Global risk consultants Verisk Maplecroft are warning that fashion brands and retailers may have to stop sourcing from Myanmar or face reputational and legal, risks following the armed coup in the country.
Fashion Brands warned
Major brands, including H&M and Primark, say they are closely monitoring the situation before deciding whether or not to continue their business relationships in the country.
Experts at Verisk Maplecroft warn that the country’s “booming garment industry” could be a “major loser” after the military seized power and declared a one year state of emergency.
This week’s military coup in Myanmar puts foreign investment at risk, poses the threat of trade sanctions, and may prompt some clothing companies to sever their sourcing ties with the country.
protests against the military coup in Myanmar had swelled to hundreds of thousands of people, from a few dozen. Students, laborers, doctors and professionals had gathered in droves to proudly defend democratic ideals in their country, even as the police fired into crowds, sometimes using live ammunition and sometimes rubber bullets, and deployed water cannons and tear gas.
Joe Biden has threatened to impose sanctions on Myanmar after the country’s military seized power in a coup and detained Aung San Suu Kyi and other leaders of the ruling National League for Democracy party.
The military coup in Myanmar has gone past the point of no return, according to a confidential U.K. foreign office assessment, in a sign that major democracies expect to have limited ability to influence the events unfolding inside the country.
Myanmar’s garment export sector has seen dramatic growth since the country began to emerge from decades of isolation and military rule around ten years ago and counts brands and retailers including M&S, Next, H&M, Bestseller and C&A among its customers.
The director general of the European Textile and Apparel Confederation, Euratex, has warned that the military takeover in Myanmar could halt the boom in clothing export sales to Europe, which grew 40% in 2020, year-on-year.
Clothing, footwear and handbags are the country’s second largest export sector and jumped 26% year-on-year to reach US$6.7bn in 2019, of which around US$5.2bn is apparel. Exports in the first 11 months of 2020 slipped back to about $4bn. The European Union is the biggest customer, taking 54% of all apparel exports, according to SMART Myanmar, the EU-funded initiative that promotes ‘Made in Myanmar’ garments and sustainable practices. Next come Japan and the United States, receiving 18% and 9% of exports respectively.
according to the Department of Commerce’s Office of Textiles and Apparel (OTEXA), US apparel imports from Myanmar jumped 56% in the first 11 months of 2020 to 104.7m SME (square metres equivalent). By value, the rise was 26% to US$231.5m. This compares with a 24% decline in the volume of total apparel imports into the US over the same period.
Buyers and investors are attracted by the country’s large workforce and low wages, as well as duty-free access to the European Union (EU) under the Everything But Arms (EBA) arrangement.
Even so, Myanmar remains a controversial sourcing base. Not only is it lagging in key areas including political and legislative reform, compliance and sustainability, infrastructure and energy, but perhaps more worrying are widespread concerns over issues ranging from ethnic violence to abusive and illegal labour practices.
Research by the UN in 2019 also prompted a number of brands to review their sourcing from Myanmar to avoid being linked to violations of international human rights and humanitarian law after several garment suppliers were found to be connected to the country’s military.