YANGON — At the Rising White Tiger garment factory on the outskirts of Myanmar’s capital city, Hnin Su Hlaing checks the stitching on hundreds of pants and shirts each day, most of which are destined for lower-end department stores in Europe. The 18-year-old left school after the sixth grade and now works up to 10 hours a day, six days a week.
“I know that these clothes are for export, but I don’t know which foreign countries they are exported to,” she said, standing by her desk at the end of one of six factory lines, where 300 garment workers toil away, repeating the same menial stitch over and over.
Employees on this factory floor earn the minimum wage of 3,600 kyats a day, or about $2.75, making it one of the lowest-cost apparel-producing nations in the world. With up to two hours overtime available each day, Hnin Su Hlaing takes home close to 10,800 kyats a month. She says the monotony of her job does not bother her.
“I’m happy here because all the people working here are my friends.”
Emerging from economic isolation after decades of military rule, Myanmar’s Aung San Suu Kyi-led government is seeking to boost the country’s low-skilled workforce with policies that favor job-creating industries.
The nation’s apparel sector, which has been buoyed by the recent removal of U.S. sanctions, is set to be a key beneficiary of this push. By 2024, the industry wants to achieve annual exports of up to $10 billion, employing as many as 1.5 million workers, a feat that would go a long way to building confidence in Myanmar’s fragile democracy.
The sector has recently seen a sharp rise in exports, but is also experiencing the growing pains that come with rapid maturity.
Barely a year since it won a landslide victory following its pro-democracy campaign, Myanmar’s inexperienced government is struggling to formulate policies that give businesses the confidence they need to make decisions, while industrial relations are a foreign concept in a country whose military dictatorship ran the economy into the ground.
From April to mid-October this year, Myanmar’s apparel exports were valued at $1.27 billion, already surpassing the total previous financial year’s (April to March) figure of $1.1 billion, according to the Ministry of Commerce.
The 2016 numbers are more than double the $572 million the industry generated five years ago, in the 2011 to 2012 financial year.
“The garment sector is booming these days,” said Myanmar’s commerce minister Than Myint, whose ministry is working closely with the industry to try and open up new export markets through bilateral agreements that aim to give Myanmar preferential tax treatment on its exports.
“The sector is important for the country’s economy, in creating job opportunities and greater export income,” he said.
Japan, South Korea and the European Union make up the bulk of the export destinations today, with very few shipments to the U.S.
At its pre-sanctions era peak, in 2001, the industry was valued at about $868 million, according to a 2012 report from the Japan External Trade Organisation. At the time, the export sector was run by about 400 factories, employing more than 300,000 workers, the majority of which were women. Back then the U.S. was buying up 50 percent of the garments produced, but the industry shrank dramatically when sanctions tightened in 2003, following concerns over rights abuses perpetrated by the military, and access to the world’s largest consumer market came to a halt.
Today, factory and worker numbers have returned to their 2001 levels, with China and South Korea among the largest foreign investors in the industry.
Achieving duty-free access to the European Union in 2013 aided the recovery and this trajectory was given a further boost in September when President Obama revealed the lifting of the remaining executive sanctions, including the removal of individuals blacklisted for their close ties to the military. Dropping the restrictions is expected to give foreign investors and international buyers more confidence in the developing economy.
“It means a lot. It means investment,” said Khine Khine Nwe, secretary general of the Myanmar Garments Manufacturing Association, referring to the lifting of sanctions. “It provides a sense of security to the investors.”
Removing the blockade is also expected to free up the banking sector to allow for more trade financing with foreign banks, meaning factories could accept payment from international buyers for orders before they are fulfilled, which is critical for cash flow in a low-margin industry that imports all its raw materials.
Obama also made Myanmar eligible for the Generalized System of Preferences, allowing the country reduced-tax access to the U.S. for more than 5,000 products. To the dismay of the local industry, however, this does not cover run-of-the-mil garments, but it is something the MGMA plans to lobby Washington to change.
“We know that there are ways, there are ways to work it out,” said a hopeful Khine Khine Nwe.
