It’s good to talk: Improving industrial relations in Myanmar’s garment sector

Myanmar’s garment sector has enjoyed rapid growth in recent years and is one of the government’s priority export sectors. However, rising industrial disputes, over issues such as working conditions and pay, pose a threat to the industry’s ability to export goods to major markets. An event co-organised by the IGC in Myanmar looked at the possible ways to improve both industrial relations and productivity in the garment sector.

The rate of growth of the garment sector in Myanmar is impressive, with approximately six new garment factories being set up every month, each employing 3,000 people or more (Htwe, 2019). The growth of Myanmar’s garment sector has come at a time when the country benefits from restored tariff-free access to Western markets, and regional production hubs like Vietnam and Bangladesh are witnessing wage increases and, in the latter case, safety concerns.

As more and more factories are exporting to the European Union and other high-value markets, the garment sector has become a key plank in job creation – and, ultimately, raising living standards – with the sector now being valued at over USD 217 billion and set to employ 1.5 million people by 2020 (Invest Myanmar, 2018).

On the other hand, Myanmar has also seen a rapid increase in the number of registered industrial disputes between workers and employers, with an estimated 30% of disputes brought to the national Arbitration Council from the textile and garment sectors – more than any other sector in the country (Ediger and Fletcher, 2017). Additionally, garment buyers recently listed labour disputes as one of their top concerns when sourcing products from Myanmar (SMART Myanmar, 2019). In addition to deterring buyers, these disputes act as a potential roadblock to improving productivity and attracting vital foreign direct investment. It is, thus, critical that Myanmar can ensure healthy relations within its garment firms.

On 26th July 2019, around 70 delegates, including policymakers, industry representatives, trade unionists and development partners, attended a conference on this issue organised by the IGC, Myanmar’s Ministry of Commerce and the Centre for Economic and Social Development. Here are some of the key takeaways from the event:

1. Communication is key

One of the best ways to reduce disputes is to increase dialogue between workers and managers over workplace issues. As trade unions were prohibited between 1962 and 2011, firms in Myanmar are generally not accustomed to dialogue, which is all the more urgent given the sector’s rapid growth.

Event speaker Mari Tanaka (Hitotsubashi University) noted that 36% of Myanmar garment factories lacked a recognised workers’ representative, and of the 64% of factories that had representatives, nearly half were appointed by the firm rather than elected by workers.

IGC-funded research on Myanmar’s garment sector, which Mari presented at the event, finds that factories with a recognised workers’ representative are less likely to experience a dispute that requires outside mediation. This correlation is stronger when the representative is elected. This research suggests that the means and mechanism for dialogue can be as important as dialogue itself.

2. The importance of a common language

Dialogue should take place in a common language for both the employers and employees. The research presented by Mari found that foreign-owned factories are more likely to experience disputes than domestically owned ones. This may suggest that disputes can arise due to cultural differences between foreign managers and domestic workers, and these differences are potentially being made worse by language barriers.

Rocco Macchiavello (Lead Academic, IGC Myanmar) discussed this issue and shared preliminary results from IGC research being conducted at the Thilawa Special Economic Zone, which has various international firms operating in it. They find that domestic managers only understand around 60% of conversations with foreigners when using Google Translate, and only 84% of conversations when a human translator is present.

With technology only partially effective and the cost of hiring full-time translators often prohibitive, the ongoing study looks at the impact of English language training for employees at Thilawa. This randomised controlled trial (RCT) has so far resulted in English learners reporting increased understanding of their foreign bosses, and greater involvement in setting firm targets and hiring of new staff.

While we still await the final results, the initial evidence does suggest that English classes are effective in improving understanding between foreign and domestic staff, and could potentially reduce industrial disputes as a consequence.

3. Foreign buyers can play an important role in raising compliance

The tragic Rana Plaza factory collapse in 2013 led to heightened public pressure on international buyers of garments in Asia to promote compliance with local labour laws and regulations.

Laura Boudreau (Columbia Business School) discussed research from Bangladesh that looks at the impact of a worker safety programme set up by a group of multinational buyers, called the Alliance for Bangladesh Worker Safety, as a response to the tragedy.

This RCT, co-funded by the IGC, evaluated the Alliance’s Safety Committee (SC) programme in improving safety standards and compliance across 84 factories. The programme enforces a local labour regulation mandating the establishment of SCs in factories. SCs are comprised of an equal number of democratically elected worker and manager representatives, and meet quarterly to discuss and act on safety issues.

The study finds that the programme improves compliance with SC laws, with increased SC meetings per quarter, a higher likelihood of conducting risk assessments, and increased reporting of SCs to management. Additionally, the programme improved workers’ awareness of SCs and their role, although it did not affect their safety knowledge.

Multinational buyers can play a similar role in improving compliance in Myanmar as that of the Alliance in Bangladesh. However, this must also be met with better enforcement of legislation by the government, as buyers would not want to play this role indefinitely. Moreover, local labour laws should be designed while bearing in mind the capacity of firms to implement them.

Conclusion

As IGC Myanmar’s Country Director, Ian Porter, highlighted in his closing remarks, the event showcased the value of good data in guiding policy. Analysing data from RCTs and surveys allows researchers to present policymakers with evidence on the effectiveness of current policies, as well as how they can be improved or better implemented.

A growing garment industry is an important catalyst for job creation and attracting vital investment to Myanmar. Evidence will be key to this journey, to ensure that growth in the sector is sustainable and unscuppered by poor industrial relations.

Editor’s Note: This blog is part of the IGC’s 10 year celebration series. This blog is linked to our work on increasing firm productivity.

References

Ediger, L. and Fletcher, C. (2017). Labor Disputes in Myanmar: From the Workplace to the Arbitration Council, San Francisco: BSR. Accessible: https://www.bsr.org/reports/BSR_Labor_Disputes_in_Myanmar.pdf [Accessed 20 September 2019].

Htwe, C. M. (2019). “Garment industry continues to grow although headwinds remain”, Myanmar Times. Accessible: https://www.mmtimes.com/node/112152 [Accessed 20 September 2019].

Invest Myanmar (2018). A snapshot of Myanmar’s garment industry. Accessible: https://investmyanmar2019.com/garment-industry-cmp/myanmars-garment-industry/ [Accessed 20 September 2019].

SMART Myanmar (2019). Communications in the factory workplace, Research Note 03/19. Accessible: https://www.smartmyanmar.org/sites/smartmyanmar.org/files/publication_docs/smart_research_note_03_19.pdf [Accessed 20 September 2019].