• Sourcing Journal

After Myanmar’s Bloody Weekend, Garment Sourcing Is Very Risky Business

Myanmar spiraled further into violence and chaos over the weekend in Yangon, the Southeast Asian nation’s largest city, after security forces killed at least 22 anti-coup protestors and dozens of Chinese-financed factories were vandalized and torched amid a wave of rising anti-Chinese sentiment.




Another 16 protestors were killed elsewhere, according to the Assistance Association for Political Prisoners, along with one policeman, marking Myanmar’s deadliest day since a Feb. 1 coup ousted de facto head of state Aung San Suu Kyi and returned the country to full military control. Local media reported that martial law has been declared in the Yangon townships of North Dagon, South Dagon, Dagon Seikkand, North Okkalapa, Hlaing Thar Yar and Shwepyitha, meaning that protestors there can now be tried in military courts.


The Chinese embassy in Myanmar said two Chinese workers were injured after unidentified assailants burned and damaged 32 Chinese-funded factories, causing property losses of roughly 240 million yuan ($38 million). It also called on the country to take action to protect Chinese property and citizens.


China urges Myanmar to take further effective measures to stop all acts of violence, punish the perpetrators in accordance with the law and ensure the safety of life and property of Chinese companies and personnel in Myanmar,” it said in a statement.


While it is unclear who was responsible for the attacks on the factories, protestors believe that Beijing, which has refused to outrightly condemn the coup, is lending support to the ruling junta. Chinese state media had previously referred to the detention of civilian leaders as a “cabinet reshuffle” and an “adjustment to the country’s dysfunctional power structure.”


“China says the attacks were well planned, with the vandals arriving on motorbikes with weapons and petrol,” wrote Michael Bristow, BBC World Service’s East Asia editor, in an analysis Monday. “Some protesters have denied they were involved. But there is widespread anti-China sentiment in Myanmar because of a belief that Beijing is helping the military government there.”

While China presents itself as an “honest broker that supports neither side,” Bristow added, such a stance is not an acceptable one for protesters.


Grim outlook for garments


The chaos has sent shockwaves through Myanmar’s garment sector, an economic tentpole that employs some 700,000 workers, most of them women, and generated $4.8 billion in exports last year, according to the Ministry of Commerce. As calls for an extended work stoppage grew last week, H&M, which works with 56 supplier factories in Myanmar, announced a temporary suspension of new orders from the nation, citing “practical difficulties and an unpredictable situation limiting our ability to operate in the country, including challenges related to manufacturing and infrastructure, raw material imports and transport of finished goods.”


On Friday, Benetton Group, which owns United Colors of Benetton, Playlife and Sisley, followed suit, expressing its “deepest concerns” about safety issues and violations of rights and freedom.

“Over the years, Benetton Group has been a standard-bearer for fundamental values such as inclusiveness, integration, and non-violence,” CEO Massimo Renon said in a statement. “As a company, we cannot fail to contribute to the respect of these values and we intend to do our part. We will suspend orders to the country to send a strong and concrete signal.”


Myanmar suppliers account for 2 percent of Benetton Group’s production chain, according to the Italian company’s website.


“Our hope is that the situation returns, as soon as possible, to one that guarantees the people’s fundamental rights and that our group may once again resume its action of supporting the local populations, that also involves promoting work and dignity,” Renon added.


Two of Bestseller’s suppliers in Yangon were rocked by the attacks, though no one was injured “in relation to this,” Morten Norlyk, a spokesman for the Danish retailer, which works with 36 garment factories in the country, told Sourcing Journal. “No persons were injured in relation to this,” he added. “We are in an ongoing dialogue with all our suppliers and we are naturally concerned about the development.”

Primark, which sources from 21 factories in Myanmar, is also taking a wait-and-see approach, with no current plans to change its sourcing strategy.


“Our highest priority is to keep workers safe and well, and ensuring their rights and freedoms are respected; these are outlined in Primark’s code of conduct, which we require all suppliers and factories that make our garments to adhere to at all times,” a spokesperson told Sourcing Journal. “We are in regular contact with our suppliers and our employees on the ground in Myanmar and are closely monitoring the situation.”

The Ireland-based chain also said Monday that it is investigating reports that GY Sen, a supplier that employs 1,000 workers in Yangon, locked the doors of its factory to prevent them from joining the civil disobedience movement. Workers told The Guardian that 20 were later fired for missing shifts to participate in anti-coup protests. Primark said it won’t be placing further orders with the factory until the inquiry is complete.

