Cbi Myanmar Garment Sector Value Chain Analysis

Value Chain Analysis
Garment Sector Myanmar
Research conducted for the Centre for Promotion of Imports from Developing Countries (CBI), Ministry of
Foreign Affairs, The Netherlands.
Input from the field: Garment Manufacturers, MGMA
Institutions providing information and support: MGMA, GIZ, SMART Myanmar, Eurostat
September 2013
Contact
CBI (Centre for the Promotion of Imports from developing countries)
P.O. Box 93144
2509 AC The Hague
The Netherlands
Submitted by
Famke E. F. Gouverneur-de Ruiter
Gouverneur Services International Co. Ltd. [FAM]
Contact
Gouverneur Services International Co. Ltd. [FAM]
Yangon, Myanmar
Email: famke@fam-studio.com
TABLE OF CONTENTS
1. Management Summary
2. Introduction
2.1. Background
2.2. Research Approach
Phase 1: Desk Research
Phase 2: Field Research
Phase 3: Finalising VCA
3. Demand Side Analysis
3.1. Demand in the EU Market
3.2. Top 5 EU Import Countries
3.3. Identifying EU Buyers of Myanmar made Garments
4. Supply Side Analysis
4.1. Myanmar Market Supply Assessment
4.2. Garment Industry Trends
4.3. Garment Industry Key Observations
Size of Factories
Compliance
Traditional Skills and Techniques
The CMP price focus
5. Matching Demand with Supply
5.1. How to match EU Buyer with the Myanmar Garment sector
Price system
Political uncertainty
Compliance
5.2. Compatible EU Buyers
CMP Buyers
FOB Buyers
Market Segments
6. Mapping the Value Chain

6.1. The Value Chain
The Basic Myanmar garments Value Chain structure
The Value Chain with Actors, Supporters, Influencers
Actors and their functions
Supporters and their functions
Influencers and their functions
6.2. The flow of Products along the Value Chain
6.3. The flow of Services along the Value Chain
7. Value Chain Bottlenecks & Opportunity Analysis
7.1. Main Bottlenecks
7.2. Bottleneck and Opportunity Analysis
7.3. Risk Analysis
8. Baseline data
9. Possibilities for CBI intervention
10. Information used for research
ANNEX 1 Industrial Zones Myanmar (Focus on Yangon)

ANNEX 2 The Myanmar Garment Industry: a very short study. By David Birnbaum
ANNEX 3 SMART Myanmar project | GIZ Financial Sector Development in Myanmar
ANNEX 4 Shortlist locally owned garment manufacturers Myanmar
1. Management Summary
The Myanmar Garment sector is growing rapidly. With the sanctions being lifted and the Myanmar
Government stimulating this growth as well by easing restrictions and helping to remove bottlenecks, this
sector will be leading in developing the country. Myanmar is standing on a crossroad and has everything going
for it to flourish, but in order to do so it will be crucial that the existing bottlenecks will be removed efficiently
and with expertise.
At this moment in time only around 20% of the garment manufacturers are locally owned and they all focus on
the CMP price system. According to U Hnin Oo, a spokesperson from the Chamber of Commerce and Industry
(UMFCCI) Underdeveloped countries usually deal with the CMP process, where profit margins remain low.
However the Industry is beneficial to the country as it creates employment, trains the labour force to be
skilled workers and earns foreign exchange.
During the World Economic Forum in Nay Phi Daw, it became very clear: Myanmar is open for business. The
parliament passed a new foreign investment law last year that is expected to boom business the coming years
by attracting great interest from foreign investors worldwide. For the locally owned CMP factories this has
advantages, as more sub-contracts will come because of more FOB factories will open up for business.
However profits will remain low with sub-contracts and if they want to compete and improve their margins
their CMP factories need to evolve considerable.
The focus of this value chain analysis has been to identify how locally owned garment manufactures could
reach their full potential. Identifying the bottlenecks and which ones are crucial to remove in order to improve
productivity and margins and be able to enter the EU market successfully as well.
2. Introduction
2.1
Background
CBI contributes to the sustainable economic development in developing countries through the expansion of
exports from these countries. This is the CBI mission. They have a solid network of international stakeholders
and their contribution consists of sustainable strengthening of the competitive capacity of SME exporters and
producers in developing countries, focusing primarily on European markets, and achieving this by offering an
integrated approach, which is applicable to companies, business support organizations (BSOs) and
governmental authorities. Their core competence is threefold: advice, counseling and knowledge
management. CBI does not provide financial resources to companies, but it supports SMEs in developing
countries by building the knowledge and skills needed for exporting.
This VCA is conducted for CBI in order to evaluate the Myanmar Garment Sector and which opportunities
there are for CBI to focus on. In this case opportunities how to help the locally owned Garment Manufacturers
reach their full production potential and evolving according to compliance standards so the can enter the EU
market.
2.2
Research Approach
Phase 1: Desk research

This research phase started off with mapping all the information that needed to be obtained for this VCA.
Much online information was gathered during this phase already and therefor a start up report could be
generated that functioned as guideline for the field research. Timeframe: July 2013
Phase 2: Field research
The field research phase was dedicated to gathering all information that could not be retrieved online.
Interviewing many Garment Manufacturers, the Vice-Chairman of the Myanmar Garment Manufacturing
Association (MGMA), in order to identify and verify the main bottlenecks and how they could be removed.
Meeting the Country Director of the Consortium of Dutch NGOs to gain information concerning any NGO
activity focussed currently or in the past on the Myanmar Garment Sector. Timeframe: Aug 2013
Phase 3: Finalising VCA
During this phase all acquired information was analysed and processed into a clear and structured report.
Timeframe: Aug/Sep 2013
3. Demand Side Analysis

3.1
Demand in the EU Market
Figures just released by Euratex, the European Apparel and Textile Confederation, show Imports into the EU27 fell 5.6% to EUR89.6bn, of which textiles accounted for EUR24.4bn (-7.9%.) and clothing EUR65.2bn (-4.7%)
as the ongoing Eurozone crisis led to a drop in consumption. The main clothing suppliers were China,
Bangladesh, Turkey India and Tunisia.
According to IMF (Institut Francais De La Mode) there is clearly a correlation that can be made between
changes in consumption and changes in imports. Retailers are increasingly relying upon just-in-time
purchasing, and as far as they can, keeping the risks related to long-term purchasing down to a minimum. In
effect, nearly one fourth of all the major global labels and brands orders consist of just-in-time purchases,
stock replenishments and updates made once the season is already under way. Within Asia, while purchases in
China (including Hong Kong) decreased 9 % in value, deliveries from Bangladesh increased by 9 %. Bangladesh
is thus the second biggest supplier of apparel to the European Union and has now surpassed Turkey. In
addition, 2012 saw an increase in purchases in Vietnam (+3 %) as well as in Sri Lanka (+5 %). Overall, Asia holds
74 % of market share in all European apparel sourcing, a figure that has held firm in comparison to 2011.
Although European Union imports have fallen 5 % in value, the fact that the decline is steeper in terms of
tonnage (-11 %) is an indication of the unrelenting pressure retailers are under when it comes to order
costs. Indeed, in many manufacturing regions, wages continue to rise and the prices of raw materials have
remained relatively high.
3.2
Top 5 EU Import Countries
In 2012 the following five countries imported more than USD 49 bln worth of garments: Germany, United
Kingdom, France, Spain and Italy. The Netherlands just dropped of this short list to a number 6 position for
both import of HS61 ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, KNITTED and HS62 ARTICLES OF
APPAREL AND CLOTHING ACCESSORIES, NOT KNITTED (WOVEN) products.
Top 5 Import EU countries of HS61
Top 5 Import EU countries of HS62
Trade Statistics (Imports) EU27 and Member States / Total

EXTRA-EU27 For product 61 in Year 2012
Trade Statistics (Imports) EU27 and Member States / Total

