Fashion industry shifts outsourcing away from military-ruled country
YANGON/TOKYO -- Global clothing retailers such as Japan's Fast Retailing and U.K. giant Marks & Spencer are ending outsourced production in Myanmar, driven off by human rights and labor concerns as well as difficulties conducting operations. Myanmar's military takeover in February 2021 prompted an exodus by foreign companies, particularly those that held joint ventures with local partners linked to the military. The regime has crushed protests against its takeover, and is accused of widespread human rights abuses. Clothing brands were an exception, continuing to outsource production to small factories in the Southeast Asian country and providing low-income jobs. But faced with their inability to improve rock-bottom wages and severance benefits under the local system, some of these companies are leaving the country。
Fast Retailing is the latest to exit Myanmar, removing partners in that country from its list of garment and processing factories. The company behind the Uniqlo casual wear chain had outsourced production of jackets and shirts for GU, another of its brands. But that relationship will end with products for the 2023 fall-winter season, the retailer said. The termination is expected to have limited impact on Fast Retailing, which has over 430 manufacturing partners worldwide in such countries as China and Vietnam. Ryohin Keikaku, the Japanese operator behind Muji household goods stores, also plans to end sourcing of down jackets and other items from Myanmar by August. Marks & Spencer announced last year it would exit by March, saying the company does not "tolerate any human rights abuses within any part of our supply chain." Primark, an Irish fast fashion retailer, also has said it is leaving Myanmar. Given the worsening situation, "we believe our only option is to begin working towards a responsible exit from the country," the company said. Workplace conditions remain unaddressed under military rule. The daily minimum wage for factory workers has stayed at 4,800 kyat ($1.68 at market exchange rate) since 2019. A report from the U.K.'s Ethical Trading Initiative -- a consortium of businesses, labor unions and nongovernmental organizations -- said trade unionists cannot safely bargain with employers。
Workers return home from a garment factory district in Yangon. (Photo obtained by Nikkei)
Increasing power outages and logistics breakdowns also pose risks to management of product deliveries. "Myanmar's large population makes it easier to recruit workers, but the unsteady electricity infrastructure is a problem," said an official from a Japanese apparel company. Tighter fuel supplies, most of which are imported, are also becoming an urgent issue. Withdrawing responsibly is a challenge for global companies. In late February, two factories that made clothes for Primark shut down abruptly, leaving 2,200 workers without a job, according to a trade union. The sudden closures by the Irish company's suppliers violated its code of conduct, Primark said, noting that "we now have confirmation that all workers will be paid in full," referring to wages and compensation owed to employees. The majority of companies seek to stay in Myanmar and improve labor conditions to the extent possible. The European Union and the European Chamber of Commerce in Myanmar (EuroCham Myanmar) have formed a network promoting appropriate levels of employment and will create a framework for monitoring labor conditions.
Karina Ufert, CEO of EuroCham Myanmar, said that "disengagement of the responsible brands will only lead to a further deterioration in the situation for the workers' rights and contribute to greater unemployment." Clothing exports are growing amid the weaker kyat. The EU, Japan and the U.S. all recorded the highest imports from Myanmar last year -- a combined $4.7 billion -- since the 2011 beginning of political reforms in the country. Fashion retailers such as Inditex, the Spanish player behind Zara, and Sweden's H&M continue to source from Myanmar. An H&M spokesperson said that "in the current situation, we are very mindful of the fact that many people in Myanmar rely on international companies for their livelihood," and the company "refrains from taking any immediate decision on future order placement in Myanmar."
