VZCZCXRO2552
RR RUEHCHI RUEHDT RUEHHM RUEHNH RUEHTRO
DE RUEHGO #0878/01 2570918
ZNR UUUUU ZZH
R 140918Z SEP 07
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC 6516
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RUEHBY/AMEMBASSY CANBERRA 0511
RUEHKA/AMEMBASSY DHAKA 4611
RUEHNE/AMEMBASSY NEW DELHI 4044
RUEHUL/AMEMBASSY SEOUL 7601
RUEHKO/AMEMBASSY TOKYO 5158
RUEHCN/AMCONSUL CHENGDU 1197
RUEHCHI/AMCONSUL CHIANG MAI 1082
RUEHCI/AMCONSUL KOLKATA 0060
RUEATRS/DEPT OF TREASURY WASHDC
RHHMUNA/CDR USPACOM HONOLULU HI
RUEHGV/USMISSION GENEVA 3293
RHEHNSC/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 0948
RUEKJCS/SECDEF WASHDC
RUEHBS/USEU BRUSSELS
RUEKJCS/JOINT STAFF WASHDC

UNCLAS SECTION 01 OF 03 RANGOON 000878 
 
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: BURMA'S SHRINKING APPAREL INDUSTRY 
 
Ref:  Rangoon 871 
 
RANGOON 00000878  001.2 OF 003 
 
 
¶1.  (SBU) Summary.  Burma's textile and apparel industry, once a 
vibrant and thriving industry, continues to lose competitiveness on 
the world market.  Burmese apparel exports have dropped 56 percent, 
from 661.8 million in 2003 to 288.8 million in 2006.  Private 
industry officials are confident that textile and apparel exports in 
2007 will match 2006 levels, but are unsure about the future of 
Burma's dwindling textile industry.  Although companies face 
declining profits, they are afraid to produce high-value products 
for niche markets and instead focus on basic Cut-Make-Pack 
operations.  There has been no new "official" foreign direct 
investment in the textile sector since 2003, although foreign 
companies from Korea and Taiwan provide indirect support to 
Burmese-owned factories.  Illegal imports of Chinese garments 
continue to enter the market, and because they only compete with 
privately-made apparel and not government products, the GOB does not 
consider them a threat.  End Summary. 
 
Garment Industry Shrinking 
-------------------------- 
 
¶2.  (SBU) Burma's garment industry has taken a big hit in the past 
five years.  In 2003, more than 400 private garment factories 
existed in Burma, exporting a total of $661.8 million in apparel 
products to countries including the United States, Europe, and 
Japan.  Between 2004 and 2006, investors closed more than 230 
private factories and laid off more than 200,000 workers.  U Myint 
Soe, Chairman of the Garment Association, confirmed that there has 
been no new "official" foreign investment in the garment industry 
since 2003.  While industry analysts point to the imposition of U.S. 
sanctions in 2004 as the driving force behind the decline of the 
garment industry, Burma's poor investment climate and deteriorating 
infrastructure also triggered the factory closings. 
 
¶3.  (SBU)  Private firms dominate Burma's garment industry, 
controlling approximately 170 private garment factories in Burma. 
The majority of these firms export finished apparel products only , 
while less than thirty factories produce for the Burmese market. 
The government, under the Ministry of Industry (I) operates two 
garment production centers, manufacturing only for domestic sale. 
Burma's investment laws do not favor foreign companies, which must 
pay their bills and taxes in foreign currency at the official 
exchange rate of 6 kyat/$1.  Locally owned companies pay in kyat at 
the market rate of 1350.  Of the 170 private factories, less than 
twenty are 100 percent foreign-owned and approximately eighty 
receive funds from Taiwanese and Korean companies but are registered 
under a Burmese owner.  U Myint Soe acknowledged that the government 
condones this practice because it is the only way to keep the 
garment industry from collapsing. 
 
They're Just Sewing Machines 
---------------------------- 
 
¶4.  (SBU) Unlike other Asian countries with developed garment 
sectors, Burma's garment industry is not particularly innovative. 
Garment factories are Cut-Make-Pack (CMP) businesses; factories earn 
profits not on goods sold, but rather on the commission made on 
low-wage sewing.  (Note: Burma's labor costs are the lowest in the 
region; garment factory workers make an average of 30,000 kyat or 
$23 a month.  End Note.)  Garment factories in Burma do not sell 
directly to the end users, but instead establish relationships with 
companies from Hong Kong, Taiwan, Japan, and Korea, which order a 
certain number of finished apparel pieces to resell to the European 
and Asian markets.  To fulfill orders, Burmese garment factories 
import 100 percent of inputs, including fabrics, threads, and 
adornments, and create the garment from a specific pattern.  The 
 
 
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