EXTRA-EU27 For product 62 in Year 2012
1
2
3
4
5
Germany
United Kingdom
France
Italy
Spain
Import Value
(1000 EURO)
7692918,01
6152914,53
3996475,51
3461565,70
2782641,17
Netherlands
2491843,78
7,8%
Total top 5
24086514,92
75,1%
TOP 5 Indicators
% of Total
Import HS61
24,0%
19,1%
12,5%
10,8%
8,7%
1
2
3
4
5
Germany
United Kingdom
France
Spain
Italy
Import Value
(1000 EURO)
7905598,40
5745670,42
4322355,80
3808184,99
3490564,09
Netherlands
2255923,23
6,80%
Total top 5
25272373,70
76,5%
TOP 5 Indicators
% of Total
Import HS62
23,9%
17,4%
13,1%
11,5%
10,6%
Total Import EU HS61
Total Import EU HS62
Trade Statistics (Imports) EU27 / Total EXTRA-EU27 For

product 61 in Year 2012
Trade Statistics (Imports) EU27 / Total EXTRA-EU27 For

product 62 in Year 2012
Indicators
Total EXTRA-EU27
Import Value
(1000 EURO)
32102250,05
Total %
100%
Indicators
Total EXTRA-EU27
Import Value
(1000 EURO)
33075284,31
Total %
100%
Total Import EU countries

Indicators
Import Value
(1000 EURO)
Total %
Total EU Import (HS61 + HS62)
65177534,36
100%
% HS61 from Total EU Import
32102250,05
49%
% HS62 from Total EU Import
33075284,31
51%
All charts based on information retrieved from the Market Access Database (MADB) of the The European Commission Trade website.
The demand from EU/EFTA countries for Made in Myanmar garments is slowly starting to show. Of course
this has everything to do with the former sanctions imposed on Myanmar. Now that these sanctions are lifted
and the European Commission included Myanmar in the Generalised System of Preferences (GSP), Garment
Manufacturers in Myanmar notice interest from EU/EFTA countries is rising. Sourcing agents and buyers are
making contact and visiting their factories. However according to a notable EU garment importer who works
with many EU companies (Inditex, Mango, Alcot, V&D etc.), if there is abstention from a European buyer to
work with a local Myanmar owned garment factory, the main reasons in general are:
Political uncertainty: Although Myanmars recent political reforms are very positive, its still complicated.
Particularly because the unpredictable electoral outcome for 2015 makes forecasting Government policies
more difficult.
CMP Export: Local factories can only offer C.M.P. price system, so buyer has to arrange all raw materials
(fabrics/zippers/ sewing thread/hangtags etc.) themselves. This asks a lot more effort and financial
investment from the buyers side.
Lack of Compliance: Local owned garment manufacturers do not yet comply to the European standards of
Compliance (Social, Technical and Environmental).
According to this EU importer the main reason they started working with Myanmar is because of Duty-Free
import on Myanmar made garments and the value for money being quite reasonable. However the biggest
weakness of the Myanmar garment manufacturer for him is the lack of follow up in communication
concerning orders.
His suggestions for the local owned garment manufactures in order to improve their competitiveness:
*Improve CSR
*Increase productivity
*invest in organisation (merchandizers) to improve follow up in communication.
Reasonable timeline to establish these improvements according to this EU importer would be 3 years.
3.3
Identifying EU Buyers of Myanmar made Garments
Trade Statistics (Imports) Eur27 and Member

States FROM Myanmar For product 61 in Year
2012
TOP 5
1
2
3
4
5
6
Import Value to the

EU/MS (1000 EURO)
Years
2012
EU27
7547,42
Germany
4632,89
United Kingdom
1040,79
Spain
642,23
Italy
437,89
Poland
207,66
Netherlands
168,45
France
146,55
Belgium
111,61
Greece
52,08
Romania
41,26
Denmark
31,54
Sweden
15,49
Austria
9,59
Cyprus
6,88
Malta
1,76
Finland
0,75
Indicators
Trade Statistics (Imports) Eur27 and Member

States FROM Myanmar For product 62 in Year
2012
TOP 5
1
2
3
4
5
6
Import Value to the

EU/MS (1000 EURO)
Years
2012
EU27
103188,42
Germany
33693,37
United Kingdom
25301,45
Spain
24148,51
Austria
6844,24
Italy
5914,43
Netherlands
2484,33
Belgium
1545,68
Poland
1237,21
Romania
1237,21
Denmark
750,40
Romania
382,95
France
326,42
Cyprus
225,09
Sweden
121,94
Greece
67,99
Bulgaria
56,83
Malta
46,14
Finland
40,90
Slovenia
0,54
Indicators
All charts based on information retrieved from the Market Access Database (MADB) of the The European Commission Trade website.
According above charts the EU import of Myanmar garments is starting to make a presence in the general
statistics. But trying to establish which market segments are responsible for these numbers is quite difficult. As
garment manufacturers are very discrete concerning their orders. Therefor providing detailed information
concerning the main EU brands that are already being produced in Myanmar is very difficult. Mainly because
most EU brand productions now are still sub-contracts from other factories (often from other countries).
However in general it can be stated (through field research) that the focus of EU brands that are being
produced in Myanmar is on low- and mid-end market brands
4. Supply Side Analysis

10
4.1
Myanmar Market Supply Assessment
The Myanmar population is estimated to be over 60 million people, with a labor force of 33.41 million people
and an unemployment rate of 5.4%. The GDP (Gross Domestic Product) is being generated in 3 sectors, being:
Agriculture (38.8%), Industry including manufacturing (19.3%) and Services (41.8%).1
According to official data from the Myanmar Customs Department, for 2012-13 (Apr-Nov 2012) the garment
export was valued at US$ 345.89 million. They expected that by the end of 2012 this number would rise to US$
600 million. As revealed by the MGMA members through December 2012, Myanmar registered US$ 848
million FOB textile export and CMP textile export stood at US$ 98 million. However locally owned garment
manufactures only provide CMP export and foreign (co-) owned factories provide all FOB export.
When in 2003 the sanctions and the trade embargo were imposed on Myanmar, it greatly affected the
garment industry, as overnight the USA market was lost. The Myanmar garment Industry started to explore
new markets, particularly in Asia. Japan has now become the main market for Myanmars garment
manufacturers, replacing the USA. This shift also meant switching their knitwear-focus into woven garments
manufacturing. According to the MGMA; before the sanctions were imposed on Myanmar, Knitwear (HS61.)
contained 90% of the garment export. Now that sanctions are lifted this shifted to >80% of Woven garments
(HS62) being exported.
Chart supplied by the Myanmar Garment Manufacturing Association (MGMA).
4.2
1
Garment Industry Trends
Est.2012, Central Intelligence Agency.
11
Set up costs for CMP focused factories require a relatively smaller amount of initial investment. Investing
specifically in sewing machines, as its a labour intensive industry. Which is suitable for Myanmars present
situation because of the limited access to financial resources most factories are self-financed. 2
The FOB focused factories in Myanmar arrange all raw materials themselves overseas, mostly from China or
Taiwan, as these materials are not (yet) available domestically. Therefore set up costs for an FOB factory
initially do not differ. Its the level of service that makes the difference. However in general most FOB factories
are equipped with better machinery and technology than the CMP focused factories, which insist larger
investments.
The vast majority of Myanmar garment manufacturers are concentrated in Industrial Zones with a strong
focus in and around Yangon. (See Annex 1) These Yangon situated Industrial Zones have access to the Ports in
Yangon within 1 or 2 hours road transport. Which make the factories quite accessible.
Industrial Zones focused in Yangon. (By MGMA)
Location Advantages and Disadvantages in Myanmar: The Case of Garment Industry. By Toshihiro KUDO*, May 2009
12
Maps provided by MGMA
YANGON Division region

