VZCZCXRO6335
RR RUEHBZ RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #0871/01 2561026
ZNR UUUUU ZZH
R 131026Z SEP 07
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC 6506
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RUEHBY/AMEMBASSY CANBERRA 0503
RUEHKA/AMEMBASSY DHAKA 4608
RUEHNE/AMEMBASSY NEW DELHI 4036
RUEHUL/AMEMBASSY SEOUL 7593
RUEHKO/AMEMBASSY TOKYO 5150
RUEHCN/AMCONSUL CHENGDU 1194
RUEHCHI/AMCONSUL CHIANG MAI 1079
RUEHCI/AMCONSUL KOLKATA 0057
RUEATRS/DEPT OF TREASURY WASHDC
RHHMUNA/CDR USPACOM HONOLULU HI
RUEHGV/USMISSION GENEVA 3285
RHEHNSC/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 0940
RUEKJCS/SECDEF WASHDC
RUEHBS/USEU BRUSSELS
RUEKJCS/JOINT STAFF WASHDC

UNCLAS SECTION 01 OF 03 RANGOON 000871 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, EEB/TPP/ABT - GCLEMENTS 
COMMERCE FOR ITA/OTEXA -  MDANDREA 
USTR FOR CMILLER 
PACOM FOR FPA 
TREASURY FOR OASIA:SCHUN 
 
E.O. 12958:N/A 
TAGS: ECON ETRD KTEX BM
SUBJECT: TEXTILE AND APPAREL PRODUCTION IN BURMA 
 
REF: STATE 114799 
 
RANGOON 00000871  001.2 OF 003 
 
 
¶1.  Summary.  Burma's garment and textile sector faces many 
difficulties, including poor investment climate and crumbling 
infrastructure.  It has the added disadvantage of being subject to 
U.S. sanctions.  In the past five years, employment levels and 
company profits in the Burmese garment and textile sector have 
decreased steadily, and the textile sector accounted for less than 
five percent of total trade earnings in 2006.  Since most garment 
exports are produced using imported goods, the real economic impact 
of the decline has been increased unemployment.  U.S. sanctions 
alone cannot be blamed for the decline of the sector.  Although the 
Burmese Government reports no legal imports of Chinese textile 
products, they are often sold in higher-end stores.  The GOB has 
done little to bolster the textile and apparel sector, and is unable 
and unwilling to stop the illegal import of Chinese products.  End 
Summary. 
 
¶2.   GOB economic data is closely guarded and generally unreliable. 
The regime considers data on industrial production and textile and 
apparel production to be confidential and therefore does not publish 
it.  We met with private textile producers and local statistical 
associations to obtain the following information: 
 
--Total industrial production for FY05/06: $262 billion 
--Total garment exports in 2006: $288.9 million 
--Garment exports Jan-July 2007: $161.4 million 
--Textile/apparel share of total imports in FY05/06: 12 percent 
--Textile/apparel share of total exports in FY05/06: 9 percent 
--Textile/apparel share of total imports in FY06/07: 9 percent 
--Textile/apparel share of total exports in FY06/07: 5 percent 
--Textile/apparel share of total imports in FY07 (through July): 13 
percent 
--Textile/apparel share of total exports in FY07 (through July): 4 
percent 
--Total Exports in textile/apparel to the U.S. in 2006: $0 
--Total Manufacturing employment: 1.2 million, as projected from GOB 
1990 Labor Force Survey 
--Total Textile and apparel employment: 125,900 in private sector. 
Employment figures for state-owned garment industry are not 
available. 
 
(Note:  Burma's fiscal year runs from April 1 - March 31.) 
 
¶3.  Q: Are host country producers receiving lower prices due to 
heightened international competition?  Have manufacturers received 
more, less, or the same number of orders as in years past?  Have 
foreign investors, particularly Asian investors, closed factories or 
otherwise pulled out of local production? 
 
A:  Garment producers in Burma primarily perform cut, manufacture, 
and pack (CMP) operations.  They use textile inputs mainly imported 
from China and export finished products to Europe, Japan, Korea, 
Singapore, Malaysia, and Hong Kong.  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 explained, but their logistic costs are higher.  Burma's 
crumbling infrastructure, cumbersome import/export processes, and 
unpredictable government interference make operations riskier and 
more expensive, do garment producers are forced to take lower prices 
per piece. 
 
As of September 2007, there were approximately 200 garment factories 
in Burma, and less than 20 of them were foreign owned.  Japanese and 
Korean companies remain the largest foreign investors in the textile 
and apparel market.  Burma's business laws do not favor 
foreign-owned companies, which must pay taxes and all bills in 
 
RANGOON 00000871  002.2 OF 003 
 
 
foreign currency, converted at the official rate of 6 kyat to $1. 
These companies face significant profit loss, as the archaic 
exchange rate (the market rate is now over 1350 kyat to the $1) acts 
as a tax on foreign companies. 
 
