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Myanmar’s Garment Factories Power Through Energy Crisis—That Might be the Problem

Myanmar’s garment factories are still chugging along despite local reports that power outages and rising fuel prices have pushed nearly all of them to the brink of insolvency, experts told Sourcing Journal.

Not that they aren’t feeling the squeeze, said Sofia Nazalya, senior human-rights analyst at global risk-intelligence company Verisk Maplecroft. Between the disruptive impacts of the military coup and Covid-19 pandemic, sourcing in the beleaguered Southeast Asian nation was already in a precarious position. A fuel shortage that leaves garment manufacturers running on fumes could be the “final straw” for Western brand holdouts that continue to source from Myanmar following the ouster of Aung San Suu Kyi’s civilian government last year.

“While the fuel crisis is resulting in similar supply chain disruption across most Asian garment manufacturing hubs, the ongoing humanitarian and political crisis in Myanmar is likely to tip production in favor of other more resilient garment hubs,” Nazalya said. “Bangladesh and India, similarly impacted by high fuel prices, are facing supply chain disruptions but are better positioned to ride out the fuel crisis.”

For the brands that haven’t budged from Myanmar, citing concerns that withdrawing would leave workers even worse off, business remains as usual. Primark’s suppliers, for instance, are still able to maintain their operations despite fuel challenges, a spokesperson for the retailer told Sourcing Journal. Similarly, H&M’s sourcing base is “at this time operating normally,” the fast-fashion purveyor said. Bestseller, Next and Inditex, which also produce in the country, did not respond to requests for comment.

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For labor campaigners, a complete shutdown of apparel operations in Myanmar would almost be a relief. Brands should have left a long time ago because of the deteriorating human-rights situation under military rule, said Christina Hajagos-Clausen, director, textile and garment industry, at IndustriALL Global Union.

Human-rights groups aren’t the only ones with concerns. In December, ACT (Action, Collaboration, Transformation), another multi-stakeholder initiative that seeks to improve living wages for garment workers, ceased all activities in Myanmar after IndustriALL’s local trade union affiliate, Industrial Workers Federation of Myanmar (IWFM), said it could no longer able to operate freely under current circumstances. The following month, the U.S. Departments of Commerce, Homeland Security, Labor, State and the Treasury, along with the Office of the U.S. Trade Representative, issued a business advisory warning of the “heightened risks” associated with doing business that could benefit the military regime.

The ‘wrong reasons’

Last month, the Ethical Trading Initiative, a multi-stakeholder organization whose roster includes many of the aforementioned retailers, pivoted from urging members to reassess their sourcing relationships in Myanmar to advising them to refrain from making any additional investments “at this time.” Businesses, it added, should continue to “meaningfully engage” with local and international unions regarding their presence in Myanmar.

“If [brands] are forced to leave now because of power shortages, it will be, shamefully, for the wrong reasons—but at least it will hasten the end of the dictatorship, who are demonstrating a complete failure to keep the country operating, even by their own low standards,” Hajagos-Clausen added.

Khaing Zar Aung, IWFM’s exiled president, said she hasn’t heard anything about factories closing. She said that there is no longer any rule of law in Myanmar and if factory owners are facing cash flow problems they’ll just shift the burden onto their workers. Labor violations, including wage underpayments and forced overtime, are increasing at a staggering pace. Brands, she insisted, aren’t protecting worker rights by staying. Rather, they’re making profits off the backs of poor people because the concept of due diligence in Myanmar is just a pipe dream.

“They will argue with me: They will stay in Myanmar because they worry about the workers who are women, who are vulnerable,” Khaing Zar Aung said. “But do they really worry about them? I say no.” Brands like H&M, she argued, haven’t done much to protect employment. According to estimates from the International Labour Organization, more than 250,000 jobs evaporated in the first half of 2021 alone. Neither did brands worry about jobs when they halted sales in Russia in the wake of the invasion of Ukraine, she pointed out.

Meanwhile, pro-democracy activists like her have targets painted on their backs, particularly now that the junta has vowed to execute those who oppose its power. More than 5,600 civilians have been killed in Myanmar since the start of the coup, the Institute for Strategy and Policy in Myanmar reported in May. At least 3,107 of them were killed after being named “Dalans,” or military informants, the organization added.

H&M said that it is monitoring the country’s situation closely and will refrain from making any decision on its long-term presence there “at this point.” Primark offered a similar response, saying that it is waiting for the results of the Ethical Trade Initiative’s human-rights impact assessment before it determines its next steps. These will align with the United Nations Guiding Principles on Business and Human Rights, which “underpin how we work in all our sourcing countries,” a representative said.

But if brands really cared, they would work with unions to support and fund workers instead of giving the junta legitimacy, Khaing Zar Aung said. “But they don’t. Why? Because they see they can make a profit.” Many garment factories, she said, are in league with the military, which gets called in when conflicts with workers arise. As long as these manufacturers can violate workers’ rights they will not close down, she added.

‘Forced labor returning’

Earlier this month, No Sweat and Global Women’s Strike, the organizations coordinating the Myanmar Military: Never in Fashion campaign, took to the streets outside the flagship London stores of H&M, Primark and Inditex-owned Zara to protest what they say is the “inaction” of these brands to listen to what the trade unions in Myanmar are asking and take action.

“When we have contacted these brands, we have either been met with silence or we have had replies that explain they cannot pull out of Myanmar as they want to protect their workers from unemployment,” Jay Kerr, campaigner and T-shirt project lead at No Sweat, told Sourcing Journal. “Whilst this seems benevolent it is disingenuous. We saw during the pandemic that brands will cancel contracts and refuse to pay suppliers when their profit margins are affected. The reality is that the military’s actions have caused a spate of union-busting activity, with workers’ rights [being] thrown out by employers.”

Wage levels have plummeted, with reports of some workers earning as little as $1.95 a day, Kerr said. “This is virtually the international poverty level for people in full-time employment,” he said. “Trade unions are even hearing of cases of forced labor returning. All this [is] beneficial to the brand’s bottom line. Lower wages and longer hours mean more cheap products, and the civil war and unstable situation, with no independent union oversight, means they can wash their hands of any responsibility for the conditions their clothes are produced in.”

Kerr said he believes that some manner of furlough scheme for Myanmar’s garment workers is easily affordable for these multinational companies. For the 30 brands that were part of ACT’s Myanmar program, furloughing the 140,000 garment workers they were responsible for in the country would cost them roughly $3.5 million each. Last year, Inditex raked in $3 billion, while H&M and Primark both made profits of more than $1 billion each.

“These brands have the money on their own to fund such a scheme, they just have to have the will to do it,” he said. “If they really cared about their workers, they would not be asking them to work for poverty wages, or potentially conditions of forced labor, risking their lives in factories under martial law with no proper union representation. They would be looking at ways to protect them from the ravages of war and a brutal military regime, and use their huge financial power to help restore democracy.”

Khaing Zar Aung worries that Myanmar’s plight is being forgotten in the torrent of geopolitical conflicts that have gripped the globe. But the battle for democracy in her homeland has larger implications for human rights everywhere, particularly as the totalitarian regimes of Russia and China gain ground, she said.

“If the EU and other democratic nations ignore [what is happening in Myanmar], then we all lose,” Khaing Zar Aung added.