The Yangon Ports:
1. Bo Aung Kyaw
2. Asia World
3. MIP
The first one is a military port and used rarely. Ports Asia World and MIP are privately owned companies. They
are significantly investing in modernizing their ports in order to meet international standard in the near future.
The Thilawa Port:
4. MITT
MITT is a deeper-sea port 25 km south of Yangon. Owned by Hutchison Port Holdings (HPH) and the facility is
also adjacent to the soon-to-be-developed Special Economic Zone3 at Thanlyin-Kyauktan area.
Special Economic Zone (SEZ) is a geographical region that is designed to export goods and provide employment. SEZs are exempt from federal laws regarding taxes,
quotas, FDI-bans, labour laws and other restrictive laws in order to make the goods manufactured in the SEZ at a globally competitive price.
13
To facilitate growth of trade and foreign direct investment in the Myanmar Garment Industry, the Myanmar
Government eased restrictions on the Financial/Trade sector.
Incentives to stimulate the Garment Industry:
The new Foreign Investment Law (FIL) provides Foreign-invested enterprises an exemption from income
tax for five years starting in the year in which the goods and services were first provided, with a possibility
of an extension.
The Myanmar Investment Commission may also grant the following exemptions:
Income tax relief for business profits that are reinvested within one year.
Up to 50% income tax relief for profits earned from exported product
The right to pay income tax on foreign employees at the same rates that apply to Myanmar citizens.
The right to carry forward losses incurred within two years following the expiry of the aforementioned five
year tax holiday, with the carry-forward period lasting up to three years.
Customs duty relief for (i) imported machinery, equipment and materials that are required for the business
of the enterprise during it's establishment (ii) raw materials imported during the first three years of
commercial production after its establishment and (iii) imported machinery, equipment and materials that
are necessary for use in its expanded work if the amount of investment is increased and the original
enterprise is extended.
In September 2012, the European Commission included Myanmar in the Generalised System of
Preferences (GSP), which grants duty-free and quota-free access to the European market for all products
except for arms and ammunitions.
Myanmar also enjoys tariff exemptions on export to Japan. For example they don't have to pay the 7.4 to
10% tariff on woven shirts and blouses which China and Vietnam are required to do.
Myanmar is also a member of the ASEAN Trade in Goods Agreement (ATIGA). Which gives tax relief to
ASEAN countries that import goods certified under the ATIGA, and also receives tax relief reciprocally on
imports to countries who signed up to the agreement.
Myanmar receives tax relief from Korea as part of the ASEAN- Korea Free Trade Area.
The USA has also reinstated the most Favoured Nation Status on Myanmar.
14
4.3
Garment Industry Key Observations
Through fieldwork observations and interviews with several Garment Manufacturers from SMEs (Small
Medium Enterprise) and the Vice-Chairman of the Myanmar Garment Manufacturing Association (MGMA) the
following key observations were concluded concerning the Garment Industry in Myanmar.
Size of Factories
The garment factories in Myanmar can be divided in 4 categories based on the information from the MGMA
Garment Directory 2013-14. In this directory all Myanmar Garment Manufactures are listed together with the
number of operating (sewing) machines they own and the registered investment type of the factory. However
it can be confusing, as many local registered factories are actual foreign owned (or for a majority stake).
MGMA Vice-Chairman states that only 20% of all garment manufactures in Myanmar are really locally owned.
Categorising factories according to their number of machines is a reliable way to indicate the size of the
factory as it states the production output it could have. However during fieldwork it became clear that a lot of
factories register with a smaller amount of operating machines than they actual possess because of tax
advantages. Considering the above, the factories can best be categorized as following:
1. X-Small factories
> 20
machines but < 200 machines
2. Small factories
> 200 machines but < 500 machines
3. Medium factories
4. Large factories
The X-Small factories are very basic and only produce on a small scale for the domestic market. The Small
factories can also produce for the local market but mostly function as CMP sub-contractors for the FOB
factories and therefor dont conduct the actual export if the say the produce for overseas buyers. The Medium
CMP factories do have experience with export but they are also used as sub-contractors if they have capacity
leftover. The FOB factories are present in Medium and in Large sizes and according to the Vice-Chairman of
the MGMA all (co-) owned by foreign companies.
15
Compliance
All locally owned garment manufactures do not comply with the European standard of Compliance (Social,
Technical, Environmental). They lack for instance Business Social Compliance Initiative of the Foreign Trade
Association (BSCI Code of Conduct). Most of these factories are situated in old buildings equipped with old
machinery. The last decade these manufacturers were only focussed with trying to survive through the
embargo time. Complying with European terms of standard was the last thing on their minds, as the EU
market was lost anyway. So for many years this developing field of expertise was totally ignored. Now that the
sanctions have been lifted and the locally owned garment manufacturers are eager to do business with the
European market again, there suddenly develops an interest in how they can improve and evolve in order to
meet the EU compliance standard.
Traditional skills and techniques
Myanmars textile heritage is long and rich, and although neighbouring Southeast Asian countries has
influenced it, it still carries its own distinctive traditions within its weaving designs.
Unfortunately the Garment Sector doesnt do anything with this heritage and is only focussed on export
market demand. Therefor the traditional textile techniques are only being used in the traditional way for local
market.
The CMP price focus
In Myanmar the locally owned Garment Manufacturer is focused on the CMP (Cut-Make-Pack) export instead
of the FOB (Free On Board) export. FOB export involves the complete process from development/production
to exporting. An FOB export factory purchases fabric, trims and materials and in the strict definition of FOB, is
fully responsible for importing and exporting costs up to loading onto the export carrier. It may also be
involved in the sample making and negotiations with the buyers. This is a significant distinction because the
financing of fabric purchases and payment of import and export costs require financial resources and sourcing
of fabric, and the development of samples require competencies and management skills beyond cutting and
sewing.
The CMP system is a form of production where the overseas buyers provide all the raw materials and the
factory then only Cut, Make and Packs. However the factory will arrange import handling of Raw material. This
import procedure goes very quickly as Ministry of Commerce made it possible that an import licence can be
processed within 24hours after a factory application has been submitted. No import fees will be charged
because the CMP business is not considered a genuine trade as it only earns a processing charge. After the
manufacturing process, the factory will work closely together with forwarder to arrange clearance for export.
16
Average CMP prices for MOQ (Minimum Order Quantity) of common items made in locally owned SME
garment factories in Myanmar. Washings, Printing, Embroidery are all upcharges as do more difficult patterns
because they result in more sewing time. Prices differ a lot between factories, and therefor negotiating is very
important when doing business in Myanmar. Below CMP prices are an average and quoted in Sep 2013 in USD:
Jacket > $ 3.5

Vest > $ 3.2
Men shirt > $ 2.5
Trench Coat > $ 6.2
Polo Shirt > $ 1.5
Trousers > $2.8
Pants > $ 2.5
Pants Cargo > $2.9
T-shirt > $ 1.0
Dress > $ 3.0
Skirt > $ 2.5
5. Matching Demand with Supply

