Waiting for an Industrial Revolution
covering burma and southeast asia
Friday, January 28, 2022


Waiting for an Industrial Revolution

By Min Zin AUG, 2003 - VOLUME 11 NO.7

Industry in Burma lags well behind that of its neighbors largely because of double standards, military meddling, and now, stiffer US economic sanctions. Small may be beautiful but it is also vulnerable. And as increased US sanctions on Burma halt imports to American markets, all but the largest private garment factories in Burma are falling like dominoes. On the outskirts of Rangoon, several private garment firms with fewer than 100 employees are shutting down, explains the editor of a business journal in the capital. Signed into law on July 29, America’s severe sanctions will likely eliminate hundreds of thousands of jobs. The ban on imports threatens to cripple Burma’s entire labor-intensive garment industry. Even the big manufacturers are buckling under the weight of US pressure. "We are almost dying. The future for our business looks so bleak," says a South Korean manager from Myanmar Daewoo International in Rangoon, speaking to The Irrawaddy on the condition of anonymity. Myanmar Daewoo operates the largest garment factory in Burma. It began in 1991 as a joint venture between the junta’s Union of Myanmar Economic Holdings (UMEH) and Daewoo, the massive Seoul-based manufacturer of automobiles and electronics. Daewoo invested US $1.25 million in its Burmese operations and now employs 2,600 workers to produce shirts, blouses, pajamas and jackets. Myanmar Daewoo still has orders from Europe to fill, but the American sanctions will soon cause demand to evaporate. "The company is still figuring out if it should shut down the Rangoon factory. But at the moment we don’t have any plans," adds the Daewoo manager. About 80 percent of garments made in Burma go to US retailers via traders in Singapore, Malaysia, Taiwan, Hong Kong and South Korea. Other recently booming industries aren’t quite as skittish. Food and beverage manufacturing, for example, represents an estimated 85 percent of gross manufacturing output. But Burma’s food industry supplies mainly the local market and will not be affected by US trade bans. The rest of Burma’s industrialists primarily process raw materials for farming, forestry and fishing. "Burma’s industry sector is extremely underdeveloped," says Dr Khin Maung Kyi, a senior economist based in Singapore. "Burma has to depend on imports of even the most elementary manufactured products, which could easily be produced in the country." Industry as a share of Burma’s Gross Domestic Product (GDP) stagnated after the military took power in 1962, and has remained the lowest in Southeast Asia, according to the Asian Development Bank. In 1962 industrial production accounted for 10 percent of GDP, a figure almost identical to that of neighboring Thailand. But in the decades that followed, Thailand’s industrialization accelerated. By the time of the Asian economic crisis in 1997, industry represented 39 percent of the country’s GDP. But in the same year the figure for Burma was only nine percent. Meanwhile, the Rangoon-based business magazine Living Color estimated industry as percentage of GDP fell even further, to 7.6 percent in 2000-2001. There have been only a few attempts to develop Burmese industry. The economy was only nominally liberalized in 1988. A large-scale privatization program was launched shortly thereafter, but only a small number of firms were allowed free rein. "Privatization is still insignificant. Only a few state-owned economic enterprises like cinema halls and sawmills have been privatized," says Khin Maung Nyo, a well-known economist in Rangoon. "The system still rests on state monopoly and intervention." So the state still largely owns and controls modern industry—including firms involved in the production of machinery, equipment and transportation. And despite their relatively small contribution to economic growth, state-run initiatives are favored heavily by the government. Toshihiro Kudo of the Tokyo-based Institute of Developing Economies says that state-owned economic enterprises in Burma receive better treatment than private firms. "They get better access to inputs [raw materials, electricity, petroleum], finance, foreign exchange, as well as to the bureaucracy," he observes. Experts say that the biggest underhanded support for state firms comes in the form of distorted official exchange rates—implicit subsidies, in effect. In its most recent assistance plan for Burma, the Manila-based Asian Development Bank concluded that inequitable exchange procedures have contributed to inefficiency in economic management and have undermined incentives in the private sector. Though the number of private factories increased in the 1990s, and private investment as a percentage of total capital peaked at 65 percent in 1993, the level of private investment in the industrial sector has since declined with government neglect.

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