The clothing industry in Myanmar is gloomy about post-coup prospects

The clothing industry in Myanmar is gloomy about post-coup prospects

Clothing industry executives and experts within Myanmar have warned that the country's apparel sector is already suffering because of the 1 February coup, when the military seized power and detained Aung San Suu Kyi and other elected leaders. 

Despite the imposition of a one-year state of emergency, healthcare workers, civil servants and others have launched a civil disobedience movement, with demonstrations being staged nationwide.

As a result, clothing industry managers within Myanmar have told just-style many clothing factories are not functioning because staff are on strike and protesting. Even Chinese-owned facilities, which have been a major part of the recent expansion of the sector in Myanmar, have been affected. 

Managers say there is uncertainty about the future, and whether production will pick up soon.

"Business owners have already planned contingencies in the event of sanctions," says U Aung Min, garment factory owner and central executive committee member of the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). 

"We will most likely shut down our factories and move our operations overseas. I myself also have a garment factory in Thailand and I will produce 'Made in Thailand' clothes instead of 'Made in Myanmar,' but I feel sorry for the Myanmar workers because they will lose their jobs." 

The UMFCCI also announced last week that its head office would be closed for the time being, because of the ongoing political unrest.

Trade disruption

A Myanmar-based economic consultant for the United Nations warns that disruption was already restricting trade. 

"The halt in garment trading would affect 50% of the trade sector," she says, taking account of all industries, leaving the country more reliant on Chinese imports. Trade is especially badly disrupted in border regions, she adds.

Currently, most UN agencies, some of which offer direct and indirect support to the clothing industry, have postponed travel – including within Myanmar – events, meetings, and government activities until there is a clear UN position on the legitimacy of the military-led government. However, some activities, based on desk-research and alike, may continue on a case-by-case basis. 

Sanctions fear

European businesses, represented by EuroCham Myanmar, are worried generally about the future of the Myanmar economy, already hit by Covid and now more worryingly the military coup. 

Officials at the chamber fear resulting international sanctions, even if targeting mainly military-connected companies. The reason is that European companies with contracts in Myanmar will worry about reputational damage and risk associated with continued association with the country.

Some even fear that Myanmar could lose its Everything But Arms preferential trading status with the EU and even fail to be offered some or all Generalised Scheme of Preferences (GSP) access. 

That would be "a death blow to the country's textile industry," says one official, noting that finding alternative markets would be very difficult. Already Japanese importers are disinclined to take Myanmar textiles – and this is only likely to worsen, especially if there is a crackdown and bloodshed.

Logistics disruptions

Another major anticipated problem are logistical restrictions on exports and the import of raw materials. Logistics have been disrupted severely during Covid-19, but this will worsen now, with Yangon port currently at a standstill. Borders with Thailand are closed and there are restrictions on traffic into and out of China.

The banking system has ground to a halt and receiving money from abroad is currently almost impossible. Communications systems are patchy. The internet has been severely affected – with periodic interruptions likely. New cyber-access laws designed to increase political control are set to restrict use of the internet. Phone communications are also affected. Many civil servants are protesting, so securing paperwork, such as trading permissions and licenses, is also difficult.

The economically-important expat community in Myanmar is largely in shock, with many trying to leave the country. Limited departing flights are filling up: fully booked until mid-March. Many expats are also trying to get rid of their possessions in a hurry.

The general prognosis in the manufacturing sector – especially garments – is bleak, say industry managers. 

Business in the short run is expected to fall away dramatically. And when existing orders are filled, the likelihood of fresh contracts from Europe, Japan and the US are very dim. Foreign direct investment is likely to dry up completely. 

In the medium-term the business outlook depends almost entirely on the crisis being resolved soon, with a restoration of democracy. Executives say that the long-term outlook is currently unpredictable. Uncertainty shrouds Myanmar's clothing industry.

Click on the following link to read just-style's coverage of the potential repercussions of the recent coup: Clothing sector likely major loser from Myanmar coup.