Myanmar's export sectors develop in 2014 amid improving political environment

This report provides an analysis of the performance of key export industries in Myanmar last year, and offers forecasts for this year. It is produced by the Hinrich Foundation, a development organization that aims to promote sustainable global trade by, among others, helping create jobs in emerging Asia.

With the US and the EU permanently lifting most trade sanctions against Myanmar in 2013, the local economy has grown by 7.3 percent in 2014. According to the UK government trade predictions, 2015 could record improvements in Myanmar’s economy by about 7.8 percent.

Foreign investment had been diminished greatly since the 1990s in response to the former junta administration’s human rights violations. Since the formation of a quasi-democratic leadership in 2010 and the subsequent implementation of business reforms, the country has attracted more international partnerships. Three industries in particular, namely jade products, fashion accessories and home decor, have benefited from these developments.

From April to December 2013, overseas sales of jade items surged by more than 50 percent compared with the same period in 2012. The major markets are mainland China and Hong Kong, where the mineral is considered a symbol of prosperity and good fortune. The primary reason behind the Asia-Pacific region being the only destination for this line is the continuing embargo implemented by the US due to perceived unethical manufacturing processes. These include claims of forced and child labor, sexual exploitation of workers, land confiscation and environmental damage. The Jade Act imposed by Washington in 2008 prohibits exports of gems and stones from Myanmar. The restriction also applies to jewelry made of jade and ruby. The segment, however, remains one of the most lucrative sectors in the nation.

The handicraft segment’s foreign revenue is likewise improving. In 2013-14 the volume of shipments abroad is about 200 percent higher than the previous fiscal year. The important destinations are South Korea, Japan, Singapore and mainland China. Suppliers want to establish partnerships with the US and the EU markets, but find it difficult to fulfill strict requirements and certification. Another roadblock in penetrating traditional markets is intense competition with other sourcing centers such as Vietnam and mainland China, which are able to fulfill larger orders of the same quality and complexity.

Price and product trends

Myanmar handicrafts are often influenced by customs and religion. Various Buddhist symbols are featured in vases, while wall art and sculptures highlight cultural icons such as pagodas, elephants and peacocks. Floral motifs are also popular.

Workmanship can be seen in jade souvenir plates and tea sets, which are normally handpainted. Since this line is labor intensive, nearly all production steps, including material preparation, assembly and finishing, are done manually. Rich colors, including red, yellow, orange and green, boost aesthetics. Jewelry comes in stylish shapes, shades and trimmings. They are often embellished with stones and beads. Necklaces usually have pendants that hang from the center of a metal, leather or fabric cord.

For home decor, handcarved patterns and lacquer-coated motifs are some of the widely used. The latter is prominent in bowls, flower vases and ornamental boxes. Floral, animal and geometric engravings are likewise incorporated. Silver and brass are extensively adopted as base materials because of their ready availability and versatility. Decorative plates and bowls, and statuettes normally feature these types of metal.

Fashion accessory items emphasize environment-friendly components. Bamboo is widely utilized in umbrellas, while water hyacinth is mostly employed in handbags. Manufacturers apply eye-catching colors such as green, yellow, red and orange to enliven selections. An assortment of motifs, including floral and leaf, boost aesthetic value.

Prices are often influenced by design complexity and materials used. The low end is composed of small items in basic designs, and one to two colors. The midrange comprises models with embellishments and some wood- or metalwork. Upscale products are normally made of high-grade components with silver or gold trimmings.

Challenges

For jade products, the main difficulty faced by manufacturers is the proliferation of fake jewelry. Syndicates have been actively selling counterfeit models over the past few years to take advantage of rising demand. Most illicit items, including necklaces, rings, paintings, vases and bowls, incorporate stones dipped in liquid plastic compounds that provide a bright luster similar to that of genuine versions. To help buyers avoid being victimized by this scam, mine officials plan to open a one-stop service center in Sagaing, where manufacturers of various jade crafts are based.

Enterprises that create home decor are primarily concerned with surging labor costs. Since most production processes are manually done, highly skilled workers are needed to do metal- and woodwork. Training for young artisans usually takes a year to be completed, slowing down productivity. Compounding this problem is the lack of technology needed to boost efficiency. Neighboring countries such as Vietnam are also adept at creating handicrafts, but they have more and better equipment to handle large orders.

Fashion accessory suppliers are having difficulty over lack of design innovation. Because of limited knowledge on the latest trends, the majority of releases come in basic and plain models. Trimmings are often limited to embroidery, and faux flowers and leaves. Enterprises also point to electricity shortage as a stumbling block. Frequent outages, especially during the dry months of March to May, significantly reduce the production efficiency of factories. Moreover, unreliable power supply in the country, both for industrial and household use, keeps potential investors away.

2015 Outlook

In spite of all the challenges faced by these sectors, suppliers in general are expecting better export performance over the next 12 months. Companies are looking to take advantage of a huge overseas potential for their lines now that most trade and economic sanctions against Myanmar are lifted. To boost competitiveness, local enterprises will broaden selections amid the anticipated rise in the number of foreign buyers sourcing from the country, particularly from the US and the EU. To make releases more appealing to potential clients, companies are combining traditional and modern detailing methods. They are also adopting native materials such as water hyacinth and bamboo to provide fresher takes on classic models.

To help SMEs, the local government is also planning to pass the Value-Added Exports Bill in February. This policy ensures tax exemptions and financial aid to exporters of finished goods to create more jobs.

Another positive development is the impending formation in 2015 of the ASEAN Economic Community, where Myanmar is a member. This will result in the removal of tariffs and other dues, and will encourage a robust environment for trade among Southeast Asia countries.

For more information about the Hinrich Foundation's industry-specific sourcing reports spanning seven different countries in Asia, including Myanmar, visit Online Developing Country Sourcing.

This article and its contents are provided by the Hinrich Foundation, a partner of Global Sources in promoting trade across Asia. The products and the suppliers featured in this article are export assistance program beneficiaries of the Hinrich Foundation.