YANGON, Myanmar — The factories selected to produce clothing for Gap Inc., the first U.S. retailer to reenter Myanmar since sanctions were eased, experienced early problems, including age verification of young workers, health and safety issues and excessive working hours for employees.
Revealed in a report submitted by Gap to the U.S. State Department, many of these problems were addressed through U.S. audits before the company decided to source from two South Korea-owned factories in the Myanmar capital, Yangon. The Aug. 25 report, titled “Responsible Sourcing in Myanmar,” was released on Thursday by the U.S. Embassy here.
The two factories — Yangon Pan Pacific International Co. and Myanmar Glogon Co. Ltd. — are currently producing finished outerwear for Gap Inc’s Old Navy and Banana Republic factory stores.
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“These improvements are encouraging, especially considering how new many of the practices and more rigorous standards are for these factories and the garment industry in Myanmar,” the report said.
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The Southeast Asian country was once considered a pariah in the international community for its repressive military regime and countless human rights abuses. After economic sanctions were levied by the U.S., international apparel and retail firms ceased production, causing exports from its robust garment sector to plummet to $200 million from $800 million in value.
But 2011 ushered in the administration of Burmese President Thein Sein, a nominally civilian government that claims to be transitioning to a democracy. Since then, democratic reforms have been instated, prompting the U.S. government to ease sanctions on the country in late 2012. Investment flowed in accordingly, and the following year, garment exports — mostly to Japan, South Korea and the European Union — topped $1 billion.
However, prominent apparel brands did not immediately return to Myanmar, due to its still-woeful infrastructure and concerns over labor rights abuses and an uncertain political climate. With its announcement in early June, Gap Inc. was the first major American brand to declare its entry into Myanmar.
This decision did not come without challenges though, as the report reveals, stating that Gap senior executives determined that “no factory in Myanmar would be approved by Gap Inc. until third-party inspections and audits confirmed the factory met basic safety and structural standards and achieved an acceptable level of initial compliance with our [Code of Vendor Conduct].”
Some of the problems found in either one or both factories by Verité, an independent non-governmental organization that acted as an auditor, were inconsistent policies with hiring underage workers and a lack of an age verification process, working hours exceeding the legal limit of 60 hours a week, inconsistent pay for overtime work, reports of verbal abuse and inappropriate behavior from factory management, and electrical and chemical issues within the factory’s facilities.
“At one factory, several workers stated they were 19 years of age but had worked at the facility for 3 to 5 years,” it said. “Workers reported cases of verbal abuse and inappropriate behavior by supervisors.”
To solve issues of noncompliance, Gap established regular training programs and weekly follow-up meetings with factory managers, continuously tracking progress. Improvements included establishing an age verification process and a minimum working age of 18, revising work schedules to address excessive hours, and instituting formal policies to address inappropriate supervisory behavior and workers grievances.
As the issues were addressed in varying degrees and speed by each factory, Gap Inc. posited that the factory slowest to adopt changes was more entrenched in Myanmar’s way of doing business.
“Due to Myanmar’s isolation and lack of exposure to international practices, they have limited experience with adopted new business methods or complying with current international standards,” it said.
The report also covered extensive fire safety and structural integrity checks, noting that any workplace hazard was corrected in subsequent audits. Other issues not typically covered in garment factory audits, such as ensuring that the factories’ land was not in a land dispute or that business transactions adhered to anticorruption policies, were also addressed, the report said.
“While work remains to meet our expectations for sustained performance and continuous improvement, each factory has taken important steps that have considerably improved working conditions and compliance,” it said, adding that one factory had successfully resolved all key issues by the third evaluation in June.
Chu Sung Min, general manager of Yangon Pan Pacific International, said the changes demanded by Gap were “not difficult” to instate, as his company had produced Gap clothing in other countries before.
“We already have to have global standards because we have factories in Vietnam and Indonesia also, and we have previously handled orders from Gap before,” Chu said, adding that Yangon Pan Pacific had never had underage workers. “Before the Gap order came, we of course did not hire child labor, so there were no concerns about that.”
While he declined to reveal how much an average line worker in his factory could take home, employees can earn more than $100 to $200 a month, he said.
“Calculated by hourly salary, I think we are the highest-paying factory in Myanmar,” Chu said.
With no government-mandated minimum wage, monthly wages for workers can fluctuate depending on the factory and position, but a 2013 study done by labor rights organizations show that a basic minimum wage can be as low as $25 a month, with workers earning double after excessive overtime.
Sai Khing Myo Tun, a spokesman and adviser for the independent Myanmar Trade Union Federation, said he welcomed the company’s vigilance.
“We do need investment and we need investors who take responsibility when they come into the country,” he said. “We would like to ask the investors to be very careful and take responsibility on taking care of the labor rights issues here. This will also help us with the democratization of the country.”
While the value of Gap’s investment has not been revealed, the Myanmar Garment Manufacturers Association — which represents the country’s exporting factories — said that exports to the U.S. are expected to grow to at least $50 million in this year from $1.96 million in 2013.