Plugging into Production Networks: Industrialization Strategy in Less Developed Southeast Asian Countries

8. Border Industry in Myanmar: Plugging into Production Networks through Border Industry

214 8 Border฀Industry฀in฀Myanmar:฀ Plugging฀into฀Production฀Networks฀ through฀Border฀Industry1 Toshihiro฀Kudo฀and฀Ikuo฀Kuroiwa I.฀ INTRODUCTION The chairman of the Myanmar Garment Manufacturers Association (MGMA) deplores the fact that the garment industry in Yangon and its suburbs has been losing workers, in particular experienced workers, to Mae Sot, a Thai border town opposite Myawaddy on the Myanmar side. His own factory employed 150 workers but has recently lost 10 sewing-machine-operators to Mae Sot.2 The question is why Myanmar workers have left Yangon, the former capital and business centre of the country, for a small border town on the Thai side. The garment industry in Yangon was severely damaged by the United States’ sanctions of July 2003, which banned all imports from Myanmar. The industry exported nearly half of its products to the United States, and more than 80 per cent of U.S. imports from 08฀PPNetwk.indd฀฀฀214 9/16/09฀฀฀11:23:37฀AM Border฀ Industry฀ in฀ Myanmar฀ 215 Myanmar were clothes. Myanmar’s garment exports declined sharply from US$829 million in 2001 to US$312.4 million in 2005, a 62.3 per cent decline.3 Many factories were closed and many workers lost their jobs.4 Some garment workers who were made redundant went to Mae Sot to seek employment. Such a migration reflects the poor business conditions and serious unemployment problem in Myanmar, as well as the significant wage gap between the two countries. It is therefore only natural that Myanmar workers migrate to Thailand, attracted by abundant job opportunities and higher wages. However, there are two important questions that must be answered: the first is why so many garment factories are concentrated in a small Myanmar-Thai border town. This question raises issues unique to Cambodia, Laos, and Myanmar, as shown below. The other question is why the industry is located on the Thai side, not the Myanmar side. Mae Sot and Myawaddy are separated by a small river called the Moei. The friendship bridge that was constructed by the Thai government in 1997 connects the two towns. The Thai garment industry could easily cross the bridge and relocate to Myawaddy, where it could probably employ more Myanmar workers at lower wages. However, this did not happen. The absence of a border industry in Myawaddy indicates that there exists some hindrance or impediment which prevents the Thai garment industry from operating on Myanmar soil. Nevertheless, the flourishing border industry in Mae Sot indicates the possibility of a border industry thriving on Myanmar soil, once such hindrance has been removed and a favourable business environment created. This chapter examines factors that promoted industrial clustering in the Myanmar-Thai border area, and identifies factors that pushed factories to the Thai side. It also examines the garment industry in Mae Sot as a case study. Such analysis could lead to important policy measures for promoting border industry on Myanmar soil. The first section reviews the historical, political and economic relationship between Myanmar and neighbouring countries. This section also provides background knowledge on how a border industry has become possible along Myanmar’s border areas, especially the MyanmarThai border area. The second section examines factors that promoted a border industry which is expected to grow for some time. What, then, is the rationale behind this and what is the source of competitiveness of a border industry? This section addresses these questions. The third 08฀PPNetwk.indd฀฀฀215 9/16/09฀฀฀11:23:37฀AM 216฀ Toshihiro฀ Kudo฀ and฀ Ikuo฀ Kuroiwa section focuses on the garment industry in Mae Sot. Relying on firsthand information from a questionnaire survey, the study discusses the competitiveness of the garment industry in Mae Sot in terms of labour costs, logistics, and infrastructure services. In conclusion, this section also explores the possibility of relocating the border industry to Myanmar soil and presents some policy measures. II.฀ MYANMAR’S฀OPEN-DOOR฀POLICY฀AND฀ NEIGHBOURS Myanmar shares long borders with five neighbouring countries, namely China (a border of 1,357 miles), Thailand (1,314 miles), India (857 miles), Bangladesh (152 miles) and Laos (128 miles), as well as sharing coastal waters with Malaysia and Singapore. In view of its geographical location, it seems only natural that Myanmar would have strong economic ties with its neighbouring countries. In fact, however, Myanmar’s borders have long been closed for all practical purposes throughout the country...