VZCZCXRO9148
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #1471/01 2770722
ZNR UUUUU ZZH
O 040722Z OCT 06
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5227
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
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RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 RANGOON 001471 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/MLS, EB/TPP/ABT:TLERSTEN; PASS TO USTR FOR 
AHEYLIGER; COMMERCE FOR ITA/OTEXA:MDANDREA; TREASURY FOR 
OASIA:AJEWELL 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KTEX BM
SUBJECT: BURMA'S TEXTILES AND APPAREL SECTOR: SMALL AND 
SHRINKING 
 
REF: STATE 138090 
 
RANGOON 00001471  001.2 OF 002 
 
 
¶1. Summary:  Employment levels and company profits in the 
Burmese garment and textile sector decreased steadily over 
the past three years, and accounted for less than five 
percent of total trade earnings in 2005.  Since most garment 
exports are produced using imported goods, the chief economic 
impact of the decline is increased unemployment.  Burma 
profited briefly from US/EU limitations on Chinese imports in 
2005-06, but volumes have since returned to their normal, 
minimal level.  End summary. 
 
¶2. GOB economic information is rarely available and generally 
unreliable.  The regime considers data on industrial 
production and textile and apparel production confidential 
and does not publish it.  Answers to reftel questions for 
2005 and the sources we used follow: 
 
-- Total garment exports: $250 million (source: Business 
Information Group, BIG) 
-- Garment exports Jan-July 2006: $177 million (source: BIG) 
-- Textile/apparel share of total trade: 4.3% (source: 
Central Statistics Organization, CSO) 
-- Exports in textiles/apparel to the US: $20,000 (source: 
BIG) 
-- Manufacturing employment: 1.2 million (source: GOB 
statistics projected from 1990 Labor Force Survey) 
-- Textile and apparel employment: 150,000, about half 
working in privately owned factories (source: private 
industry contacts) 
 
¶3. Q: Are host country producers receiving lower prices due 
to heightened international competition? Are orders the same 
as last year?  Have foreign investors left? 
 
A: In 2005, garment producers primarily performed CMP (cut, 
manufacture and pack) operations, using inputs mainly 
imported from China, and exporting finished products to 
Europe, Japan, Singapore, Malaysia, Hong Kong, and Canada. 
Private garment factory owners tell us that they face 
decreasing prices for their production.  Labor costs in Burma 
are lower than most competitors in the region, they said, but 
their logistics costs are higher.  Burma's crumbling 
infrastructure, cumbersome import/export processes, and 
unpredictable government interference make operations riskier 
and more expensive, so garment producers are forced to take 
lower prices per piece.  One owner also told us that after 
2003, U.S. sanctions dissuaded most major buyers from 
sourcing in Burma, and some Hong Kong and Taiwanese investors 
moved their production to China and Vietnam.  Most factories 
in Burma now take whatever foreign orders they can get. 
 
¶4. Q: Has increased global competition affected local labor 
conditions? 
 
A: Burmese wages are already among the lowest in the region, 
so global competition has a smaller impact on Burma's 
isolated economy than domestic factors.  Factory workers 
demanded, and in most cases, received, a significant wage 
increase in April 2006 when the GOB increased civil service 
salaries across the board.  Garment workers at the bottom of 
the scale now earn K.30,000 per month, just over US$22 at 
market exchange rates.  About half of all garment sector 
employees work at government-owned factories. 
 
¶5. Q: Have US and EU restrictions on China affected export 
prospects of host country producers? 
 
RANGOON 00001471  002.2 OF 002 
 
 
 
Due to low demand in 2003 and 2004, many manufacturers 
operated for only three to four months of the year. 
According to the Secretary of the Garment Manufacturers 
Association, from July 2005 to June 2006, Burmese factories 
received 50 percent more orders than the prior year because 
the EU and US imposed the Safe Guard system and reduced 
imports from China.  After August 2006, the number of orders 
fell back to normal as most buyers returned to Chinese 
suppliers. 
 
¶6. Q: Has the host country taken action to increase the 
country's competitiveness? Does Post think the strategy will 
be successful? 
 
A: The GOB offers modest tax benefits to factory owners, 
upgraded its port facilities, and recently promised to supply 
a few industrial zones with more reliable electricity. 
Officials plan to develop free trade zones or industrial 
zones on the coast following the model of Chinese Laws on 
industrial zones.  The government-controlled Federated 
Chambers of Commerce offer training courses with private 
sector sponsorship to upgrade workers' skills.  However, 
despite these modest incentives, Burma's business climate 
remains unattractive to both domestic and foreign investors. 
Productivity is low, infrastructure is deteriorating, and 
corruption and political intervention are rife.  Until the 
government establishes more predictable, efficient, and 
transparent economic and business policies, Burma's share of 
the global textiles and apparel sector will continue to 
shrink. 
STOLTZ