Sep 29, 2012

Myanmar trade set for revival after import ban lifted

Myanmar's garment and agriculture industries could be set for a revival after a US decision to ease an imports ban, but observers warn against hopes of a sudden export boom for the impoverished country.

After decades of military rule that laid waste to Myanmar's economy, leaving many jobless and infrastructure in ruins, a wave of reform under a new regime is raising the prospect of a brighter future as the nation opens to the world.

The West has rolled back its embargoes against Myanmar in recognition of the huge strides towards democracy, stoking expectations of an economic renaissance in the resource-rich but long-neglected country.

United States Secretary of State Hillary Clinton said this week that the US would relax its curbs on imports, in a move aimed at removing the final major obstacle to trade with the country.

"The easing of the import ban could see huge increases in exports for relevant sectors, which in turn would benefit the domestic economy and create employment," said Jan Zalewski, an analyst with the IHS Global Insight research group.

Experts say the move, which will be considered by Congress sector by sector and comes after Washington scrapped most restrictions on US investments into Myanmar, will present a sea change for some industries, including textiles, timber and agriculture.

Garment exports were some of the hardest hit when the US slapped its embargo on Myanmar products in 2003 in response to the brutality of the then ruling junta.

Washington's announcement was applauded at the Maple Trading garment factory in Bale on the outskirts of Yangon, where workers described the hardships caused when the industry collapsed, wiping out three in four jobs.

The plant's 40-year-old supervisor Conney, who has been working at the firm for 12 years, said many factories were forced to close after the import ban.

"Some of the workers were living in private hostels and were in so much trouble," said Conney, who goes by one name, adding that stories were rife that many young women had been forced to turn to prostitution.

"It would be great to have good business so the female workers can have a safe life here," she said as the huge strip-lit factory floor rang with the clatter of sewing machines assembling jackets and trousers for Japanese and Korean buyers.

"They work in the factory from dusk to dawn and also support their families," she said.

Maple Trading boss Aung Win said he was "delighted" with the US decision and hoped it would see a return to the times of large-scale orders for his factory, which employs around 700 people, mostly women.

"There used to be around 400,000 workers in garment factories and now there are only about 100,000," he said. "There will be more factories, unemployment in the country will decrease and purchasing power will go up."

Aung Win, who is also the vice chairman of Myanmar Garment Manufacturers Association, added the country could tempt back migrants -- a millions-strong diaspora -- who are working in factories abroad, notably in Thailand.

"Myanmar's biggest advantage is the very cheap availability of labour, compared to even other low-wage manufacturers such as Bangladesh and Cambodia," said Arvind Ramakrishnan, an analyst at global risk research Maplecroft.

"However, shortages of electricity and extreme levels of labour rights violations will be severe risks associated with this sector in the medium term," he said.

Ramakrishnan said those risks meant the country was "unlikely to become a serious challenger to other textile producers in the region in the foreseeable future".

Aung Win also said the lifting of Washington's embargoes was not likely to produce change overnight.

"When American businesses come in, they will look at things like corporate social responsibility, codes of conduct etc. Only when they are satisfied with such criteria, will they order our products so we will need to prepare for that."

Investors eyeing Myanmar's strategic location between China and India and its rich natural resources are also awaiting a new investment law, which was sent back to parliament for amendment by Myanmar President Thein Sein this week, to gauge the risks of doing business in the country.

The immediate beneficiaries of the US import ban being lifted could be state-owned companies, and businesses owned by political elites, Ramakrishnan said.

The US has allowed American firms to work with the controversial state-owned Myanma Oil and Gas Enterprise -- with caveats.

But certain sectors, such as the country's huge store of precious stones like gems and jade are likely to face rigorous scrutiny, given the close association of the junta and its cronies to those sectors.

And the process of rolling back the bans is likely to be time-consuming, said IHS's Zalewski, as the US unpicks which businesses it deems to be still connected to the former military regime.

"It now remains to be seen what will be the extent of the easing of the import ban," he said.

"Myanmar's military has a large footprint in the economy and the US will be cautious that it does not amplify the army's power still further through trade liberalisation."

Source: AFP