YANGON, Myanmar — As one of the world’s newest democracies, Myanmar poses numerous risks for investors cautious not only about the financial stakes, but of their international reputations, as well.

This story first appeared in the November 18, 2014 issue of WWD. Subscribe Today.

With presidential elections a year away, some fear the country’s fragile democracy could be turned back and some major apparel makers are sidelining themselves until the results are in. During his visit to the country last week for the Asian regional economic forum, President Obama highlighted Myanmar’s fragile democracy by urging President Thein Sein to continue on the path of reforming the country’s constitution and political institutions.

“There’s no doubt many are not coming to Myanmar until the elections are over,” said Alan Renton, chief operating officer of China-based Prosperity Knitwear of Myanmar. While his firm decided its $20 million in planned investments are worth the risk, many others are waiting it out, he said. “There’s no question about it,” he said.

Yet apparel makers, always careful about their reputations with international consumers sensitized to complaints of child labor and sweat shop conditions, are at particularly high risk when investing in a country with the seemingly unlimited problems confronting Myanmar, said Steve Marshall, a liaison officer with the International Labor Office in Yangon.

The needs are almost limitless in the country of about 54 million with an annual income just 10 years ago of less than $300. The educational system deteriorated dramatically under the regime, as did infrastructure. One of the poorest countries in Southeast Asia, unemployment in Myanmar is estimated at 30 percent.

Child labor is not uncommon, and the legal working age is 13, Marshall said. Many of the domestic apparel makers employ children, and the ILO acknowledges it is not a black-and-white issue about child labor in Myanmar’s economy.

“Burmese employers can’t understand complaints from the West about child labor,” Marshall said. “They see employing children as social welfare.” Marshall noted that if employers dismissed all their child workers, there are few viable opportunities for the children, who are often sent to urban areas to help support their families.

“No one agrees with the concept of children working. But what would people rather see: a child working in relatively good conditions in a factory or recycling from a dump?” Marshall asked.

Gap, one of the first American firms to have sewing done in Myanmar, partnered with Care International to promote the advancement of life skills of female garment workers by providing education and technical training.

“We realized this was a historic moment for Myanmar,” said Wilma Wallace, vice president for global responsibility with Gap. “We have a strong commitment to social investment and we said, ‘If not us, who?’”

The British Embassy in Rangoon has allocated about $8 million to promote three industries in Myanmar with the biggest potential for reducing poverty. Apparel tops that list, and the embassy is providing free consultancy to nine domestic apparel makers to help them grow and move up the value chain from cut, make and pack to free on board. Part of the effort is helping the firms more with their businesses online. In addition, it is offering assistance to the government to process applications for export and import licenses online.

The U.S. Agency for International Development is also working to improve living conditions in Myanmar and is partnering with companies across sectors, including Gap Inc., Coca-Cola Co., Procter & Gamble Co., Hewlett-Packard Co. and Chevron Corp., according to a development specialist based in Yangon. From leadership training, vocational training, addressing academic needs and improving technology, U.S. firms are stepping up, the development specialist said during an interview in the U.S. Embassy.

“The reality is that the world of investment waits for no man,” Marshall of the ILO said. “Companies coming into Myanmar are finding an absence of solid law, and everyone is making it up as they go along. They want to protect their interests, and they want to protect the best interests of society.”

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