Textiles and Garments: Myanmar Becoming Promising Investment Destination and Rival (Business Brief No. 3259 Full Ed.)

As Myanmar becomes a more promising investment destination within ASEAN, KResearch views that businesses, especially those seeking new locations for production base and aiming to maintain their competitiveness should consider investing in textile and garment industries there. Supporting factors include:

- Currently, Myanmar is one of our trade partners. A bright future lies ahead for textile industry in Myanmar as Thailand is Myanmar's top import source for garments and textiles. (Our export value has continued to rise on robust industry there.) Thus, demand for related products, e.g., textiles, will likely increase in line with the rising Thailand-Myanmar garment trade, thanks to the popularity of Thai products in Myanmar and increasing consumer purchasing power due to their government's policy of increasing wages.

- In garment manufacturing, it was found that Myanmar becomes an interesting production base because existing manufacturers, including Thailand, are seeking to reduce location risk by establishing production facilities within Myanmar, where production costs and wages are lower than elsewhere in the region. In addition, it is expected that the Thai exports of textiles and garments to Myanmar in 2012 may reach USD245-255 million, growing 30-35 percent YoY.

Nevertheless, businesses should monitor a variety of risks when conducting trade in Myanmar. For example, Burmese workers typically prefer to work in Thailand, thus reducing the number of skilled workers available there. Myanmar has to largely depend on foreign capital, expertise and technology in their development of production processes and labor skills. At present, there are still some US and EU sanctions on Burma. Although it is expected that western nations may gradually lift those sanctions after upcoming elections (scheduled to be arranged in April), the official end of these sanctions is still unknown. Also, Myanmar has not played a significant role as a manufacturer and exporter in global textile and garment trade, so they may need some time to strengthen their position. Meanwhile, investor confidence toward their regime, economy and finance matters, as well as the problem of inadequate infrastructure that is during the initial development stage could be factors that limit their potential.

As a result, Burmese efforts to minimize such limitations should be regularly reviewed as progress on these matters would help attract more foreign businesses to set up production there. Recently, Myanmar announced that they would float their currency in April 2012. This reflects their intent to instill confidence toward their country. It is expected that Myanmar's strengths may shine later on, thus allowing them to become our rival that could show frog-leap growth as Vietnam. In addition, businesses should devise detailed plans, seek allies and explore new channels for market expansion within ASEAN. The development of the Special Border Economic Zone should be also followed up, as it is expected to help facilitate our business expansion into Myanmar.