Myanmar\\\'s place in the global garment business

Introduction
In the past few years, Myanmar has been one of the world's fastest-growing economies. This success has been the result of a new government under Aung San Suu Kyi, which has resulted in democratic reforms and a shift towards a more capitalist economy. Annual GDP growth rates in the past few years have been around 7%, which puts Myanmar in the top ten for GDP growth, but the country is still very poor, with a GDP per capita of $6300, ranked 163rd in the world. While several neighboring countries are global leaders in textiles, the industry is relatively nascent in Myanmar. Yet, clothing ranks as the #6 export earner for the country (CIA World Factbook, 2018). This paper will examine the current state of the clothing industry in Myanmar, and what this means for fashion merchandising.

The Economic Situation
When Myanmar was under military rule, even in Yangon, the largest city, the average person was very poor. Under the new economic landscape, that is starting to change. The major cities like Yangon, Mandalay and Naypyidaw are starting to see an emerging middle class, complete with shopping malls and modern stores. While the country is clearly in the early stages, it appears to be following a development pattern not dissimilar to that of other Asian nations, perhaps most closely Thailand, and more recently, Vietnam. There are risks to this progress, in particular a current account deficit, but in general the conditions for growth are positive and money is starting to flow into the country (Chern, 2017). There are definitely differing views, however, on the state of the economy (Lwin, 2017), which leads one to believe that the high end of the economy might continue to do well while those who are more dependent on government for financial security are going to be more at risk.

Surrounded by major players in the textile business, Myanmar is starting to develop an industry of its own on the manufacturing side. Akter (2017) notes that the country has a low cost of production, and that has drawn the interest of buyers. Garment sector exports were worth $1.8 billion, and the industry got an early head start with the former military government made it one of the only open sectors of the economy in 1988. The removal of sanctions following the installation of a democratic regime opened up many export markets for Burmese clothing. The industry is expected to be worth as much as $12 billion by 2020, a tremendous growth rate if that were to happen (Akter, 2017).

The Garment Industry
In terms of the garment industry in Myanmar, production is the largest segment of the market, and this is typically low-cost production. The country has entered in a handful of trade agreements, which has spurred further growth. The US and China are two major buyers for the country's garments (Friedman, 2017). The garment industry has been bolstered by Myanmar's participation in the World Trade Organization, and by the National Export Strategy that the government has set forth, the result being that this is one sector for which there is considerable optimism in the country (Micro-pak, 2017).

Legal Policies
The road to growth for the garment industry in Myanmar began under the former military regime, which saw the industry as a potential source of employment. The democratic government has not wavered from that view, and if anything has done even more to open doors for growth in this sector. For one, the country joined the WTO, and ASEAN, and that has helped to open opportunities for foreign direct investment. In addition, this economic growth spurs growth of Myanmar as a consumer of fashion. The fact that trade policies such as the National Export Strategy have focused on the development of the garment industry has helped Myanmar see strong growth in the sector.

The legal story has also been interesting, because the government has pushed back against activists in terms of wages in the garment sector. While the country in general seeks to portray itself as "ethical and sustainable" (Akter, 2017), it also has held wages in the sector low, as a means of maintaining cost competitiveness. Myanmar is wedged in between India, Bangladesh, China and Thailand so naturally fits into the garment business, but has to compete against those countries on a cost basis, since it has insufficient technical prowess to compete on anything other than low cost at this point in time.

Keeping wages low is one part of this plan. While the Burmese economy overall is shifting towards capitalism, government still sets wages in the garment sector. It has set a daily minimum wage of $2.61, compared with the $4.07 wage that activists had been asking for. By keeping wages this low, the hope is that the sector can receive enough foreign direct investment to develop. (Friedman, 2017).

