China is the largest foreign investor in Myanmar and has substantial investments in the country’s garment sector. FDI has the potential to positively contribute to economic transformation and poverty-reduction in Myanmar. As of mid-2015, about 55 per cent of registered garment firms in the country were fully or partly foreign-owned. Among them, a quarter came from China, 17 per cent from Hong Kong, 29 per cent from South Korea and 12 per cent from Japan.
However, Chinese and Hong Kong-linked garment firms have produced few benefits, linkages or spillovers in Myanmar beyond exports and job creation. The reason is Myanmar’s industry lacks entrepreneurial, management and technical skills. Foreign-owned firms have few local managers. In the long term, Myanmar should follow the Bangladesh example, where tertiary education institutes dedicated to the garment industry increase supply of managers and high-skill technicians.
In addition the country should ease entry restrictions for foreign firms, undertake active investment promotion in garments through complementary reforms in finance and trade policy, expand training to tackle the shortage of high-level skilled manpower, and engage with buying firms, especially global retail or apparel corporations.
Other possible reforms are: making access to trade credit possible for garment exports and providing tariff-free fabric imports to both free-on-board and cut-make-package producers.