WASHINGTON — New labor and energy initiatives between the U.S. and Myanmar could provide the impetus that puts the Southeast Asian nation on the sourcing map for apparel importers.
But industry executives and experts cautioned that Myanmar has a way to go on the path toward industrial development before it becomes a major supplier.
Gap Inc., the first U.S. retailer to re-enter Myanmar since U.S. sanctions were eased in 2012, is committed to maintaining production in the country as long as the government continues to institute reforms and the industry meets its sourcing needs.
Executives said they were encouraged by more U.S. engagement in Myanmar, noting that the bilateral initiatives on labor rights and sustainable energy are an important step toward opening up sourcing in the country. The two countries signed a statement aimed at crafting policy promoting fundamental labor rights and practices in Myanmar. They also signed the first solar energy project in Myanmar’s Mandalay region, valued at about $480 million.
“There are lots of manufacturers looking into Myanmar,” said Edwin Keh, a lecturer at the University of Pennsylvania’s Wharton School. “There are ‘push’ reasons to explore investing and producing in Myanmar. These include a desire to replace more expensive Chinese production, recent concerns with Bangladesh, Cambodia and Vietnam, and the squeeze from customers for ever-cheaper CMT (cut, make and trim).”
“The current rush to get into Myanmar is a recognition that this is a small country with limited capacity, so investors don’t want to be left out,” Keh said.
Several major firms were forced to pull out of the country in 2003 when the U.S. imposed an import ban after a military junta began repressing human rights. The U.S. began taking steps to renew economic ties with the country in 2012 after the government made some reforms, including the release of political prisoners, enactment of labor laws permitting the formation of unions and passage of foreign investment laws. In November of that year, the Obama administration said it would allow most imports into the U.S. from Myanmar and the U.S. officially lifted the import ban in August.
Apparel imports to the U.S. from Myanmar rose to $8.9 million for the year ended July 31 from $1.9 million in 2013. By comparison, imports to Japan from Myanmar were $506 million for the year ending June, while imports to the European Union were $209.8 million, according to International Development Systems.
Julia Hughes, president of the U.S. Fashion Industry Association, said the new U.S.-Myanmar labor and energy initiatives were encouraging.
“Companies have been talking with the ILO and with U.S. government officials on how there might be new initiatives to craft an industry standard before substantial trade moves into Myanmar,” Hughes said.
Debbie Mesloh, senior director for government and public affairs at Gap, said, “Responsible business investment goes hand-in-hand with the government’s commitment to make sure that they have the social development they need. I think the announcement when [U.S. Trade Representative] Michael Froman was there in August was a great positive step.”
Mesloh said there is a “definite sense on the ground” in Myanmar that “there are people who want to improve the communities, who believe that by working in the apparel industry, they can do that,” she said. “We knew that there would be challenges, but again, thinking we could make a difference in the social development of the country [particularly with women] is something that we felt that we could play a meaningful role in.”
Outerwear made in Myanmar for Gap’s Old Navy and Banana Republic factory stores hit shelves at the end of August. Mesloh said Gap is in a “wait-and-see mode” in Myanmar since it placed its first round of orders there.
“As long as that process continues and as long as they are able to meet our business needs, we certainly are committed to staying there,” she added.
Rick Darling, executive director of government and public affairs at Li & Fung Trading Ltd., which has had apparel production in Myanmar for several years, shipping primarily to the EU and which also recently opened an office there, said the company is continuing to expand investment in the country.
While Darling said more U.S. engagement with Myanmar is positive, it will not become a big apparel supplier to the U.S. until underlying issues such as social compliance and inadequate labor laws are resolved.
“My sense is the government [of Myanmar] and officials are very serious about moving as quickly as possible to bring the industry up to international standards,” Darling added.