Sustainable Production…in Myanmar?
In spite of its rich raw material reserves, Myanmar is one of the poorest countries in the world. However, since 2011, this country by the Indian Ocean has been opening up, both politically and economically. The decades-long military government was removed and, with the country’s first constitutional presidential elections, the process of democratization began. The economy is growing rapidly, particularly the textile industry. But despite the economic upturn and general improvement in living conditions, there is a negative side. New jobs are often created in low-wage sectors, frequently dominated by precarious working conditions.
We make a small proportion of our products in Myanmar too. But how successfully are we able to implement our standards for sustainable production in Myanmar? Hannes from our CR team asked himself this very question. Here he gives us an insight into our approach and what working conditions are like in-country.
Why do we produce in Myanmar?
Since 2016, we’ve been making a small proportion of our products in Myanmar. One of our long-term producers in China approached us and offered to make our backpacks in their new production site in Myanmar. At that point, the factory wasn’t yet operating to full capacity, so our producer was looking for products to increase it. When it comes to quality and working conditions, we really put our trust in our producers, so we agreed to extend production to Myanmar.
How would you describe working conditions in Myanmar?
In general, we must bear in mind that conditions vary greatly from factory to factory. However, the risk of finding working conditions that are bad is relatively high compared with other countries. After Myanmar’s political and economic opening, civil rights have advanced. But systems to improve working conditions are being introduced very slowly. Many workers don’t actually know what their rights are. A constructive basis for negotiation between trade unions and employers must be established first.
We’re aware of the risks of producing in Myanmar and are working with the Fair Wear Foundation(FWF) to ensure working conditions constantly improve. Part of this involves paying regular visits to our production sites to discuss the problems and challenges they face. The Fair Wear Foundation also conducts thorough audits to check whether work standards are being adhered to. To address problems at an even deeper level, we’ve already held a training session for workers and management on the subject of workers’ rights.
Are there any special requirements for our production in Myanmar?
The Fair Wear Foundation has stricter requirements for monitoring working conditions at production sites in Myanmar. Each year, the FWF conducts a Brand Performance Check (hier mehr), to check whether we’re adhering to these standards and our responsibilities.
So what are the biggest challenges?
As so often in life, the biggest problem is communication. Often, there aren’t any official communication channels betwen management and workers. This means that management is often unaware of current issues. On-site this often expresses itself in organized strikes by unhappy employees. To make matters worse, foreign investments are causing the gap between rich and poor to get wider. The workers often earn just a fraction of what foreign investors turn over, and they want a share in this wealth. On the other hand, the investors and factory owners frequently set low wages to remain internationally competitive. In many cases, this also leads to conflict.
What problems have we encountered in the factories so far?
In the factories that produce for us, all staff are able to make a complaint to the Fair Wear Foundation by phone. Since we started production in Myanmar, three employees have used this right. (More information can be found here http://www.fondofbags.com/the-fair-wear-foundation-complaint-helpline/). Working closely with the FWF and factory management, we were able to find a solution for these three complaints that was acceptable to everyone. Workplace safety was also improved, wages and wage transparency was increased and management and the union now work more closely together.
What have we learned from these complaints?
Although it’s always good to have faith in our suppliers, it’s important to get an idea of the situation on the ground first hand, to dig deeper and then work proactively, in cooperation with suppliers, to improve it. The improvements mentioned above were successfully implemented, however we’ve since decided to leave the original production sites. Over time, our trust in their management continued to erode. Since November 2017, we’ve moved production to another site in Myanmar. We audited the site in advance and were able to get clarity on working conditions and especially workplace safety. Since then, there have been no employment law incidents. We’ll soon be conducting our first follow-up audit to check the relationship between the employer and employees.
What is the situation with wages?
This is our next challenge. Myanmar is a low-wage country, with one of the lowest minimum wages in the world. Even though it increased once again this year, it’s currently 4,800 kyat per day (approx. 2.60 euros).
However, salaries at our production site are over the statutory minimum wage. At the last increase in 2017, the average salary was 50% higher than the statutory salary at the time. A worker received 158,000 kyat a month, which is equivalent to about 84 euros. Because purchasing power is low, this actually corresponds to a much higher value in euros. Bonuses and overtime are also added on top of that.
Using the World Bank’s conversion factor, we have converted and presented the wages in PPP$ (Purchasing Power Parity). This allows the actual purchasing power to be displayed and wages to be compared regardless of the currency. The data was collected in 2017 and in the meantime, the minimum wage has been raised to 144,000 kyats.
What does the future hold? Will we stay in Myanmar?
We always plan to have long-term cooperations with our suppliers. We’re happy with the level of quality and working conditions, so this principle also applies to Myanmar. Naturally we have to keep an eye on how the situation develops on-site; that being said, we believe that a proactive approach to improving working conditions achieves much more than just turning our backs on a country completely.
For more information and to answer your questions please call our CR-Team: CR@FONDOF.de