Myanmar offers opportunities for footwear sourcing due to competitive wages and an ideal demography, but challenges remain around infrastructure, labor standards, and political stability. The footwear industry in Myanmar is currently small scale and export-oriented, though industrial zones are developing. Improvements are being made to laws around minimum wage and labor, but full enforcement will take time. Regional integration under ASEAN also presents opportunities and challenges for Myanmar's development.

1. Footwear Sourcing in Myanmar:
Opportunities & Risks
CascadeAsia
Photo: ”Sunrise Over Bagan" by Dima Chatrov, http://yourshot.nationalgeographic.com/photos/1543168/
Ryker Labbee
Senior Analyst, Myanmar

2. About Cascade Asia
Photo: "Mahamuni Buddha temple in Mandalay" by Paul Arps, http://flic.kr/p/iWjD4r

3. Cascade Asia Advisors
is a boutique
intelligence and
strategic advisory firm
focused on
Southeast Asia.
Intelligence – On-the-ground market insight
 Industry and/or issue deep dive
 Supply chain reliability analysis
Risk Management – Monitoring & Mitigation
 Early Warning System (EWS)
 Financial & reputational due diligence
Relationships – Enhanced network access
 Government relations
 Stakeholder perception audit
Strategy – Optimized competitiveness
 Market entry/establishment design
 Corporate positioning
About Cascade Asia
Photo: “Shwedagon at Dusk” by Ryker Labbee, Cascade Asia file photo

4. Early Warning System
Photo: http://www.rawstory.com/rs/2013/08/07/californians-
angered-and-startled-by-first-mobile-amber-alert/

5.  Over 90% of our analysts have
advanced degrees.
 We speak 10 Southeast Asian
languages.
 66% of our clients are from the
private sector.

6.  Ryker Labbee, Senior Analyst
– 11 years experience following Myanmar
– MA in international affairs, economics
– Splits time between Seattle and Yangon
 Jacob Clere, Senior Analyst
– Industry experience and network
– MS in development economics, emerging
markets
– Lives in Yangon
Cascade Asia in Myanmar

7. What Does Tomorrow Hold?
Footwear Manufacturing in Asia Today …and Tomorrow?

8. Economic & Political Overview
Photo: “Irrawaddy Near Inwa” by Ryker Labbee, Cascade Asia file photo

9. Macroeconomic Outlook
Source: IMF, Cascade Asia
5.3%
5.9%
6.4%
6.8% 6.9%
2010 2011 2012 2013 e 2014 f
Gross Domestic Product 2010-2014

10. 750
800
850
900
950
1000
0.0
200.0
400.0
600.0
800.0
1000.0
1200.0
1400.0
1600.0
1800.0
2000.0
Janurary February March April May June July August September October November
Myanmar Imports and Exports 2013 (US$m)
Exports
Imports
USD/MMK
Current Macroeconomic Backdrop

11. Myanmar’s Export Economy

12. China, 14193.395
Thailand, 9984.012
U.K., 6458.979
S. Korea, 3055.518
Singapore, 3044.678
Malaysia, 2437.866
Vietnam, 1625.861
France, 511.186
India, 474.36
Japan, 277.282
Netherlands, 249.136
U.S.A., 243.565
Indonesia, 241.497
Philippines, 146.667
Others, 508.637
Cumulative FDI into Myanmar from 1989 to 2013 (US$m)
Foreign Direct Investment
Source: Myanmar Investment Commission

13. Near-Term Political Outlook
 Stability, further liberalization expected in 2014
 National elections coming in 2015
 Constitutional reform efforts ongoing
– Required for Suu Kyi to run for presidency
– No changes to military reservation in parliament
 Opposition party fragmentation expected
 Unrest involving ethnic minority groups
– Conflict persists in hinterland
– Buddhist/Muslim tension a problem

