Lifting Sanctions Futile Without Infrastructure: Exporters

By May Lay 2 October 2012

RANGOON—The lifting of import restrictions of Burmese goods into the United States has received a cautious welcome from local manufacturers who insist that vastly improved infrastructure and technology are still required to compete with neighboring markets.

The Obama administration eased remaining trade sanctions on Burma on Sept. 26 while Burmese President Thein Sein and opposition leader Aung San Suu Kyi were visiting the US. Burmese exporters and local traders say removing restrictive measures is essential for joining the modern business environment after decades of international isolation.

“Burma used to export gems and jade to the US market as well as wood products, beans, pulses, seafood and garments,” said Capt Aung Khin Myint, the joint-secretary of the Union of Myanmar Federation of Chambers of Commerce and Industry.

“When we start to think about exporting to the US again, we need basic infrastructure, technology for value-added products and to reduce local transport costs. Without these factors, we cannot compete with our neighbors Laos, Cambodia and Bangladesh in the international market.”

The US market only generally imports “value-added products” such as finished clothes. Because of the previous trade restrictions, Burmese businesses could only export raw materials such as cloth to neighboring countries where they would be tailored into complete garments and then exported to Western countries.

“The garment industry in Burma is only at a CMP [Cutting, Manufacturing and Packaging] level,” said Khine Khine New, general-secretary of the Myanmar Garment Manufacturers Association (MGMA). “We have no technology to produce our own designs. The garment industry now makes only 10 to 15 percent of its total earnings with CMP.

“Currently we accept orders for value-added sewing from Japan and Korea which covers 70 percent of our total annual earnings. We also export to Taiwan. Local transport costs are too high in Burma,” she added. “We are charged US $500 for one container to export with the freight on board system.”

Khine Khine New explained that Burma must be reaccepted into the European Generalized System of Preferences and Everything But Arms schemes which reduce import tariffs for developing countries. Neighbors Laos, Cambodia and Bangladesh are already accepted due to their superior recent human rights records.

In 2003, Washington decided to ban importing products from Burma because of widespread allegations of forced labor including child soldiers by the International Labour Organization. Because of the sanctions, more than 80,000 garment workers lost their jobs, according to government figures.

In 2000, the garment industry in Burma was booming with 54 percent of orders from the United States and 37 percent from Europe. Garment exports in 2001 reached a record US $829 million compared with $770 million in 2011, according to official MGMA data.

Burma’s fisheries industry also exported to the US market before the imposition of sanctions. But seafood imports to North America require an International Organization for Standards certificate to ensure quality and safety. “We have to prepare many things and can’t export goods so far,” said Win Kyain, the general-secretary of the Myanmar Fisheries Federation.

“In the past, some Myanmar products have been exported to the US through other countries,” he added. “But without sanctions, we are able to send goods directly. The US market was very big for garments. Around 85 percent of total exports were previously garments with 15 percent seafood and timber products.”

Burma’s agricultural industry also needs investment to provide value-added products for export to the US market. “So far these crops are exported to the US via India where untreated goods from Burma are processed,” said Sai Ba Nyan, the vice-chairman of the Myanmar Pulses, Beans and Sesame Seeds Merchants Association.

“Exporting to the US market needs controls on chemical use in beans and pulses. We also need to process from the raw state,” he added.

The Myanmar Forest Products and Timber Merchants Association said that Burmese timber merchants currently can only make semi-finished products which are exported to Japan, Australia and Asian countries. Local merchants also export raw materials to India and China at a low price.

“We will try to export 10 percent semi-finished products in the future. Normally most of the local hotels use furniture imported from China and Thailand. Actually these are first exported from Burma as semi-finished products and raw materials. We need technology and infrastructure to produce value added products such as finished furniture,” said Min Thein, the director of Lin Win Furniture Company.