Small and medium-sized enterprises (SMEs) in Myanmar’s garment sector are feeling the impact of the coronavirus outbreak as a result of raw material shortages but concern over a fall in orders is now spreading across the sector as the US teeters on the brink of recession.
Last week, IndustriAll affiliate, the Industrial Workers Federation of Myanmar (IWFM), warned the economic situation in Myanmar is acute. The Confederation of Trade Unions of Myanmar sounded alarm bells over the lack of raw materials from China that has caused the closure of 16 factories 7,000 layoffs.
In an update to just-style, SMART Myanmar – a European Union-funded initiative aimed at promoting ‘Made in Myanmar’ garments and sustainable practices – says the bigger volume operations with the most market power, primarily Chinese, are “managing”, but still with no overtime and some on a four-day week.
“Some have told me they see the light at the end of the tunnel, as the land border with China reopened and it’s possible to truck stock in somewhat quickly to meet orders,” says Jacob Clere, team leader of SMART Myanmar. “The smaller volume operations, especially SMEs, are really struggling and many are starting temporary closures or else laying off some workers and reducing to shortened work weeks.”
However, the newer problem, Clere says, is the fear of a fall in orders, now that the US is sliding towards recession and “most of the world is in the grip of the virus”.
The US Federal Reserve announced it had cut short-term interest rates to zero yesterday (15 March) as it looks to combat the economic damage caused by coronavirus, and what reports suggest is a likely US recession.
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By GlobalData“The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States,” the Fed said in a statement. “The effects of the coronavirus will weigh on economic activity in the near-term and pose risks to the economic outlook.”
In Myanmar, the government recently lowered the interest rates to access business loans. Large events are also being cancelled to prevent the possible spread of the virus, including the Myanmar New Year celebrations.
The Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) says the government, the Central Bank and the respective ministries are “responding in a timely manner” to the current situation. But it says it will ask the government to set up a national-level committee that includes representatives from the private sector to manage the economic and social impact of the epidemic.
“It is our belief that the economic and social crisis caused by Covid-19 can be overcome with minimal harm,” UMFCCI said.
Click here for additional insight on the coronavirus outbreak: Is coronavirus a threat to the clothing industry?