14. Business Climate in Myanmar
Source: WEF, WB, IFC, WJP, TI
Global Com
petitivenessIndex, 2013-2014
(148)
Ease
of DoingBusiness, 2014
(189)
Rule
of Law, 2013
(97)
Logistics Perform
ance
Index, 2012
(155)
Corruption
Pereption
Index, 2012
(174)
AVERAGEGLOBAL RANK
Singapore 2 1 11 1 5 4
Malaysia 24 6 46 29 54 32
Brunei 26 59 - - 46 28
Thailand 37 18 54 38 88 47
Indonesia 38 120 55 59 118 78
Philippines 59 108 64 52 105 78
Vientam 70 99 66 53 123 82
Lao PDR 81 159 - 109 160 127
Cambodia 88 137 83 101 157 113
Myanmar 139 182 - 129 172 156
Global Com
petitivenessIndex, 2013-2014
(148)
Ease
of DoingBusiness, 2014
(189)
Rule
of Law, 2013
(97)
Logistics Perform
ance
Index, 2012
(155)
Custom
s
Infrastructure
International shipm
ents
Logistics quality
and
com
petence
Tracking
and
tracing
Tim
eliness
Corruption
Pereption
Index, 2012
(174)
AVERAGEGLOBAL RANK
Singapore 2 1 11 1 1 2 2 6 6 1 5 4
Malaysia 24 6 46 29 29 27 26 30 28 28 54 32
Brunei 26 59 - - - - - - - - 46 28
Thailand 37 18 54 38 42 44 35 49 45 39 88 47
Indonesia 38 120 55 59 75 85 57 62 52 42 118 78
Philippines 59 108 64 52 67 62 56 39 39 69 105 78
Vientam 70 99 66 53 63 72 39 82 47 38 123 82
Lao PDR 81 159 - 109 93 106 123 104 111 118 160 127
Cambodia 88 137 83 101 108 128 101 103 78 104 157 113
Myanmar 139 182 - 129 122 133 116 110 129 140 172 156

15. Why Source from Myanmar?
Photo: “Intha Rower on Inle” by Ryker Labbee, Cascade Asia file photo

16. Ideal Demography
95%literacy rate
46million
Photo: Soe Zeya Tun/Reuters, http://blogs.wsj.com/photojournal/2009/08/04/pictures-of-the-day-233/

17. Ideal Demography
Median Age: 28
Source: CIA World Factbook

18. Competitive Wages
$25-$80*month
Photo: "Myanmar Clothing & Textiles,” http://www.myanmarbusinessconsultants.com/clothing-and-textiles

19. Competitive Wages
538
403
344
325
286
209
80
32
Beijing
Mumbai
Kuala Lumpur
Manila
Bangkok
Jakarta
Phnom Penh
Yangon
Monthly Base Salary
(Factory Workers)
58
36
31
27
27
27
24
23
19
16
6
4
3
0
Indonesia
Thailand
Bangladesh
Philippines
South Korea
China
Malaysia
Vietnam
Cambodia
India
Hong Kong
Japan
Singapore
Myanmar
Firing Costs (in Weeks of Salary)
Source: World Economic Forum, Wall Street Journal, Cascade Asia

20. Proximity

21. Government Incentives
 New foreign investment law (November 2012)
– Land leases now possible for 50 (+20) years
– Eleven types of tax incentives: e.g., 5-year income tax
exemption, import duty exemptions, etc.
– 100% foreign ownership now possible
– Remittances of profits much easier, no longer taxed
 Changes in trade environment
– CMP customs tax exemption on raw material imports
– Reduced cargo inspection stations at border
checkpoints

22. Coastal Ports  Over 2,000 kilometers
of coastline
 9 major ports
 Dawei Port/SEZ linking
South Asia to Thailand
– To rival Singapore?
– Interstate highway
 Reduced shipping costs
versus Strait of Malacca
transport
Source: Myanmar Port Authority
Developed Port Capacity

23. What Challenges to Expect?
Photo: “Rail Activity Near Yangon" by Ryker Labbee, Cascade Asia file photo

24. Mature CMP Capacity, Incipient FOB
 CMP:
– Sanctions limited manufacturers to CMP orders until
recently
– CMP garment exports reached about US$1 billion in
2012
 FOB:
– Lifting of sanctions improved prospect for FOB
businesses
– Poor banking services complicate FOB
– US $114 million FOB exports (2012)

