California Apparel News

After the U.S. import ban was lifted, the American Apparel & Footwear Association was bombarded with inquiries about Myanmar. “We have gotten interest from all sorts of people,” said Steve Lamar, executive vice president of the apparel and footwear trade group.

The United States lifted its nearly 10-year ban on imports from Myanmar, the country formerly known as Burma, in November. In December, three members of the Myanmar Garment Manufacturers Association traveled to Arlington, Va., to meet with AAFA representatives to seek support for their industry.

The country’s apparel industry is hoping to grow and give Vietnam and Bangladesh a bit of competition. The country already attracted the interest of Fast Retailing, the parent company of Japanese casual-clothing chain Uniqlo, which announced last year it would jump start its apparel production in Myanmar.

AAFA’s Lamar said apparel manufacturers are curious about the country even though it has to import its own fabric and trims and doesn’t have the basic amenities that other poor countries in Asia have. “People are looking at Myanmar, but they are very cautious,” he said. At the end of January, Steve Mostofsky will be making his third trip to Myanmar to check out the possibility of setting up a knitting factory to make hundreds of thousands of socks for various U.S. and European brands.

“We are building alternative sources of supply to complement Chinese production,” said Mostofsky, chief executive and president of North Carolina–based TTI Global Resources, which does 90 percent of its sock production in China for scores of athletic brands, retailers and private labels. The other 10 percent of production is done in Cambodia.

Mostofsky is hoping to form a joint venture to establish a sock-knitting factory in a country where no such factories exist. For Mostofsky, the attractions to the country is that for now wages are fairly low and there is a very good supply of labor, which will increase as economic refugees return to the country. In addition, the existing garment industry is very willing to make the necessary improvements to meet international brand standards of working conditions, safety and environmental responsibility, Mostofsky said. But they need time and help to achieve that goal.

Challenges remain

Still, people are concerned. One of those cautious people is Rick Helfenbein, president of Luen Thai USA, the U.S. component of sourcing giant Luen Thai Holdings in Hong Kong. He said his company took a look at the country but feels it has a ways to go.

“First of all, the Europeans have been there longer than we have been. And I hear—but I can’t prove this—that a lot of land speculators bought up potential factory property and are charging high prices for land,” he said. “I also heard that the jade business there is quite good, and there may be difficulty securing workers or keeping wage rates reasonable for the next five to 10 years.” (The United States prohibits jade and ruby imports from Myanmar.) Sourcing directors also need to be aware there is a list of people associated with past military dictatorships in Myanmar who are not allowed to do business with U.S. companies. TTI Global Resources’ Mostofsky admits Myanmar has its challenges. The electricity supply is unreliable and expensive if generators are used, the roads are terrible, financial services are iffy, and wireless phone connections are a challenge.

Visa Inc. and Master Card have just started setting up services in this Asian country, which before only accepted cash to settle a hotel or restaurant bill.

Great potential

Despite all that, Mostofsky believes Myanmar has great potential down the road for apparel manufacturers wishing to expand their sourcing options. Labor rates are one-fourth those of China. Because Myanmar was, at one time, a British colony, English is prevalent. And the local culture tends to generate factory owners who have a natural concern for their workers, Mostofsky said.

“The apparel production that is done in Myanmar now is exclusively cut, make and pack. This is the unintended consequences of an embargo by the United States, Canada and Europe,” he explained, noting that all those trade embargoes were lifted last year. The Myanmar government is well aware that major and quick infrastructure changes are necessary to generate foreign investment. Mostofsky said the government is committed to improvement. The issue of a reliable supply of electrical power is scheduled to be completed within the next 18 months, Mostofsky noted. In addition, privately owned free-trade zones have been built.

Myanmar’s apparel industry is still in its infancy, even though its 280 apparel factories exported about $770 million in goods in 2011, primarily to Japan and South Korea. In contrast, Vietnam exported $15.6 billion in clothing in 2011.

Myanmar’s apparel factories started to grow in the mid-1990s with many joint ventures between state-owned enterprises and companies in Hong Kong and South Korea. Much of the production was done to get around U.S. quota limits that ended in 2009 on Chinese-made apparel.

Apparel production in Myanmar peaked in 2001, when the country exported nearly $829 million in clothing, with about half of that going to the United States and another large share to Europe.

By 2003, the United States totally banned any trading with Myanmar, where democracy leader Aung San Suu Kyi was under house arrest off and on for 15 years. She was released from house arrest in November 2010 and elected to the country’s parliament in 2012. The Myanmar representatives visiting the AAFA admitted their apparel sector is still in its infancy and needs help to get up to speed, the AAFA’s Lamar said. “One of the things they need is better training on social compliance,” Lamar noted.

The issue of social compliance is foreign to a country where the average apparel worker toils 72 hours a week. Currently, there are no foreign organizations inspecting and certifying Myanmar’s apparel factories. That could change.

Avedis Seferian, president and chief executive of Worldwide Responsible Accredited Production, also known as WRAP, has been taking a look at Myanmar from afar and trying to set up contacts with local garment officials. “We are trying to establish communication channels,” said Seferian, whose organization is in Arlington, Va. “There is a real need in that part of the world for training in best practices for compliance. At this point, it is truly a question of when and not if we go in.”