5.1
How to match EU Buyer with the Myanmar Garment Sector

Price system
To facilitate growth of trade and foreign direct investment in the Myanmar Garment Sector, the Government
eased restrictions on the Financial/Trade sector. Due to these improved business conditions, more political
stability and the fact that Myanmar offers one of the cheapest labour pools in the region with an average
industry labour wage of US$ 60,- for 60hrs (incl. overtime).4 The Garment Sector is set to rapidly expand in the
coming years. Important is that the garment sector should focus on producing raw materials domestically of
export quality (comply with international quality standards). So locally owned garment manufacturers can also
provide FOB export and compete with the foreign owned factories. The CMP price system is not as profitable
as the FOB system. Producers capable of FOB manufacturing may receive a better price for their product
because of the enhanced level of service.
This amount can increase with 20% when factory is located in an Industrial zone or decrease with 30% when located far outside of Yangon (see Annex 1).
17
Then again FOB suppliers also take on a high level of financial risk and can incur significant losses when an
order is not completed as planned. Therefor, the higher returns of the FOB manufacturer are balanced by
higher risk, service costs, losses and greater cash flow requirements. However CMP factories can also use the
growing amount of FOB factories to their advantage, because it will also bring more sub-contracts for the CMP
factories.. Therefore making sure CMP factories can keep production lines occupied and running.
This season a lot of factories are completely fully booked with Japanese and Korean orders. Filling up CMP
factories with Japanese line contracts; meaning production lines that are only producing for that specific
Japanese brand all year long, and with Korean sub-contracts. Therefore some factories do not even have a
low-season this year. Normally during this low-season (March-April and Sep-Oct) CMP prices would
decrease. For these filled up factories this is no longer applicable. This is of course a positive thing, however
one has to keep in mind that sub-contracts from FOB factories are not very profitable for the manufacturer.
For example, in the few instances where I was able to see cost sheets, I calculated that CM prices were below
5 per minute. To put this into context, a factory in Myanmar is paid less than the same factory in
Bangladesh. 5
Political uncertainty
The fact remains that the military Junta has ruled Myanmar for many years, which let to the imposed
sanctions and trade embargo. Now that President Thein Sein has initiated a series of political and economic
reforms leading to a substantial opening of the long-isolated country, most political parties have begun
building their institutions in preparation for the next round of general elections in 2015.
If EU buyers are absent because of the uncertain political situation, one can only advise to wait after the
elections of 2015. As it then becomes clear in which direction the political future of Myanmar will develop.
However in general its strongly believed Myanmar will develop in a positive and strong way.
Starting up business now will only gain the EU buyer goodwill, because they will be part of building up the
country and helping the locally owned garment manufactures doing business with the European market again.
Compliance
It would be highly appreciated by the manufacturers if EU Buyers could also guide the locally owned garment
manufactures as well through the process of reaching the required compliance on all levels (Social, Technical,
Environmental). Starting up business together while agreeing on a timeline in which factory improvements
need to be finished is very motivating for the garment manufacturer. It cannot be expected from these
factories to possess all these strong compliance standards overnight.
5
Annex 2 The Myanmar Garment Industry: A Very Short Study. By David Birnbaum. 28 Feb 2013
18
They need of expertise guidance and a timeline that is reasonable to succeed. It will only be admirable if a EU
buyer is willing to invest time and expertise in helping these factories evolve. The EU Project SMART Myanmar
(Annex 3) is already helping to create awareness concerning sustainable production. Their objectives are to
improve the production and consumption of sustainably manufactured garments from Myanmar. Their
anticipated results:
5.2
Relevant Business Support Organizations are trained to have the capacity to promote and advise on
sustainable consumption and production (SCP) effectively.
Expedient business, marketing and export strategies for products made in Myanmar will enhance
sales and create new market opportunities.
The production in garment and other sectors made in Myanmar will be cleaner, safer and more
efficient.
The capacity building in business support organizations and the training of SCP consultants will create
spin out opportunities in to other sectors, improving the wider business community.
Compatible EU Buyers
The Myanmar garment sector has a > 80% of Woven garments export. The EU market has quite a big demand
for this product group, 51% of all EU clothing import value to be more specific. Therefor they are very suitable
match with each other. However which EU buyer would be most compatible for the Myanmar garment sector
in this moment in time?
CMP Buyers
EU buyers that function as suppliers for other EU buyers. Meaning the EU suppliers that have the means and
the expertise to offer FOB prices to the EU buyers and work with Myanmar garment factories on CMP price
base. In order to do so the EU supplier must be comfortable arranging all raw materials and its transport
themselves.
FOB Buyers
All FOB garment manufacturers are owned by foreign companies. Mostly from South Korea, Taiwan, Japan and
China, pricing is lower then their home country but not considerable. However its the GSP that would be
making the big difference now when buying FOB in Myanmar. Although keeping in mind all raw materials have
to be imported by the FOB factories as well, will cause longer lead times for instance then China FOB factories
will quote.
19
Market Segment
There is not a specific market segment best for Myanmar production. High, Med or Low, all segments are
being produced in Myanmar. As discussed previously the Japanese and Korean market are momentarily the
biggest market for the Myanmar garment industry. Their orders are very strict, meaning 100% control. Every
garment has to be checked before shipment and strong QCs companies inspect during the complete
manufacturing process. But then again they are also willing to pay a higher CMP price compared to EU buyers,
and they apparently have less strict compliance standards the factory is required to meet. Thus it depends on
the manufacturer if they wan't to work with EU buyers. The garment manufacturer states that the EU market
is the biggest market and they dont want to put all their eggs in one basket by focussing only on Japan and
Korea. For the EU market its very interesting, because Myanmar factories are trained according to Japanese
and Korean quality standards and these standards are really high (for all segments). Garment workers are
trained to produce a consistent high quality of workmanship. Meaning the workmanship could easily comply
with the quality levels of high-end EU buyers. So basically in the Myanmar garment factories you see Asian
High/ Med/Low-end brands being produced next to each other and the garment workers are used to an
extremely high quality standard of workmanship.
6. Mapping the value chain

6.1
The Value Chain
The basic Myanmar garments Value Chain structure

As discussed previously, there are no export quality raw materials available in Myanmar yet. Export quality
meaning: fabric, trims, yarns that comply with international quality standards. Except for a Japanese yarn
supplier. But their yarns are quite expensive compared with other countries, and their colour palette is not
consistent. Colours often differ from official colour-codes. Therefor buyers still supply their own yarn for bulk
production. All garment manufacturers (CMP & FOB) in Myanmar outsource silkscreen printing, embroidery
and garment washings of their orders as well.
20
This means that the basic Myanmars export value chain is similar for FOB as it is for CMP export for both
Woven and Knitwear garments, and can be visualized as following:
RAW
Material
Import
For export
garments all
Yarn, Fabric,
Trims are
imported
Special
Finishing
Printing
(slikscreen)
Washing
Embroidery
Processing
Cut
Make
Pack
Schipment
Export to
Customer
Current Total Lead Time => 61 days minimal for EU orders
Delivery Raw
Materials:
18 to 24 days
Customs
Clearance:
3 to 7 days
Manufacturing:
14 to 45 days
Transport
Goods to EU:
26 to 36 days
The Value Chain with Actors, Supporters and Influencers
Actors
Supporters
Influencers
Raw material
Importer
UMFCCI
Policy Makers
Printing, Washing,
Embroidery
factories
MGMA
Institutions &
Associations
Garment
Manufacturers
Packaging Suppliers
Forwarders
Financial
Institutions
Customs
21
Actors: are those who are directly involved in the garment manufacturing value chain in Myanmar.
Raw material Importer
Printing, Washing,
Embroidery factories
Garment Manufacturers
Forwarder
Raw material Importer > For CMP manufacturers the buyer is responsible for sourcing the raw
materials, shipping them and the manufacturer will handle all accompanying import matters. The FOB
manufacturers do it all themselves.
Printing, Washing, and Embroidery factory > All factories work closely together with specialized
printing (only silkscreen, no roll or digital printing yet available), washing and embroidery factories.
Garment Manufacturer > Responsible for the actual manufacturing (labelling and packing) of the
garment.
Forwarder > Responsible for the export shipment. All necessary documents are provided in close
collaboration with forwarder, manufacturer and buyer.
Supporters: are those who support the garment manufacturing value chain in Myanmar.
UMFCCI
MGMA
Packaging
Suppliers
Financial
Institutions
Customs
UMFCCI (The Chamber of Commerce and Industry) > a non-governmental organization representing
and safeguarding the interest of the private business sector and acting as bridge between the State
and the private sector.
MGMA (Myanmar Garment Manufacturers Association) > Consultancy, Corporate Intelligence and
Training Centre for the Garment Manufacturing Industry.
Packaging Suppliers > Provide the carton boxes, polybags, tissue paper, silicon dry bags.
Financial Institutions > Banks provide the possibility of T/T payment, the telegraphic transfer payment
before shipment. Myanmar garment manufacturers dont work with LCs.
Customs > Customs have a big role in making sure import and export runs smoothly and delays are
minimised. The clearance process already improved a lot compared with a few years ago. In general it
will only takes 3 days to receive custom clearance.
22
Influencers: are those who influence the garment manufacturing value chain in Myanmar.
Policy Makers
Institutions &
Associations
POLICYMAKERS
The Myanmar Government

