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Myanmar Crisis

Uniqlo parent latest victim in Myanmar garment sector violence

Two Fast Retailing supply factories hit by arson as more brands consider exit

Fast Retailing had six supplier factories in Myanmar as of March 2020, with five located in Yangon, the country's commercial capital. (Photo by Keiichi Furukawa)

TOKYO -- Violence between security forces and protesters has threatened Myanmar's status as a hub for clothing manufacturing, with the Japanese parent of Uniqlo reporting two supplier factories have been set on fire in the latest unrest to rock the country's garment industry.

Fires broke out at two of Fast Retailing's five contract factories in Yangon on Sunday night, the company said Tuesday. A company spokesperson suggested that the factories were targeted by arsonists. The company was still assessing the damage and there has yet to be any reports of deaths or injuries.

Myanmar accounts for as much as 2% of Fast Retailing's contract factories. However, the Japanese company has been increasingly using Myanmar as a production base. Since 2019, Fast Retailing has added two factories there.

The company now has six supplier factories in Myanmar to manufacture some of its GU branded products. If the turmoil in the Southeast Asian country is protracted, Fast Retailing will have to consider shifting production elsewhere.

Chaos has descended upon the country of 54 million people after peaceful protests against the Feb. 1 coup turned violent, leaving at least 180 people dead, according to opposition groups. The spillover of violence into Fast Retailing, which sells made-in-Myanmar clothes all over the world, bodes ill for Myanmar, which regards the textile industry as a driving force behind economic growth.

The world's large apparel brands, which have increased production in Myanmar since the country embraced democracy, may stop placing orders with the country's plants. In fact, some apparel companies have already stopped business there.

Workers iron and arrange clothing at a factory in Yangon. The coup has dealt a blow to the garment industry, which had been the driving force behind Myanmar's economic growth.   © Reuters

After Myanmar shifted to civilian rule in 2011, the international apparel companies rushed to set up production in the country, drawn to its cheap labor and large workforce. The World Trade Organization data shows that clothing exports from Myanmar reached $5 billion in 2019, five times the amount in 2014.

Meanwhile, China's clothing exports dropped 18% during the same period. Myanmar's 400% growth dwarfs the 35% increase for Bangladesh, the world's second-largest clothes exporter, and the 53% rise for third-ranked Vietnam.

Japanese apparel companies joined foreign peers in migrating to Myanmar. According to the Japan Textile Importers Association, Japan imported 113.4 billion yen ($1 billion) worth of clothing from Myanmar in 2019, up 12% from a year earlier and a fourfold increase from 2011, the year of transition to civilian rule. Myanmar was the seventh-largest clothing exporter to Japan in 2019.

Other Japanese apparel companies are also beginning to feel the effect Myanmar's upheaval. Shimamura, an apparel retail chain, suffered a delay in deliveries from Myanmar and is considering alternative production in China or other Southeast Asian countries. Wacoal, a leading underwear maker, has suspended operations at a Myanmar plant.

Adastria, which sells casual clothes, faces two- to three-week delays in delivery from contract plants in Myanmar due to disruption in production and logistics. The company plans to temporarily halt local production next month while it considers moving production to Vietnam, Indonesia and China.

Japanese apparel companies are not the only ones affected. Hennes & Mauritz (H&M) of Sweden, which has more than 40 contract factories in Myanmar, has suspended production there, Reuters reported. OVS of Italy said Monday that it has halted deals with manufacturers which discriminate against Myanmar demonstrators protesting against the military.

Additional reporting by Marimi Kishimoto in Bangkok

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