China keeps eyeing Myanmar as low-cost garment hub

In view of soaring wages and difficulties in recruiting workers, China’s manufacturing industry in the Pearl River Delta (and elsewhere) is looking for alternatives to minimise their production costs, including the relocation of their production facilities to relatively accessible markets in Southeast Asia. Myanmar tops the list for many of them.

The country is the largest in mainland Southeast Asia by geographical area and is rich in natural resources. It also has a young population. To check the stability of the political situation, a team of HKTDC Research divisionn(Hong Kong Trade Development Council) recently undertook a field trip to Myanmar and compiled its findings in the report "Myanmar Rising: The Garment Sector Takes Off".

Particularly attractive for the garment sector is the low minimum wage of around 90 US dollars per month; the lowest in the region. In comparison: in Laos, it is around 100 US dollars; 140 US dollars in Cambodia and around 150 US dollars per month in Vietnam.

In addition, Myanmar also enjoys tax exemptions from the EU market, which makes up 23 percent of its garment exports. Other key markets are Japan, South Korea and China. Lower import tariffs than many of its ASEAN peers also work in favour of Myanmar.

While at the beginning of the year, the export volume was carefully estimated at 4 billion US dollars, the Myanmar Garment Manufacturers Association (MGMA) expects it to reach 12 billion US dollars by 2020 and to create 1.5 million jobs.

Myanmar's ascent in the garment world is fairly recent but is happening rapidly; it started only in 2014 when Myanmar generated 1.5 billion US dollars through garment exports. In 2015, the industry employed approximately 250,000 people.

Among the local ones, Chinese factories are as much responsible for this ascent as Taiwanese and South Korean ones, given their preference for opening a branch in Myanmar. Favourable changes by the government for foreign direct investment (FDI), relaxation or removal of economic sanctions by other countries and benefits for foreign investors like tax exemptions in the first five years and tariff-free import of raw materials will keep the country a suitable apparel sourcing destination for the garment industry.

Photo: Dieter Wendelken / pixelio.de