Manufacturing exports down by $1.86 bln in nearly nine months

Exports of finished industrial goods drastically plummeted to US$5.14 billion in nearly nine months (1 October-25 June) of the current financial year 2020-2021, an extreme drop of $1.86 billion compared with the corresponding period of the previous FY, according to the Ministry of Commerce. As per figures provided by the ministry, the exports of finished industrial goods exceeded $7 billion during the same period in the 2019-2020FY. The IHS Markit Myanmar Manufacturing Purchasing Managers’ Index, a composite single-figure indicator of manufacturing performance, signalled the sharpest deterioration in manufacturing business conditions in the previous months. The higher material costs and unfavourable exchange rate movements contributed to a sharp increase in cost burdens, causing constraints to complete the order.

It can do more harm to the foreign investment sector if the problem is still not resolved. The PMI measures the output, new orders, performance, delays in the manufacturing process and stocks of both inputs and finished goods, according to HIS Markit’s statement. The layoff is extended and the workers are forced to return to their hometowns amid the political instability and the COVID-19 resurgences. Nevertheless, the Swedish fashion retailer H&M is gradually placing orders from Myanmar again after it paused in March. Then, more international fashion retailers such as Primark and Bestseller starts to resume new orders. Additionally, Germany will also continue its support for Myanmar garment businesses so that Myanmar women can continue their livings, Germany Embassy Yangon’s Facebook posted.

Myanmar’s manufacturing sector is largely concentrated in garment and textiles produced on the Cutting, Making, and Packing basis, and it contributes to the country’s GDP to a certain extent. Myanmar’s garment exports witnessed a decline of over 20 per cent in the past eight months (October-May) of the current financial year 2020-2021 compared with a year-ago period on the back of a slump in demand by the European Union market, the Ministry of Commerce stated. Myanmar’s garment industry has been facing challenges such as raw material supply disruption and cancellation of orders amid the pandemic.

Additionally, the surging COVID-19 cases posed impediments to the industry, a market observer shared his opinion. Myanmar mainly exports CMP garments to markets in Japan and Europe, along with the Republic of Korea, China, and the US. The garment sector is among the prioritized sectors driving up exports. The CMP garment industry has emerged as a promising one, with preferential trade from Western countries. Yet, the current political changes in the country are likely to aggravate the garment industry, traders stressed. Myanmar’s garment factories operate under the CMP system, and those engaged in this industry are striving to transform CMP into a free-on-board (FoB) system.

As the factories cannot enter into a contract for FoB, Own Design Manufacturing (ODM) and Own Business Manufacturing (OBM), the income is limited, according to the MGMA. Exports of garments manufactured under the cut-make-pack (CMP) system were valued at US$4.798 billion in the last financial year2019-2020, according to data from the Ministry of Commerce. Although the sector is struggling due to the cancellation of the order from the European countries and suspension of trading by western countries during the pandemic, export values rose in the previous FY (1 October 2019-30 September 2020). More than 500 members and over 700 garment factories in Myanmar are listed on the MGMA, with an employment of over 400,000 workers. However, a third of garment industry workers are out of jobs in difficult times.

Source: The Global New Light of Myanmar

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