o Ministry of National Planning (MIC, Myanmar Investment Committee): To start up the
manufacturing business, the company needs to apply for the MIC in order to get 5yrs tax
holidays.
o Ministry of Commerce: Company Registration and applying for Import/Export license.
o Ministry of Industry: Getting approval for the Export/Import license, Factory licensing.
o Ministry of Finance: Profit Taxation.
o Ministry of Labour: Approving overtime
o Ministry of Transport: Import/Export checking
Foreign Export Benefits > GPS (EU) | ATIGA | Tax relief/exemptions from Korea and Japan | USA
Favoured Nation Status. These are all tax benefits to help economic development in Myanmar.
ILO (The International Labour Organisation) > The UN specialized agency, which seeks the promotion of
social justice and internationally recognized human and labour rights. The ILO has been present in the
country since 2002. They were involved with the recent government labour law reforms. Which
include: right to freedom of association/collective bargaining/a minimum wage/a ban of forced labour
and labour dispute settlement. Unfortunately the lack of strong institutions prevents the insurance of
these reforms being implemented effectively.6
Institute for Human Rights and Business. Responsible Investment in Myanmars Garment Sector (22-March-13)
23
INSTITUTIONS & ASSOCIATIONS
JETRO (Japan External Trade Organization) > is a Government-related organization that works to
promote mutual trade and investment between Japan and the rest of the world. JETRO provides a lot
to the Myanmar Garment Industry. From Management Business training to collaboration projects like
MGHRDC; The Myanmar Garment Human Resource Development Centre, training all sorts of garment
workers free of charge.
HIDA (Human resources and Industry Development Association) > is an organization for human
resources development in developing countries to promote technical cooperation through training,
experts dispatch and other programs. According to the MGMA they are already present since 1958 but
on a very small scale, meaning that since that time until now they only trained around 400 people in
different field of expertise in the garment sector.
SMART Myanmar > Actively promotes and supports the sustainable production of garments made in
Myanmar striving to increase the international competitiveness of Small and Medium Enterprises
(SMEs) in this sector. (For more information concerning this project please find enclosed Annex 2.)
Building Markets > Their slogan: We build markets, create jobs and sustain peace in developing
countries by championing local entrepreneurs and connecting them to new business opportunities.
They also really help in organising and creating structure in for instance the flow of government
information. For example on their website you can immediately find out everything there is to know
about all the Myanmar running tenders and all necessary information you need in order to bid. It
creates transparency, clarity and confidence for companies in order to place a bid.
GIZ > (Gesellschaft fr Internationale Zusammenarbeit) Sustainable, Innovative, Effective, they offer
customized solutions to complex challenges. They are an experienced service provider and assist the
German Government in achieving its objectives in the field of international cooperation. Their goal:
offering demand-driven, tailor-made and effective services for sustainable development. Please find
enclosed Annex 3 with more information concerning their recently set up project in Myanmar for
Financial Sector Development in order to help SMEs get access to competitive financing.
24
6.2
The flow of Products along the Value Chain
Consumer
Retailer
Importer
Large Garment
Manufacturer (FOB)
SME Garment
Manucturers (CMP)
SME Garment
Manufacturers (FOB)
ALL RAW MATERIAL

IMPORTED
Chart based on research by FAM
There are three types of Garment Manufacturers in Myanmar.

1. Large FOB garment manufacturers > they focus on direct (to the retailer) and indirect (via importer)
knitwear and woven garment export.
2. SME CMP garment manufacturers > they focus on manufacturing and often function as subcontractor
for the FOB manufacturer. If the export its only via an importer, not direct to retailer.
3. SME FOB manufacturers > Same focus as Large FOB manufacturer.
25
6.3
The flow of Services along the Value Chain
Some manufactures (very rare) have their own embroidery machines, but in general it can be said that all
Myanmar garment factories (CMP or FOB) at this moment in time have close cooperations with different
specialized finishing factories to arrange silk screen printing, embroideries and garment washings for their
orders. As do they all need the services from Customs/ Banks/ Packaging suppliers and Forwarders. CMP
manufacturers also function as sub-contractor for FOB manufacturers. Thus the flow of services along the
Value chain can be visualized as following:
Chart based on research by FAM
26
7. Value Chain Bottlenecks & Opportunity Analysis

7.1
Main Bottlenecks
Why is export currently not reaching its full potential?

This question is only applicable for the SME garment manufacturers that focus on the CMP export.
Foreign companies own the FOB manufacturing factories and their capacity is completely filled up mainly for
the Asian market, their export is reaching full potential.
Therefor the question is now; how could the locally owned garment manufacturer reach their full potential
and evolve so they can compete with the growing amount of foreign owned FOB manufacturers?
To answer this question several locally owned garment manufacturers were individually interviewed and the
Vice-Chairman Dr. Aung Win of the Myanmar Garment Manufacturers Association (MGMA).
Costs of doing business in Myanmar are high. Myanmar has underdeveloped telecommunications and
transportation infrastructure compared to other countries. There is currently no domestic supply of fabrics,
trims and other raw materials so longer lead times are needed to ship these products into the country.
Electricity costs are soaring due to lack of stable Government supply and the need to generate electricity from
diesel to compensate. The workforce may be very low cost, but this automatically results in workers being unloyal to the factory. Labour is easily lost to other industries or to the competition. The uncertainty for a factory
how many workers will stay each month is a recurring problem. Therefor factories set up a training centre
where they train new workers every day to fill in the gaps that occur each month. The majority of the locally
owned factories have out-dated machinery that slows down the production process considerably, this in
combination with their focus on the CMP price system prevents them of being competitive. The small order
quantity and the lack of technical know-how are also a major obstacle that prevents these factories of
reaching their full productivity potential. Finally, the lack of compliance in locally owned factories like for
instance the Business Social Compliance Initiative of the Foreign Trade Association (BSCI Code of Conduct) is
a serious issue. Compliance nowadays is very important for the EU/EFTA market, as is a sustainable production
process.
27
The main bottlenecks that prevent the locally owned garment manufacturer to reach their full (export)
potential:
Electricity
Insufficient supply of power
Credit & Finance
Limited access to financial resources
Transportation
Poor Infrastructure
Communication
Undeveloped telecommunications
Labour
Workers go "factory hopping"
Compliance & Sustainability
Many SME Factories lack compliance and a sustainable

manufacturing process
Machinery & Techincal Know

how
Many SME factories have outdated machinery and lack the

technical know-how to improve efficiency.
Price System & Order Quantity
Locally owned factories focus on CMP price system this

often goes hand in hand with smaller order quantities.
These eight identified issues can be categorized into two main segments being:
1. Business Environment wise
2. Production wise
28
7.2
Bottleneck and Opportunity Analysis
BUSINESS ENVIRONMENT BOTTLENECKS ALONG THE VALUE CHAIN

Bottleneck
Electricity > Insufficient supply of government generated power that lead to very high process cost for the Garment factories as
they need to use diesel generators to compensate.
Potential solution
The Government supplied Mandalay, Pyay, Magwe and Bago with a 1-megawatt generator in March 2013 to help with the peaks
in demand during the hot season from March to May. Gas turbines are also being imported from Spain, Germany, Austria,
Singapore and Malaysia to help meet the demand. Recently the Government announced they want to cut off Industrial Zones
from Government Electra supply in the future. They want every Industrial Zone to provide their own Electra power plant
arranged by all factories involved. This is just a plan and will certainly not be implemented in the near future because of the
large investments for the manufacturer that go with it. But this is a discussion between the government and the garment
manufacturers. The Government recently opened Tenders concerning improvement of the Myanmar Electrical grid where all
companies worldwide could bid on. So the first step in the right direction has been taken to remove this bottleneck.
Who should or could help?
Ministry of Electric Power, Energy companies and Industry
Time frame risk (1)
Medium
Critical Bottleneck (2)
Bottleneck
Credit & Finance > Limited access to financial resources. Interest rates are very high (13%) and the time frame in which a loan
has to be paid back very short (1-5 years).
Potential solution
Stakeholders in the financial institutions should find a way how they can offer SME's competitive financing. As this is a key factor
for the SME CMP factories. In order to evolve they need to invest in their organisations (building and machinery wise) and if they
would like to switch into FOB export they need competitive financing as well.
Banks together with MGMA and in collaboration with organisations like GIZ.
Time frame risk (1)
Medium
Bottleneck
Transportation > Poor Infrastructure
Potential solution
The Government is already taking on this task. Roads are being widened or totally renewed, fly-overs and bridges are being
build all to smoothen and speed up the Myanmar road infrastructure. However still a lot of roads surrounding the industrial
zones towards Yangon are total ruined because of container transport. This causes a lot of traffic problems and delays.
Ministry of Construction
Time frame risk (1)
Low
Bottleneck
Communication > Underdeveloped telecommunications
Potential solution
Internet is recently been implemented in Myanmar and still improving every month as the quality was very poor in the
beginning. Now it's quite ok and therefor Email and Skype communication is possible. But then again factories are not yet used
to this fast modern way of communication. Meaning checking emails daily and answering them also! a cellular network is also
available and although reception is often poor its already a big improvement compared with just a few years ago.
Time frame risk (1)
The Ministry of Communication and information technology, by urging companies who won tenders concerning
telecommunication to improve or develop quickly. Buyers, by explaining their wishes about fast email communication clearly
before they go into business together.
Low
29
PRODUCTION BOTTLENECKS ALONG THE VALUE CHAIN

