Korea-Myanmar JV for building FOB garment factories on 500-acre land

Myanmar-based Olympus Asia Group and Korean company Panko Corporation joint venture for building free-on-board (FOB) garment factories on 500 acres of land, for which they are looking for land in Yangon, Bago or Ayeywarwady regions. The project will start within one year and it will take three years to build the required infrastructure.

According to the Myanmar Garment Manufacturers Association, vast majority of Myanmar’s garment factories operate under the cut-make-pack system. Under the CMP model, a foreign buyer with financial backing and technical expertise will contract a garment factory, usually in an emerging market, to carry out their labour-intensive work.

Under the FOB system, on the other hand, foreign retailers place orders from well-financed factories with technical expertise. Most factories in Myanmar lack access to financing and do not have enough skilled workers to operate under the more profitable FOB model.

Olympus Asia Group CEO U Okkar Zaw Naing said that the factories would operate under the FOB model, and would focus on creating jobs for local people.

The project will include an international-standard wastewater treatment plant; generate its own electricity; and include dormitories for employees. The companies will produce their own cotton and buttons in Myanmar, as well as producing clothes for export.

U Okkar Zaw Naing believes the integrated factories will create between 40,000 to 60,000 job opportunities for Myanmar people. The company will also offer training and competitive salaries.

They are looking at three places for the project, in Yangon, Bago and Ayeyarwady regions, but have not yet made a decision. It will depend on which place is best in terms of electricity, employees and logistics costs, he said.

U Okkar Zaw Naing said that their partner company has asked them to build their own substation for electricity, because power here is not reliable.
Choi Yung Joo, chair of Panko Corporation, said that Myanmar has the potential to develop its textile industry and they are sure this project will contribute to development.

Myanmar’s garments industry has great potential, but its development requires foreign investment, but without good local businesspeople, foreign companies cannot invest. However, for foreign companies sourcing from Myanmar, there are a host of challenges including underage workers, unsafe factories and high logistics costs. For companies building new factories in Myanmar, infrastructure is a major challenge.

The Myanmar garment industry is growing fast, and is a priority sector for the government.