Are Exiting Brands Making Myanmar’s Labor Conditions Worse?

Are Exiting Brands Making Myanmar’s Labor Conditions Worse?

Since Myanmar’s military seized power in a brutal coup d’état against the civilian government in February 2021, plunging the Southeast Asian nation into a bloody civil war that has resulted in the deaths of thousands of civilians, Khaing Zar Aung has been urging fashion’s biggest names to divest their business or else risk legitimizing—even upholding—the junta’s dictatorial regime.

The president of the Industrial Workers Federation of Myanmar, who lives in exile overseas, has been partway successful. By August 2023, H&M Group and Zara owner Inditex, two of the world’s largest apparel purveyors, announced their intention to join the likes of Aldi South, C&A, Mango, Primark, Lidl, Marks & Spencer, Tesco, Uniqlo owner Fast Retailing and Muji parent Ryohin Keikaku in phasing out operations in accordance with IndustriALL Global Union’s responsible exit framework, though neither offered a timeline.

At the time, Khaing Zar Aung chalked the decisions up as a win. As democracy crumbles—and any hint of opposition violently suppressed—brands can no longer “pretend” to protect workers’ rights through their due diligence efforts, she said. Even those that professed stringent measures have been linked to dozens of suppliers accused of rampant labor abuses, including forced overtime, wage theft, unfair dismissal, gender-based violence and attacks on freedom of association.

But the data her organization helped gather shows that nothing has changed, she said. If anything, human rights conditions are deteriorating. Case in point: Myanmar Labour News, a Yangon-based outlet that tracks worker complaints, logged 455 violations in 2023, or nearly thrice as many as the 165 the year before. Zara and other Inditex brands were mentioned 33 times and H&M 13 times. Primark, which announced its withdrawal in 2022, again with no exit date, racked up nine references.

In interim results from the first four months of 2024 that Khaing Zar Aung provided Sourcing Journal, H&M and Inditex continue to appear as buyers of offending factories. So does Lidl, which said it would be leaving by 2025, and Fast Retailing-owned GU, whose dealings with Myanmar were supposed to have ended with products for the 2023 fall/winter season.

Khaing Zar Aung said that when brands announce their divestment but don’t specify when or, if they do, peg their exit further into the future, they surrender their leverage, since misbehaving suppliers have no incentive to improve. “Can you imagine a supplier knowing they will get orders until a specific time and then they will lose them?” she said. “So why would they have to comply…to please the brands to gain more orders?”

Asked for comment, an H&M spokesperson said that the Swedish retailer is “in the process of exiting the country in a responsible way” and that it continues to remediate cases “as soon as they are brought to our attention.” Inditex would only say that the company is “in the process of a phased and responsible exit” from Myanmar and continues to reduce the number of active manufacturers in the country.

Primark noted that it stopped placing orders in October 2022 and that “final orders” from Myanmar shipped a year later, while a representative from Fast Retailing said that it hasn’t conducted business in the country since the production of a “small number” of GU items came to a “scheduled contractual conclusion” in 2023. Lidl, for its part, said that it takes its responsibility toward factory employees in Myanmar and other sourcing countries “very seriously” and that it follows up on any information about “deficiencies in our supply chain or that our standards are not being met.”

Vicky Bowman, director of the Myanmar Centre for Responsible Business, an initiative that promotes responsible business activities in the country, said that the three-fold spike in violations reflects two trends. One, ​​that workers are increasingly turning to platforms like Myanmar Labour News because they hope that their complaints will reach brands more quickly, resulting in the possible resolution of their grievances. Two, it’s a sign of the mounting precariousness of work in the sector.

“Future orders are less predictable, including because some major European buyers have withdrawn, partly as a result of campaigns,” she said. “Production is also disrupted by logistical and power issues. This all has a knock-on effect on workers. Responsible sourcing practices based on long-term contracts become rarer. Factories have to chase new buyers based on price. It is harder to establish effective social dialogue in factories, particularly when there is high turnover and fewer workers on contracts.”

Conscription law as ‘forced labor’

Whether firms should stay or go has been a source of heated debate with no hard answers, let alone anything resembling a consensus. That Myanmar is in crisis due to the actions of the junta is indisputable. The path forward? Less clear.

In 2022, an Ethical Trading Initiative report concluded that the coup resulted in an “almost total absence of infrastructure to promote and support human rights,” making it impossible for responsible businesses to apply normal human rights due diligence. Neither do buyers hold any influence with the military to reduce any security threats to trade unions and workers’ representatives, the multi-stakeholder group said.

Complicating matters is Myanmar’s activation of its national conscription law, which had remained unenforced since its introduction in 2010. This changed in February, when the junta, smarting from heavy losses in its ranks to rebel fighters, declared that any man aged 18 to 35 and any woman aged 18 to 27 could be called up to serve in the military for at least two years, though it later clarified that women will not be included for now.

Considering that the median age of garment workers in Myanmar is 27 years, per the International Labour Organization, the announcement is another source of tension for factory employees who face additional “high risks of further violence,” said Peter McAllister, executive director of ETI, whose brand members include Bestseller, Inditex and Primark.
Khaing Zar Aung said the effects of the forced recruitment, the evasion of which is punishable with five years imprisonment, are already being felt. She’s spoken with “40, 50” garment workers who have had to return to their villages to “take the ballot,” meaning participate in the lotteries for the draft. Those who are picked have no choice but to enlist. Evasion of conscription is punishable by three to five years in prison, plus fines. Those who resist put their families at risk of arrest.

