H&M, Zara’s owner stick with ‘made in Myanmar’ after coup, but some brands exit

European retailer Primark, which bought garments such as raincoats and parkas from 25 factories in Myanmar, said last month it would exit, citing difficulties in ensuring the safety and rights of workers who make the clothing. Its decision follows the departure of other European brands, including Aldi South Group, C&A and Tesco PLC.

On the other hand, companies such as H&M Hennes & Mauritz AB, Zara-owner Inditex and Uniqlo-parent Fast Retailing Co. are staying. An H&M spokeswoman said there are “contradictory considerations and different perspectives as to whether trade with Myanmar should continue or not" and that the company has no plans to leave. The brand was “mindful of the fact that many people in Myanmar rely on international companies for their livelihood," she said.

Inditex and Fast Retailing didn’t provide comment. Inditex said in July it is working closely with suppliers in Myanmar and is committed to protecting human rights.

At the heart of the debate lies a tough choice: take advantage of Myanmar’s low wages and preserve jobs that benefit the country’s poor or leave because of labor abuses that some workers and rights groups say have worsened under military rule. The dilemma reflects a riskier global environment for business overall. Hundreds of Western businesses have paused or stopped operations in Russia, for instance, since it invaded Ukraine.

A September report by the London-based Ethical Trading Initiative, which interviewed 3,120 Myanmar garment workers, alleged labor violations including excessive overtime work and verbal, physical and sexual harassment. Workers have few avenues to air grievances since the junta, in an effort to stifle democratic institutions, arrested union leaders and threatened workers’ organizations, said the group, which includes companies, trade unions and nongovernmental organizations seeking to promote workers’ rights.

Fast-fashion brands don’t typically build or operate garment factories themselves, but instead place orders at independently run factories, often located in developing Asia where workers can be hired to sew clothes for as little as a few dollars a day. In recent years, the brands have pushed to enforce higher safety and labor standards at the factories they contract, for instance by conducting more-extensive inspections, after industrial disasters like the collapse of the Rana Plaza factory building in Bangladesh in 2013 killed 1,100 workers and shamed the brands.

In Myanmar, workers being denied full wages and severance benefits were problems even before the coup, but human-rights groups say the country’s unstable and oppressive political environment since the junta wrested control has exacerbated the situation.

The coup sparked protests across the country, which the military sought to crush with deadly force. Its response led to armed resistance, intensifying civil war. The junta has arrested around 15,000 people and killed 2,300 people since it seized power, according to the Assistance Association for Political Prisoners, a local human-rights group.

In September, Vicky Bowman, the British director of the Myanmar Center for Responsible Business, a nonprofit that advised investors including international clothing brands, was sentenced to a year in prison on allegations she violated immigration law. The U.K.’s Foreign, Commonwealth and Development Office said it will continue to support Ms. Bowman, who is a former British ambassador, until the case is resolved.

Over the past 20 months, a number of businesses have decided to quit Myanmar, including Norwegian telecommunications firm Telenor ASA and oil-and-gas companies Total Energies SE and Chevron Corp. Aldi South, which sells products such as cargo shorts and running shoes, decided to exit in September 2021, citing the unpredictable nature of doing business and difficulties upholding human rights. European brand C&A also cited political developments and U.K. retailer Tesco said its exit was in line with advice from global unions.

Some civil society and labor groups argue clothing companies should stay. Unlike the hydrocarbons and telecommunications sectors, which benefit the military regime, the bulk of the money garment retailers spend in the country goes toward labor and other production costs, they say.

“If they stop buying, the worst affected will be laborers from the garment industry," said Ye Naing Win, general secretary of the Cooperative Committee of Trade Unions, a Myanmar labor organization. The Ethical Trading Initiative report estimates that 320,000 workers would lose employment or suffer reduced income if European buyers withdraw. It didn’t take a position on whether brands should stay or go.

In an open letter, IndustriALL Global Union, an international labor union with affiliates that represent more than 50 million workers worldwide including in Myanmar, called on H&M to pull out, arguing that brands can’t perform due diligence where trade unions are severely repressed. “There is no responsible way to conduct business in Myanmar," Atle Høie, its general secretary, wrote. IndustriALL has also urged other brands to exit.

Some Western brands paused buying clothes after the coup, but restored purchases after a few months. Garment exports to the European Union, U.S. and Japan in the first half of 2022 were up 29% from the same period last year and 12% higher than in 2020, the year before the coup, according to United Nations trade statistics. The recovery contrasts with the broader Myanmar economy, which is 13% smaller than it was in 2019, according to the World Bank.

In a July report, the World Bank said the depreciation of Myanmar’s currency over 2021 and 2022 had strengthened the price competitiveness of Myanmar-produced garments. At the same time, the weak kyat—which has dropped by a third in value relative to the U.S. dollar since the coup—contributed to high inflation. Half the employed garment workers who participated in a recent survey by the U.N. Development Program said they are eating less due to a lack of resources, according to the results released last month.

In June, workers who hadn’t received full pay at a factory in Myanmar’s largest city, Yangon, staged a protest, said a 25-year-old female garment-industry worker who declined to be named. A few hours in, a group of men arrived brandishing sticks, made vulgar comments and beat them, causing the workers to flee. The worker said she quit and quickly fell into debt.

She has since found work at a different factory, but 20% interest payments on loans she had taken after becoming jobless eat into her salary. She now feeds her infant son a less-expensive milk powder. “Now I have to worry about everything," she said.

This story has been published from a wire agency feed without modifications to the text