The U.S. decision to lift a ban on exports from Myanmar could give the
country its best shot at becoming the world's next low-cost manufacturing hub
as well as firm up the fragile political reforms now taking place.
But business leaders say it will
be a long time before T-shirts and hoodies made in the Southeast Asian country
are ubiquitous in shopping malls and years before meaningful benefits reach its
archaic industrial infrastructure and low-income households.
With Wednesday's action,
Washington has lifted nearly all of the economic sanctions imposed against
Myanmar in recognition of its reforms over the past 18 months. Secretary of
State Hillary Clinton said the most recent move is the next step in normalizing
commercial relations between the two countries. Bans on investment and
financial services were lifted earlier.
"By lifting the sanctions we
can now see real changes in Burma,'' said Nyan Win, spokesman for the National
League for Democracy, using the country's other name. "It will bring a lot
of benefits to the country and we will support the government using the
benefits for the people of Burma." The NLD is led by Nobel Peace laureate
Aung San Suu Kyi.
Resource-rich Myanmar, a country
of 60 million people, is coming to be seen by many international investors as
having potential both as a source of raw materials and a large consumer market
following a series of wide-ranging reforms implemented in the past year after
long isolation under military dictatorship.
However, economic stagnation
following the imposition of a number of trade and investment sanctions by the
U.S. and other countries since the late 1990s means the country lacks even some
of the most basic economic infrastructure required to compete with other
frontier, low-cost manufacturing nations such as Cambodia and Bangladesh.
Maung Maung Lay, vice president
of the Union of Myanmar Federation of Chambers of Commerce and Industry,
doesn't expect to see any tangible export volumes to the U.S. until the
beginning or the middle of next year. Even then, he expects shipments to be
just a trickle.Myanmar is essentially starting back where it was more than a
decade ago while its competitors—from Cambodia to parts of China—have surged
ahead.
"We have lost many
markets," Mr. Maung Manug Lay said. "We have to compete in the new
world order, so there are more challenges than opportunities."
The biggest expected beneficiary
should be the country's textiles and garments industry, which had exports
totaling $558 million in 2011, according to Myanmar's Garment Manufacturers
Association, representing 200 factories in Myanmar. Other industries that could
gain include the timber sector.
Aung Win, vice chairman of the
garment association, said it could take up to a year for garment makers to
rebuild capacity, with local manufacturers needing to import equipment and
machinery and source the necessary financing for such operations.
"Now, we only have mostly
Japanese orders and Korean orders—they are not enough to go around for the
industry in Myanmar," Mr. Aung Win said. "Most factories are
struggling—we hope this obstacle will go away when American orders come
in."
In Washington, senior State
Department officials told reporters in a briefing that the process of easing
sanctions would require congressional consultations and waivers from the
administration on different products or sectors. The intent is to help
Myanmar's economy grow beyond extracting minerals and timber and to be able to
create manufacturing jobs, the officials said.
In one of the first reactions
from the U.S. garment industry, the American Apparel & Footwear
Association, which represents U.S. clothes makers, said it welcomed the easing
of restrictions in light of the country's reforms. It said it would work with
local stakeholders to ensure clothes were made under appropriate working
conditions and workers "are treated with fairness and respect."
Myanmar President Thein Sein,
speaking during a panel discussion at the Asia Society in New Yorkon Thursday,
said: "We have got developed countries to relax their restrictions on our
economy. We believe there will be an increase of foreign investment and that
will allow our citizens to improve their living standards."
The prospect of an effective
low-cost manufacturing hub has caught the attention of some manufacturers and
trade groups.
Mr. Aung Win said his garment
association meets potential foreign buyers on a daily basis. Fast Retailing
Co., the Japanese operator of the Uniqlo clothing chain, meanwhile, has flagged
Myanmar as a potential manufacturing base alongside Bangladesh as part of its
capacity expansion.
Myanmar should have a competitive
edge in labor costs. A Japan External Trade Organization report this year
showed the average monthly wage of a factory worker in Yangon at 61% of that in
Hanoi and 83% of average wages in Phnom Penh, Cambodia.
While a handful of multinationals
such as Coca-Cola Co., PepsiCo Inc. and General Electric Co. are making earnest
moves into Myanmar's domestic market, caution and a degree of skepticism
prevails among many companies about Myanmar.
A spokeswoman for Hennes &
Mauritz AB said the Swedish fashion retail giant is watching developments but
hasn't made any decision about using goods from Myanmar until the situation
becomes clearer. H&M and other foreign manufacturers have been bound by the
U.S. rules against exporting goods with Myanmar-originated materials to the
U.S.
Adam Sitkoff, the Hanoi-based
executive director of the Asia Pacific Council of American Chambers of
Commerce, said many U.S. businesses are looking to see how Myanmar can fit into
their future supply-chain plans.
"In the near term, however,
American consumers probably won't see many 'Made in Myanmar' labels in their
favorite stores as the country lacks key infrastructure, legal certainty, and
skilled labor," he said.
A protracted debate in the
country's legislature about how to allow foreign investment also clouds the
investment outlook.
While some probusiness
politicians—including Mr. Thein Sein—are calling for faster economic reforms,
some lawmakers and local business leaders are concerned that an overly
aggressive pace of change would give foreign companies too big a share in the
local market at the expense of domestic companies.
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