LOW wages in Myanmar, now among the lowest in Asean, have been mentioned as the primary advantage for companies planning to locate their manufacturing plants in the country. Many companies have taken advantage of the situation. The number of foreign-owned factories has been on the rise, despite the existence of major challenges, such as poor infrastructure throughout Myanmar. According to data provided by the Directorate of Investment and Company Administration (DICA), 407 companies have invested a total of US$4.42 billion in the manufacturing sector, or 9.56 per cent of combined foreign investment in the country, as of May this year. This amount reflects a 17.55 per cent increase from the $3.76 billion in investment in the manufacturing sector at the end of 2014. In terms of the number of investors, the figure rose by 13 per cent from 360. More companies have committed to pour more investment into the sector, as the total number of foreign companies with permission at the end of May stayed at 497. Together, they promised a combined investment of $5.65 billion, which would account for 10 per cent of the total foreign investment permitted. In terms of value, the manufacturing sector is ranked third, following only the oil and gas sector and the power sector. This rise in investment followedefforts by the Thein Sein government, which has amended several laws on foreign investment since 2011. Foreign direct investment inflows to the country are expected to reach $6 billion in the 2015-16 fiscal year, though actual inflows hit $8.01 billion in the previous fiscal year, well above the $5-billion target. “I have no doubt that manufacturing is one of the key drivers of Myanmar’s economy, as it can create a lot of job opportunities and earn a fortune in foreign currencies,” said Yanai Takashi, president and chief executive officer of Myanmar-Japan Thilawa Development Ltd (MJTD), in an interview in April. The first phase of the Thilawa Special Economic Zone alone has the potential to create 40,000-50,000 job opportunities and has attracted exportoriented firms, he added. UK Trade and Investment, a government agency tasked to promote UK companies, estimated that among all Myanmar’s economic sectors, manufacturing would create the largest number of new jobs, as demand should rise
from 1.8 million jobs to 7.6 million by 2030. Given that about 70 per cent of Myanmar’s population of 52 million is involved with agriculture, this job creation would greatly lift the quality of life of many locals.
Minimum wage
The recently published 2013-14 Asean Investment Report reveals that China is increasing its investments in the garment industry throughout the Asean region – especially in Myanmar, Cambodia and Vietnam – in order to capitalise on low labour costs. The latest survey conducted by Standard Chartered shows that manufacturers in China – spanning nine cities in China’s Guangdong Province and accounting for 27 per cent of Chinese exports – continue to face persistent labour shortages and rising wages. Manufacturers in China and other countries in Asean are facing the challenge challenge of rising wages. The minimum daily wage in Thailand was raised to Bt300 in 2013. Negotiations are underway to further increase this figure next year. Thai workers expect the minimum wage to reach Bt491 a day in three years and Bt561 a day in five years. From April, the minimum wage in Laos was raised by 44 per cent from 626,000 kip (about $77) a month to 900,000 kip (about $110). In Myanmar, the average factoryworker wage is between Ks45,000 ($40) and Ks80,000 ($71) per month in Yangon. Manufacturers are now closely monitoring the latest developments in Myanmar as workers attempt to secure a minimum wage for the first time in history. Negotiations have grown fierce as workers want pay raises while employers seek to keep wages low. The final rate, however, will be applied to all manufacturers nationwide. Labour Minister Aye Myint said last month that the minimum wage will be set in a range of Ks3,200-Ks4,000 per day, or approximately US$2.86-$3.58.
Threat to workers
Several Chinese and South Korean garment manufacturers have threatened to shut down their factories and leave the country if the Myanmar government institutes a minimum daily wage of Ks3,600 (just over US$3). The manufacturers announced these conditions during a meeting of the Myanmar Garment Manufacturers Association (MGMA) in Yangon on Thursday. Sandar, the managing director of the Myanmar Apparel Co Ltd and Pearl Garment and local representative for a Chinese investment group, was the first to threaten to close her factory in response to the new minimum wage. Won Ho Seo, chairperson of the Korean Garment Manufacturers Association, said Korean manufacturers would also close their factories following the Chinese, citing the likelihood of labour protests as the reason. After the meeting, the Chinese Investors Association issued a statement in opposition to the proposed minimum wage. According to the statement, the association, which is comprised of investors from mainland China, Hong Kong and Taiwan, is investing in Myanmar because of its large population and tax exemptions on goods exported to other developing countries. The investment was meant to yield bilateral interest for both employers and Myanmar employees. Therefore, the statement said, the government’s announcement on June 29 of a new minimum daily wage of Ks3,600 was “shocking.” The statement also said if the government insists on setting such a rate at a time when workers lack sufficient skills, orders for garments will diminish, sparking lay-offs in the garment factories. Consequently, the operation of factories would stop and ultimately be shut down; the statement predicted.Sandar said Myanmar has about 30 Chinese garment factories and over 60 South Korean garment factories. About 200,000 Myanmar citizens who work in these factories could lose their jobs, she said. The Chinese employers also said if they closed their factories, they do not plan to pay laid-off workers a compensatory payment equal to three months of wages because the lay-offs, in their view, are the result of government action. Myint Soe from MGMA said its 145 members will lodge a complaint within two weeks. He said the minimum daily wage of Ks 3,600 is, indeed, lower than that of Cambodia. However, the opposition of these manufacturers is rooted in their inability to afford the new minimum wage for all of their workers, not a lack of desire to pay them. Aung Lin, president of the Myanmar Trade Union Federation, said the garment manufacturers’ offer to pay Ks2,500 per day or else shut down their factories if the proposed rate is set is just a threat. He also said some labour unions are not even satisfied with the rate of Ks3,600. He said his federation would soon hold a press conference on the matter. “Our country has hundreds of other businesses that employ 20 to 30 million people. About 200,000 people work in CMP (cutting, making and processing) garment factories. The opposition of these garment manufacturers can impact workers from other businesses. There are many who cannot accept wages as low as Ks3,600. I want them to devise ways to pay this rate. Don’t threaten us with shutting down factories and causing workers to lose their jobs,” said Aung Lin. Foreign businesses operating in Myanmar, including garment factories, enjoy many benefits, including a generalized system of preferences. Therefore, a rising number of foreign employers are coming to Myanmar to invest in the garment industry.
Workers’ demand
The Ks3,600 rate is indeed lower than the Ks5,600 that workers from industrial zones in Yangon Region asked for. About 150 of them shouted for the new rate as they staged a march on the 125th International Labour Day on May 1. The government’s willingness to institute a minimum wage follows years of economic growth, which spurred domestic consumption and, as a result, inflation. The preparation has been lengthy. A survey on living costs, expenditures, commodity prices and salary rates was conducted last year, as the government originally planned to announce the minimum wage at the end of last year. The survey covered more than 20,000 households in 128 townships throughout the country. The situation worsened as the enactment of the minimum wage was delayed and the government raised salaries for civil servants, which further buoyed spending and goods prices in the country. Aung Lin said earlier that if the new wage cannot cover workers’ living costs, the views of labour unions across the country would be collected. He did not comment on whether a nationwide protest is in the works.
