Commentary: After the coup, Myanmar’s garment industry hangs by a thread
If international retailers divest from Myanmar, factories will close and workers will be made redundant, causing almost a decade worth of development and know-how to be lost, says a researcher.
SINGAPORE: The future of the garment industry in Myanmar hangs by a thread. Still reeling from the impact of COVID-19, it is now suffering from the aftermath of the military coup.
As a result, its remarkable ascent in the export sector has been thwarted, and there are fears that the industry will unravel.
In 2019, before COVID-19 struck, about one third (amounting to US$6.5 billion) of all goods exported from Myanmar was produced by the garment industry, according to United Nations Comtrade data.
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According to SMART Textile & Garments, an organisation funded by the European Union (EU) and co-funded by private sector partners, the industry employed 700,000 low-income workers. There were high expectations for strong growth.
The onset of the pandemic scuppered this upward rise. The industry was battered by a trifecta: Disruptions in the supply chain from China, plummeting demand from Europe in lockdown and operational restrictions imposed by the Burmese government to reduce the transmission of COVID-19.
Fortunately, an increase in exports to the US and Japan offset decreases in exports to the EU, according to the International Labor Organization. Also, the outlook became more optimistic towards the end of 2020 as China and Europe emerged from lockdowns and the large clothing retailers resumed their orders.
CUE THE MILITARY COUP
However, just as supply chains from China were restarted and restored and other logistical issues resolved, the military staged a coup in February.
The already frayed seams of the garment industry began falling apart. Strikes have been called for by the garment workers’ union, and martial law in some Yangon townships and roadblocks hindered workers from getting to work.
Arson attacks against factories destroyed capital and property. Cash flow problems and a banking crisis are stalling operations and transportation problems in and out of the country plague delivery schedules.
Consequently, the garment industry experienced a low point. Big fashion brands such as H&M, Primark, Next and Benetton suspended operations between February and May because of human rights concerns and civil unrest.
Some factories reported operating at a fifth of their capacity and surviving on orders placed before the coup. Many garment factories closed down.
According to a preliminary survey conducted by the European Chamber of Commerce in Myanmar, a quarter of garment workers had lost their jobs by May.
This grim situation was slightly alleviated in May when H&M, Primark and Bestseller announced that they would resume business in Myanmar. Their rationale for doing so is garbed in the rhetoric of moral obligation – to their suppliers, garment workers, the economy and the general welfare of Myanmar.
By taking a moral stance, these companies are justifying their continued trading in Myanmar in view of the public condemnation of the military coup. This has come from many quarters: The EU in the form of targeted sanctions, international and garment organisations supporting the restoration of democracy and one of the unions of garment workers in Myanmar in the form of work stoppages.
KNOTTY POLITICAL AND MORAL QUESTIONS
Here, we see the interplay of two distinct political and moral orders which have bedevilled Myanmar watchers and stakeholders for decades. Since the coup, every aspect of Myanmar life has become even more politicised and woven into the struggle between the military regime and the country’s citizens.
In this case, how can one engage in activities – for example, conduct business, provide healthcare and deliver aid – in ways that unpick the seams of the current military-political order? How should this be done (through sanctions and the termination of trading?), and at what cost to individual jobs and the economy?
Is this a valid trade-off if individuals, political parties and organisations (trade unions) of Myanmar call for it? Do they speak for all Myanmar citizens?
These knotty questions have to be negotiated by individual companies. But the decision may eventually be made for them if operations cannot continue because of financial and logistical problems.
Access to cash deposits in banks continues to be an issue, and the transport of goods has been severely impeded by the global five-fold increase in sea freight costs, Myanmar being struck off the sailing plans of shipping lines, premium rates for limited space on air freight and the impact of curfews on ground transport.
In addition, escalating violence such as assassinations and bombings in urban settings is creating fear and uncertainty among the public at large and will only aggravate the situation. Given these snags, the likelihood that clothing retailers will relocate to Bangladesh or Cambodia, where costs might be similar or even lower, is high.
In that case, the European Chamber of Commerce in Myanmar is concerned that the industry will unravel.
According to SMART, 54 per cent of all apparel exports go to European clothes retailers. If they divest, factories will be forced to close, and workers will be made redundant and skilled teams dispersed, causing almost a decade worth of development and know-how to be lost.
This will also have a cascade effect on allied industries such as footwear, handbags, logistics and transportation.
The outlook at the moment is dismal, and, at present, things are extremely volatile in Myanmar. The future of the garment industry, as well as that of the country as a whole, ultimately depends on whether Myanmar citizens will be able to untangle the snarls in their political system and refashion a political order that ends decades of military dominance and violence.
Sue-Ann Oh is Visiting Fellow of the Myanmar Studies Programme at ISEAS – Yusof Ishak Institute. This article was first published as a commentary for Fulcrum.