Design Side
Thus, in general Myanmar has specifically encouraged the development of this industry. However, it appears to see the garment business primarily through a job creation lens. The promotion of this industry is not just on the basis of low wages, but specifically to encourage foreign direct investment in the sector, meaning that foreign companies would establish factories in Myanmar. Even though the country has areas with specific histories of textile-making, there is no evidence that the government is promoting the development of any design-side business for Myanmar. As such, there are no homegrown brands of note. One reason of course is that the domestic market is very small, probably insufficient to support homegrown design at this point in time. Only when an emerging economy becomes much larger can it typically support local designers and small-scale high quality producers. The largest emerging markets – in South America, China, Turkey, India, South Africa, Mexico, are at that point but Myanmar is probably ten years away from having any meaningful local brands.

The government could take steps to encourage the development of a much higher level of vertical integration by setting up a fashion school. In a country where many lack basic education, and certainly college education, this may seem a little odd to suggest a fashion school, but if the garment industry is going to be the recipient of positive government policy, then it only stands to reason that the country should make further investments that the country's garment industry should be sustainable through the development of designers, managers and marketers that can help to raise the industry beyond the level of low-cost producer.

Comparison with the United States
The US is more or less the opposite of Myanmar with respect to this industry. A mature market, the US is in a position where it focuses on the design and marketing functions, and offshores production. American firms would look to sell to Myanmar, in the major big city malls, but they also might look to invest in production. The Gap, for example, entered the market via production in 2014 (Micro-Pak, 2017).

The US also has a strong retail market, whereas Myanmar does not. There is a significant difference in terms of operational maturity as well. While the Burmese garment industry has been fostered by the government since 1988, it is still a fairly small industry with a minimal domestic business. So in that sense, the operational maturity simply is not there. Burma represents a good opportunity on the producer side, however.

There are small companies in the US that still produce locally, and this sort of cottage industry has become commonplace in the modern capitalist economy. This is also where there is room for intersection with Myanmar, because that is likely how fashion design in the country will start. A repat, coming back with a Western education, and either design sense or business sense, is the most likely to kickstart the local design business. That said, while some major textile producers like Turkey have strong fashion industries, Myanmar is unlikely to join those ranks any time soon.

All told, for companies looking for cheap producers, the political and legal and economic environment in Myanmar is generally favorable to foreign direct investment. The government should, however, encourage its nascent capitalist economy by providing access to education for people to get into the garment industry at all levels. To do so would allow for stronger growth – in a sense this is a perfect industry for some sort of infant industry protections, and it would be good government policy to do so.
Other than investing on the education side, the key for the Burmese government going forward will be to maintain open markets that can attract new investment, and to encourage the development of local cottage industry, especially now as the wealth levels in the big cities are starting to get to a point where people can afford such clothing.


References

Akter, A. (2017). Low cost production has drawn foreign buyers' attention to Myanmar apparel industry. Textile Today. Retrieved March 8, 2018 from https://textiletoday.com.bd/low-cost-production-drawn-foreign-buyers-attention-myanmar-apparel-industry/

Chern, K. (2017). Why the Myanmar economy is slowing, and how it could bounce back. Myanmar Times. Retrieved March 8, 2018 from https://www.mmtimes.com/business/26948-why-the-myanmar-economy-is-slowing-and-how-it-could-bounce-back.html

CIA World Factbook (2018) Burma Central Intelligence Agency. Retrieved Mar 8 from https://www.cia.gov/library/publications/the-world-factbook/geos/bm.html

Friedman, A. (2017). Myanmar's garment industry is on a growth path. Sourcing Journal . Retrieved March 8, 2018 from https://sourcingjournalonline.com/myanmars-garment-industry-growth-path/

Lwin, M. (2017). Time to focus on Myanmar's economy. Straits Times. Retrieved March 8, 2018 from http://www.straitstimes.com/asia/se-asia/time-to-focus-on-myanmars-economy

Micro-Pak (2017). Myanmar's increasing influence in the textile industry. Micro-Pak. Retrieved March 8, 2018 from http://www.micropakltd.com/myanmars-increasing-influence-in-the-textile-industry/