Myanmar - The Emergence of a Low-Cost Apparel Sourcing Destination

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Economic Data Population

54 million

166 million

102 million

Surface Area

676,578 square kilometres

130,170 square kilometres

11,04,300 square kilometres

Workforce

340,000 (90% are women and working age group is 18-27 years) - 0.62% of total population

4.5 million (median age is 26 years) - 3.70% of total population

37,000

GDP Growth

8.1% (US $ 68 billion)

7.6% (US $ 285 billion)

8% (US $ 80 billion)

T&C Exports

3.5% of total GDP

12.3% of total GDP

5% of total GDP

2017 Total Export

US $ 14 billion (Apparel export: US $ 2.7 billion)

US $ 35 billion (Apparel export: US $ 29.21 billion)

US $ 3.17 billion (Apparel export: US $ 68 million)

Minimum Wage

US $ 88 (after recent hike of 33%)

US $ 68

US $ 55


Scenario of Myanmar's Export — Pre and Post Embargo US imported apparels worth US $ 400 million from Myanmar before it imposed sanctions in 2003, which is followed by EU at US $ 335 million. The total apparel export of Myanmar was US $ 817 million before the US imposed sanctions. Despite sanctions imposed in 1996 by EU, apparel exports from Myanmar grew from US $ 94.1 million in 1997 to US $ 457 million in 2004. But, since 2004, apparel exports from Myanmar declined by 60% as some US buyers stopped buying altogether and some EU buyers were afraid of boycott campaigns by consumers, stimulated by US sanctions of 2003.


Apparel Exports After US Sanctions were Lifted

After the sanctions were lifted, apparel exports from Myanmar to US reached US $ 135 million in 2017 out of the total export of US $ 2.7 billion by Myanmar.

However, export has still not picked up because of the unstable policies of US banking system which is expected to be free in November 2018; also the GSP benefits have been accorded to the country only recently in April 2018.


Apparel Exports After EU Sanctions were Lifted In April 2013, the EU also lifted sanctions against Myanmar (except for arms and armaments) and accorded them GSP benefits.

EU apparel import now stands at nearly US $ 1.27 billion (47%) of the total garment export of Myanmar (US $ 2.7 billion) in 2017.


Major Apparel Importers of Myanmar After EU

US $ 324 million US $ 729 million

Myanmar exports to Japan valued at US $ 729 million in 2017, while export value to South Korea stood at US $ 324 million. Both the countries are 2nd and 3rd largest apparel importers of Myanmar respectively after EU.


Knit Versus Woven While knit products were the focus of export pre-embargo, during post-embargo, the focus of export shifted to woven products mainly to Japan and South Korea.


Major Markets

EU

JAPAN

SOUTH KOREA

US

Around 47% of the country's CMP products were exported to EU in 2017. Japan and South Korea accounted for 27% and 12% respectively. The share of US was around 5% in overall garment exports by Myanmar.


Myanmar Garment Exports

US $ 10 billion

US $ 1.7 billion

US $ 2.1 billion

US $ 2.7 billion


Type of Business: Cut-Make-Pack (CMP)

The banking system is virtually non-existent in the country with few private banks restricted to only accepting deposits. An unstable foreign currency exchange rate has led to a scenario where all documentation and paperwork need to be organised either by the buyer/client or through domestic/regional agents. Due to lack of local textile mills and not so developed supply chain, all input materials which include fabrics, threads, buttons, zips, labels, linings and even the packaging are imported and have to be provided by the buyer/client. The local factory is thus restricted to assembling the predesigned article, packaging it and exporting it and hence these are just small operations called ‘workshops’.


Major Product Categories and Facts

All types of jackets, men’s shirts and coats, women’s overcoats, capes and wind jackets

80% of garment manufacturing dominated by woven products and 20% by knit products

80%

20%


Number of Factories

As on 31st July 2018, the total number of registered factories in Myanmar were 506.*

Whereas, in 2016, the total number of factories existing in the country were 430 and the bifurcation of those are as follows: 9 SOEs, 2 joint ventures with Myanmar textile industry, 34 joint ventures with private companies, 224 FDI companies and 161 local companies. Only 20% were really local companies according to Myanmar Garment Manufacturers Association (MGMA).

*The list of 500 exporters/manufacturers is available at apparelresources.com


Leading Foreign Investors

55% FDI 25% CHINA 17% HONG KONG 29% SOUTH KOREA 12% JAPAN 17% OTHERS

With over 55% FDI, 25% FDI is from China, 17% from Hong Kong, 29% from South Korea, 12% from Japan and the remaining 17% are from others.


Some Leading International Companies in Myanmar Nadia Pacific Apparel Co., Ltd. (South Korea):

The company majorly produces down and padding jackets, woven shirts and pants with an annual production capacity of 1.08 million pieces.

Atsumi Myanmar (Japan): Manufacturer of foundation garments, panties, nightwear, sportswear, swimwear, camisoles with an annual production capacity of over 7.50 lakh products. They have 6 production lines.

GFT Enterprise Co., Ltd. (Japan): Manufacturer of

men’s and boy’s apparels and furnishings. The company has 400 workers working across 4 production lines.


