Bestseller, H&M and Primark are resuming garment sourcing in Myanmar after temporarily suspending orders following a military coup in February that plunged the Southeast Asian nation into spiraling violence, chaos and bloodshed.
Bestseller is back
A third-party audit, commissioned by Bestseller and published last week, concluded that the Danish retailer has complied with sanctions and not cooperated with the ruling junta, whose brutal crackdowns have killed more than 800 civilians, according to the Assistance Association for Political Prisoners, a local monitoring group.
The investigation, conducted by independent lawyer Jonas Christoffersen, who previously served as director of the Danish Institute for Human Rights for a decade, focused on three factories in the Ngwe Pinlae Industrial Zone, which is operated by Myanmar Economic Holdings Limited (MEHL), a military-owned conglomerate whose sprawling business interests span the construction, manufacturing, insurance, tourism, mining and banking sectors.
Both MEHL and the Myanmar Economic Corporation (MEC), another military holding company, are the target of sanctions from the European Union, United States and the United Kingdom.
But a report by Offersen Christoffersen, Christofferson’s law firm, said there are no “reasonable grounds” to assume that the factories are owned, directly or indirectly, by the military or have paid administration fees, directly or indirectly, to the military.
“It is my assessment that Bestseller has lived up to the UN’s recommendations with regards to conducting responsible business in Myanmar,” Christoffersen said in a statement. “They have fostered decent working conditions in the country and they have lived up to the highest international standards for corporate social responsibility. Bestseller has abided by the EU’s sanctions—including those that the EU enacted recently.”
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Christoffersen recommended that Bestseller, which works with 36 factories in Myanmar, resume its activities in the country as “quickly as possible” to protect jobs and maintain foreign investment and trade. Pulling out of Myanmar, on the other hand, would be a “clear violation” of Bestseller’s corporate and social responsibility, since a mass exodus by international companies would trigger almost certain economic collapse.
“The key question now is how to protect a national population where an additional 25 percent are set to fall below the poverty line,” he said. “If all Western companies stop trade with Myanmar, we will face a humanitarian catastrophe.”
Clothing and textiles, Myanmar’s top export earner after oil and gas, generated more than $4.8 billion in exports last year, according to the Ministry of Commerce.
Bestseller said it may be forced to initiate a “responsible exit strategy” with the three Ngwe Pinlae factories, which employ roughly 7,300 workers, because of international sanctions, however.
“Right now, the majority of workers are back at the factories, and they are deeply reliant on wages to pay for food, medicine and the like,” Dorte Rye Olsen, sustainability manager at Bestseller, said in a statement, citing the brand’s “close dialogue” with local stakeholders about the best way forward. “We continue undaunted to establish decent working conditions in Myanmar. Since the military coup, we have intensified our regular assessments and we will continue to do so.”
H&M ‘gradually’ resumes orders
H&M said it made the decision to “gradually” place new orders in Myanmar to forestall the “imminent risk” of closure of its 56 supplier factories, which would “inevitably” result in unemployment for tens of thousands of garment workers. “Today, more than 50,000 people rely on jobs at our suppliers for their livelihood,” a spokesperson told Sourcing Journal. “Without buyers ordering products, there will be no garment industry in Myanmar.”
H&M said, however, that it will refrain from making a decision on its long-term presence in the nation and will “continue to closely monitor developments.” And though it says its ongoing due diligence concludes that H&M has no direct links to the military in Myanmar, it is seeking legal guidance on how to tackle any potential indirect links that might arise. H&M is “deeply concerned” about the ongoing crisis and “fully respects” applicable sanctions, it said.
“We are aware of increased challenges in relation to fundamental human rights, such as freedom of association, and we have raised this concern with suppliers as well as trade unions, brands and human-rights organizations,” the spokesperson said. “In this difficult and complex situation, we cannot stress enough the importance that all stakeholders work closely together to tackle any issues. Partnership and transparency will be key.”
Primark presses play on ‘some’ production
Primark, which produces apparel at 21 factories in Myanmar, said it is beginning to place “some” orders with key strategic suppliers in the country, in part, because it wishes to protect the livelihoods of the workers who make its clothes.
“The safety and well-being of everyone who makes Primark’s products is our highest priority, as are their rights and their freedoms, as outlined in Primark’s code of conduct,” a spokesperson for the British discount chain told Sourcing Journal. “We are committed to honoring all existing orders with our suppliers in Myanmar, however long they take to fulfill. We remain in regular contact with our suppliers and continue to monitor the situation very closely, while following the advice of the U.K. government and third-party experts.”
Bestseller, H&M and Primark are the exceptions to the rule, experts say, as Western policies, coupled with increasing reputational jeopardy, have made it more difficult for multinational companies to remain in the country.
Italy’s Benetton Group, which owns United Colors of Benetton, Playlife and Sisley, is still maintaining the sourcing freeze it instituted in mid-March, a spokesperson said. C&A is finishing up previously placed orders “with low productivity,” but it has not placed new ones since the coup and will not be doing so unless the European retailer sees “significant improvements within the country,” a spokesperson told Sourcing Journal.
“The military has long been active in Myanmar’s economy via its holding companies, such as the MEC,” said Kaho Yu, senior Asia analyst at Verisk Maplecroft, a risk-management firm. “Its widespread influence across most sectors of the economy, from natural resources to retail, means foreign businesses will have no choice but to work with military-affiliated local partners, which is likely to eventually expose them to reputational risks or even sanctions.”
“Troubling human-rights reports, safety concerns and shareholder pressure in the wake of the coup will likely prompt some foreign companies in Myanmar to halt operations or reconsider pulling out from the country,” he added.