“We will work with our supplier and, where required, other trusted third parties,” the spokesperson said. “If the factory is found to have breached our code [of conduct], we will work with the supplier and factory to remediate any issues.”


A spokesperson from Adidas, which works with six suppliers, echoed that sentiment, noting that the sportswear giant is “in close exchange with other brands, industry associations and civil society organizations about the current situation.”


With a coup comes consequences


With the coup showing no signs of resolution, the United States continues to dial up the pressure on the Myanmar military.


Earlier this month, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) implemented new restrictions on exports and reexports to Myanmar, which it refers to by its former name of Burma, and transfers within the country, of sensitive items subject to the Export Administration Regulations (EAR) “in response to the military coup and escalating violence against peaceful protesters.”

In a further blow to the country, BIS has moved Burma from Country Group B to Country Group D:1, restricting certain exports and reexports without a special waiver. BIS has also added the Burmese Ministries of Defence and Home Affairs, the Myanmar Economic Corporation, and the Myanmar Economic Holding Limited to the Entity List, which prohibits them from receiving some or all items subject to the EAR without a license.


“The United States remains fully committed to the people of Burma, and strongly condemns violence by the Burmese military against peaceful protesters,” BIS wrote. “We will not allow the Burmese military to continue to benefit from access to items subject to the EAR. Commerce is reviewing potential additional measures as warranted by the military’s actions. The U.S. government will continue to hold perpetrators of the coup responsible for their actions.”


Analysts say that these developments could discourage foreign brands—already on tenterhooks after a 2019 United Nations report disclosed ties of garment factories to the Burmese junta—from further investing in Myanmar for fear of potential hits to their reputation.


“This would effectively reverse a trend to move labor-intensive work from China to Myanmar in recent years that has taken advantage of lower wages despite less developed infrastructure,” said Mirko Woitzik, manager EMEA, intelligence solutions, at Everstream Analytics, which measures and monitors supply-chain risks. “The developments could also accelerate a decision by the European Commission to revoke trade privileges—a move it has considered since 2018—that include preferential access to the [European Union] market, which would affect the garment and shoemaking sectors.”


There’s one minor reprieve, however. While more targeted sanctions are likely on their way, Wotizik doubts that the U.S. or the EU will adopt widespread actions that will cause irrecoverable damage to Myanmar’s economy as a whole “in an effort to not push the country closer to strategic rivals such as China.” Logistics in the lurch


The turmoil, however, has all but crippled the logistics networks that are the arteries of the apparel supply chain. Roughly 95 percent of the country’s trade is conducted by sea, which means that connections through the ports of Thilawa and Yangon are vital to Myanmar’s economic functions. Already, thousands of striking truck drivers have throttled the delivery of imports, leading to cargo-container pileups and prompting shipping firm Hapag-Lloyd to hit pause on any import bookings into Myanmar.


“If the uncertainty around the coup lingers on in the coming days, [other] carriers could temporarily omit port calls to Myanmar, cutting off a crucial connection which is mainly used by smaller vessels that carry containers to Singapore for consolidation and onward carriage,” Wotizik said. “Companies with an interest in Myanmar should keep abreast of the latest developments and anticipate delays to both logistics and manufacturing operations in the coming weeks. Due to the volatile situation and given their access to first-hand information on the ground, it is also recommended to get in touch with local suppliers and carriers to assess their business continuity plans.” No room to be wrong on workers’ rights

The Clean Clothes Campaign, the garment industry’s largest consortium of labor unions and non-governmental organizations, said in early March that companies sourcing from Myanmar must ensure that workers’ rights to peaceful protest are respected without discrimination or penalization and that trade union representatives are neither victimized nor targeted.

“Brands and retailers must condemn the military’s announcement declaring illegal labor-rights organizations and prohibiting them to continue their activities,” it wrote in a statement. “They must also voice and show their support for freedom of association and ensure their direct and indirect suppliers respect these principles.”

Jason Judd, executive director of the New Conversations Project at Cornell University, said that buyers and suppliers have to “make good” on their obligations to the most basic rights of workers.

“Buyers did little about the slow-motion coup in Cambodia over the last few years, and some cut production workers loose in the Covid crisis,” Judd told Sourcing Journal. “In Myanmar, buyers can make good on their obligation to back the workers making their products in ways the buyers can control—communication with their suppliers, orders, supplier finance, emergency income for workers—and via their governments’ trade and human rights policies.”

