Brands are always seeking a competitive edge in new manufacturing hubs

Brands are always seeking a competitive edge in new manufacturing hubs

Regardless of the debate about whether China is losing its shine as a clothing source, brands will always be looking for a competitive edge in new manufacturing hubs.

Myanmar's low wage garment sector, for instance, is poised for rapid growth. The country's first democratically elected government in 50 years assumed power in April, and several reforms have already been made to bolster the country's appeal as a sourcing destination for international clothing brands.

The incoming ruling party, the National League for Democracy (NLD), stated in its manifesto for the general elections last November that it will encourage greater foreign investment "in line with the highest international standards." 

However, US sanctions against Myanmar under the International Emergency Economic Powers Act (IEEPA), which provides a legal framework for the US Department of the Treasury to blacklist certain individuals or companies, could be renewed in May.

In November, US Ambassador to Myanmar Scot Marciel told the US Senate he would not recommend any dramatic change to the sanctions programme. This is in part due to unfortunate timing: the NLD's tenure officially began shortly before a national two-week holiday in April, thereby denying it the opportunity to assuage existing doubts about it being able to govern without military interference before the US sanctions review deadline.

Nonetheless, Jacob Clere, team leader of SMART Myanmar – a European Union funded initiative aimed at promoting 'Made in Myanmar' garments and sustainable practices –told just-style he believes Myanmar is already an attractive sourcing destination.

He cites the country's experience and commitment to product quality, strong knowledge on manufacturing structured garments and improving infrastructure for manufacturers as key factors. 

"There exists abundant and readily trainable manpower – or womanpower, really, since the industry is over 90% run by women…and the government continues to show a commitment to continuous and positive improvements in the legal framework," he explains.

"Myanmar successfully implemented a minimum wage [MMK3,600 or US$2.97 per day at current exchange rates], and recently updated several labour and factory safety laws."

This followed the passage of a new minimum wage law for garment workers under the outgoing military-backed regime in August 2015. Such developments have significantly improved Myanmar's standing as a sustainable sourcing destination, which in the past was held back by concerns such as child labour. 

Clere says that SMART Myanmar has "helped many responsible European brands and retailers begin sourcing garments in Myanmar during the past couple years and several are already sourcing in quite large volumes."

East African powerhouse

Sub-Saharan Africa also continues to develop its reputation as a manufacturing centre, and a key leader in this trend is Kenya, East Africa's economic powerhouse.

Joseph Wairiuko, executive officer for textiles at the Kenya Association of Manufacturers, says the confidence of international buyers has been boosted by long-term export sales to the US through the African Growth and Opportunity Act (AGOA).

Combined efforts of the government and the private sector to prioritise manufacturing and compliance with international standards have also helped, he notes. "Kenyan manufacturers have been exporting to international markets under such trade regimes such as AGOA and [the] EU EPA [Economic Partnership Agreement].

"As such, the manufacturers are experienced in terms of handling various orders regardless of the quantities and can meet the buyers' quality demands as well as market deadlines."

He says Kenyan manufacturers have been gaining experience in logistics management and export document processing.

The Kenyan government is trying to bolster this reputation through its 'Kenya Industrial Transformation Programme' (KITP), launched last September (2015), which cites the textile and clothing sector as a critical focus for government support in developing manufacturing.

The government has designated land for industrial parks operating under special economic zones – for instance the planned Athi River and Naivasha textile centres, where textile and apparel manufacturers will be offered land, a shared waste water management facility, plus energy subsidies.

Made in Mauritius

Another African manufacturing centre that continues to offer promise is the Indian Ocean island state Mauritius, whose clothing and textile exports rose in the past year. In 2015, the Mauritius Export Association (MEXA) reported an increase of 4.95% in textile exports, namely yarns and fabrics, year-on-year. For 2016, it is forecasting an increase of 5.37%. 

Lilowtee Rajmun, director of MEXA, explains: "Last year, the total exports of textile and apparel stood at MUR28bn (US$795m). Our main markets are traditionally Europe, United States and South Africa."

Rajmun stresses that the Mauritius textile and apparel industry's strength comes from high quality products, social accountability compliance, and environmental consciousness. She adds that "the sector has also sharpened its competitive edge by working on a shorter lead time, that is from when the order is taken to the time of delivery to customers," to alleviate high storage and warehousing costs for clients.

She also highlights the vertical integration of the Mauritius textile and apparel industry, especially developed following the end of the World Trade Organization (WTO) Multi-Fibre Agreement (MFA) in 2005 "to build up competitiveness."

"Today, the sector has developed into a matured industry providing a full range of services alongside the normal production process. In terms of service, we have developed a strong customer-oriented approach, strengthening the auxiliary services, namely the design concept and the merchandising techniques."

Iran opening up

Meanwhile one new frontier country that may have potential as a manufacturing hub, albeit in the longer term, is Iran.

Sanctions on the country have been significantly eased following an international deal over its nuclear programme, allowing for trade with previously off-limits countries and regions – notably Europe.

But while Iran is opening up to foreign investment and business, it could be more advantageous for importers than exporters. 

"The sector was negatively affected by the sanctions. There was not enough investment in technology, and smuggling increased," says Mehrdad Hossaini, a clothing retailer in Tehran.

Smuggling of clothing increased because of export sanctions imposed by the West, while imports of Chinese and Indian products increased to the detriment of local manufacturers.

Imports of textiles and garments were estimated at US$1.29bn in 2014, according to the latest available figures from the Islamic Republic of Iran Customs Administration (IRICA), although these numbers obviously do not include illicit trade.

And while Iranian manufacturers are now importing new machinery, Hossaini says the sector will struggle to be competitive at a global level. "We are behind Turkey, China and Asia in modern manufacturing capabilities, especially Turkey, which is next door and a top producer. Exporters are also struggling to engage [at a commercial level] with Western buyers," he explains. 

Current production is targeted at the domestic market and developing economies, he notes. Meanwhile, the easing of sanctions "will benefit importers and retailers, as foreign brands were not allowed, and there is demand [from Iranians] to buy international brands."

Click on the following links to read other reports in this management briefing:

Sourcing shifts – Why China makers are moving out or moving online

Sourcing shifts – Multiple country choices require complex decisions

Sourcing shifts – The potential and pitfalls of local sourcing

With additional reporting by Paul Cochrane, Bertha M Rinjeu and Villen Anganan.