Hong Kong firms are to set up the apparel industrial park in the Thilawa Special Economic Zone (SEZ)

Hong Kong firms are to set up the apparel industrial park in the Thilawa Special Economic Zone (SEZ)

Burma/Myanmar appears set to become a major outsourcing destination for Hong Kong garment companies, with a deal signed last week to set up a 2,400 hectare apparel industrial park in the Yangon region.

The vice-chairperson of the Myanmar Garments Manufacturers' Association (MGMA), Dr U Aung Win, told just-style that a delegation from Hong Kong signed a contract at the Union of Myanmar Chamber of Commerce and Industry (UMFCCI) in Yangon on 13 June to set up the apparel industrial park in the Thilawa Special Economic Zone (SEZ). 

As reported on just-style in April, the plans were first announced at Hong Kong's Clothing Industrial Training Authority, an educational institute for the Chinese apparel industry. The apparel industrial park will cover 2,400 hectares and operations will commence in mid-2015.

Whilst declining to name the 12 companies investing in the project, Dr Aung Win said that the MGMA met with more than 20 companies from Hong Kong last week; including some already setting up factories in Bago (70 kilometres from Yangon). 

"Everyone at the meeting expressed a lot of enthusiasm about Myanmar's potential as an outsourcing destination; they said it was better than Vietnam, Bangladesh and Cambodia. I believe our country will soon become the number one outsourcing country for garment manufacturing," Dr Aung Win said.

"We're seeing a fair bit of interest from Hong Kong groups, primarily in light manufacturing. They are trying to understand if Myanmar is a now a place in which they should spread some of their manufacturing capacity," added Kevin Murphy, the managing director of Andaman Capital Partners, a Yangon-based investment advisory firm with experience in helping light manufacturers enter Myanmar's market.

Dr Aung Win said that the country's new Foreign Investment Law, which was passed in 2012 and replaced a highly restrictive 1988 code, is one key reasons for Hong Kong companies investing in Myanmar, because "it gives them guarantees."

Murphy agreed: "I believe the regulatory situation is improving, with the Myanmar government keen to promote job creation and foreign investment."

Investment projects
Foreign investors have been trickling in to Myanmar's garment sector since the US and EU started to relax curbs on trade with the country back in 2012.

There are, though, concerns that systems and infrastructure need to be improved and restructured before significant clothing and textile commerce can begin in earnest.

Last April, the Myanmar Investment Commission (MIC) launched a "one-stop-shop" service for foreign investors helping them deal with different ministries whose approval is required for investment projects.

"It's early days, but some groups see Myanmar's potential. There appears to be a local strength in very detailed hand working on garments and light goods," he said, adding investors maybe "hedging against rising wages in China, and unreliable health and safety operating conditions in Bangladesh and related reputational risks."

However, they must also weigh "the persistent concern in Myanmar about electricity supplies and the dearth of supply of semi-skilled workers available in the market," cautioned Murphy.

Dr Aung Win told just-style that electricity shortages were not a concern for the Hong Kong delegation, with the World Bank, its International Finance Cooperation (IFC) and the Asian Development Bank (ADB) all financing electricity projects in the country.

The possibility of political instability during the lead up or aftermath of the 2015 general elections was also not raised, he said.

According to MGMA, the only potential drawback discussed during the Hong Kong delegation's visit was the absence of a minimum wage in Myanmar, which will be set by parliament in December. At present, the average garment worker's wage in Myanmar is US$100, whilst in mainland China it is around US$250.

Meanwhile, Dr Aung Win said that MGMA is employing Japanese instructors at a training centre in Yangon's Insein Township to train sector workers.

Last week, US apparel giant Gap announced that it will begin sourcing garments from two factories in Myanmar - a move it says makes it the first US retailer to enter the market.

But the company has also been forced to defend the move after human rights advocates suggested Gap simply wants to get its clothes produced as cheaply as possible. 

Click on the following link to read: Gap hits back at criticism of move into Myanmar.