Some Local Companies in Myanmar (Export Turnover) Tri Sea Garment Manufacturing Co., Ltd.:

Manufacturer of polo shirts, panties, knitwear, maternity wears and jackets. They have 750+ machines, 1200 workers and are one of the few garment manufacturers in Myanmar capable of producing Japanese products.

Eurogate Sportswear Ltd.: Manufacturer of

outdoor jackets, down jackets and coats with an annual production capacity of 3 million pieces. They have 2,400 workers across 24 sewing lines.

Maple Garment Factory: Manufacturer of pants, woven items, kidswear, coats and wool jackets. Their MOQ is 5,000 pieces and has over 900 workers.


Major Ports Myanmar has a total of 9 well-connected ports in the country. Following are the 3 major ports vital in connecting the world’s most dynamic economies:

Asia World Port (in Yangon) - 436,936 TEU Myanmar International Terminal Thilawa Port (in Thilawa) - 140,000 TEU Myanmar Industrial Port (in Yangon) - 40,000 TEU


Major Industrial Zones Yangon: Thilawa:

200 garment factories, skilled workers and better electricity supply

Pathein: Bago:

Skilled workers and low land cost

Hpa-An:

1 garment factory already established and 6 garment factories under construction. Low labour cost. Also, ASEAN East-West Highway in 2015, which will connect Hpa-An with Mae Sot in Thailand significantly faster and travel time to Thailand will reduce from 6 to 2 hours

Lot of investment from Hong Kong. This is a 2,400 hectare special economic zone that is 25 km from Yangon and 50 km from airport More than half a dozen garment factories with 50-year leases possible for foreign investors wishing to set up factories

Mandalay: Hundreds of workshops and small factories that produce and dye

cotton textiles. Additionally, there are several cotton ginning factoriesÂ


Trade Relationships of Myanmar EU-Myanmar: Myanmar, as a least developed

country, benefits from the most favourable regime available under the EU's Generalised Scheme of Preferences (GSP).

Â

EU-ASEAN:

Myanmar is a member of ASEAN. Actively included in discussions on trade and investment issues.

USA:

USA has re-established USAID mission, thereby easing economic sanctions.


Challenges in Garment Production Factory efficiency and productivity need to be improved. Factories must switch from the Cut-Make-Pack (CMP) system to Free on Board (FOB). Most of the factories are still not BSCI certified. All fabrics and trims are imported.


Strengths Excellent workmanship:

Market experience:

Quality workmanship and experience in making complex products

Experience of working previously for Japan and Korean markets

Easy availability of labour:

Competitive lead times:

The country has huge pool of cheap labour

Aligning technology with business strategy leads to a high performance industry and an integrated service provision shortens lead times

Well-connected roads and ports: Government has unveiled plans to construct 34,400 km of roads over the next two decades. Work is expected to focus on the country’s economic hubs of Yangon, Mandalay, Bagan and Pyay


Weaknesses Highly restricted banking sector:

Low efficiency and productivity:

Lot of FDI companies are reluctant due to the non-existent banking system

Most of the garment companies have been facing the concern of low efficiency and productivity

High land price:

Power shortage:

Land prices are not only high but also erratic and keep fluctuating often

There are too many instances of power cuts in Myanmar and there has been no effort to control it.

Lack of experience in FOB:

Lack of compliance in many factories:

Lack of textile knowledge and sourcing skills required for FOB and full package export

Majority of locally owned garment makers are not certified by internationally recognised standards or guidelines

Less knowledge of EU market:

Tourism taking away lot of workforce:

Most of the factories have never worked with any European brands

According to Asian Development Bank, tourism revenues grew by 19% last year as inbound traffic increased, totalling US $ 2.1 billion


Opportunities Removal of international sanction and improving trade relations

Industrial zones offering incentives for foreign investment

Garment sector is a priority sector for Government

International commitment to assist Myanmar in technology and production training


Threats

Political instability and unrest

Industry requires more time to achieve compliance standard

No textile industry in the country to support garment production


Prominent Associations and Organisations Myanmar Garment Manufacturers Association, 6th Floor, 29, Min Ye Kyaw Zwa Rd, UMFCCI Tower, Ward (8), LMDW, Yangon, Ahlone Township, Myanmar. Role: Provides valuable technical training services and helps in finding business opportunities. Union of Myanmar Federation of Chambers of Commerce and Industry, No. 29, Min Ye Kyaw Swar Road, Lanmadaw Township, Yangon, Myanmar. Role: UMFCCI supports the business communities by sharing knowledge, expertise and opportunities and provides services like training, business facilitation, conducting trade fairs, etc. Smart Myanmar, 11th Floor UMFCCI Tower, 29, Min Ye Kyaw Swar Street, Lanmadaw Township, Yangon, Myanmar. Role: The project actively supports sustainable consumption and production of garments ‘Made in Myanmar’ – a concept with emphasis on resource efficiency and social responsibility. Shwe Job, launched by Smart Myanmar, is a Myanmar language educational app that teaches factory workers and managers about occupational safety & health and provides information on the country’s labour laws.


//contact@apparelresources.com


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