Bottleneck
Labour > Workers go "factory hopping" meaning labour is easily lost to other industries or to the competition.
Potential solution
Investing in skill development to make sure there are enough skilled workers in the garment sector. Also a strategic move would
be to offer the low wage worker something that adds value to there job and that will encourage them to stay and be loyal to the
factory they work for. Then factories can rely on their workers and workers can rely on their factory as they receive more then a
pay check. Which will provide a stable and consistent workforce and production. By adding value, one could think of:
Child Day Care connected to the factory for low wage workers children (age 3 months - 5 years).
Providing 'safe' lunch every day free of cost
Medical benefits
Time frame risk (1)
The Myanmar Garment Human Resource Development Centre (MGHRDC) in collaboration with JETRO is already training
garment workers free of charge. This initiative creates more skilled low wage workers for the garment sector. They already
trained 700 operators since they started in 2009. Concerning the Child-Day Care, there is no NGO organization in Yangon
present that could be asked for advise to set up such initiatives. Therefor it could be helpful to gain information from certain
factories in Bangladesh where these kind of added values like day-care are already implemented. The other values are already
being implemented more often by local owned factories.
Medium
Bottleneck
Compliance & Sustainability > Many SME Factories lack compliance and a sustainable manufacturing process.
Potential solution
Buyers must guide the manufactures and help them to reach these expected standards. It cannot be expected from the locally
owned garment manufactures to possess all these strong compliance standards overnight. They need guidance and a timeline
that is reasonable. Training and consultancy concerning these matters are significant. Therefor a project like SMART Myanmar
that is creating awareness concerning sustainable production, is very positive and important input.
CBI with MGMA and compliance (Social, Technical, Environmental) experts/consultants.
Time frame risk (1)
Medium
Bottleneck
Machinery & Technical Know-how > Many SME (CMP) factories have out-dated machinery that delay productivity and lack the
technical 'Know-how' to upgrade their production process efficiency.
Potential solution
If locally owned CMP factories could have access to competitive financing. They could for instance invest in upgrading their
machines. Industrial Engineering consultants that could asses factories and provide them with the necessary solutions.
Banks, GIZ, CBI with Industrial Engineering consultants
Time frame risk (1)
Medium
Bottleneck
Price System & Order Quantity> Locally owned factories focus on CMP price system and this often goes hand in hand with
smaller order quantities. This has a great influence on the productivity as these factories have to change the lines each time they
change the styles. This affects the speed process and causes lower productivity.
Creating an attractive climate for investors to develop factories that can produce high quality raw materials domestically.
Offering the CMP garment manufactures expert training and consulting on how they could evolve into FOB export. Making it
possible for local garment manufacturers to have access to low-cost capital so they can invest in their organisation and can
switch to FOB export. They will earn more profit and the bigger order quantity that goes along with FOB order increases the
productivity and the line efficiency.
Potential solution
Myanmar Government. CBI with MGMA and FOB price system experts/consultants. Banks in collaboration with GIZ
Time frame risk (1)
Medium
(1) Risk that bottleneck will not be removed on short-term (high-medium-low)

(2) Are the bottlenecks critical (i.e. the programme would fail to improve exports if the bottlenecks are not removed as planned)? (Y/N)
30
Opportunities in the VC that would benefit export

Opportunity
Changing the locally owned garment manufacturers focus from CMP to FOB export.
Which organisation is
providing this solution?
Solvable in short term (3)
Critical Opportunity
- (CBI could)
Opportunity
Creating stable and consistent production because of steady workforce by adding value to a garment workers job.
- (CBI could)

Opportunity
Opportunity
Y
Y
Y
Y
Training more garment workers to upgrade workforce skills.
JETRO together with MGHRDC, (CBI could)
Y
Y
Bringing compliance up to standard, so locally owned garment manufacturer can enter the European market.
SMART Myanmar, (CBI could)
Y
Y
Opportunity
Improving productivity and efficiency by providing technical production process "Know-how".

- (CBI could)

Y
Y
(3) Short term meaning that the opportunity can be successfully addressed within the duration op the programme
CBI selection criteria for potential projects are aimed on Small Medium Enterprises (SMEs) with a maximum of
+/- 500 workers and at least 51% locally owned. However only the CMP manufacturers are locally owned and
many of them have more than 500 workers. The factories that do comply with the selection criteria
concerning the amount of workers are very primitive. Meaning they only produce for the local market in very
basic circumstances. They will never be able to compete with the FOB manufacturers. As for the bigger CMP
factories they would be able to evolve and compete with the foreign manufacturers if they would receive the
expert guidance. CBI should consider adjusting their selection criteria a little bit for the Myanmar garment
sector by adjusting the maximum amount of workers a factory can have to: < 1000 workers.
31
7.3
Risk Analysis
Risk Assessment and Mitigation

Risk (general or specific)
Specific risk: manufacturers won't get access to competitive financing in the near future.
Possible Impact on CBI
This will have direct impact on the CBI programme as manufacturer can't invest in necessary upgrading or improvements to be
intervention
able to change price focus or to achieve compliance standard.
Chance risk will occur (4)
3
Impact on programme (5)
4
Mitigation Strategy
CBI has to focus on setting up the programme for manufacturers in a way they that they can start up and then improve/upgrade
along the way because of higher profits they will start making. So basically by self financing.

intervention
Mitigation Strategy
Specific risk: government won't allow a child-day-care connected to a factory

CBI can't proceed with this specific programme

intervention
Mitigation Strategy
Specific risk: trained garment worker will leave to a neighbouring country (Thailand) where the can earn more income.
This will have a direct and negative impact on the outcome of the CBI programme, as the outcome will not benefit the Myanmar
garment sector.
3
4
CBI could train garment workers and urge factories at the same time to add value to the garment worker job, so the garment
worker will have a good reason to stay in Myanmar. Therefor the skilled workforce will grow.

intervention
Mitigation Strategy
Specific Risk: EU buyer doesnt accept manufacturers timeline to achieve compliance standard.
This will have a direct impact on the follow up of the CBI programme, as it won't benefit export to the EU.

intervention
Mitigation Strategy
2
5
CBI has to work closely together with experienced organisations that already done this before in other countries (like
Bangladesh) Furthermore a close collaboration with the MGMA would be advisable in order to obtain all necessary documents
and licenses smoothly.
3
3
CBI has to focus on the most important compliance that can be achieved with little investment. Therefor manufacturer can show
their willingness to comply. The EU buyer must be explained their help is needed in order for the Myanmar manufacturer to
reach compliance standards. This is a positive strategy; as EU buyers can explain to their customers they are 'helping' the
Myanmar garment sector evolve, making sure the sector will reach the high level standards as soon as possible with their help.
General Risk: The military regime will take over the government again.
This will have a direct impact on the CBI programme as a military regime could mean that the country will undergo the same
sanctions as it had before.
2
5
a reoccurrence of a military regime is beyond control of CBI and there is no mitigation strategy.
(4) 1=Rare | 2=Unlikely | 3=Possible | 4=Likely | 5=Almost certain

(5) 1=Negligible | 2=Minor | 3=Moderate | 4=Major | 5=Severe
32
8. Baseline data
Estimated number and investment type of garment manufacturers active in the Value Chain according to the
MGMA Garment Directory 2013-14:
SOE (Stated Owned Enterprise) > 9 manufacturing companies

Joint Venture with MTI (Myanmar Textile Industry) / UMEHL (Union of Myanmar Economic Holdings
Limited) > 2 manufacturing companies
Joint Venture with private company > 2 manufacturing companies
100% Foreign Company > 21 manufacturing companies
Local Private Company > 171 companies7
When following the CBI selection criteria: with a maximum of +/- 500 workers and at least 51% locally owned.
From all registered manufacturers, it gave a potential of 52 garment manufacturers that would comply.
However during more extensive research a lot of these manufacturers were deleted from the shortlist. As
many turned out (after a visiting them), they were in fact not really locally owned. Also the registered number
of machines (that could indicate the number of workers) often didnt match reality. Meaning that the
manufacturer has far more operating machines. Due to tax benefits they register with a smaller amount of
operating machines. So in order to give the most accurate number of locally owned garment manufactures
that would comply with the CBI selection criteria, all factories on the shortlist should be visited, because
through telephone conversation you rarely retrieve this personal information. Please find enclosed Annex 4
for manufactures shortlist with contact details.
Note: figure is grossly overestimated, as a lot of companies are registered as local but not with a majority stake. Estimation according to Vice-Chairman of MGMA:
20% of all garment manufacturers are really locally owned.
33
9. Possibilities for CBI intervention