This could have severe implications for garment workers who are still hurting from the widespread unemployment and deepening poverty caused by pandemic-induced declines in orders and raw-material disruptions. The coup has only exacerbated the suffering. Nearly one-third of the country’s 700,000 garment workers have lost their jobs since the military ousted the civilian government on Feb. 1, workers’ rights advocate Ye Naing Win told Myanmar Now last month. Roughly half of Myanmar’s garment factories have shuttered, he added.
A person involved in the Myanmar garment sector, who asked to remain anonymous because he was not authorized to speak publicly, said that news of logistics restrictions by the military was not true and that operations are running normally, save for some banking issues.
No freedom, no economic future
Circumstances could worsen still, said Nate Herman, senior vice president for policy at the American Apparel & Footwear Association (AAFA), who called for a swift restoration of democracy and the release of those who have been illegally detained or arrested.
“The fact is that the military coup, and the rise in violence that has followed, is causing significant disruptions in sourcing opportunities from Myanmar,” he said. “The longer the military junta denies democracy and freedom to the people of Myanmar, the more they endanger the economic future of the Myanmar people.”
As long as the military remains in power, sanctions from Western countries will likely stick around for the “foreseeable future,” creating significant due-diligence and compliance risks for international businesses operating in Myanmar, said Lucas Myers, Asia program associate at the Wilson Center, a policy forum in Washington, D.C.
“Under the junta, I am doubtful that international companies concerned with sanctions will be able to continue to conduct business that does not involve or benefit the military in some fashion,” he said.
Meanwhile, labor advocates say that Bestseller, H&M and Primark’s resumption of sourcing in Myanmar, which does not appear to have been based on discussions with unions, is premature. Unions contacted by the Worker Rights Consortium, a Washington D.C. labor-rights group, said they have not engaged in dialogue with Bestseller.
“It is concerning that Bestseller believes it can through ‘due diligence’ in its supply chain ensure that ‘trade unions can operate effectively, all wages are paid and other central rights are protected,’” said Bent Gehrt, field director for Southeast Asia at the Worker Rights Consortium. “This claim ignores the fact that the junta has declared the majority of labor groups illegal and has arrested some union leaders, continuing to kill people with impunity. It is thus not feasible in the current climate to ensure that workers can access their rights.”
Gehrt expressed doubts about Bestseller’s report that its Ngwe Pinlae factories have no ties to the military, noting that the assumption seems predominantly based on information provided by the suppliers themselves. Like Bestseller, H&M also sources from factories inside industrial zones linked to the military, including Ngwe Pinlae, he said.
“In the news reports, H&M doesn’t explain why it doesn’t see any linkage to the military,“ Gehrt said. “It is also not clear if, before making this decision, H&M had any extensive consultation with the unions representing the workers.”
H&M said that Ngwe Pinlae houses three of its supplier factories, which is where the legal advice it‘s looking for will come in. “We will always ensure to comply with legal regulations in all countries where we operate, and we will fully respect applicable sanctions,” a spokesperson said.
Bestseller did not respond to a request for comment.
Difficult to determine the truth
Whether to source or not in Myanmar is a dilemma that is compounded by the dearth of transparency in the nation, where corruption is rife.
“It is very difficult to determine the truth with any certainty; the authorities generally do not cooperate, do not make evidence available and discourage workers on the ground from talking to journalists or investigators,” said William A. Reinsch, senior adviser at the Center for Strategic and International Studies, a think tank based in Washington, D.C. “Whatever decision [a] company makes will be criticized by someone.”
Also tough? Restricting a sanction’s impact exclusively to the desired target.
“In this case, removing Myanmar companies from [a brand’s] supply chain might hurt the companies’ owners and their landlords and investors, which presumably are the targets, but they also clearly hurt the workers who lose their jobs and incomes and who often end up being the innocent victims,” Reinsch added.
Ayesha Barenblat, CEO of Remake, a grassroots labor-rights group, said that garment workers in Myanmar are under great stress for their safety, and that brands need to directly engage with the “brave women garment-union leaders fighting to uphold democracy in Myanmar rather than focusing on their bottom line.”
Union demands to brands have been clear: “to support their strike fund and divest from placing orders in factories that support the junta,” she added.
Similarly, members of the UN’s Working Group on Business and Human Rights are urging companies to align with the Guiding Principles on Business and Human Rights and avoid contributing to human-rights violations or “becoming complicit” in crimes if they continue to conduct business in Myanmar.
Because “the risk of gross human-rights violations has greatly increased in Myanmar, action by states and human-rights due diligence by business, and investors, should be rapidly and proportionately heightened,” Surya Deva, vice chair of the working group, said in a statement last week. “There may come a point at which businesses might need to suspend operations or even consider exit[ing] from the country if risks of involvement in human-rights abuse cannot be reasonably managed, while doing so in a manner to safeguard the well-being of workers and affected communities.”
Pressure from other governments, too, is mounting. The United States, in coordination with Canada and the United Kingdom, announced Monday new sanctions against the State Administrative Council, the official name of the post-coup military government. The sanctions named 16 individuals, including “key members” of Myanmar’s military regime, which is “violently repressing the pro-democracy movement in the country and is responsible for the ongoing violent and lethal attacks against the people of Burma, including the killing of children,” the U.S. Treasury said in a statement. They will now be blocked from their property and possessions in the United States and barred from conducting business with Americans, it added.
“As President Biden has stated, the United States will continue to promote accountability for those responsible for the coup,” Secretary of State Antony Blinken said in a statement. “Our actions today underscore our resolve and that of our partners to apply political and financial pressure on the regime as long as it fails to stop violence and take meaningful action to respect the will of the people.”