In 2006-2007, one local garment factory closed its operations due to 
profit losses. 
 
¶4.  Q: Have U.S. and EU restrictions on certain exports of textiles 
and apparel from China, effective through 2007/2008, affected export 
prospects for host country manufacturers? 
 
From January-July 2006, Burmese factories received 50 percent more 
orders than the prior year because of U.S. and EU-imposed safeguards 
on Chinese products.  After August 2006, the number of orders 
reduced to normal levels, as most buyers returned to Chinese 
suppliers. 
 
¶5.  Q: Has the host government implemented, or is it considering 
implementing, safeguards or other measures to reduce growth of 
imports of Chinese textile and apparel products into the host 
country? 
 
Although the Burmese Government does not record any imports of 
Chinese textile or garment products, Chinese apparel is readily 
available in larger cities and in upscale stores.  Some of these 
Chinese products are imported via Thailand; the rest is illegally 
smuggled into Burma over the border.  The GOB does not consider 
Chinese textile or apparel products to be a threat to local 
industries, and thus is not considering implementing safeguards on 
Chinese products. 
 
¶6.  Q: Does the host government have any policies or programs in 
place to deal with any dislocated workers in the sector resulting 
from increased competition? 
 
A:  Under Burmese law, a laborer can request a subsidy from the 
government's unemployment benefit program.  In practice, the 
government does not provide money to unemployed workers. 
 
¶7.  Q: Has increased global competition affected local labor 
conditions by causing employers to reduce wages, seek flexibility 
from government required minimum wages, or adversely affected union 
organizing? 
 
A:  Burmese wages are among the lowest in the region, so global 
competition has little to no impact on Burma's already isolated 
economy.  In April 2006, factory workers demanded and received a 
significant wage increase after the GOB increased civil service 
salaries.  Currently, garment workers at the bottom of the scale 
earn 30,000 kyat/month (approximately $23 at market exchange rates). 
 
 
While Burmese law permits workers to form unions with the prior 
consent of the government, the government, in practice, does not 
allow unions.  Global competition does not affect union organizing 
in Burma; rather the GOB blocks the formation of unions as a method 
of political control. 
 
¶8.  Q: Has the host government or private industry taken action to 
increase the country's competitiveness, such as improving 
infrastructure, reducing bureaucratic requirements, developing the 
textiles (fabric production) industry, moving to higher value-added 
goods, or identifying niche markets?  Does post think that the host 
government or private industry's strategy will be successful? 
 
A: Burma's infrastructure is baldy dilapidated, with little evidence 
 
RANGOON 00000871  003.2 OF 003 
 
 
of GOB plans to improve.  The GOB offered modest tax benefits to 
factory owners and promised to supply a few industrial zones with 
more reliable electricity.  Officials plan to establish special 
economic zones (SEZs) by 2015 in the border areas with Thailand and 
China.  These SEZs will function as free trade zones, and the GOB 
plans to offer tax incentives for foreign companies who invest. 
However, the law has been awaiting final approval for several years. 
 As another incentive, the government-controlled Federated Chamber 
of Commerce offers training courses with private-sector sponsorship 
to upgrade workers' skills. 
 
In 2007, the GOB streamlined the process for import/export licenses. 
 Previously, it took up to 21 days to receive a license; now some 
companies receive their licenses in less than 7 days.  The 
streamlined process is not universally applied; several smaller 
garment factories complained that it still takes up to 21 days to 
receive a license.  Additionally, companies must apply for the 
licenses in Nai Pyi Taw, Burma's new capital, which is located more 
than 200 miles from Rangoon.  Companies must apply in person for a 
license, and cannot apply in advance of either the import or export 
shipment. 
 
Because most local garment factories perform CMP operations, neither 
the government nor companies have made any effort to find niche 
markets or produce high value-added products.  Textiles produced in 
Burma are of lower quality and thus are not exported; there is no 
plan to improve textile production. 
 
¶9.  Q: Overall, if not already addressed, does post think that the 
host country can be competitive in textiles and apparel exports 
given heightened global competition? 
 
A:  Burma's business climate remains unattractive to both domestic 
and foreign investors.  Productivity is low, infrastructure 
continues to deteriorate, and corruption and political intervention 
are rife.  Until the government establishes more predictable, 
efficient, and transparent economic and business policies, Burma's 
share of global textiles and apparel will continue to shrink. 
 
VILLAROSA