Myanmars apparel sector is growing at a fairly rapid pace

Myanmar's apparel sector is growing at a fairly rapid pace

Myanmar's garment sector is in the midst of significant growth and exciting changes - and a brand new and exclusive report produced by the Myanmar Garment Manufacturers Association (MGMA) offers essential reading for retailers, brands and importers looking to source from the country.

In 2014, Myanmar garment sector export revenues are estimated to have reached at least US$1.5bn, a jump of more than $300m in one year and a doubling after less than three years. 

This is not surprising given the number of new apparel factory openings last year, and growth is expected to continue thanks to investment in the renovation and expansion of existing facilities to cope with this demand.

Indeed, MGMA registered more than one new garment factory opening each week throughout 2014 - a consistent indicator of high growth in the industry. And its report on 'Myanmar's Garment Sector - Opportunities & Challenges in 2015,' explains that what was once an industry with factories only around greater Yangon has now quickly spread, as new factories begin operations in Bago, Pathein and Hpa-An.

Rapid growth
At present there are around 275 large, typically foreign-exporting garment factories in Myanmar, and over one dozen textile and cotton ginning factories.

Half of all garment export revenue in 2013 came from non-knit men's coats and non-knit men's suits, but in 2014 the sector saw significant product diversification, mostly by foreign-owned factories setting-up specialised production units similar to those they maintain in other countries. There is also an increased interest in input production and manufacturers seeking to capture added value by increasing the vertical integration of their production.

Investors are being attracted to Myanmar's garment sector for a number reasons, not least because of its attractively low labour costs. Large retailers are also keen to diversify their sourcing base into a country with good future prospects, even if the current situation presents infrastructure impediments and non-negligible risk.

As an added incentive, in early 2015 the MGMA will be publishing a ‘Code of Conduct' for its member companies. This document comes from extensive workshops with the European Union's SMART Myanmar project as well as following from several meetings with international brands and partners.

"Myanmar's apparel industry is small compared with our neighbours in Bangladesh, China and Thailand, but we are currently experiencing robust and sustained growth as international investors and retailers discover the attractive features of our industry," explains U Myint Soe, MGMA chairman.

"Certainly, our industry faces many challenges. The banking sector in Myanmar is under-developed, infrastructure outside Yangon is nascent, and our international product sourcing networks are often smaller than many of our counterparts in other countries. These are serious obstacles to growth, but MGMA is addressing these problems and others with steady determination, organising capacity building and advocating for policy improvements."

Opportunities and challenges
Compared with other countries in the region, Myanmar's garment industry is still extremely small, and it tends to specialise in higher quality, technical garments which would otherwise be sourced from China.

At present, production in Myanmar operates along the Cut, Make, Pack (CMP) contracting system, which means all the raw materials are imported by the customer, and the designs, patterns and instructions are all provided to the factory. The factory stitches the garment before packaging it for transport to the buyer. Thus, profit margins are much lower, and this focus on the production part of the value chain means there is little development of wider domestic supporting services and vertical integration.

An alternative, and now more common international model is Free On Board (FOB), through which factories arrange the purchase and import of raw materials and other services such as design, merchandising, logistics and warehousing. This can significantly increase profit margins, although few factories in Myanmar currently have the size, skills or access to credit to support this type of operation. Myanmar's tax system also provides incentives for CMP production over the FOB system.

Despite these concerns, interest remains in the future potential of the garment industry in Myanmar as a sourcing location. It has a significant opportunity to set up "right" from day one in terms of being compliant with the standards that the industry needs, and to have the right level of skills, the report's authors explain. There is a belief among buyers that workers can be trained through collaborative partnerships with buyers to improve efficiencies and compliance.

Myanmar also has some advantages over other regional garment producers, and authors again point to low wages (lower than everywhere except Bangladesh) and a ready supply of relatively well-educated labour.

Constraints to growth still exist, however, in particular poor infrastructure, lack of supporting functions, and longer lead times. But labour shortages and frequent strikes in countries such as Cambodia, and significant health and safety concerns in Bangladesh, means buyers are increasingly looking to diversify their sourcing locations.

Click here or on the following link to view more details of the report's content and how to purchase a copy: Myanmar's Garment Sector - Opportunities & Challenges in 2015