US embassy cable - 04RANGOON138

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000138 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 02/01/2014 
TAGS: KTEX, ETRD, PHUM, ECON, PGOV, BM, Economy 
SUBJECT: BURMA SANCTIONS: GARMENT INDUSTRY TAKES STOCK 
 
REF: 03 RANGOON 1425 AND PREVIOUS 
 
Classified By: COM CARMEN MARTINEZ FOR REASONS 1.5 (B,D) 
 
1. (C) Summary: We are getting a slightly clearer picture of 
the impact of last year's U.S. import ban on the Burmese 
garment industry -- the industry most directly impacted by 
the measure.  Even the most optimistic garment manufacturers 
say they will not survive 2005, when the global quota system 
will end, unless the import ban is lifted in 2004.  Employers 
lament the number of layoffs thus far, and predict more as 
the year progresses.  Finally, based on information gathered 
from our garment industry contacts, it does not appear that 
large numbers of garment workers have entered the region's 
flourishing illegal sex and entertainment industries.  End 
summary. 
 
The Calm Before the Storm 
 
2. (SBU) Six months after the implementation of a ban on 
Burmese imports into the United States, garment makers have 
basically written off their industry's future.  Burma's 
garment industry, operating purely on a low-profit "cut, 
manufacture, and package" (CMP) basis, had relied on the U.S. 
market for about 80 percent of its orders. 
 
3. (C) Industry representatives are not in accord on the 
viability of the garment sector once global quotas are 
abolished in 2005.  Some think they could take advantage of 
rising labor costs in China to squeeze out some market share 
based solely on low wages.  However, others insist that the 
high non-wage costs of production in Burma, particularly 
energy costs, and the total lack of domestically produced 
inputs, including fabric and accessories, have already doomed 
the garment sector.  All agreed, though, that if U.S. 
sanctions continue through 2004 nothing can save the 
remaining garment factories.  No matter their assessment, all 
of the garment manufacturers with whom we spoke are packing 
their parachutes, fully preparing to try and bail out over 
greener pastures by the end of this year. 
 
Critical Condition 
 
4. (C) According to estimates given us by several garment 
factory owners, since sanctions went into effect in late 
August 2003, about 120 out of roughly 300 factories have 
closed.  50,000-60,000 workers have lost their jobs both from 
shuttered plants and other factories trying to stay alive by 
sloughing off a few workers every month.   The manufacturers 
told us that most of these closures and lay-offs had occurred 
in the first few months of sanctions, and that the situation 
was in stasis at the moment.  Some unexpected, but 
short-term, orders from Europe had frozen firings and factory 
closures, though no factories have re-opened as has been 
reported in the media. 
 
5. (C) Though the fate of the newly unemployed workers, 
mostly young women, is still debatable one factory owner had 
an anecdote which provides an unscientific glimpse at one 
group of workers.  He told us that when he recently contacted 
300 ex-workers to try and rehire them to take advantage of 
some new orders, he was surprised that only 60 took him up on 
his offer.  Of the 240 that refused to come back, he said 
about 180 had gone back to their rural hometowns and were, he 
opined, forbidden by protective families to return to the 
city.  Another 50 had stayed in Rangoon and taken lower 
paying, but far easier, service jobs.  The remaining ten had 
entered the entertainment industry, though he thought most 
had become waitresses or karaoke hostesses rather than 
prostitutes. 
 
Government Help is Too Little Too Late 
 
6. (C) As mentioned in reftel, the government has made a 
half-hearted effort to hire some laid-off workers to take up 
similar positions (at less than half the pay) in new 
state-owned textile plants.  Our private sector contacts said 
they knew of no former employees that had grabbed this 
opportunity.  The government has also loosened a few 
regulations for garment makers, including the one which 
previously banned them from using their export income to 
finance imports, which is helping moribund garment makers to 
keep their heads above water. 
 
Comment: The Picture Sharpens 
 
7. (C) As always, predicting the fate of laid off workers, 
and the industry itself, is difficult.  However, we are 
getting a slightly clearer image of the post-sanctions shake 
out of the garment sector.  The regime has no intention of 
helping make the industry more competitive with neighboring 
countries for non-U.S. orders.  It's also clear that garment 
manufacturers are pragmatically preparing for the worst, 
though still hoping that the plight of their factories and 
workers will move Congress to lift the import ban this year. 
Finally, information gathered from our garment industry 
contacts does not indicate that large numbers of garment 
workers have entered the region's flourishing entertainment 
or illegal sex industries.  Though inevitably some ex-workers 
have been enticed into the entertainment industry, it seems 
that others have, for now, just returned home to be 
re-assimilated into farm work or local cottage industries. 
End comment. 
Martinez