Quarterly Business Magazine

Myanmar's Garment manufacturers desire to step up to FOB system

Imported Raw Materials need to be duty free
Posted :
Wednesday, November 18, 2015

Myanmar's garment manufacturers needs customs duty exemptions on imported fabrics and accessories if they were to change to FOB [ Freight On Board] system instead of the currently dominant CMP [ Cutting, Making,Packing] system. U Myint Soe, a Myanmar garment factory owner has told us that fabrics imported under the FOB system are levied a 5% duty upon arrival at the ports. Even though Myanmar garment factories are allowed to utilize the FOB system, the vast majority employ the CMP system. Only after cooperating with Chinese and South Korean businesses for about 6 months are they able to switch.

A research study paper in favor of the FOB system has found out the following prerequisites if the FOB system were to be successfully used: tariff exemptions on imported fabrics and accessories;control and holding of such imports by the Customs office; and banking connections between Local and Foreign banks to use L/C [ Letter of Credit ] as the payment mode. Director U Myint Cho of the Department of Trade Promotion has stated that this study was jointly performed by the Ministry of Commerce and Trade and MGMA [ Myanmar Garment Manufacturers Assosiation]. This will be submitted to the Economic Committee.

He further stated that the garment manufacturers has requested for tariff exemptions on imported fabrics and accessories for FOB system to flourish. Garment manufacturers also wish that relevant Ministries and Departments exercise some concessions to make this a reality. During the last few months, there has been protests in Myanmar concerned with the minimum wage and the number of foreign orders was down across the board but now they are rising again.

Another challenge faced by the Myanmar garment manufacturers is the shortage of qualified labor.

Japan and South Korea are the two major international markets for garments made in Myanmar and over 20 countries including Chinese Taipei, China, Malaysia, Turkey and Germany have invested in Myanmar Garment factories.

The Garment industry is an integral part of Myanmar's 5 year National Export Plan and it could benefit greatly with the successful practice of FOB, according to the garment manufacturers.

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