What can CBI do to alleviate the identified bottlenecks in the VCA?
The Myanmar garment sector is being coached and trained by JETRO (Japan) since 2009. They invested in
educational projects in collaboration with the MGMA that proved to be very successful. The SMART Myanmar
(EU) project aims to build capacity and increase skills and knowledge in local partner organizations, facilitating
development of marketing and export strategies for the garment sector. Helping them to add sustainability
into their manufacturing process.
Therefor CBI could focus on the opportunity to invest in knowledge in order to improve export potential. The
locally owned SME garment manufacturers lack the knowledge concerning:
How to run an FOB export business to make more profit
Compliance according to EU standards to be able to enter the EU market on a large scale
Improving factory productivity and efficiency to reach full factory potential
CBI experts could provide necessary training for managers and merchandisers to gain competencies and skills
in order to run a FOB price system in the future. Explaining they can arrange raw materials themselves
domestically in the future but they can already arrange raw materials themselves abroad through visiting fairs.
Same way how they can get in contact with new (EU) buyers and how they can market themselves in a
positive and attractive way. It all comes down to good Sourcing, Planning, Marketing and Management skills
CBI could also provide compliance experts (social and technical) that can train locally owned manufacturers
how they can meet compliance requirements in the near future. Smart Myanmar is already educating factories
how they can implement a sustainable production process. But important is to keep in mind the fact that
manufacturer will not be able to access competitive financing in the near future. Therefor the manufacture
must be able to proceed in a step by step programme with a reasonable timeline. Guiding manufacturers
through these expert training programs concerning all compliance standards, is very important. As the local
manufacturer needs time to learn and adjust with coaching for a longer period of time in order to be
successful.
However the most logical step would be first try to help factories getting their production process arranged in
the most efficient way as possible with the available means at hand in order to improve their productivity. For
instance educating them about the different possibilities of setting up production lines in the most
appropriate way for their production (long / short/ U-shape) and how different departments (cutting, sewing,
finishing) can be arranged the most efficiently. An experienced Industrial Engineering (technical know-how)
could provide customised solutions (that are in reach) in order to let factory reach its full potential.
34
Knowledge is power. However it would be very interesting if CBI would investigate the opportunity adding
value to the low wage garment worker job, in order to improve productivity.
As said before the garment industry is expected to grow very rapidly the coming years; therefor they will
provide a lot of employment in Myanmar. Developing a programme to gain a low wage garment workers
loyalty and therefor achieving a constant and stable production flow in a factory, can certainly help to improve
productivity and therefor (export) potential.
The low wage garment workers are the most important assets of the factory. Without them there is no
production. Factory owners state that between 20% and 40% of the workers (mostly women and girls) leave
because of wages, the rest because of health issues or arguments with their supervisor and finally if they
become mothers.
More and more factories are trying to add values to a garment workers job. Some factories now provide a free
safe lunch in a clean canteen each day. Or they provide a 3 KG bag of rice to each garment worker each
month. Some factories work with a production target system, meaning if the garment worker already reach
their target before their shift ends, they can go home early. All in the hope they earn the garment workers
loyalty.
CBI could assist in finding a successful approach how to compensate these garment workers low wages by
improving their quality of life by adding a major value to their job and therefor creating factory loyalty in
return.
Child Day Care connected to the factory (age 3mth -5yrs)
If this benefit could be realized and implemented as a standard for the low wage garment worker in Myanmar,
it would generate a genuine improvement of their quality of life without raising their wages. Which would
improve the lives of many workers in the Garment Sector now and in the future. As women can keep on
working while having children and therefor be able to provide for their family as well.
35
10.
Information used for research
Myanmar Textile Garment Directory 2012

Myanmar Textile Garment Directory 2013-14
Institute for Human Rights and Business, article Responsible Investment in Myanmars Garment Sector
(22-March-13)
Location advantages and disadvantages in MM: The case of Garment Industry Paper by Toshihiro KUDO*
MSR (Myanmar Survey Research)
Newspaper The Myanmar Times Article Garment Sector on the rise (29 April 2013)
Newspaper The Irrawaddy Article After Bangladesh Tragedy, Questions for Burmas Garment Sector (11June-13)
Newspaper Myanmar Business Today Article Garment Industry Needs to grow out of CMP (1-Aug-13)
http://www.adfiap.org/smartmyanmar
http://www.jetro.go.jp
http://www.hidajapan.or.jp
http://www.buildingmarkets.org
http://www.umfcci.com.mm
www.giz.de
Interview with Dr. Aung Win, Vice-Chairman MGMA
Interview with a notable and a major EU garment importers
Interview with various Garment Manufactures on location
Interview with the director of trading company Jebsen and Jessen Myanmar (Port information)
The Myanmar Garment Industry: A Very Short Study. by David Birnbaum (28-Feb-13)
36
ANNEX 1
MYANMAR, Current and Potential Locations for Garment Manufactures

Name
Yangon Division Region
Mandalay Divesion Region
Ayeyarwaddy Division Region
Bago Division Region

Magwe Division Region
Mon State
Sagaing Division Region
Southern Shan State
Thanintharyi Division Region
Zone
Yangon Industrial Zones
Industrial Zone - 1
Industrial Zone - 2
Myingyan Industrial Zone
Meikhtila Industrial Zone
Pathein Industrial Zone
Myaungmya Industrial Zone
Hinthada Industrial Zone
Bago Industrial Zone
Pyay Industrial Zone
Yenangyaung Industrial Zone
Pakokku Industrial Zone
Mawlamyine Industrial Zone
Monywa Industrial Zone
Aye Tharyar Industrial Zone
Myeik Industrial Zone
Dawei Special Economic Zone
Established Working factories Garment factories

1075
NA
1990
661
NA
1997
333
NA
NA
306
NA
1997
81
NA
1993
NA
50 (planned)
NA
58
NA
NA
482
NA
NA
35
NA
NA
124
NA
1998
137
NA
NA
448
NA
NA
326
NA
1992
490
NA
1999
342
NA
NA
153
NA
NA
NA
NA
YANGON, Current and Potential Locations for Garment Manufactures

Name
Yangon Division Region
Outside Yangon
Proposed Plans
Zone
Established Working factories Garment factories
A. Dagon Seikkan Industrial Zone
1997/98
78
7
B. Thaketa Industrial Zone
1999
116
9
C. Hlaing Thar Yar Industrial Zone (1-4, 6-7)
1995/96
474
45
C. Hlaing Thar Yar Industrial Zone (5)
1996
275
45
D. Shwe Lin Pan Industrial Zone
2002
275
2
E. Shwe Pyi Thar Industrial Zone (1)
1990
123
16
F. Mingalardon Industrial Zone
1998
6
4
G. Shwe Pauk Kan Industrial Zone
1990/91
315
13
H. Dagon (East) Industrial Zone
2001
NA
NA
I. Dagon (South) Industrial Zone Sector (1)
1992
156
10
I. Dagon (South) Industrial Zone Sector (2)
1992
643
10
J. South Okkalapa Industrial Zone
1958/59
130
1
K. Shwe Pyi Thar Industrial Zone (2-4)
1998/2000
75
6
L. North Okkalapa Industrial Zone
1958/59
130
8
A. Thilawa Special Economic Zone
2001
25
2
B. Kyauktan Industrial Zone
1997
NA
NA
C. Hlegu Industrial Zone
178
D. Hmawbi Industrial Zone
E. Taikkyi Industrial Zone
Reference: MGMA Garment Directory 2013-14
NA : Information Not Avaiable
37
Myanmar (Division Regions)