25. Labor Market Inefficiencies
60
94
28
120
17
31
68 71
15
93
32
44
49
106
39
141
29
39
131
23
41
0
89
148
64
69
81
111
15
95
Cooperation labor-
employer relations
Flexibility of wage
determination
Hiring and firing
practices
Redundancy costs Pay and productivity Country capacity to
retain talent
Labor Market Efficiency, 2013 (rank/148)
China (34) Cambodia (27) Indonesia (103) Myanmar (98) Vietnam (56)
Source: World Economic Forum

26. Low Productivity
$3.20
$5.30
$17.70
$18.30
$25.40
Myanmar
Vietnam
China
Thailand
Malaysia
Average Daily Wage Cost for a
Factory Worker, 2010 ($ Per Day)
1.5
2.2
7.7
9
11
Annual Labor Productivity in the
Aggregate Economy, 2010
(2010 $ Thousand per Worker)
Source: McKinsey Global Institute

27. A Closer Look at Productivity
Vacant
20%
Storage
30%
Operations
50%
Factory Space Utilization
(% of space by activity)
~100 percent space utilized for operations
in most advanced and developing countries
Source: Focus group on Myanmar manufacturing firms, April 2013; International Labor
Organization; McKinsey Global Institute analysis
20
8
Average of Asian
comparison
countries
Myanmar
Labor Hours in Factories
(number of hours/day)
2-3 shifts of 8 hrs each
Single shift

28.  Lack of new machinery
 Small-scale operations
 Limited and inconsistent
internet access
 Poor telecoms
infrastructure
 Lack of experience with
21-st century machinery
and maintenance
Primitive Machinery, Technology
Photo: "Design Concentration" by abrinsky, http://flic.kr/p/bQZX5a, cropped from original

29. Poor Electricity Infrastructure
Source: Myanmar Energy Sector Initial Assessment, Asian Development Bank (2012)

30.  Only 22% of roads paved
 Poor overland
connections to
neighboring countries
 Poor inland water
transport capabilities
 Abysmal rail
infrastructure
 Dry port plans in
Mandalay being explored
Transportation Infrastructure
Photo: “On the Road to Mandalay” by Ryker Labbee, Cascade Asia file photo

31.  No unified labor code
 Common complaints of workers in Myanmar:
– Low wages (average $25–$80 per month)
– Forced overtime
– Poor factory conditions and treatment
 Rated a ‘Tier 3 country’* in the 2011 US Department of
State 2011 Trafficking in Persons Report
 Rapid urbanization without adequate regulatory policies
may cause environmental problems
– Example: Shwe Gas Pipeline Project
 State Department reporting requirements
* As defined by the U.S. Department of State’s 2011 Trafficking in Persons Report, a country
with a Tier 3 rating is a country whose government does not fully comply with the minimum
standards and is not making significant efforts to do so.
Labor Standards & Compliance

32. Trade Unions
600since
2011
Photo: "Workers Strike from the Myanmar Sunny Clothing Factory" by Mizzima, http://bit.ly/1i0k6Gi

33.  Inexperienced
government
 Little experience working
with western businesses,
international regulations
 High volume of FDI to
process, approve, etc.
 Legislation being enacted,
yet enforcement is lax
 Inadequate judicial
system
 Location of Naypyitaw &
lack of access
Political & Economic Stability
Photo: Shwe Mann in Parliament, Reuters

34. Industry Snapshot
Photo: “Footwear Manufacturing in Myanmar” by Neena Pathak, PRI: http://www.pri.org/stories/2013-09-16/labor-laws-
strengthened-myanmar-workers-still-struggle

35. Source: Institute of Developing Economies, Japan External Trade Organization, Trade Nosis
Footwear Exports from Myanmar
Myanmar FOB Exports
Footwear, gaiters and the like; parts of such articles
0
20
40
60
80
100
120
140
2007 2008 2009 2010 2011 2012
US$inmillions
Others
Thailand
South Korea
Germany
EU (15 countries)
Japan

