Put-Off by Rangoon’s Flaws, Garment Makers Look to Pegu

By Soe Sandar Oo 13 December 2013

RANGOON — Investors in Burma’s garment sector are looking to areas outside of the commercial capital Rangoon, where the high price of land and a scarce labor pool are sending businesses elsewhere, according to Aung Win, deputy chairman of the Myanmar Garment Manufacturers Association.

Soaring land prices in Rangoon have driven new investment in garment-making ventures out to Pegu, Irrawaddy and Mandalay divisions, he said.

“They are especially interested in Pegu because it is near Yangon [Rangoon], labor is available and electricity [supply] is also not much different from Yangon,” Aung Win said.

The investors in question are from Hong Kong, South Korea and Japan. Currently, there are about 20 garment factories in Pegu, set up by companies from South Korea and Hong Kong.

According to a list compiled by the Myanmar Investment Commission (MIC), a total of 20 Hong Kong firms have been given permits to conduct manufacturing operations in Burma this year. Among them, most are in garment sector.

Lewis Leung, president of garment industry consulting firm Prince Edward Road Management, said Pegu Division, directly north of Rangoon, was shaping up to be a promising manufacturing zone.

“I think some parts of Pegu are going to be an industrial area. It is along the highway [to Rangoon] and that includes the Indakaw Industrial Park of Myanma Economic Holdings Ltd.”

He said he was considering investing in Bago [Pegu] because the region offered a large labor supply and lower wages than Rangoon. He added that other investors from South Korea and Hong Kong had already successfully set up operations there.

“I believe it would be great if the Directorate of Investment and Company Administration of the Ministry of National Planning and Economic Development could have a branch office in Bago Division,” said Leung, who has taken more than 50 Hong Kong companies to Pegu Division to scout its investment potential.

Investors are eyeing Burma’s garment sector in part thanks to new duty-free access for Made in Myanmar garments to one of the world’s largest free-trade blocs. EU sanctions were lifted on April 22, and the European bloc granted Generalised Scheme of Preferences (GSP) status to the country in July, dropping all duties on imports from Burma and boosting interest in the sector’s potential.

According to MIC statistics, about 60 percent of the 94 investment applications submitted by foreign firms in 2012-13 were for cutting, making and packaging (CMP) ventures, a form of garment manufacturing.

There are about 300 garment factories in Rangoon, employing some 20,000 people.