Another big question, he said, is what kinds of conversations do buyers have with governments in the years or months before tensions reach this kind of boiling point.


No room to be wrong on workers’ rights


The Clean Clothes Campaign, the garment industry’s largest consortium of labor unions and non-governmental organizations, said in early March that companies sourcing from Myanmar must ensure that workers’ rights to peaceful protest are respected without discrimination or penalization and that trade union representatives are neither victimized nor targeted.


“Brands and retailers must condemn the military’s announcement declaring illegal labor-rights organizations and prohibiting them to continue their activities,” it wrote in a statement. “They must also voice and show their support for freedom of association and ensure their direct and indirect suppliers respect these principles.”


Jason Judd, executive director of the New Conversations Project at Cornell University, said that buyers and suppliers have to “make good” on their obligations to the most basic rights of workers.

“Buyers did little about the slow-motion coup in Cambodia over the last few years, and some cut production workers loose in the Covid crisis,” Judd told Sourcing Journal. “In Myanmar, buyers can make good on their obligation to back the workers making their products in ways the buyers can control—communication with their suppliers, orders, supplier finance, emergency income for workers—and via their governments’ trade and human rights policies.”


Another big question, he said, is what kinds of conversations do buyers have with governments in the years or months before tensions reach this kind of boiling point. “Without clear and substantive messages from buyers about progress on freedom of association or wages, for example, years’ worth of orders are implicit endorsements of a government and industry’s approaches to these issues,” Judd said.


Myanmar, Khaing Zar, president of the Industrial Workers’ Federation of Myanmar, told Sourcing Journal, has descended into a “situation of instability.”


“Brands are thinking: should they give the orders or not?” she said. “Suppliers are wondering: should they take the orders or not. We have to sustain the business in Myanmar in the garment sector, that is why we have to fight the military government. Fighting for democracy is the main thing, but this is also important.”

Addressing the danger of just venturing out to the street, Zar added that, “[w]orkers can be killed anyti

me.”

“People are aware they can be shot. But we need to bring back the democracy,” she continued. “From 2010 to 2021 during the democratization of Myanmar, we have seen freedom—not total freedom but we have seen it. So, we can compare, the military and freedom. Even though people are afraid they want to fight for that.”

Both that fear and the fight are clearly reflected through the workers in the garment industry, many of whom have been taking time off from work to join the protests.


“It’s very clear from the conversations that I have had directly with unions and workers, the concern about the chilling effect it is having on workers,” said Thulsi Narayanasamy, senior labor rights lead at the Business and Human Rights Resource Centre.


“What we’ve heard directly from workers and unions in Myanmar the last few weeks is the military is going from door-to-door with lists of unionized workers’ names,” she said, noting the” huge amount of violence against the workers and the union leaders are having to be in hiding,” which has “a chilling effect on workers.”

“So, I guess on the flip side of that: What have the brands done?” she asked, raising a point for the global market.


“We’re really disappointed with the lack of response from the brands,” Narayanasamy said. “H&M and Benetton have temporarily suspended further orders in Myanmar but the desire from the labor movement is for those brand —and for others who might follow suit and also suspend production—to not do that unless they’re going to be very clear and explicit in making a statement of support for workers freedom of association and freedom of assembly.


“They can also call on their suppliers to protect workers who desire to take a part in the anti-coup protest. We have not seen any brands make strong explicit statement[s] to that effect,” she added.


Echoes of Xinjiang?

Kate Larsen, lead consultant at SupplyESChange, says she sees parallels between the situation in Myanmar and that of the Xinjiang Uyghur Autonomous Region, where millions of Uyghurs, Kazakhs and other Muslim minorities are being subjected to a campaign of repression and subjugation that experts have described as tantamount to genocide.


Global trade union IndustriAll’s guidance to Myanmar-sourcing brands to “ensure there are no business or investment relationships in their supply chains with companies owned by and linked to the military,” she said, is similar to the U.S. Customs and Border Protection’s original detention order on all cotton imports from the Xinjiang Production and Construction Corps, a paramilitary organization known to employ Uyghurs in forced labor.


“Companies should make sure that other business activities and suppliers do not contribute to human-rights abuses and that workers and trade unionists are not punished for participating in protests and strikes against the coup,” she said. “[They] should condemn the killings and use of violence, and use their leverage, as the [UN Guiding Principles] expect, to influence business partners to also condemn and call for an end to the violence and human rights abuses.”

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