US embassy cable - 03RANGOON1358

C O N F I D E N T I A L RANGOON 001358 
 
SIPDIS 
 
STATE ALSO FOR EAP/BCLTV; TREASURY FOR OASIA JEFF NEIL 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 10/22/2013 
TAGS: PGOV, PREL, BM, Economy 
SUBJECT: BURMA: KOREAN FACTORY OWNERS COMPLAIN 
 
 
Classified By: CDA a.i. Ronald K. McMullen for Reasons 1.5 (B,D) 
 
1.  (C) SUMMARY: Since the U.S. import ban became law on July 
28, 10 of the original 35 Korean-owned garment factories in 
Burma have closed.  The remaining 25 factories are hanging on 
by filling European orders, but are continuing layoffs.  Laid 
off workers have returned to their home towns and villages 
because of a scarcity of jobs in the Rangoon area.  END 
SUMMARY. 
 
2.  (C) Two Korean factory owners and the Korean Embassy's 
Commercial Attach told EAP/BCLTV Director and Poloff on 
October 22 that of the original 35 Korean-owned garment 
factories and suppliers in Burma, 10 have closed since the 
start of new U.S. sanctions in late July.  The 25 remaining 
factories are relying on orders from Europe to keep their 
production lines open but are still being forced to lay off 
additional workers. 
 
3.  (U) The two factory owners questioned the intended target 
of the U.S. sanctions, complaining that their workers had 
only lost their jobs and could simply return home, while 
foreign investors were the only ones really hurt.  The Korean 
owners said they had lost huge sums of money since the 
sanctions, but they couldn't take their capital goods out of 
the country, mainly because the plants are legally owned by 
Burmese front companies that won't allow the move. 
 
4.  (U) One of the owners said his factory employed 1,200 
fairly well-educated workers.  Of them, one third could read 
and understand English, and over 200 others were university 
students.  A factory job was appealing to university 
students, as it could bring more social mobility, at $17 to 
$20 a month pay, than any other job a university graduate 
could land.  Once laid off, their workers had to return to 
their home village as there were not many other options for 
employment in the Rangoon area.  The owners said they were 
not aware of former workers being forced into the sex trade, 
and they thought this outcome was unlikely. 
 
5.  (C) In an ironic twist, one of the remaining Korean 
factories was trying to expand its production line but 
couldn't because of difficulty hiring laid off workers.  The 
workers wouldn't take the new jobs because of the expensive 
daily commute to the new factory on the other side of town. 
 
6.  (C) COMMENT:  The Korean owners' complaint about being 
the target of sanctions is sour grapes.  The BCLTV Director 
pointed out to the two owners that they knew it was risky to 
invest in Burma, and that import ban legislation had been 
discussed for years.  Interestingly, the Koreans admitted 
that about 100 Chinese, Hong Kong, and Taiwanese-owned 
garment factories were able to close down, pack up, and ship 
out all their plant equipment just before sanctions took 
effect, primarily because they had not created Burmese front 
companies when setting up operations in Burma.  The Korean 
decision to go with a Burmese front company seemed more 
advantageous during start up, but now proves to be a major 
mistake when trying to flee the country.  As for workers and 
the sex trade, this is another source that supports the view 
that laid-off garment factory workers have returned to their 
villages or have sought other, albeit scarce, jobs in other 
sectors and have not yet made the sex trade their number one 
choice for follow-on employment.  That said, Rangoon does in 
fact have a large enough sex industry, as well as 
entertainment industry, to absorb workers laid off from the 
garment factories. 
 
7. (U) This message has been cleared by EAP/BCLTV Director 
Judith Strotz. 
McMullen