The United States and Myanmar have reached agreement on two key initiatives concerning labor rights and sustainable energy that could help lift the Asian country into being a serious player in global apparel sourcing.
The action came as U.S. Trade Representative Michael Froman made the first visit of a USTR to Myanmar, in conjunction with an ASEAN Economic Ministers meeting. The countries issued a joint statement Thursday saying they have agreed to “a consultative process that is intended to culminate in the development, by the time of the ASEAN Leaders meeting in November…of a new Initiative to Promote Fundamental Labor Rights and Practices in Myanmar.
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“The initiative will build upon Myanmar’s existing reform efforts, including ongoing activities supported by the International Labor Organization,” the statement said. “Its main goals will be to develop a multiyear strategy for labor law reform and capacity building, to implement fundamental labor rights and decent working conditions on the ground, and to foster strong relations between businesses, workers and the government of Myanmar.”
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Froman also led a signing ceremony Thursday for the first solar energy project in Myanmar’s Mandalay region. The agreement, between U.S.-based ACO Investment Group and the Burma Ministry of Electric Power, paves the way for developing two 150-megawatt solar energy plants. Burma was the long-used name of the country and is still prevalent in many institutions.
The value of the project is about $480 million, making it one of the largest investments by a U.S. company in the country since the easing of sanctions.
Several major apparel and retail firms were forced to pull out of the country in 2003 when the U.S. imposed a ban on imports after a military junta began repressing human rights. The U.S. began taking steps to renew economic ties with the country in 2012 after the government made some reforms. The U.S. officially lifted the import ban in August 2013.
As American and other companies look to Myanmar as a potential sourcing destination, trade experts have cited improvement in labor rights and infrastructure as necessary for investment. Through the U.S. Responsible Investment Reporting Requirements, U.S. companies making significant investments in Myanmar must be fully transparent about payments made to the government and about how they respect human rights in their business operations. Gap Inc., the first U.S. retailer to reenter Myanmar since sanctions were eased, submitted a report to the U.S. State Department this week on conditions it found at the first two factories it engaged to produce clothing for its Old Navy and Banana Republic factory stores.
The report said the factories experienced early problems, including age verification of young workers, health and safety issues and excessive working hours for employees. The report said many of these problems were first addressed through audits before Gap decided to source from the two factories.
The report did not identify the two South Korean-owned factories in the Myanmar capital, Yangon. However, sources said the 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.
“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.
To solve issues of noncompliance, Gap established training programs and meetings with factory managers. 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.
While the value of Gap’s investment has not been revealed, the Myanmar Garment Manufacturers Association said exports to the U.S. are expected to grow to $50 million in 2014 from $1.96 million in 2013.