As Asian garment makers venture into Burma to explore investment options, U.S. companies are more cautious, watching for signals that the military-dominated country is ready to join the international economy.
“If I were a sourcing executive, I would want to see substantial human rights progress before sourcing manufacturing from there,” said Erik Autor, vice president of international trade and counsel for the National Retail Federation.
Sukij Kongpiyacharn, president of the Thai Garment Manufacturers Association, traveled this month with other Thai apparel makers to Rangoon, once the seat of government in Burma, to meet with officials of the Board of Investment of Burma.
“We want to be the first wave of investors there,” Kongpiyacharn, managing director of Hong Seng Knitting Ltd., said in a phone interview from Bangkok. “If we invest in Vietnam, we would be in the fourth or fifth wave of investors because they have been making apparel there for 10 or 15 years already.”
Some nine out of ten Thai apparel makers are moving their plants out of Thailand because the minimum wage there has been raised 40 percent to $10 an hour, Kongpiyacharn said. Also, Thai makers suffered from the December flooding that put much of the industrial zones outside of Bangkok under water and out of business for weeks.
Kongpiyacharn estimated it would be at least a year before Thai manufacturers could open plants in Burma. He estimated it would cost about $10 million to establish a 100,000-square-foot plant employing 3,000 workers. Currently, Thai executives are considering buying existing apparel-making plants in Burma, he said.
Many of the apparel workers in Thailand are Burmese, Kongpiyacharn said, and he’s confident the Burmese workforce, while isolated from the rest of the world for almost 30 years, could be quickly trained.
The U.S. imposed economic sanctions on Burma, which is also called Myanmar, after the military seized control after 1988 elections and killed democracy demonstrators. As recently as 2007, the military has not hesitated to exercise its brutality in quashing democracy demonstrators. So complete has been its control that many fear to even speak openly about their country’s political situation. Before her release last year from more than 17 years of house arrest by the military, Aung San Suu Kyi, the leader of the opposition party, was referred to as The Lady by Burmese too afraid to speak her name.
The U.S. has eagerly responded as the Burmese government has released political prisoners, and promises to hold free and fair elections in April. Secretary of State Hillary Clinton visited in December, and this month said the U.S. would send an ambassador to Burma for the first time in two decades. President Obama has described the pardons in a statement as “a substantial step forward for democratic reform.”
Senate Minority Leader Mitch McConnell (R.-Ky.) visited Burma in January and returned endorsing a return to diplomatic relations between the two countries. A persistent opponent of any legislative initiatives the Obama administration has suggested, McConnell said he was willing to work with the administration to lift sanctions if Suu Kyi believed it appropriate. McConnell has long criticized Burma’s human rights record and for almost a decade has sponsored legislation to impose tough sanctions on Burma.
David Steinberg, a professor in the School of Foreign Service at Georgetown University, said McConnell’s endorsement of lifting sanctions could be the linchpin needed. Noting the Obama administration wouldn’t use any political capital on Burma as it moves toward November elections, the administration also views any democratization progress there as another success in its foreign policy agenda.
Easing sanctions can be a multistep process that could begin with U.S. recognition of the name Myanmar that was given to the country by the military-led government and has since been largely ignored by the U.S. diplomatic community. It likely won’t be an immediate, overall lifting of the economic penalties, Steinberg said.
“I hope we can begin the process this year,” he said, acknowledging any moves could be complicated by the political environment in Washington.
Australia already has eased its sanctions against Burma. Japanese, South Korean and Indian companies are exploring the establishment of manufacturing, telecommunications, hospitality and banking operations there. Vietnam and the Chinese province of Guangdong have held trade fairs in Rangoon, and the American Chamber of Commerce in Singapore recently held a seminar on investing in Burma.
Yet it could be years before apparel makers and other manufacturers can set up shop in Burma, predicted Nicholas Lardy, a fellow at the Peterson Institute for International Economics. The lack of infrastructure, the absence of a supply chain, an untrained workforce, and the scale of manufacturing that would be needed to compete with other Asian countries already firmly established as world-class manufacturers could impede Burma’s progress, he said.
While Vietnam’s exports to the U.S. amount to $300 billion yearly, Lardy said, “I would faint if Burma could ultimately export $10 billion to $15 billion yearly.”
Autor agreed and said Burma needs significant improvement in its human rights, and will need laws that meet international norms for labor, environmental protection and legal standards.
“If we see a future there, we may see companies looking at Burma,” he said.