs.
Source From: Myanmar Insider
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