In October, a new investment law sailed through parliament giving Myanmar’s Investment Commission the power to offer tax breaks to investors in industries that the government wants to steer the economy towards.
“In the context of investment, resource-based sectors dominate FDI [foreign direct investment] in Myanmar,” said the commission’s secretary, Aung Naing Oo. “As you are well aware, foreign-earnings can be increased by exporting value-added products. Therefore, priorities are given to attract more investment in the manufacturing.”
But there is much work for an inexperienced government to do. Delays in government policy are the main gripe among businesses, which say the industry needs to climb from the bottom rung of the garment manufacturing ladder to capture more of the clothing production, and in turn greater margins.
“There are a lot of laws that need to be amended because most of the laws are out of date,” said Sai Maung, the owner of the Rising White Tiger garment factory.
Reducing red tape would lure investment into a local raw materials industry, he said, reducing the cost of imported materials for production.
Perhaps the greatest challenge facing the immature industry, however, is getting industrial relations right. Independent unions are still in their infancy and workers remain unsure of their rights. Employers are unfamiliar with workplace standards demanded by the international market, while the labor law is weak and lacks proper enforcement from an inexperienced government.
“When you are in a suppressive environment for so long, it is like you pump the air into the balloon, and the minute you release the balloon into the air, it goes crazy, it goes frantic — and that is the stage at where we are,” said Piyamai Pichaiwongse, deputy liaison officer with the International Labor Organization’s Myanmar Office.
Labor laws are being rewritten, but this process requires consultation with employers and unions, something that is unfamiliar in Myanmar’s longtime top-down approach of governing, Pichaiwongse said. Understanding the responsibilities each stakeholder has to one another is still very much in its infancy, she added.
“So that is a very big concept that Myanmar has to learn, everybody including workers, employers and the government all have to learn to walk anew,” she said.
ILO surveys show that one out of 10 children between the ages of age and 17 are in some form of child labor in Myanmar. The U.N. labor body defines child labor as mentally or physically harmful work that interferes with schooling. Yet simply sacking every underage employee from every factory in the country won’t fix the problem, said the ILO’s Pichaiwongse, as there is nothing for them to fall back on. The industry was taking steps to resolve child labor, but it will take time and requires a mix of responses — from removing children from the most dangerous working environments to getting factories to support youths with education and training possibilities — are required to deal with child labor, she said. Convincing factories that have spent time under the hard strictures of the military to come forward and talk to non-government organizations and the ILO on how best to manage child labor is part of the challenge, the ILO adviser said.
“That is a long-term investment for your company, in terms of corporate social responsibility.”
Labor groups are also having a different set of challenges with employers and workers often unfamiliar with independent unions. A recent survey of 200 workers by rights group Progressive Voice found that only 8 percent were union members and 35 percent were unsure if a union existed in their factory. The Confederation of Trade Unions in Myanmar is the country’s largest labor representative. It has 45 garment sector-related unions with about 19,000 workers registered with it. The CTUM came out of decades of exile to register with the government last year, but gaining membership numbers while educating workers on their rights has been difficult, according to CTUM assistant general secretary Phyo Sandar Soe.
“The biggest challenges facing unions at the moment is workers getting fired by factory owners once they know that the worker is a labor organizer for the union or a member of the union,” she said. “The main problem is the laws itself. We are trying to amend the labor organization law and the dispute settlement law, that can only make it better for unions to form.”
There is much riding on the prospects of Myanmar’s manufacturing sector. To create a sustainable job-creating garment sector that promotes workers’ rights and is business-friendly will be inextricably linked to the political success of the new government.
“With the lifting of sanctions and the new investment law, which I hope will be very attractive to many people all over the world, we think that our country is in a position to take off,” Aung San Suu Kyi told reporters during her September visit to the White House. “But for us, economic development is just part of the democratic process that we want to encourage in our country.”
For workers like Hnin Su Hlaing, who sends part of her pay back home to her family in rural Myanmar, there is no social security blanket to fall back on, and in an economy emerging from decades of darkness, the job opportunities are few.
“I have no idea what other jobs I could get. I don’t think most jobs are available to me, apart from this job as garment factory worker,” she said.