Sanctions Lifting Could Revive Burmese Industry

By Todd Pitman 24 April 2012

RANGOON—Looking across a sea of young workers perched behind rows of buzzing sewing machines, factory owner Myint Soe has one main hope for Monday’s suspension of European sanctions on Burma—the restoration of some of the 80,000 garment industry jobs lost here over the past 10 years.

A complex web of Western trade embargoes imposed on the Southeast Asian nation since the late 1990s was supposed to punish its iron-fisted former military rulers for years of misrule and human rights abuses. But the poorest unskilled laborers suffered far more than the regime, and many lost crucial jobs that could sustain entire families.

On Monday, the European Union confirmed it was suspending most of its sanctions to reward Burma’s recent wave of political reforms. The announcement is the biggest rollback yet, and many here are hoping rekindled trade ties with the West will yield badly needed growth.

“For us, it’s simple. This means new job opportunities for our people,” said Myint Soe, who also chairs Burma’s Garment Manufacturers Association. “We’re hoping for new contracts, new orders … we’re hoping to open more factories.”

UN Secretary-General Ban Ki-moon, who announced on Monday that he will visit Burma this weekend at President Thein Sein’s invitation, said there is “an unprecedented opportunity” to help promote its transition to democracy.

“We must make the most of this moment,” Ban told reporters. We need to see more such progress, more international support for Myanmar’s efforts to bring about democratic change.”

The sanctions ostracized Burma’s former army rulers and drastically diminished lucrative investment and trade with the United States and Europe. Bans on international financial transactions were so strict that even today, top international hotels in Rangoon can only accept cash, not credit cards.

In recent months, though, the West has begun rewarding Burma’s new government for widely praised progress toward democratic rule. The government has freed political prisoners, signed truces with rebel groups and organized April 1 by-elections deemed free and fair that were overwhelmingly won by opposition leader Aung San Suu Kyi’s party.

The process has not been glitch-free. Suu Kyi’s party refused to take its new seats in the Parliament Monday because part of the oath of office pledges to “safeguard” the Constitution—which they want to change.

They would prefer it said “respect” the Constitution. Thein Sein said he was open to the possibility of revising the wording, and members of Suu Kyi’s party said they believe the matter will be resolved soon.

So far, some nations have eased travel bans against top government officials, while Washington has relaxed financial restrictions to enable US-based groups to do charity work in the impoverished country. The US may also ease restrictions on American investment and financial services.

In Luxembourg on Monday, the EU announced the suspension of most sanctions except an arms embargo against Burma for one year while it assesses the country’s progress. The restrictions had targeted more than 800 companies and nearly 500 people, and halted some development aid.

“Myanmar is making progress in terms of elections, in terms of opening their system and we’re encouraging that,” European Commission President Jose Manuel Barroso said in Copenhagen. “We have to keep our efforts to support all the reforms in Myanmar for Myanmar to live in freedom.”

Alfredo Perdiguero, a senior economist at the Asian Development Bank in Bangkok, said the EU move would spur investment and create new markets for Burma. But he said its overall effect would be limited because the country’s economy is already growing and the nation has been boosting economic ties with its neighbors, including China and Thailand.

Still, he said the EU’s suspension will have a “huge psychological impact.”

The EU sanctions had removed Burma from the Europe’s so-called General System of Preferences, or GSP, which entitled garments produced in Burma to be exempt from import duties. The loss of that status meant doing business in Burma cost more, which dramatically decreased trade ties.

Myint Soe said Burma’s return to the GSP could yield as many as 25,000 new jobs in the textile industry alone in 2012.

An easing of US sanctions could prove even more beneficial.

The garment trade here used to rely on the United States for about 75 percent of its business, and a wave of sanctions imposed by Washington in 2003 crushed the industry. Myint Soe said he was forced to fire about 400 of his 550 employees at the time.

“It was painful. Each one cried and asked ‘why?’” he said in an interview. “The sanctions targeted the government, but it didn’t affect them. It was the people, the workers, who really got hurt.”

Since then, Burma’s textile industry has rebounded as companies shifted to new markets in Asia, where trade is unrestricted. Myint Soe now employs about 300 people, and if he wins back old business in the West he could eventually emerge much stronger than before.

There has been debate over the value of sanctions, but many longtime opponents of the military regime say they have been effective and should only be relaxed slowly.

Hkun Tun Oo, a senior politician representing the ethnic Shan minority who was released from jail in a mass amnesty in January, said the EU’s temporary suspension was the right move “because if things do not improve within a year, sanctions can be renewed.”

For garment factory workers who make US $120 per month or less, the eventual end of sanctions will be a big deal.

For Phyu Phyu Swe, 33, who was sewing a stack of uniforms bound for Japan, it will mean job security, and possibly more money in bonuses.

“I have family members depending on my income, and this is the only skill I know,” she said. “So I always hope and dream that this industry will get back on its feet.”