38
ANNEX 2
David Birnbaum, has spent his entire career working in the international garment industry. From 1964 to 1998,
he lived and worked in Asia. In the early phase he specialized in building garment factories. Altogether he set
up 10 factories in Asia and more recently 1 factory in Mexico.
The Myanmar Garment Industry: A Very Short Study. By David Birnbaum (28-Feb-13)
Three weeks ago I completed a short study of he Myanmar garment industry during which time I visited a number of factories and
held a series of discussions with the leaders of the Myanmar Garment Manufacturers Association (MGMA ) as well the ILO other
interested organizations and some leading academics.
There is no doubt that the local industry faces serious challenges;
Not one of the factories I visited would meet minimum standards of compliance. Among the more serious problems is the
employment of underage children albeit as apprentices; excessive overtime, sometimes reaching 12-hour days; and seven day work
weeks. There are also structural problems such as improper layouts, poor lighting, and lack of machine guards, to name but a few.
At the same time, the local industry, having been cut-off from both the U.S. and EU markets, has little conception of the state of the
global garment industry. For example, in the few instances where I was able to see cost sheets, I calculated that CM prices were
below 5 per minute. To put this into context, a factory in Myanmar is paid less than the same factory in Bangladesh.
Finally local factories have little or no access to capital, with the result they are virtually CM operations, controlled by third-county
middlemen who provide the necessary materials while taking the lion share of the profit. The sooner the industry rid itself of these
parasites the faster it can begin the development process.
On the other side of the coin, the industry has some important positive advantages;
Despite statements to the contrary, wages are not unreasonably low. Qualified sewers are paid $85-$110 per month (including
overtime and other bonuses, which compares favorable with Bangladeshs $60 average, although well below wages in other
Southeast and East Asian countries. Workers are relatively well trained with an existing pool of unemployed multi-tasked sewers.
Furthermore, while the industry lacks qualified merchandisers, Myanmar has a large number of remarkable young university
graduates with probably the best foreign language skills in Asia. The product quality and range was better than I had expected. Lead
times compare well with competitors in South East Asia and are far better than those in South Asia.
All things considered, Myanmar has the makings of a first class garment exporting industry. However, even with the best of efforts,
the country will require two years to develop even a limited competitive capacity. The first step must be political. We are all
waiting for U.S. to drop import sanctions and for the EU to award duty free access (allowing third-country materials. Much will then
depend on the new U.S. and EU customers and even more on the transnational factories. In this regard, during the past few years
the industry has become far more sophisticated and responsible. No one wants a second Bangladesh (the original model is bad
enough). The ability to create a competitive but humane industry is in the hands of the stakeholders.
Everybody is going to Myanmar. It is the last untapped Asian resource with a large population. We can only hope we do a better job
this time around.
39
ANNEX 3
SMART Myanmar project
40
41
42
ANNEX 4
Contact details of 40 Local Owned Garment Manufacturers. Selected from the Garment Directory 2013-14.
Due to many factories being deleted from this list, as not really being locally owned. The list was
supplemented with factories that have more workers then the CBI selection criteria allow. In order to provide
more options of factories for CBI to work with.
FACTORY NAME
Asian Just Co. Ltd.
Myue & Sue
United World Garment Co. Ltd.
Cho Cho Phyu
Myin Thar Mfg Co. Ltd.
Su Yu Ei Garment
Success Creator Co. Ltd. (Cherry)
Shining Access Garment Mfg Co. Ltd.
Blessing Intertrade Garment Factory
Shwe Mingalar Garment Co. Ltd.
Asia Dragon Garment Factory
Inzali Thida Garment Co. Ltd.
Su Latt Htet Thar
Myanmar Mindum Garment
Bright Light Garment Mfg Co. Ltd.
Onrush Mfg Co. Ltd.
Shwe Zin Aye Garment
Real Star Mfg Co. Ltd.
Dagon Win Garment Factory
Ngwe Kant Kaw
True Faith
Super Garment Co. Ltd.
Gold Yacht Co. Ltd.(Shwe Ywet Hay)
Dagon Seikkan Garment
First Image Garment Mfg Co. Ltd.
Kyal Sin Wine Garment Mfg Co. Ltd.
Lat War Co. Ltd. (1)
Smile World Garment
Tailor Garment Mfg. Co. Ltd.
Asia Rose Mfg Co.Ltd.
Princess Power Mfg Co. Ltd.
Baw Ga Mandaing
New Ever Best Trading Co. Ltd.
Nilar Win Co. Ltd.
Taw Win Myanmar
Shweyi Zabe Garment Mfg Co. Ltd.
Akari Garment
Good Family Garment Co. Ltd.
Nay Min Aung Garment Co. Ltd.
Sky Apparel Group
Registered No. Of
Machine
658
650
650
600
600
600
600
589
550
550
500
500
500
480
450
450
438
420
400
400
360
350
337
300
300
300
500
300
300
296
284
250
250
250
250
235
220
200
200
200
Registered
Investment type
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Local
Contact Person
Kyi Sein
Ms. Yin Yin Htay
Mr. Shwe (MD)
Ms. Moe Moe
Sandar
Ms. Narlar Win
Ms.Thida
Mr. Aung Myint

Mr. Michael Chen
Ms. Lwin Lwin Than

Mr. U Chun (MD)
Ms. Shwe Wah Aye
Ms. Aye Aye Han (MD)
Ms. Khin Khin Kyi (MD)
Tel no. (+95)

01-618419, 095013178
01-705514, 01-685225
01-610840, 01-700822
01-610745
01-660096, 01-660208
09-5191196
09-5159239
01-610885
09-5168992
01-639329
01-592129, 01-592277
09-2165608
01-613807
09-9699824, 09-699825
01-591223, 01-590063
01-663583
01-379585, 01-381171
09-450044322
01-592035
01-688439, 01-688220
01-659214
01-612643, 01-610595
01-684126, 01-684229
01-592035
01-690052, 01-690327
01-590928
09-5074444
09-5159252, 09-5110492
01-685020
01-685321, 6885717
09-5077523
09-5013286
09-73126900
01-663583
09-5119760
09-5008066
01-6634409, 01- 663896
01-610402, 09-73049579
09-5008529, 09-73186488
01-640769, 01-647137
43

Cbi Myanmar Garment Sector Value Chain Analysis

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Value Chain Analysis

Garment Sector Myanmar

Value Chain Analysis

Value Chain Analysis

6. Mapping the Value Chain

ANNEX 1 Industrial Zones Myanmar (Focus on Yangon)

Value Chain Analysis

Value Chain Analysis

Phase 1: Desk research

Value Chain Analysis

3. Demand Side Analysis

Demand in the EU Market

Value Chain Analysis

Top 5 EU Import Countries

Top 5 Import EU countries of HS61

Top 5 Import EU countries of HS62

Trade Statistics (Imports) EU27 and Member States / Total

Trade Statistics (Imports) EU27 and Member States / Total

Total Import EU HS61

Total Import EU HS62

Trade Statistics (Imports) EU27 / Total EXTRA-EU27 For

Trade Statistics (Imports) EU27 / Total EXTRA-EU27 For

Total Import EU countries

Total EU Import (HS61 + HS62)

% HS61 from Total EU Import

% HS62 from Total EU Import

Value Chain Analysis

Value Chain Analysis

Identifying EU Buyers of Myanmar made Garments

Trade Statistics (Imports) Eur27 and Member

Import Value to the

Trade Statistics (Imports) Eur27 and Member

Import Value to the

4. Supply Side Analysis

Myanmar Market Supply Assessment

Chart supplied by the Myanmar Garment Manufacturing Association (MGMA).

Garment Industry Trends

Est.2012, Central Intelligence Agency.

Value Chain Analysis

Industrial Zones focused in Yangon. (By MGMA)

Value Chain Analysis

Maps provided by MGMA

YANGON Division region

Value Chain Analysis

Garment Industry Key Observations

machines but < 200 machines

> 200 machines but < 500 machines

> 500 machines but < 1000 machines

> 1000 machines but < 3500 machines

Value Chain Analysis

Traditional skills and techniques

The CMP price focus

Value Chain Analysis

Jacket > $ 3.5

5. Matching Demand with Supply

How to match EU Buyer with the Myanmar Garment Sector

Value Chain Analysis

Value Chain Analysis

Value Chain Analysis

6. Mapping the value chain

The Value Chain

The basic Myanmar garments Value Chain structure

Value Chain Analysis