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Burma Poised for Growth, with Obstacles

Burma’s garment industry has seen big breakthroughs in the past year, with temporary easing of sanctions following the release of pro-democracy activists and the relaxing of government controls on society and the economy. The political changes culminated in elections that were widely considered free and fair, and brought a block of pro-democracy progressive activists into the parliament.

The European Union and the United States have both eased sanctions on a provisional basis, pending further steps toward democratization. In an attempt to shore up the country’s faltering economy, the ruling junta began taking steps to attract foreign investment.

“With US and EU sanctions lifted, we can expect the annual export volume to grow by 100-200% over the next couple of years,” said Evelin Petkov, Director of Bagan Capital Ltd, a local industry watchdog based in Yangon, the country’s manufacturing hub, as quoted on
Burma seeks to become a hub for garment manufacturing. The country sees opportunities in low cost and low skill sectors. It has a large unemployed workforce and average wages are around $2 per day, as compared to $20-$40 per day in neighboring countries and China.
However, significant difficulties remain if Burma is to emerge as a major textile hub. Exports to the United States and Europe continue to be crimped by sanctions which will only be lifted if pro-democracy moves continue. The country suffers from serious infrastructure problems including frequent power shortages and a lack of developed port facilities.
For the time being, Burmese finished garments are mainly exported to Japan, their largest apparel and textile trading partner. The nation also imports leather for footwear from Burma.
Japan moved this spring to open up bilateral investment negotiations with Burma, a step that might herald greater expansion of the local industry. The agreement would facilitate the operation of Japanese industries in the country. Burma has also been working with Japanese firms to improve garment quality and processes for several years.
The nation exported roughly $770 million in garments last year, with over 30% of it going to Japan. Total dollar value is a drop in the bucket compared to other regional manufacturing powers, but Burma’s 200 firms represent a solid base for launching future industrial activities.
Despite continued political obstacles and the difficulties of establishing a new sector, demographic trends in Asia favor the continued rise of the Burmese garment and textile. Rising incomes in China mean increased demand for low cost textile products, while simultaneous shifts in the availability of cheap labor mean the country will increasingly lose market share to countries with lower costs. If infrastructure and trade issues can be overcome, a bright future awaits Burma.

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