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Viewing cable 03RANGOON4, BURMA'S GARMENT INDUSTRY SEAMS DOOMED

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Reference ID Created Released Classification Origin
03RANGOON4 2003-01-02 08:33 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Rangoon
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 RANGOON 000004 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/BCLTV, EB/TPP 
STATE PASS USTR 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
CINCPAC FOR FPA 
 
E.O. 12958: N/A 
TAGS: EIND ETRD KTEX BM
SUBJECT: BURMA'S GARMENT INDUSTRY SEAMS DOOMED 
 
REF: 02 RANGOON 666 
 
1. (SBU) Summary:  The threat of sanctions, the ongoing 
consumer boycott, and the GOB's own inane trade and 
investment policies are decimating the Burmese garment 
sector.  The upcoming elimination of textile quotas in 2005 
should put the final nail in the Burmese garment industry's 
coffin.  The regime gains little from the garment industry; 
trade sanctions now will only give the government cover for 
its own mistakes.  End summary. 
 
U.S. Taste for Burmese Garments Declines 
 
2. (SBU) U.S. imports of Burmese garments rose steadily 
through 2001 when they topped out at $415 million (about 80 
percent of Burma's total garment/textile exports).  However, 
thus far for 2002 the numbers tell a very different tale with 
U.S. garment imports off 30 percent year on year to about 
$250 million (through October 2002). 
 
3. (SBU) What gives?  The drop off, according to local 
industry sources, is due in part to consumer boycotts in the 
United States which have been steadily eroding demand for the 
"Made in Myanmar" label.  A second, related, reason is the 
looming threat that the U.S. Congress will impose textile 
sanctions. 
 
4. (SBU) However, there are also production problems here. 
Foreign investors (primarily from China, Taiwan, and South 
Korea) flocked to the Burmese garment sector in the 1990s 
seeking to take advantage of Burma's low cost and placid 
workforce, and the fact that, because of the small scale of 
the industry, most of Burma's textile products are allowed 
quota-free import to the United States (64 percent of Burma's 
garment exports in 2001 were non-quota items to the United 
States).  However, in 2002, the number of operational 
foreign-owned garment factories has plummeted as foreign 
investors and buyers grow increasingly reluctant to sign any 
long-term deals with Burmese factories because of sanction 
threats and consumer boycotts, and the impending expiration 
of the Multi-Fiber Agreement (MFA) on December 31, 2004. 
With quota considerations no longer constraining choices, 
most investors have quickly turned their backs on Burma.  A 
capricious and unfriendly business climate has also 
contributed to this exodus. 
 
Government Gains Minuscule, Workers Need Jobs 
 
5. (SBU) Though export numbers, and values, look high, in 
fact the regime earns very little.  We estimate that most 
garment manufacturers here, 95 percent of which are private, 
are paid only for "cutting, manufacturing, and packaging" 
(CMP) services generally worth about 20 percent of each 
shipment.  The GOB then takes about 10 percent of the 20 
percent in taxes, as well as some income from the small 
number of government-owned and joint venture garment 
factories.  Overall, on $200 million in exports to the United 
States, the government might earn $5 million at most. 
 
6. (SBU) The industry does benefit Burmese workers.  In this 
perilous economic period of high inflation and unemployment, 
the industry supports an estimated 100,000 unskilled workers 
(who in turn support an estimated 400,000 family members). 
Though wages are low on a global scale, they are average to 
above average for Burma -- and often include some minimal 
health and insurance benefits. 
 
Prospects are Bleak 
 
7. (SBU) Burmese industry sources tell us that the drop off 
of exports to the United States will not likely be replaced 
by sales elsewhere.  Currently, there is no other country or 
region that comes close to U.S. consumption of Burmese 
textile exports.  Though EU markets may pick up some of the 
slack, the same consumer boycotts that make exporters wary of 
the United States are also active there.  More importantly, 
the MFA is a global agreement which will be phased out in 
Europe as well as the United States after 2005. 
 
8. (SBU) In short, garments are a dying industry in Burma. 
It flourished in the context of quota arrangements, which, 
for a brief period, overshadowed an atrocious trading and 
investment climate.  With these quotas now being phased out, 
manufacturers are wisely moving elsewhere. 
 
Comment 
9. (SBU) In that context, it is really hard to say what 
impact even a total ban on trade with the United States would 
have on Burmese garment exports.  Such a ban might accelerate 
the decline of the industry, but it will also give the GOB 
political cover for short-sighted economic and industrial 
policies that have scared away investment.  They will make 
for great political theater (both in the United States and 
here), but their real impact on economic life here and on the 
regime will be close to negligible.  The only ones who will 
really suffer will be those workers who lose their jobs one 
year early.  And they, unfortunately, will tend to blame the 
United States rather than their own government.  That however 
is one of the penalties for imposing sanctions on a dying 
industry.  End comment. 
Martinez