As Myanmar opens up after decades of isolation, cheap labor is drawing a rush of garment manufacturers to the former pariah state.
Just five years ago, Myanmar was isolated from the rest of the world. Considered a pariah state, the Southeast Asian nation was ruled with an iron fist by a military junta with no regard for human rights.
US-led international sanctions ensured that few Western firms did business in the country — although illicit smuggling meant that globally recognized brands such as Coca Cola could be found in the capital Yangon — and just a smattering of garment manufacturers, fulfilling limited overseas orders, maintained a presence there.
Yet winds of change were blowing. The release of pro-democracy leader Aung San Suu Kyi from house arrest in 2010 and a transition to a reformist, although still military-dominated, government aided the easing of trade embargoes by 2012.
In 2011, the number of garment factories had grown to 200, from 120 the previous year, and the country was exporting clothing worth a total of $770 million, industry website just-style reported. Today, it is estimated that the industry employs more than 200,000 workers, which is a tenfold increase since 2010 and double the number employed before US sanctions were toughened in 2003. An average of two new factories are opening every week, according to the Myanmar Garment Manufacturers Association, which says that exports soared to $1.5 billion in 2014.
But it is not just the newly opened borders that are enticing garment producers back to Myanmar. With some of the lowest wages in Asia — only Bangladesh is lower — cheap labor is driving the attraction to a country controlled by the military since 1962. There is currently no minimum wage in Myanmar, despite ongoing stakeholder discussions, and garment workers in Yangon are typically paid an average of $80 a month once overtime is included, according to Burma Partnership, a nongovernmental organization.
Alex Moodie, Burma Partnership’s advocacy and research officer, says that base wages are “extremely low,” forcing people to work extremely long hours just to make ends meet. “There’s this complex system of overtime and bonuses and money being cut from wages which means that basically most workers have to do overtime every day, so they’re working 10, 11, 12 hours a day six or even seven days a week just to get up to that average,” he says.
This latest push into Southeast Asia’s poorest and most dysfunctional state is symptomatic of the way garment manufacturers — and the big name brands who contract to them — have been chasing cheap labor around the world for the decades.
In the post-World War II period, Western countries began to look to outsource apparel manufacturing, and by the early 1960s, Japan was the preferred garment-producing hub. The next shift in the 1970s saw Hong Kong, Taiwan and South Korea take center stage until the 1980s, when China rose to dominance.
According to Pietra Rivoli, a professor of finance and international business at Georgetown University and the author of The Travels of a T-Shirt in a Global Economy, garment production often stays in a country just long enough to take advantage of low-cost labor.
“China is still by far the global leader but there is upward pressure on wages there too, so we see a lot of apparel production shifting to countries such as Bangladesh and Vietnam,” adds Rivoli.
According to ANZ Bank, an Australia-based financial institution, Myanmar is now clearly also in manufacturers’ sights. The bank released a report in late April, “ASEAN: The Next Horizon,” that says cheap labor in Myanmar, which along with Cambodia and Laos makes up what it calls the “Mekong frontier,” will help to drive a manufacturing boom in Southeast Asia in the next decade.
“Southeast Asia will take up China’s mantle of the ‘world’s factory’ over the next 10-15 years as companies move to take advantage of cheap and abundant labor in areas such as the Mekong,” the report’s economists predict.
Legacy of Human Rights Abuses
Not all garment manufacturers chases low wages, according to Rivoli, who points to Italy’s success in luxury apparel production as an example, but it is very much the business model for fast fashion producers. “It’s driven by the competition for consumers in the Western countries. You have consumers who are price sensitive, so you therefore have firms that are price sensitive,” she explains.
Some of the world’s biggest fast fashion brands are already taking notice of Myanmar. Swedish apparel giant H&M placed test orders in 2013 and began sourcing from the country in earnest last year. Its website now lists 13 factories in Yangon and Bago where its garments are manufactured or processed.
