Myanmar - The emergence of a low-cost apparel sourcing destination

1
//feature presentation
2
DOES MYANMAR HAVE THE POTENTIAL TO BE AN
EMERGING MANUFACTURING HUB?
3
Economic Data
54 million 676,578 square kilometres 340,000
(90 are women and working age group is 18-27
years) - 0.62 of total population 8.1 (US
68 billion) 3.5 of total GDP US 14 billion
(Apparel export US 2.7 billion) US 88
(after recent hike of 33)
166 million 130,170 square kilometres 4.5
million (median age is 26 years) - 3.70 of total
population 7.6 (US 285 billion) 12.3 of
total GDP US 35 billion (Apparel export US
29.21 billion) US 68
102 million 11,04,300 square kilometres 37,000
8 (US 80 billion) 5 of total
GDP US 3.17 billion (Apparel export US 68
million) US 55
Population
Surface Area
Workforce
GDP Growth
TC Exports
2017 Total Export
Minimum Wage
4
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.
5
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.
6
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.
7
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.
8
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.
9
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.
10
Myanmar Garment Exports
US 10 billion
US 2.7 billion
US 2.1 billion
US 1.7 billion
11
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.
12
Major Product Categories and Facts
All types of jackets, mens shirts and coats,
womens overcoats, capes and wind jackets
80 of garment manufacturing dominated by woven
products and 20 by knit products
80
20
13
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
14
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.
15
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 mens and
boys apparels and furnishings. The company has
400 workers working across 4 production lines.
16
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.
17
Major Ports
Myanmar has a total of 9 well-connected ports in
the country. Following are the 3 major ports
vital in connecting the worlds 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

18
(No Transcript)
19
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).
• 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.
•  

20
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.
21
Strengths
Excellent workmanship Quality workmanship and
experience in making complex products
Market experience Experience of working
previously for Japan and Korean markets
Easy availability of labour The country has
huge pool of cheap labour
Competitive lead times 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 countrys economic hubs of Yangon,
Mandalay, Bagan and Pyay
22
Weaknesses
Highly restricted banking sector Lot of FDI
companies are reluctant due to the non-existent
banking system
Low efficiency and productivity Most of the
garment companies have been facing the concern of
low efficiency and productivity
High land price Land prices are not only high
but also erratic and keep fluctuating often
Power shortage 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 textile
knowledge and sourcing skills required for FOB
and full package export
Lack of compliance in many factories Majority
of locally owned garment makers are not certified
by internationally recognised standards or
guidelines
Less knowledge of EU market Most of the
factories have never worked with any European
brands
Tourism taking away lot of workforce According
to Asian Development Bank, tourism revenues grew
by 19 last year as inbound traffic increased,
totalling US 2.1 billion
23
Opportunities
24
Threats
Political instability and unrest
Industry requires more time to achieve compliance
standard
No textile industry in the country to support
garment production
25
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 countrys labour laws.
26
//contact_at_apparelresources.com