In response to the perils of doing business in politically unstable countries like Bangladesh and Cambodia, and the skyrocketing costs of manufacturing in China, apparel executives are surveying the world for safer, cheaper sourcing alternatives. Now that Burma has recently shown a commitment to both political reform and market liberalization, and is liberated from the sanctions once imposed by the U.S. and E.U., it has become a prime candidate to fill that role.
And there are promising signs of future progress. Last July, the E.U. reinstated Burma’s status as a beneficiary of its Generalized System of Preferences program (GSP), permitting it duty-free access to the markets of its twenty-seven members. Also, the E.U. created a special joint task force with Burma to promote the environmentally sustainable manufacturing of garments.
Many interpreted the establishment of this task force as the E.U.’s vote of confidence in Burma’s commitment to reinventing itself as a liberal democracy. The task force is the result of a general rapprochement between the E.U. and Burma, which only recently concluded a major summit designed to solidify commercial ties between the two. The bilateral talks generally focused on boosting trade but also discussed a wide range of related issues including revamping the legal system, private property protections and rebuilding a long neglected infrastructure. Catherine Ashton, the E.U.’s foreign policy chief, said, “In partnership, you know, it’s not about coming to impose it’s coming to say: these are the things we know. European countries represented here, European businesses represented here, from all over the EU know very well the journey that has to be taken for a nation to come from oppression to freedom, and they want to support this country on that journey.”
Burma embarked upon an aggressive agenda of democratic reform in 2012, with plans to liberalize its previously cloistered markets and attract foreign investment. In response to these reforms, The U.S. government has eased sanctions on the country. Nevertheless, progress has been slow, with U.S. exports to Burma reaching only $145 million in 2013, and imports of $30 million.
However, some remain anxious that Burma’s government is insufficiently rehabilitated, still clinging to tyrannical ways. And, the country has also been roiled by ethnic conflict, particularly regarding the Muslim population living along the northern border with Bangladesh. Dissident leader Aung San Suu Kyi said, “I am here to encourage you to invest in the right way, in the truly responsible way, which is taking into consideration the political and legal dimensions of investment.”
Speaking exclusively to the Sourcing Journal, a spokeswoman for the United States Trade Representative office (USTR) discussed the recent interest American retailers and brands have begun to show in investing in Burma. She noted that much of the scrutiny of Burma’s promise has come from major companies powerful enough to blaze a path for others to follow. She said:
“Leading U.S. brands have started to enter into the Burmese market. Ford Motor Corporation opened a showroom in Rangoon in October 2013 and Chevrolet is finalizing the grand opening of its Rangoon showroom. GE recently established an office in Burma and has committed $7M in Corporate Social Responsibility (CSR) activities, including capacity building and training funds. These funds will go toward strengthening the health care system, improving the energy architecture and promoting the development of Myanmar’s human capacity.”
Despite serious shortages of skilled labor and an infrastructure still in need of substantial improvement, the private sector has increasingly acknowledged Burma’s economic attractiveness and manufacturing potential. The USTR spokeswoman explained:
“This level of early private sector interest reflects recognition that Burma is located in the heart of Asia and boasts a huge potential market in its own neighborhood; 40 percent of the world’s population is located within a five hours’ flight. It is predicted that Burma will have 19.5 million members of the consuming class by 2030, up from 2.5 million in 2010, and has the potential to quadruple the size of its economy to over $200 billion by 2030. The IMF estimates that economic growth in FY13-14 is 7.5% and will rise further during FY14-15.”
Coca Cola has been at the head of the pack, aggressively investing in the nation now that sanctions have been lifted by both the U.S. and the E.U. The USTR spokeswoman said:
“In June 2013, after a 60 year absence, Coca Cola re-started bottling operations in Burma and is planning to invest $200 million over the next five years. Their initial investment has already translated into jobs for local Burmese, business for local suppliers, and promotion of responsible business practices in the country. As part of their entry into the Burmese market, Coca Cola conducted human rights, worker rights, and environmental due diligence, conducted risk assessments, held extensive stakeholder consultations and audits, and developed related policies and procedures, which they have since reported on publicly pursuant to the U.S. Responsible Investment Reporting Requirements. Coca Cola’s report can be found at http://burma.usembassy.gov/reporting-requirements.html. Coca Cola’s approach serves as a model for other businesses looking to invest in Burma, and their thorough and detailed report can serve as a template for other businesses and the Burmese government to develop robust policies and procedures to ensure responsible investment in Burma.”
And many of Burma’s detractors have overlooked its impressive resources, both natural and, increasingly, technological. The USTR spokeswoman observed that Burma’s government, once an intractable obstacle to economic and political reform, has transformed itself into an engine of both. She said:
“Burma is also abundant with natural resources, such as oil, natural gas, timber, and precious stones, and there is significant potential for growth in the agriculture, energy and mining, manufacturing and infrastructure sectors. Burma is developing in a digital age and with the Government of Burma recently awarding two foreign telecommunications services providers with licenses to operate in the country, Burma’s consumers can now take advantage of affordable mobile and internet technology from the get-go. Finally, Burma’s huge working-age population — resilient and determined — will be an engine for growth (46 million out of a population of 60 million aged 15-64).”
Burma is still confronted by daunting challenges, attempting to reinvent itself as a liberal economic nation, after years freighted with oppression. Nevertheless, it has achieved some hard-won progress on the quick, capturing the attention of some of the West’s most influential companies. What Burma’s future ultimately delivers, the recently transformed nation is sure to magnetize intense scrutiny for years to come.