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Economy

Myanmar's workers, employers clash over minimum wage

YANGON -- Myanmar's garment manufacturers have signaled their opposition to a proposed national minimum wage of just over $3 per day, saying the increase could force factories in the vital industry to close.

     "With that wage, businesses cannot survive," said Khine Khine Nwe, secretary general of the Myanmar Garment Manufacturers Association, which represents 280 factories employing around 200,000 workers.

Khine Khine Nwe, secretary-general of the Myanmar Garment Manufacturers Association, speaks at a media briefing in Yangon on March 24. (Photo by Simon Roughneen)

     The apparel industry's resistance to the proposed minimum wage drew a sharp rebuke from local labor groups, as well as the International Trade Union Confederation. "The new minimum wage will still leave workers and their dependents just above the global severe poverty line of $1.25 per person, and many will still struggle to make ends meet," said ITUC General Secretary Sharan Burrow.

     The garment manufacturers' group met July 2, following a June 29 announcement by Myanmar's National Minimum Wage Committee proposing a daily wage floor of 3,600 kyat ($3.24), or 450 kyat per hour, for an eight-hour day.

     The committee is composed of government officials, business people and worker representatives. The announcement comes after more than two years Myanmar's parliament passed a minimum wage law in March 2013. The delay was partly due to a decision by the Ministry of Labor to carry out a survey of workers' living standards and household size, which only began in January.

Buyers' market

Khine Khine Nwe, who employs nearly 400 workers at Best Industrial Company, a garment maker in Yangon, told the Nikkei Asian Review that Myanmar's garment factories mainly sell to overseas buyers and do not have a local market. "Wages should be tied to prices, and the price is not in our hands. We get whatever the buyers are willing to pay," she said.

     Garments and textiles are Myanmar's main manufacturing industry. There are more than 300 clothing factories in the country, mostly in Yangon. With the lifting of most U.S. sanctions and the inclusion of Myanmar in the European Union's Generalized System of Preferences -- which grants duty- and quota-free access to the European market -- the country's long-battered manufacturing sector is reviving. The garment sector is best placed among Myanmar's manufacturing industries to capitalize amid fierce competition from low-wage rivals.

     The garment manufacturers claim the proposed minimum wage will give an advantage to regional rivals. "The new minimum wage will make Myanmar's garment factories uncompetitive with neighboring countries, in particular Cambodia, Vietnam and Bangladesh," the association said in a statement July 3.

     Although Myanmar's economy is forecast to grow by up to 8% next year, after attracting record foreign investment of $8 billion during the 2014-15 financial year, the International Monetary Fund last week warned the economy could overheat as imports rise and the kyat depreciates against the dollar, increasing costs for businesses.

Scraping by

But just as factory owners deem the proposed wage to be too high in a volatile economy, unions and workers claim it is too low for an increasingly expensive Yangon. Inflation was just over 8% in May, versus 6% for the same month a year ago -- when the World Bank was already warning that rising prices would hit Myanmar's poor and low-wage workers.

     Minimum daily wages range from around 900 kyat to 1,300 kyat in some of Yangon's industrial zones, not enough to make ends meet in what has become one Asia's most expensive cities by some measures. Low wages have been cited as a key reason for a series of strikes and protests by workers after the government eased restrictions on demonstrations and the formation of trade unions.

     The Myanmar Trade Union Federation in 2013 advocated a minimum wage of 7,000 kyat per day per three-person household, but more recently unions have pushed for a 4,500 kyat daily minimum.

     Union leaders said the federation will campaign against the proposed new rate, raising the prospect of more unrest, which could give the government headaches as Myanmar heads toward elections in October or November. "We will submit complaints from all over the country," said Tun Wai, vice chair of the federation.

Risk and reward

Despite disagreements over the proposed wage, unions and employers are likely to meet in coming weeks, and both sides have said they are willing to cooperate on some fronts. Khine Khine Nwe said the manufacturers association would "work with trade unions on increasing productivity in factories," while Maung Maung, chairman of the Confederation of Trade Unions of Myanmar, suggested the same thing July 5 

    If garment makers stall on the minimum wage, Western apparel companies may reconsider whether to buy from Myanmar. According to the Oxford Business Group, a U.K. research company, garment makers in Myanmar need to be mindful of the political repercussions of wage disputes and strikes.

     "Even though companies would like to save money, they know they need to pay a living wage or face pressure from activist shareholders, nongovernmental organizations and customers," the group said in its publication, "The Report: Myanmar 2014." Garment makers in the country published a code of conduct in February aimed at providing "a benchmark for responsible business practices" in the sector, hoping to head off concerns that image-conscious clothing brands may shy away from Myanmar.

Beyond the wage war

Wages are not the only cost that factory owners and potential investors have to consider when deciding whether to open or expand operations in Myanmar. Peter Brimble, a Myanmar specialist at the Asian Development Bank, said the minimum wage would most likely "only deter investors producing low-end garments using very labor-intensive methods. These are not the type of investors that Myanmar will need to drive economic growth and industrial development in the future," Brimble said.

     Though attractive to garment makers, the benefits of low wages are offset by other problems, such as Myanmar's unreliable and limited power supply, high land prices, poor roads and lack of skilled workers.

     Toshihiro Kudo, a professor at Japan's National Graduate Institute for Policy Studies said challenges remain, although garment exports have risen since trade sanctions were eased with the inauguration of a civilian government.

     Factory owners "face some new problems such as labor shortages, increased wages, labor issues, etc. Both the private sector and government need to address these new issues," said Kudo, who has studied Myanmar's garment sector.

     Garments are key to the government's export plans, which rely on increasing trade with Europe and the U.S. "Myanmar's large and inexpensive labor market has caught the attention of global manufacturers, but it will need to upgrade logistics, improve power supply and infrastructure, and ensure compliance with international labor standards to attract buyers from global brands," said Myanmar's national export strategy document published earlier this year.

     Until other industries can develop, an expanding garment sector could help Myanmar branch out beyond agriculture and energy.

      "For broad-based development, Myanmar needs to diversify its economy away from dependence on [the] agriculture and resource sectors, and target labor-intensive manufacturing exports," writes Stuart Larkin, a visiting fellow at the Institute of Southeast Asian Studies in Singapore, in a recent paper.

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