Increasing Foreign Investment Helps Myanmar’s Garment Industry Grows

Myanmar’s garment industry has been struggling since the 1990s, mainly due to the country’s economic crisis and sanctions imposed by the EU and the US. Fortunately, things are getting better for Myanmar’s garment industry, as the European Union lifted economic sanctions in 2013 and the US also lifted its sanctions in 2016. Following these actions and Myanmar’s political reform, the country’s garment industry has finally seen the opportunity to recover. The increasing amount of foreign direct investment (FDI) has also been implemented into Myanmar’s garment industry, helping the country’s garment exports to grow at a quick pace.

 

According to a report from the Myanmar Garment Manufacturers Association, the total investment in Myanmar was valued at US $1.7 billion in 2015, representing an 8.7% increase year on year. In 2016, the total investment reached $2.2 billion. FDI in Myanmar’s garment industry grew at an impressive rate – from 26.5% of the total inward FDI in 2013, to 27.4% in 2014 and 29% in 2015.

 

The increasing amount of foreign investments and sourcing deals are believed to be driven by low labour cost, combined with a vast workforce and low production costs in the country. Many international garment brands including Gap, H&M, Marks & Spencer and Primark have shown a growing sourcing interest in Myanmar. For example, Gap announced that the volume of products it was sourcing from Myanmar had tripled in the period from June 2014 to June 2015.

 

The increasing investment, especially foreign direct investment, has also brought about the increase of garment exports in Myanmar – total garment exports recorded $1.5 billion in 2014, $1.7 billion in 2015 and an estimated $2.2 billion in 2016, with the main export markets being Japan, South Korea, the EU, and China.

 

Currently, Myanmar’s Ministry of Industry is working to attract more local and foreign investment by developing a specialised textile and garment zone in the Shwe Taung, Bano region. The ministry is planning to work with a Japanese company to utilise 127 acres’ land of the No.1 Garment Factory in Shwe Taung to set up the special textile and garment zone.

 

To further increase the foreign investment in the sector, the Myanmar Investment Commission (MIC) also introduced several incentives including an income tax exemption for seven years and exemption on customs duties and local taxes on import of raw materials and partially manufactured goods. Today, most of the large garment companies in Myanmar are either wholly foreign-owned or operating through joint-venture agreements between local and foreign companies, most of which are from Mainland China, Hong Kong, Japan, Korea, and Taiwan.

 

In the near future, all signs suggest that Myanmar’s garment industry will continue to grow. The market report from Textiles Intelligence predicted that there will be up to 1.5 million jobs in the Myanmar’s garment industry by 2020, and garment exports could rise from $1.5 million in 2014 to as much as $12 billion in 2020.

 

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