Myammar’s reputation as an ideal sourcing destination has been under scanner since the country’s military coup in 2021. Despite the apparel sector being Myanmar’s largest employers, accounting for 30 per cent of total exports in 2021, it faced substantial job losses and uncertainties due to the coup, indicates UNComtrade 2022.

Nevertheless, fashion companies’ continue to source from Myanmar due to its changing business environment and need to diversify away from China. From January-May 2022, Myanmar’s apparel exports to the EU and the US remained largely stable while those to Japan increased back to level before the military coup, shows UNComtrade data.

Supplementary sourcing base

However, Myanmar’s share in leading apparel import markets US, EU and Japan remain below 5 per cent as most fashion brands and retailers treat Myanmar as a supplementary sourcing base as part of their overall sourcing diversification strategy. On its part, Myanmar is diversifying exports to other countries post the military coup. In 2021, it increased exports to other Association of Southeast Asian Nations (ASEAN) members from 0.3 per cent in 2020 and 2.7 per cent in 2019. Its imports of textile raw materials from Asia also increased to 97.3 per cent, including 72 per cent from China.

Exports determined by trade sanctions

Myanmar’s apparel exports in 2022 were also determined by trade-related sanctions imposed by importing countries. The most significant sanctions were imposed by the US including suspension of 2013 Trade and Investment Framework Agreement and issuance of the Business Advisory for Burma in January 2022. These have made US fashion brands and retailers cautious about sourcing from Myanmar post the coup. The 2021 USFIA industry Benchmarking Study released in July shows, only about 9.4 per cent of respondents reported sourcing from Myanmar, much lower than 19 per cent in 2020 before the military coup.

In contrast, the EU continues to source from Myanmar as it enjoys duty-free benefits under the Everything But Arms (EBA) program. Similarly, Myanmar’s exports to Japan are also quality for duty-free benefits under the Generalized System of Preferences for Least Developed Countries.

Low-cost sourcing base for specialized products

Fashion companies also consider Myanmar a low-cost sourcing destination for specialized categories, particularly outwear. This encourages brands like Zara, H&M, Adidias, etc, to continue sourcing outerwear from Myanmar. The low-price of outwear ‘Made in Myanmar’ also attracts brands to source from there as against China and Vietnam. Myanmar remains a reasonable souring destination for certain types of orders and an ideal destination to diversify away from China.

However, despite these positives, Myanmar’s outlook as an apparel sourcing base remains uncertain due to the recent political turmoil. A few labor unions are calling for a suspension of Myanmar’s EBA eligibility. If implemented, this would cause Myanmar’s apparel exports to suffer substantially. Companies are therefore, urging brands and retailers to make a responsible exit from Myanmar and ensure transparency of operations.