Clothing firm Gap was the first major US apparel retailer to establish a presence in Myanmar, announcing in June 2014 that two South Korean-owned factories in Yangon had begun producing jackets and vests for its “Old Navy” and “Banana Republic” lines.
Meanwhile, sportswear retailer Adidas updated its global supplier list in January to reflect that it had also begun sourcing from a Yangon-based factory following two years of “extensive stakeholder engagement.” Bill Anderson, the head of social and environmental affairs for Adidas in the Asia Pacific region, acknowledges that Myanmar has a “legacy of human rights abuses including the use of forced labor, child labor” and that the company had to tread carefully.
“With the lifting of international trade sanctions against Burma, we asked ourselves a simple question: “If we want to do business in Myanmar, should we do more in our assurance process?” The answer was: “Yes, we need to set the bar higher.”
These retailers’ entry into the market is almost certain to prompt others to follow suit. But the garment industry has faced major issues in neighboring countries, most notably the collapse of the Rana Plaza factory in Dhaka, Bangladesh, which killed more than 1,100 people and injured thousands more. And last January, government security forces shot dead five garment workers during mass demonstrations for better pay and conditions in Cambodia’s capital, Phnom Penh.
In Myanmar, Moodie says, the sweatshops condition endured by many garment workers are reminiscent of those found in British factories during the Industrial Revolution.
February saw a wave of worker strikes in Yangon as thousands walked out to call for better pay and conditions, which led to clashes with police and saw two union leaders arrested.
Race to the Bottom
Although H&M declined to comment for this article, Gap has acknowledged issues with compliance at its factories. Its “Responsible Sourcing in Myanmar” report released in August 2014 revealed that initial assessments of the two factories it had engaged identified issues with health and safety procedures, excessive forced overtime and disciplinary procedures.
The retailer stated that it is training management and workers in an effort to improve conditions, but noted that at one of the factories: “Due to Myanmar’s isolation and lack of exposure to international practices, they have limited experience with adopting new business methods or complying with current international standards.”
According to Moodie, the biggest hurdle that remains is a lack of adequate legislation. Despite laws on labor organization and labor disputes being passed since 2011, the legal and institutional framework fails to properly protect workers.
“This industry is going to grow and grow and grow in Burma,” he says, adding that the situation in Cambodia and Bangladesh is “the last thing Burma needs or wants.”
“It can be a model for sustainable business practices where the rights of workers are respected and companies that invest get a lot out of it … but it needs political will from the government and it also needs a commitment from the private sector too,” he says.
Daisy Gardener, a policy adviser at Oxfam based in Yangon, says that the global race to the bottom for cheap labor means employers must treat their workers fairly. “Manufacturing jobs will increasingly provide important employment opportunities for young people in Myanmar, but they will only be able to lift themselves out of poverty if these jobs provide fair wages and conditions,” she says.
Gardener says brands can also make a difference by providing stable, long-term orders to factories and giving them a reasonable amount of time to fulfill those orders. “If brands push suppliers to produce quickly and cheaply, this translates into downward pressure on the workers who then have to work into the night to finish orders and they are told they can’t ask for higher wages because the factory can’t afford it,” she says.
Elizabeth Cline, the author of Overdressed, a book that explored the fast fashion industry, says the manufacture of such cut-priced clothing is not only problematic for workers in developing countries — it can also be harmful to the very shoppers in the West driving the trend.
“Fast fashion is sometimes made with toxic dyes, as Greenpeace has uncovered, so there’s the issue of fast fashion’s impact on our health,” she says. “I think it’s also harmful to the consumer on a spiritual level. Purchasing cheap clothes is a habit and a compulsion that is shown to give consumers little long-term satisfaction — we buy it because it’s cheap and novel and it appeals to our basest instincts In other words, it doesn’t make us truly happy.”
This article has been sourced from Fair Observer and was originally published by Glammmonitor.