Myanmar garments to get US boost

Aung Thein, vice president of the Myanmar Industries Association and managing director of Nibban Electronics, welcomed the move, saying it would boost exports to the US and strengthen local industries. Garment factories would reap the most from the decision, he said.

“For the time being, some well-known brands like H&M have been making some of their items in Myanmar. As the restrictions are eased, local businesses will get a chance to produce more value-added products and can export them to the US,” he said.

He expected garment factories to be the main beneficiaries, as they are the biggest victims of the US sanctions.

“The sanctions hurt the grassroots a lot. When the US started imposing sanctions on Myanmar, some of the garment factories here had to stop working. As a result, a lot of garment workers, mostly female, lost their jobs and faced many difficulties for their survival. So, I believe SMEs [small and medium-sized enterprises] will benefit a lot from this temporary easing of sanctions,” Aung Thein said.

In 2014, Myanmar-US trade value stood at US$185.6 million (Bt6.67 billion), with Myanmar exports valued at $92.7 million, according to the US Department of Commerce. In the first 10 months of this year, exports to the US rose to $116.7 million, along with an increase in bilateral trade value to $306.1 million. The US put a lid on Myanmar imports in 2004. The activity resumed only in 2013, with goods valued at $19.9 million shipped to the US. Myanmar exported $1.56 billion worth of garment products in 2014, according to the Myanmar Garment Manufacturers Association, which expects the value to hit $2 billion this year from just over $900 million in 2012. According to the association, GAP is a pioneering US company to source “Made in Myanmar” garments. Others are H&M, Primark and Adidas.

Maung Aung, a senior adviser to the Commerce Ministry, is also convinced that the easing of restrictions would benefit mainly garment factories, as garments constitute a sizeable portion of exports to the US. “We expect our CMP [Cutting, Making, and Packaging] businesses to become the beneficiary of the temporary easing. There will be more job opportunities in this sector,” he said.

“Now our bilateral trade between Myanmar and the US is much lower than the figures of other Asean countries. It is still too early to say how this move will benefit the entire economy, but something is always better than nothing.” Since the European Union lifted sanctions and returned the generalised system of preferences (GSP) to Myanmar, some foreign companies have relocated factories to the country to take advantage of the low tariffs. In July, 2014, the US granted permission for timber trade with Myanmar for one year. Most of the trade sanctions were lifted, but dozens of junta-era cronies and their sprawling business interests remain on a Washington embargo.

Complicating the issue is the fact that the main Yangon port terminal is run by Asia World, one of the country’s largest conglomerates, which is owned by Steven Law, who remains on the blacklist. This makes it difficult for US businesses to operate shipments through the port, which handles around half the country’s freight.

According to a report, in a letter to the Treasury Department in July, the Clearing House Association and the Bankers Association of Finance and Trade said the ongoing sanction listings could have the unintended effect of a “de facto trade embargo” on Myanmar.

It had been reported last month that major US banks, such as Citigroup, Bank of America and PNC Financial, were shying away from backing Myanmar trade after discovering that the Asia World port is controlled by a businessman on the US sanctions blacklist. This led to the decision to allow shipments to go through all ports and airports for six months. Maung Aung warmly welcomed the move, which allows Myanmar to sell more products to the US and allows US banks like Citigroup to resume business with Myanmar.

“It is good news for the short term. But for the long term, we expect the resumption of GSP from the United States. If that is granted, more local businesses will definitely try to export their products to the US,” he said.

With a view to the six-month easing to boost bilateral trade, Aung Thein also expects the full lifting of sanctions.

“If all the economic sanctions are lifted and the US also offers us its GSP like the EU, our businesses will be more enthusiastic about expanding its network to foreign countries. In return, this will result in the nation’s economic growth and prosperity,” he said. This would work hand in hand with new policies from the new government, he asserted.

“Economic growth and political stability are correlated. With the better political climate, I expect better bilateral relations with the US and other countries in the next government’s term. The new government needs to create a more level-playing field and a more favourable working environment.”

Source: ELEVEN

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