Japan looks for new manufacturing base

By Ye Lwin
August 16 - 22, 2010

RISING wages in China have removed some of the lustre from the Pearl River delta for foreign manufacturers. But if Myanmar wants to pick up the slack, it has to improve its infrastructure, industry sources said last week.

Mr Hideki Arai of Asahi Kasei Trading Company, said China was the main manufacturing base for Japanese textile and clothing makers.

But the business environment there has changed for the worse, and many companies are looking to move elsewhere, seeing major potential in ASEAN countries.

Mr Eitaro Kojima, managing director of Japan External Trade Organization’s (JETRO) Yangon office, said Japan has an umbrella free trade deal with ASEAN – the ASEAN-Japan Comprehensive Economic Partnership – and several bilateral deals already in place, which leaves the region in a good position to benefit from China’s loss.

U Myint Soe, president of the Myanmar Garment Manufacturers Association (MGMA), pointed to Myanmar’s large and relatively inexpensive labour pool as one of the country’s potential attractions to lure Japanese investment.

“But we need to enhance our workers’ capacity-building as the Japanese market is sensitive in terms of quality control,” U Myint Soe said.

Mr Kojima said Myanmar stood to gain new investment if it improved its operating environment, but warned that regional competitors like Bangladesh, Cambodia and Laos had similar advantages and more attractive operating climates.

“For the time being, clothing exports from Myanmar to Japan are larger than those from Bangladesh to Japan,” Mr Kojima said.

U Myint Soe said statistics from the Myanmar Garment Manufacturers’ Association show clothing exports to Japan had been rising for the past five years, from US$53 million worth in 2005, to $71 million in 2006, $96 million in 2007, $133 million in 2008 and $149 million in 2009.

But Mr Kojima said Bangladesh would soon overtake Myanmar because new factories are already being built there. Bangladesh also produces its own fabric, while Myanmar has to import virtually all the raw materials.

“I expect that exports from Bangladesh to Japan will overtake those from Myanmar because there are more Japanese factories on the ground there,” he said.

“At the moment, I am not sure how many new Japanese-financed factories are on their way in Bangladesh. But I can say there are no new factories planned for Myanmar, only orders. But new suppliers and buyers are looking for suitable factories here,” Mr Kojima said.

“If private factories here can set up new lines and provide clothing of a certain quality then I think more opportunities will arrive.”

There are only four wholly Japanese-owned factories in Myanmar, with another 20 or so working to supply the Japanese market, U Myint Soe said.

He added that while labour costs are relatively low in Myanmar compared with other Asian countries, potential investors are wary of the challenges posed by unreliable electricity supply, substandard infrastructure and other logistical hurdles.

“Regular electricity supply is the most important consideration for Japanese companies contemplating investing here,” Mr Kojima said.