Hong Kong garment manufacturers eye Myanmar outsourcing
The average monthly wage for a skilled worker in Myanmar is US$100
As China's garment manufacturing industry continues to lose its competitive edge as a low-cost clothing supplier through worker wage rises and increasing regulation, more companies are looking to alternative sourcing destinations. As a result, new frontiers like Burma/Myanmar are being assessed.
To that effect, a leading Hong Kong politician has confirmed that 12 Hong Kong garment companies are to build plants in Myanmar's Thilawa Special Economic Zone in Yangon.
Felix Chung, a textile and garment industry representative member of Hong Kong's Legislative Council (Legco) spoke about the plans at a seminar held on Monday (14 April) at the country's Clothing Industrial Training Authority.
Noting that the firms are as yet reluctant to reveal their names, he said the majority are undergarment manufacturers with some others producing jackets. One will process recycled fabric to supply underwear and swimsuit manufacturers.
Chung said Hong Kong businesses have been allocated 100 hectares. He noted: "One of the 12 Hong Kong companies wants to establish a complete production chain in Myanmar, from textiles to dyeing. Therefore it is looking for big space for shifting its suppliers."
Construction is expected to be completed by December, with firms able to start production by next May.
He said transport would be eased by the zone being just 20km from Myanmar International Terminal Thilawa container port, which is part-owned by Hong Kong-based Hutchison Port Holdings. Chung revealed the company was willing to invest more money to buy additional facilities and improve the terminal's capacity.
The Legco member added that the Hong Kong Government has signed an investment promotion and protection agreement with Myanmar, which is awaiting approval from the Chinese government, who has the final say over such overseas deals.
For the garment manufacturing industry, China's mainland has already lost its competitive advantages, Chung believes, through wage rises and increasing regulation.
The average monthly wage for a skilled China mainland worker is US$600, while in Myanmar the rate is US$100, he stressed.
The minimum monthly wage for Chinese mainland workers is around $250, while there is no legal minimum wage in Myanmar thus far.
Chung added that it made more sense to shift business to Myanmar rather than inland China, where workers earn $400 per month - a rate that is rising.
He believes manufacturing in Myanmar is even more attractive than Cambodia and Bangladesh. In Cambodia, Chung said, the minimum wage was $60, before rising to $100. Now workers want $160: "The root of the problem is its population is too small. Plus, in Cambodia, labour unions are influential. In one factory, there could be five or six labour unions."
Dealing with so many unions "could be very troublesome", he said. "In Bangladesh, big companies are thinking of stopping orders over concerns with its human rights and corporate social responsibility issues."
Meanwhile, Myanmar has "abundant workers", who are "hard-working and obedient", he said. And with a population approaching 60m, and high unemployment rates, there is abundant labour, he stressed.
The Hong Kong Clothing Industrial Training Authority, which has helped train workers in Bangladesh and Cambodia, would also help train workers in Myanmar, Chung said.
In addition, Hong Kong has set up an industrial organisation called the HK Myanmar Manufacturing Association (HKMMA) to help domestic firms launch manufacturing projects in Myanmar. It represents Hong Kong companies negotiating with the Japanese developers of Thilawa SEZ and Myanmar public authorities.
He predicts Myanmar will be stable politically in the coming years, with the current liberalisation policy continuing. But he warned: "Corruption cannot be avoided.
Speaking later, HKMMA representative Dominic Cheng said Hong Kong companies relocating to Myanmar would benefit from the low and zero duties charged on its exports to the European Union.
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