Myanmar - Defense Industry - Background
In the 20th Century, the country's defense industry was very small, in general supplying only uniforms, light arms, and ammunition. The government dockyards at Rangoon possessed limited shipbuilding capability. Most of the rest of military hardware was imported from various countries. In the late 1970s and early 1980s major suppliers included Denmark, the Federal Republic of Germany (West Germany), Australia, and the United States. Subsequent to the end of the Cold War, China and North Korea became major suppliers, and domestic producton slowly expanded.
Manufacturing in Myanmar is mostly concentrated in textiles and similar labor-intensive low capital investment work. According to the GOB's own statistics, manufacturing made up only 9 percent of the economy in FY 2002-03. This 9 percent is dominated by bloated state-owned enterprises (SOEs) producing sub-par goods for the domestic market in factories with Soviet-sounding names like the "No. 1 Jute Processing Factory." Manufacturing is centered in several large blocks of farm land rezoned for industry, established around Rangoon and Mandalay to take advantage of large pools of cheap labor. The vast majority of foreign investment, both independent and JV, in the manufacturing sector is in the export-oriented portion of the garment industry, a portion basically abandoned by the government, to take advantage of Burma's extraordinarily low wages -- even by regional standards.
The contribution of industry to Myanmar’s economy rose from 26.5% in 2010 to 34.4% in 2014, while the share of agriculture fell from 36.8% to 27.9% during the same period. It is worth noting that the share of industry in GDP has surpassed agriculture, and may surpass the service industry in the medium term. There are 18 industrial zones in the country, 9,849 factories, and about 1.74 million employees. The main industries include oil and natural gas exploration, small machinery manufacturing, textiles, printing and dyeing, rice milling, wood processing, sugar, paper, fertilizer and pharmaceuticals.
Attempts to run factories at an international standard, had been buffeted by a multitude of pre-existing and systemic problems. First is a chronically unreliable power supply and the high cost of imported diesel fuel. One electronics component factory poured 45 percent of operating expenses into fuel and power generation. Dismal roads and disorganized trucking make transportation difficult and expensive. Telecommunications infrastructure is in terrible condition. This makes "just-in-time" delivery impossible as it requires most factories to warehouse spare parts and several months of inputs.
The biggest challenge facing manufacturing in Myanmar is its inadequate and underdeveloped infrastructure. Myanmar’s electricity grid remains prone to shortages and black-outs. Factories, especially those seeking to operate on a twenty-four hour basis, need to maintain back-up generators, which are often expensive to run and unsuitable for large scale manufacturing. workers’ productivity in Myanmar, which is generally perceived as lower than other countries in the region. However, Myanmar workers are also considered to be hard-working and fast learners. It is also expected that the country’s current electrification rate will be double by 2030 with the international help.
Although skilled workers are limited, working-age labourers who can be trained to become an efficient workforce are abundant in Myanmar. Workers’ productivity in Myanmar, which is generally perceived as lower than other countries in the region. However, Myanmar workers are also considered to be hard-working and fast learners. The military’s nationalization of schools in 1964, its discouragement of English language classes in favor of Burmese, the lack of investment in education by the previous governments of Burma, and the repeated closing of Burmese universities from 1988 to the mid-2000’s have taken a toll on the country’s work force. Most people in the 15- to 39-year-old demographic lack technical skills and English proficiency. In order to address this gap, Burma’s Employment and Skill Development Law went into effect in December 2013 and is being revised. The law provides for compulsory contributions on the part of employers to a “skill development fund,” although this provision has not been implemented.
The supply of young workers is quite sufficient in the medium to long term. In addition, Myanmar’s literacy rate is one of the best in Southeast Asia, creating a very favorable environment for the country to transform from relying mainly on agriculture to being a modern economy driven by industry and services. Despite implementing economic reforms in 2012, the military government had implemented economic isolation for many years, resulting in a severe shortage of skilled workers and professionals in Myanmar, which has a major impact on the productivity and quality of local workers. In terms of the supply of knowledge workers, Myanmar also needs to train talents so that they have advanced management expertise or technical knowledge that meets international standards.
The strengths of local companies generally include established business contacts, relationships, and networks with stakeholders, as well as having established brands and a better understanding of the local culture, including corporate culture. However, they frequently suffer from weaknesses common to emerging markets, such as capital limitations, technological and technical restraints, and a lack of international standards in the manufacturing of globally competitive goods.
The own design manufacturer (ODM) realizes additional value through design. A few of the most enterprising ODMs can make the transition to the own brand category (OBM) and eventually become apex firms in their own right with their own regional or global brand. Developing countries, like Myanmar, tend to start out as assemblers using knock down kits provided by an apex firm or its first tier full package suppliers. In time and with the help of clustering, they become full package suppliers, and then advance to the ODM stage. OBMs with global brands from developing countries are a rarity.
|
NEWSLETTER
|
| Join the GlobalSecurity.org mailing list |
|
|
|
