Myanmar has been working to restore its former garment manufacturing glory, but rising costs in the country are stopping some factories in their tracks.
Fourteen factories in Yangon’s industrial zones appear set to shutter in the coming months as wages and land costs increase, Myanmar Times reported.
In January, Myanmar’s National Committee for the Minimum Wage approved a 33 percent wage hike for workers in January, taking their daily rate from 3,600 kyat ($2.47) to 4,800 kyat ($3.29), which works out to roughly $85 a month.
And rising land costs in line with that haven’t helped the situation for factories either. Some have already been forced from industrial zones over land leases they could no longer sustain.
After years of U.S.-levied sanctions during the country’s military rule were eased, companies, like Gap, turned back to the country for sourcing to take advantage of low cost and abundant labor. Thanks to its history of garment production, Myanmar was quickly able to reassert itself as a viable player for apparel manufacturing—both the quality and capacity for scale were already there.
As of May, U.S. apparel and textiles imports from Myanmar are up nearly 53 percent year over year, according to data from the U.S. Commerce Department’s Office of Textiles and Apparel. In 2017, the U.S. imported $149 million worth of textiles and apparel from the country.
But with costs climbing, Myanmar may lose some of its appeal for apparel.
Now that minimum wages have risen, U Myint Soe, chair of the Myanmar Garment Manufacturers Association (MGMA), told the Times, “I see that many businessmen, including the locals, are thinking twice before investing in manufacturing-intensive sectors like garments.”
Continuing, Soe said, “The garment industry is under pressure from having to raise the minimum wage. At the same time, productivity, which is already lower than other countries in the region, has not improved. As a result, many garment businesses no longer want to operate here.”
Chinese-operated Seduno Myanmar Fashion closed its doors earlier this month, reportedly citing low production, an inability to meet delivery time demands, and of course, the climbing costs of doing business.
Of the 400 garment factories MGMA says there are in the country, 170 are foreign-run, with China accounting for 60 percent of that count, the Times reported. And with current trade relations between the U.S. and China strained as they are, some experts in the industry think more Chinese manufacturers may look to open more factories in the country, to get duty breaks on exports to the U.S. and European Union and the Generalized System of Preferences—which could potentially counter some of the closures.