ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintTitle ChevronIcon Twitter
Politics

Factory owners seek to reassure worried Western investors

Myanmar women make clothing at a garment factory in Yangon's Shwepyitha Township. (Photo by Simon Lewis)

YANGON -- Stung by international criticism of alleged "modern slavery" practices, Myanmar's garment industry is trying to persuade potential Western customers that its factories are cleaning up their act.

     In a notable first for the rapidly industrializing country, a code of conduct has just been ratified by the Myanmar Garment Manufacturers Association in an attempt to reassure Western companies about financial and labor standards.

     The garment industry was badly damaged by U.S. and European Union sanctions aimed at Myanmar's military rulers, which peaked in 2003. Most of the sanctions have been removed since 2011 in response to reforms by the country's military-backed civilian government, spurring a recovery in garment exports, mainly on the back of orders from Japan, South Korea and the EU.

     So far, Gap is the only visible major U.S. brand to publicly declare it has resumed buying from Myanmar, leaving industry leaders disappointed that more international brands, especially those from the U.S., have not returned following a wane in the consumer boycott campaigns that accompanied the sanctions.

     Officials say the garment industry, which is Myanmar's biggest industrial sector, is hampered by fears among Western companies that consumers might punish them for manufacturing in a country where labor standards are perceived to be well below international norms.

     A number of inquiries have alleged exploitation of labor, including the damning report "Modern Slavery" published in November 2013 by the Burma Partnership, which lobbies for democracy and human rights. The group, which based its report on research by labor unions and activist groups, claimed that factories in Yangon's industrial zones imposed "abysmal living and working conditions" on workers.

     The garment industry's new code combats these criticisms head on, requiring companies to uphold International Labor Organization standards, ensuring health and safety for workers and respecting workers' rights to collective bargaining, among other commitments.

     The code also says that companies "shall consider the economic, social and ecological conditions which are directly or indirectly influenced by their business action[s]." It adds: "The companies promote the principles of responsible management, such as transparency, accountability, sincerity and integrity."

     Critics said the code would make little difference. "This code of conduct, designed and adopted by the private sector, the MGMA, is only voluntary and there are no legal requirements to adopt better employment practices. It is quite simply not enough," said Alex Moodie, political and human rights analyst at the Burma Partnership.

     "What is needed is a structural shift, including stronger legislation and enforcement by the government that ensures good-faith bargaining. Otherwise, the worst offenders in the garment industry will simply carry on with their terrible employment practices and factory workers will continue to suffer," said Moodie.

Carrots over sticks 

However, supporters of the code say that the prospect of lucrative contracts from Western customers will provide a sufficient incentive to bring factories gradually into line.

     "It's a very practical and useful guide for producers," said Jacob Clere, a project manager at the MGMA. "Any factory that strictly follows this code will open [itself] up to the flood of product orders coming in from the European market."

     The code was drawn up with the help of an EU program known as SMART, meaning small and medium-sized enterprises for environmental accountability, responsibility and transparency, which supports Clere's role at the garment association. If the code is endorsed by international brands, it could help bring consistency to the highly variable standards at Myanmar's 300 or so garment factories, said Clere.

     Myanmar's garment exports last year were worth about $1.6 billion, according to the MGMA -- a tiny fraction of a global industry worth $460 billion in 2013. However, the country's apparel exports are rising steadily, especially to Europe.

No race to the bottom

"Right now, we're at a tipping point," Clere said. "International brands and garment producers have it within their power to tip this industry towards becoming among the safest and most responsible garment industries in the world. We won't get there by racing to the bottom like we've seen in some other countries. We'll get there by following the principals laid out in MGMA's code."

     Win Ei Khine, a member of the MGMA board, said the code would improve the industry for the benefit of local workers and owners, as well as reassuring international brands and attracting Western contracts. "Branding is something we should build for ourselves too, not just for promotion," said Khine, who is also executive director of Maple Garment factory in northern Yangon.

     "But of course, this will reassure potential buyers who might be concerned about the reputational risks associated with doing business in Myanmar to work with us without hesitation."

     The code also addresses child labor, which is a major concern for international investors -- not least due to its potential impact on sales in the West. Children are still employed across the informal economy, including in the apparel sector, and human rights groups have highlighted the role of child soldiers in the armed forces and ethnic armed groups.  

     The new code for garment manufacturers sets a minimum worker age of 15 and states that legitimate young workers should be excluded from hazardous jobs, although it does not specify an age range. "Where underage workers are already employed or discovered, the companies [will] strive to support reasonable remediation measures that promote social integration of children and enable them to enroll in school or alternative education programs," it says.

     Vicky Bowman, executive director of the Myanmar Centre for Responsible Business, a Danish-backed human rights group, welcomed the code's "realistic approach to the issue of child workers," but warned that age verification would remain a crucial challenge.

     The code's reference to international conventions is also welcome, Bowman said, adding that independent monitoring and reporting would be required to test its credibility.

     "International brands can help their suppliers to meet these commitments through capacity building and technical advice," Bowman noted.  "But they also need to have effective audit and monitoring, and a sanction -- i.e. ending the contract -- where the supplier fails to take remedial action within an agreed time frame."

     The industry's efforts to address investors' worries come amid international concerns, expressed by U.S. President Barack Obama and others, that democratic reforms in Myanmar may have stalled. The country's military retains a constitutionally guaranteed role in politics, and accusations of human rights abuses persist. 

     Sean Turnell, an associate professor at Sydney's Macquarie University who studies Myanmar's economy, said that some manufacturers will likely sign up to the code with good intentions. "For others, it's part of a marketing campaign, with an eye on establishing the Myanmar brand for the long term in higher-yielding Western markets," he said.

     "So [it is] a good thing if adhered to, bad if it's a fig leaf covering widespread abusive and exploitative practices. Of course, 10 years ago the powers that be in Myanmar would not have even cared about good PR [public relations]. So something has changed."

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more