Myanmar’s Garment Sector Facing Implosion as Orders Slump with COVID-19
By Myo Pa Pa San 15 July 2020
Yangon — Myanmar’s CMP (cut, make and pack) garment factories are struggling due to the lack of orders from the European Union, the major market.
In January, the majority of clothing factories were forced to stop running overtime due to dwindling stocks. Around 90 percent of supplies came from China, which were blocked because of coronavirus, and the rest came from Indonesia, Vietnam, Thailand and South Korea.
Many factories have reduced working hours and cut jobs, while some have permanently or temporarily shut down. Some factories have not received orders or even price enquiries since March, according to the Myanmar Garment Manufacturers’ Association (MGMA).
“After the last orders were delivered in August, there have been no new orders. [The factories] haven’t received new orders since COVID-19 broke out,” said the MGMA president U Myint Soe, who also owns a factory.
Many clothing shops across Europe have closed and the demand from Japan has declined by almost half, he said. Without new orders, many factories will be forced to reduce their workforce and working hours, and close either temporarily or permanently.
“Paying salaries will become a problem. Employees can’t make a living without a salary and employers can’t pay them without orders and income,” said factory owner U Myint Soe.
Employers have suggested that the Ministry of Labor provide financial assistance to prevent the factories from shutting down.
International closures have removed 50 percent of market demand for Myanmar’s clothing, handbags and footwear, according to the MGMA.
Garment exports are mainly shipped to the EU, Japan and South Korea and the country earned over US$4.5 billion (6.2 trillion kyats) from the sector from Oct 1 to July, according to the Commerce Ministry.
Export revenues are down $65 million (90 billion kyats) compared to the same period a year earlier, mainly due to COVID-19.
Over 500,000 are estimated to be employed in the garment industry. There are around 420 factories, of which 236 are Chinese-owned, 67 are owned by South Korean firms, 20 have Japanese owners and 92 are owned domestically by members of the MGMA.
There are also some domestically owned, smaller-scale factories that are not members of the MGMA.
“The demand for clothes has declined due to COVID-19. Many factories have reduced their workforce,” an MGMA spokesman told The Irrawaddy.
More than 100 CMP businesses have closed, largely as a result of COVID-19, he said.
“Around 30,000 employees have been made redundant so far. Ten of the foreign-owned factories, which are members of the MGMA, have closed and the managers have returned to their countries,” said Ko Wai Lin.
The majority of the foreign factories that have shut are mainly Chinese-owned. Some employers left without paying salaries or redundancy payments. In Shwepyithar industrial zone alone, managers of five garment factories have fled without paying salaries and there are more cases in other industrial zones.
“Some foreign employers have closed their factories and fled. Recently, a factory with around 700 employees fled. There is no guarantee that such cases won’t happen again. Much needs to be done for the garment industry to recover,” said factory owner U Myint Soe.
He called for government intervention and cooperation between staff and owners to address the crisis.
“As the sector has virtually stopped trading, it was as if a whole season has been removed. If you are to place an order for a season, you have to place the order at least three months’ prior. Now there have barely been enquiries for orders. It is a concern,” said owner of the UNIHGTT garment factory U Aung Myo Hein.
Last week, owners of domestically and foreign-owned factories discussed the difficulties facing the industry. The discussions will be reported to the government soon, he said.
“If we don’t receive orders, over 50 percent of the country’s garment factories will be in great trouble. What will the government do if the businesses have to close? It has to see the reality,” U Aung Myo Hein said.
Factory owners will also ask the government how it can help workers who lose their jobs, he said.
In April, the EU set up the “Myan Ku” program as a rapid response measure to alleviate the economic impact of the COVID-19 pandemic on predominantly female garment workers from across Myanmar who lost their jobs due to the crisis. The EU has contributed €5 million ($5.72 million) to help approximately 50,000 laid off and under-employed garment, footwear and textile workers with emergency cash support between May and August.
When the industry struggled because of US sanctions around 10 years ago, factories were forced to reduce their working hours, pay, workforce and enforce temporary closures, according to factory owners.
“Most of the factories that export to the EU and US have seen a decline in orders. And they can’t deliver the finished goods because buyers have asked for them not to be sent. Shops have closed due to COVID-19 and the products can’t be sold, so buyers have asked for deliveries not to be sent,” said U Aye Thaung, chairman of the Shwelinpan Industrial Zone Management Committee.
However, factories that make sports clothing and personal protective equipment are still receiving orders, he said.
The Commerce Ministry’s permanent secretary, U Khin Maung Lwin, said the ministry has appointed commercial attachés to EU countries and the US in order to gain greater access to those markets.
Myanmar earned $4.6 billion (6.4 trillion kyats) from garment exports in 2018 and the MGMA targeted $10 billion (13.8 trillion kyats) from exports in 2024.
Translated from Burmese by Thet Ko Ko
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