36.  Yangon has 4,000 hectares of land
for industrial zones, ~20 distinct
zones
– Hlaing Thar Yar (470 hectares, ~500
companies)
– Shwe Pyi Thar (435 hectares, ~200
companies)
– Dagon (400 hectares)
 Hlaing Thar Yar, Shwe Pyi Thar both
operating light manufacturing like
garments and food processing
 Most CMP operations in Yangon
are situated in industrial zones
within a 30-km radius of Yangon
Port, including those listed above
Source: HKTDC Research
Industrial Zones in Yangon

37. Operating Cost Comparison
Source: Various government and industry park sources

38. Profile: Royal Rose Footwear
 Sells primarily to domestic
and Japanese markets
 Two large workshops
 Subcontracting and hiring
temps are common when
large orders received
 Singer sewing machines only
machines in use
 30,000 pairs of sandals/
month
Royal Rose Japanese Catalogue

39. Profile: Royal Rose Footwear
 (Left) Cutting &
making: not a
machine in sight!
 (Below) Finished
products
Photos: Royal Rose Factory by Jacob Clere, Cascade Asia file photos

40. What’s on the Horizon?
Photo: “Bagan Balloons” by Alex Schwab, http://flic.kr/p/bC7iVQ

41. Source: http://bit.ly/16bMIES
Laying More Groundwork
 Minimum wage law
– We have a law in place (effective June 2013)
– Wage limits, determined by presidential committee on
per-industry basis, in place by year-end 2014
– Enforcement is likely years away
 Improvement of worker skills, productivity
– Employment & skills development law
– Educational reform
 Intellectual property law (major issue)
 2015: banking, telecoms improvement

42.  Low wages, political
liberalization energizing
labor groups
– Strike by 600 workers at
shoe factory last week
 Wages to increase but
remain competitive
– Legislation, unions to
push wages higher
– Population stabilizer
 Much in flux at present
Labor Unrest & Uncertainty
Photo: Laid-off Workers Protest in Yangon by JPAING, The Irrawaddy
(http://www.irrawaddy.org/wp-content/uploads/2013/11/workers.jpg)

43. Myanmar International
Terminals Thilawa
Thilawa Special Economic Zone
 Ambitious target to be
operational by 2015
 2,400 hectares
industry; thermal plant
 Connected to MITT

44. ASEAN Economic Community (AEC)
 Economic integration via AEC by 2015
 Free labor mobility
 Removal of cross-border import duties
 Capital market linkages
 Interstate transport, including several
Myanmar-Thailand links, to improve
 Challenges integrating the “six majors” with
the underdeveloped ASEAN 4 (CLMV)

45. Summary & Recommendations
Photo: Sule Pagoda at Night by Damir Sagolj, http://damir.photoshelter.com/gallery-image/Heavy-Going-in-
Myanmar/G0000foxNHfmepcI/I0000XFrB_yZk9Aw

46. Summary
 Opportunities
– Huge long-term potential for industrial relocation
– Unskilled but literate workforce eager for jobs
– Unparalleled strategic location
 Challenges
– Infrastructure challenges won’t be solved overnight
– Labor unrest likely to continue
– Political stability not yet certain
– Expectations are high (and the world is watching)

47. Recommendations
1. Begin monitoring today. Daily media monitoring,
rolling coverage of new players, monthly regulatory
assessments, quarterly infrastructure updates.
2. Don’t settle for anything but on-the-ground
intelligence. What’s percolating on the streets today
that your team should know about? What are your
key stakeholders saying or thinking? Which factories
are adding capacity? Which industrial zones are
easiest to do business?
3. Begin considering now how to tailor your market
entry strategy. Begin mapping out the process for
your market entry that anticipates the uniqueness of
Myanmar.

48. Q & A
t/ 1.360.358.3094
e/ rlabbee@cascadeasia.com
w/ cascadeasia.com
1. Q: How long does it take for a ship from
Myanmar to reach the United States?
A: Approximately 24–27 days, typically connecting in Singapore
2. Q: What is the flight schedule to Myanmar?
A: Daily: Bangkok, Doha, Kuala Lumpur, Singapore, Seoul, Tokyo; at least
3x weekly: Hanoi, Hong Kong, HCMC, Taipei; 2x weekly: Phnom Penh