Myanmar Coup Clouds Future Of Garment Industry

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Myanmar Coup Clouds Future Of Garment Industry

Myanmar's US$ 6 billion garment and footwear industry, already under pressure from the coronavirus pandemic, now faces more potential damage in the aftermath of the country's military coup. The military's seizure of power in Myanmar is poised to deliver a major blow to the country's US$ 6 billion garment and footwear industry, threatening a vital source of jobs in a sector already reeling from the pandemic. Experts say the consequences for the important industry could be severe, as sanctions loom and brands review future orders. "The coup in Myanmar is deeply concerning," said American Apparel & Footwear Association senior vice president of policy Nate Herman. "In the short term, our members will be focused on making sure workers are safe, and that their obligations to those workers are being met. Over the medium to long term, this coup will prompt re-evaluation of Myanmar as a stable sourcing partner." A lot is at stake. Apparel manufacturing in Myanmar has boomed during the past decade as the country returned to quasi-civilian rule and foreign investment poured in. Called a "crucial engine of poverty reduction" by the World Bank, the sector accounted for more than 30% of exports in 2019, up from 7% in 2011, UN statistics show. Prior to Covid-19, more than 700,000 people, the majority women, worked in almost 700 apparel factories, according to the EU-funded initiative Smart Myanmar, which promotes sustainable practices in the sector. That number has since dropped by tens of thousands as factories shut amid the pandemic-induced global turndown. Now, the coup has injected another major source of uncertainty. Amid calls to join a general strike, thousands of Myanmar's garment workers in major cities have taken part in demonstrations against the military takeover, according to the Clean Clothes Campaign, which has been monitoring events on the ground. Andrew Tillett-Saks, an organiser working with the labour movement in Yangon, said unions had taken a lead role in mobilising street protests. "The sight of industrial workers, largely young, women garment workers, seems to have deeply inspired the general public, broken down some of the fear and catalysed the massive protests and general strike we are seeing now," said Tillett-Saks. With events still unfolding, many brands say it is too early to publicly discuss contingency plans. They face a quandary. Remaining engaged in a country under military rule carries risks. Cutting ties will hurt workers. The Fair Wear Foundation has urged member brands to prioritise workers' safety and ensure their payment. Swedish giant H&M said it would "refrain from taking any immediate action with regards to our presence in the country." "We are prioritising the safety of our staff as well as supporting our suppliers so they can ensure the safety of their employees," the company said in a statement. "We are also in dialogue with UN agencies, humanitarian organisations, diplomatic representatives, human rights experts and other multinational companies," the statement added. "These consultations will guide us in any future decision in relation to how we as a company can best support positive developments in Myanmar." According to industry observers, while brands are in wait and watch mode, they are likely already rethinking any expansion plans. Industry expert Sheng Lu agreed. Myanmar, Lu said, had grown popular with brands because of its cheap workforce, some higher-quality production capacity and its duty-free access to major markets. Any threat to the latter, in particular, could be devastating, he said. "Fashion companies give substantial weight to the factors of 'political stability' and 'financial stability' in their sourcing decisions - reputational risk matters," said Lu, an associate professor at the University of Delaware's department of fashion and apparel studies. "The country's latest political instability will hurt Myanmar's attractiveness as an apparel sourcing base, given many other alternatives out there." Vital to Myanmar's textile boom has been the European Union. The bloc receives more than half of the country's apparel exports, which enter duty-free under the Everything But Arms framework. Attention, meanwhile, is focused on the US, a smaller but fast-growing market for Myanmar, which benefits from some preferences under the US GSP. Already, the Biden administration has flagged potential targeted sanctions on individuals and military-controlled companies. The garment sector is largely foreign-owned, though the military's sprawling economic interests overlap with some players in the sector. As reported by Nikkei in 2019, several garment factories operate within military-owned industrial zones. Military conglomerate Myanmar Economic Holdings Ltd. also owns the Pyin Oo Lwin garment factory, according to MEHL's website. According to experts, the US approach this time could be more surgical, rather than the blunter instruments used in the 1990s, like import bans. Decisions would take into consideration the welfare of Myanmar workers and people. More complex measures, such as changes to trade preferences, would likely be held in reserve to increase pressure down the track, they believe. The instability also poses problems for attracting the foreign workers needed for some higher skilled and technical jobs. If visa requirements are toughened, factories may not have the expertise to continue operating. Experts warn that in the coming months, investments will pause, new approvals will dry up, orders will continue to drop. The question is how bad it will be -- both for the sector, but more importantly for the people of Myanmar.