YANGON, Myanmar — Myanmar’s garment industry has been buoyed overnight by the news that Washington has reinstated the country into a program that allows it reduced tax privileges on exports to the world’s largest economy.
In her first visit to the U.S. since her party’s historic election win in November, Myanmar’s de-facto leader Aung San Suu Kyi met with President Barack Obama at the White House on Wednesday.
Speaking at a joint press conference from the Oval Office, Obama unveiled a commitment toward lifting sanctions on the pariah state, which has been imposed on the country’s military leaders and crony-led businesses for 20 years. At the same time, the U.S. president revealed Myanmar’s reentry into the Generalized System of Preferences, which offers developing countries reduced tariff access to the world’s largest consumer market.
“And if you combine those two efforts, I think this will give the United States, our businesses, our nonprofit institutions, a greater incentive to invest and participate in what we hope will be an increasingly democratic and prosperous partner for us in the region,” Obama said.
The news has been welcomed by leaders in Myanmar’s fledgling garment industry, who say the upgraded trade status will eventually create a level playing field among other garment-producing nations that enjoy such benefits.
“There have been a lot of improvements in Myanmar’s garment industry since the EU GSP came in,” said Myint Soe, chairman of the Myanmar Garment Manufacturers Association, or MGMA, referring to a similar duty-free program in the European Union that Myanmar was allowed to reenter after showing improvements in labor conditions in 2013.
According to figures from the MGMA, Myanmar shipped $1.56 billion worth of apparel in 2014, the year following the EU’s GSP allowance. This was almost double the amount of the two years before.
Soe cautioned, however, that it remains unclear how much access to the U.S. market would be granted in the short term, following Wednesday’s announcement in Washington, as details were still coming through. But the industry body was encouraged by the diplomatic decision.
“We expect things to improve in the near future,” he said, estimating that the U.S. market could one day account for up to 50 percent of the country’s exports. “It will lead to a lot of jobs.”
The U.S. suspended GSP privileges for Myanmar in 1989 due to concerns over workers’ rights while the country was under junta control. The country will become eligible for the scheme as of Nov. 13. The program is designed to put countries on a pathway toward industrialization, a priority for Myanmar’s new government as it seeks to revive an economy left isolated during decades of military rule.
“The clothing industry will receive a significant boost once it has GSP access to the U.S. market,” said Jayant Menon, lead economist for trade and regional cooperation at the Asian Development Bank in Manila.
Eric Rose, lead director at Herzfeld Rubin Mayer & Rose Law Firm in Yangon, who works with U.S. firms eyeing the country, said there will still be challenges for the industry to ensure sustainability, but as the sector becomes more sophisticated and international agreements fall within the GSP schedule, buyers will see greater tax benefits in shipping from Myanmar.
“This industry can provide hundreds of thousands of jobs, as it did prior to 2003,” he said.