Growth Trend of Myanmar Garment Industry

Presentation Outlines 1. Introduction 2. Brief Background 3. Growth Trend of Myanmar Garment Industry: 1997 1997-2006 4. Situation Analysis 4.1 Strength and Weakness of Myanmar Garment Industry 4.2. Constraints and Threats on Myanmar Garment Industry 5. Concluding Remarks

1. Introduction 1.1. The garments industry has been one of the main drivers of industrialization in Myanmar. 1.2. Abundant supply of cheap labor is one of the main competitive advantage of Myanmar Garments Industry 1.3. To highlight the opportunity and strength of the Myanmar Garment Manufacturing Firms and constraints on their development. 1.4. To explore the possible ways of cooperation with Chinese and Neighboring Countries Garment industry on contractual basis and, if possible, to move further to “Supply Chains development ” in long term.

2. Background 2.1. Since the times of Myanmar Kings, household/cottage industry of textile (both of cotton and imported silk from Yunnan) and clothing (cotton ginning, spinning, weaving, garment garment-making, etc) for local use have been developing throughout Myanmar. 2.2. During the colonial period, indigenous textile and clothing cottage industry survive in spite of the English made quality textile/cloth importation and marketing in Myanmar, especially after the opening of Suez Canal in 1869.

2. Brief Background (continued) 2.3. After independence, during 1950s and early 1960s it developed with the support of the government. Myanmar had exported quality nylon fabrics to the neighboring countries, even to Thailand. Almost all of the textile factories were owned by the then renowned private companies. 2.4. Then, the Socialist regime started in 1962 and the government nationalized the private enterprises and business, including micro businesses in 1964. Since that time, till 1989, private sector, except small businesses and street vendors, died down. Former textile factories became State Owned Enterprises (SOEs) under the Ministry of Industry No.1. micro-“State-Enterprises” renowned

2. Brief Background (continued) 2.5. After the present regime assumed power in 1988, market oriented economic reforms were introduced. Private garment factories (especially the CMP industries) have been set up since 1994, starting with just 25 factories, located in Yangon. But, it grew up to 291 in 1999, within the span of 5 years.

3. Growth Trend of Myanmar Garment Firms: 1997-2006 3.2 Graph.1 Number of Garment Firms

3.3.Growth Trend of Myanmar Garment Firms (continued) 3.3. Findings: During 7 years from 1997 (based year) to 2004 it grew 1.5 times. However as compared with the peak-year 1999 it has grown 3 times. After 1999, the garment firms fell down significantly and it remained at just 48.8% of the 1999 level. 3.4. Main reasons are: (1) the US economic sanction, (2) phasing out the WTO Agreement on Textile and Clothing quota by the end of 2004, as well as (3) domestic trade procedural. See the Graph (2) (below)

3.3.Growth Trend of Myanmar Garment Firms (continued) 3.3.2. Graph.2. Major importers of Myanmar Garments Graph.

4. Situational Analysis 45.5% share of the total garments export of Myanmar goes to Japan (*2011 data) 30.3% garments export goes to South Korea (*2011 data) Moreover the Govt. is pushing US Govt. which results the US Govt. has already started relaxing its sanction against Myanmar.

4. Situational Analysis (continued)

4. Situational Analysis (continued) Domestic Private Firms 4.1 Strength and weakness of Myanmar Garment Firms 4.1.1 Strength in terms of productivity Table 3. Productivity of Garment Firms: Particulars 100% Foreign Firms Foreign JVs Domestic Private Firms Total Number of Firms 13 6 111 130 Number of workers 9790 4380 29550 43720 Number of Sewing Machines 4412 2728 16649 23789 Production Numbers (in dozens) 4445757 2423000 6092820 12961577

4. Situational Analysis (continued) 4.1 Strength and weakness of Myanmar Garment Firms 4.1.1 Strength in terms of productivity Table 3. Productivity of Garment Firms: 2004 (continued)

4. Situational Analysis (continued) 4.1 Strength and weakness of Myanmar Garment Firms 4.1.2 Strength and weakness in terms of competitiveness. Table 4. Competitiveness Study

4. Situational Analysis (continued) 4.2 Constraints on Myanmar Garment Firms 4.2.1 Sharp competition in world clothing market after the removal of quota abolishment as per WTO Agreement on Textile and Clothing. Table 5. China s and India s share of World Textile and Clothing Market. 2004. (in percentage) China’s India’s share of World Textile and Clothing Market. 2004. (in percentage) s

4. Situational Analysis (continued) 4.2. Constraints on Myanmar Garment Firms: 4.2.2. US Sanction on Myanmar. 4.2.3. Power shortage in Myanmar. This causes extra high cost of “power generating” in small scale necessary for the private garment factories. It was estimated that due to the high cost of fuel, one unit of electrical power generating cost was more than 10 times of the government rate. That was one of the major factors that strained on the competitiveness in terms of cost. 4.2.4. Insufficiency of the supportive physical infrastructure, such as mode of transportation (telecommunication, road, port, and shipping facilities) causes more transaction time.

4. Situational Analysis (continued) 4.2.5. Rigidity in trade procedural matters fairly results in Rigidity transaction cost. 4.2.6. Shortage of skill workers and middle level technicians Shortage in Myanmar. 4.2.7. Job-hopping from factory to another. 4.2.8. Lack of financial access, incentives, modern efficient Lack machineries and especially garment technology and management.

5. Concluding Remarks 5.1. Present Myanmar private garment firms on CMP basis Present started in 1994. In 1995, garment export was merely USD 50 million. As it grew it reached up to peak USD 745.5 million in 2000 and then to USD 829 million in 2001. But, as explained above due to various constraints or threats it fell down to USD 312.4 million in 2005.

5. Concluding Remarks (continued)

5. Concluding Remarks (continued) 5.2. Not only in value term as said above, but also the number of factories (firms) decline from 291 in 1999 to 142 in 2004. Most of the private garment firms are small enterprise in regional term, but in Myanmar definition of small and medium industry, they are medium size enterprises, employing 101 to 300 workers in each of them. 5.3. Sharp competition in world garment trade after the Sharp removal of WTO quotas resulted in sharp decline of Myanmar garment export as well as the number of Myanmar private garment firms.

5. Concluding Remarks (continued) 5.4. Should the Chinese Textile and also Garment Firms increase more cooperation with the Myanmar counterparts for CMP garment products, it would be both mutually beneficial.

5. Concluding Remarks (continued) Between 1990 and 2001, Myanmar export soared by 69 times. Increased 2.5% in 1980 and 39.5% in 2000 The US offered the largest market but in 2003 the market suddenly lost due to the sanctions imposed upon Myanmar by the US Government (Kundo 2008) The result was drastic decline in export in 2005 which was only 38% of 2001 export. This results garments suppliers started exploring in Asian market

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