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Gap Report Outlines Issues With Sourcing in Myanmar

As the first American retailer to resume sourcing in Myanmar since U.S.-levied sanctions were eased following the country’s military rule, Gap Inc. elected to publish a report evaluating its supply chain risks to paint a picture of local conditions and aid in development of responsible sourcing practices for the Southeast Asian nation.

In a voluntary report to the U.S. State Department titled, “Responsible Sourcing in Myanmar,” Gap outlined the challenges affecting the apparel industry that could potentially pose a risk to both garment workers and retailers.

Gap, which is currently sourcing finished outerwear for its Old Navy and Banana Republic Factory brands from two third party factories in Yangon, said it engaged in extensive consultations with stakeholders about human rights issues in the country, and how these issues could affect its business.

“To date, Myanmar has had little rule of law, and many government and administrative institutions have yet to be formed or develop the capacity to effectively perform their intended functions. The country is just beginning to develop modern national laws on investment, business practices, government budgeting, human and labor rights, environmental protection and other governance matters. Local enterprises in the apparel and other industries are often not accustomed to complying with international standards or legal requirements, which are often loosely or not enforced,” the report noted.

But despite that, Gap said because of Myanmar’s legacy of garment production, it was able to identify factories capable of supplying high quality apparel in the volumes it requires for business.

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Gap’s current operations in the country are limited to cutting and sewing fabric and attached trims and labels, and the retailer contracted third party labor rights and working conditions experts to identify any human and workplace rights issues before approving the South Korean-owned factories for production.

“Our approach in Myanmar has involved ensuring appropriate policies are in place, assessing risks to workers, taking action to mitigate and prevent risks and reporting on our progress,” the report noted.

Gap announced its plans to source garments in Myanmar back in June, and in its initial assessments of the industry’s conditions done in November 2013, the retailer identified a number of non-compliance cases.

According to the report, the top issues affecting business in Myanmar are child and forced labor, working hours and wages, freedom of association and collective bargaining. At one or both of its supplier factories, Verite, a consultancy specializing in labor rights and working conditions, which served as Gap’s audit team, also found that factories had electrical and chemical safety issues, inadequate ventilation and temperatures, and working hours exceeding the permitted 60-hour weekly limit.

Current local law in Myanmar stipulates that youth age 15 to 18 can work without protective restrictions as long as a medical doctor deems them “fit to work,” but the country recently ratified the International Labour Organization’s convention on Worst Forms of Child Labor, which is scheduled to be enforced this December. The new convention will require restrictions on hazardous jobs for juveniles.

Until March 2013, Myanmar had no country-wide mandate on minimum wage, but the nation’s Ministry of Labour, Employment and Social Security enacted a law stipulating that bodies in each state or region would be responsible for researching the labor market and recommending a minimum wage to then be set by the national body. The government is still working on efforts to define these wages, but on average, a garment worker in Myanmar currently makes $75 to $150 per month based on skill levels.

Gap said it expects to see a lag between new policy and procedure implementations and workers and management adjusting their behavior accordingly. “In Myanmar, this adoption period may be longer than it might be in some other cases considering how new many policies and programs are to certain management, supervisors and workers at each factory,” the report noted.

Myanmar’s government issued a provisional Myanmar National Building Code in September 2013, but it has yet to be implemented. According to the report, “The country’s limited rule of law and under-developed regulatory regime, including the absence of a national building code to date, and factories’ lack of experience with fire safety and emergency preparedness create potential human rights and business risks.” Gap said it expects these risks to be low in comparison to others, but in light of the structural calamity that was the Rana Plaza collapse in Bangladesh last year, no retailer—including Gap—is willing to risk a potential structural failure.

During its audits, Gap identified areas for structural improvement at its factories, like sagging roof trusses and excessive storage loading, but said that none were “imminent threats to worker safety.”

Gap has continued to work with factory management, workers and industry experts to conduct structural and fire safety assessments, emergency preparedness audits and to train workers and management to appropriately versed in workplace safety. “While changes take time and there is still work to do, each factory has made considerable improvements, which we expect to continue,” the report noted.

Examples of those improvements include: putting policies in place to address under-age hiring, reductions in excessive working hours, corrections to insufficient overtime wages and fire safety and emergency preparedness including adding new exit routes and implementing fire safety training.

One advantage the retailer said Myanmar’s apparel industry holds over Bangladesh is that fire risk is less likely in its factories. “Whereas many garment factories in Bangladesh are located in multi-story buildings, apparel factories in Yangon are typically one- and two- story buildings with mezzanines. Fire risk to workers’ lives is generally much greater in taller buildings where it is more difficult to quickly exit the building from higher floors,” according to the report.

Gap said, “Going forward, we are continuing to actively engage management to implement policies and programs that embed sustainable social compliance and continuous improvement into factories’ operations. We aim to support the adoption of lasting solutions that will sustain fair, safe and healthy working conditions.”

Myanmar’s garment sector was once its fastest growing, with exports exceeding $800 million in 2001, but growing human rights concerns forced retailers to flee and the country’s economy faltered. In 2013, Myanmar exported just $1.96 million worth of goods to the U.S., but the Myanmar Garment Manufacturers Association said it expects that number to reach $50 million this year.