“Women are still emotionally impacted by conscription, as they have sons, brothers and husbands who are at risk,” Bowman said. “Some garment workers are already resigning. There are expectations that more workers will not return after the New Year holiday. Workers may hope to leave Myanmar, mainly to work in Thailand, if they can. And workers are reluctant to be out after dark, which impacts on their willingness to do overtime, even though they need the cash.”

Military-owned garment factories have also been ordered to begin mass-producing more than 100,000 sets of army uniforms for recruits, local media has reported, though Bowman said that these have “nothing to do” with the export-oriented private sector.

In a statement to its members shortly after the military’s announcement, Fair Wear Foundation, whose roster includes brands such as Ganni, Jack Wolfskin and Vaude, warned that the conscription law can be considered a “form of forced labor,” particularly since suppliers can no longer ignore requests to submit workforce data to junta officials. The activation, it said, poses not only a significant issue for production stability and supply chain disruptions, but also a severe human rights risk.

“We call upon member brands active in Myanmar to reassess their sourcing policy for Myanmar,” the multi-stakeholder organization said. “This development will significantly impact your due diligence responsibility; the linkages between your suppliers and the military regime [are] undeniable. Sustaining these practices will go directly against the UN Guiding Principles.”

What this means in plain English is that there’s a “very, very thin margin” left for brands to prove that they can conduct human rights due diligence, Eveline de Wael, Fair Wear’s regional coordinator for Myanmar and Vietnam, told Sourcing Journal. “The space is shrinking.”
Why brands stay…and why they leave

In an industry spoiling for options when it comes to production destinations, choosing to opt out of Myanmar, which doesn’t have the same breadth or depth of manufacturing as China, Bangladesh or even Vietnam, may seem like an easy choice.

Despite the challenges, however, several international companies have remained steadfast in their determination to stay in Myanmar. Leaving, they say, will only consign garment workers to a worse fate, including unemployment in an already destabilized economy battered by extreme inflation. Their justification is that some due diligence is better than none at all, especially if it staves off a bigger human rights catastrophe.

Among the more prominent of these is Bestseller, which has business relationships with 21 factories in Myanmar. In a March update of its human rights due diligence processes, the Danish retailer said that it monitors payments of wages to ensure that workers are paid what they are legally due, engages factory management and worker representatives in social dialogue mechanisms and investigates allegations of unfair dismissals.

Bestseller also referred to the risk of conscription, both for its direct staff members and the employees of factories from which it sources products. In response, it said that it has increased monitoring of factories and the “potential risk of military drafting workers at factories or in transit to and from their place of work.” It’s also continuing to “focus on monitoring the provision of safe transportation for workers to and from work,” as well as increasing its worker documentation monitoring “as there is an increased prevalence of fake IDs being used by people to avoid conscription.”

“Bestseller does not do business with the military or military-affiliated companies,” a spokesperson told Sourcing Journal. “If a factory we work with was to receive an order from the military or a military-affiliated organization, our process would be to firstly ask that factory not to do so—and if the factory cannot refuse, then we would disengage from the factory. These expectations are known and understood by our factories, with whom we have close relationships and enforced proactively by Bestseller’s responsible sourcing team.”
Other retailers that are in the “stay” camp include Jack Wolfskin, which said that by staying engaged with its partners in Myanmar, it can “ensure that people in the country can work in an environment where working conditions are externally controlled, constantly reviewed and under constant improvement.” Vaude similarly said that it has maintained its operations in the country because “we believe that supporting the people in the country is best achieved by contributing to job security and the livelihoods of workers.” Neither the number of complaints nor the working conditions have changed despite recent developments, it said.

And despite coming under fire for being slow to act when one of its Burmese suppliers fired workers for protesting for better wages and conditions, Adidas said that it carries out a “heightened version of human rights due diligence” and “continuously engage[s] with international and local stakeholders to monitor the evolving human rights situation.”

At the same time, these companies may increasingly be outliers. The activation of the conscription law and reported military-linked garment activities will make businesses “more cautious” about sourcing from Myanmar, said Kaho Yu, principal Asia analyst at risk intelligence company Verisk Maplecroft. Multinational brands could face additional reputational risk of having direct business dealings with the military that will make it difficult to adhere to international best practices, while the garment industry itself could see increasing labor shortages as workers get drafted or flee. Investor backlash and consumer boycotts, too, are a “realistic prospect” for manufacturers associating with the regime, he said.

“The ongoing crisis stemming from the military coup in Myanmar [has] dashed hopes of the country becoming [a] major manufacturing hub for the foreseeable future,” Yu said. “This trend could significantly impact Myanmar’s long-term economy given that garment is a key source of revenue and employment in the country.”

To due diligence or not to due diligence

The ETI is very specific about what “enhanced” human rights due diligence entails. Assessments aside, companies need to bolster resources to support these processes, including putting more people on the ground.
“To be conducted responsibly, both decisions require stronger measures of human rights due diligence, engagement with local stakeholders, and close attention paid to the latest developments,” McAllister said. “There should be a continuous evaluation of the risks to workers. They should then engage directly with their suppliers to take action to mitigate any further risk as much as possible or review their presence in the country.”

Avedis Seferian, CEO of Worldwide Responsible Accredited Production, better known as WRAP, said that the social compliance firm has seen “some decline” in WRAP-certified facilities in Myanmar. But the company is still able to conduct audits and where it can validate that a facility meets its requirements, it will still issue a certificate.

“Given Myanmar’s history, even after its return as a sourcing destination a decade ago, there was always a risk of a link between a supplier and the military regime, which is why responsible buyers took pains to ensure their due diligence included as thorough a review of facility ownership as possible,” Seferian said. “Recent developments only serve to further heighten awareness around that risk, but that doesn’t really change the meaning of it for brands and their due diligence responsibilities.”

That is to say, it is “still incumbent upon them to do the necessary work—and an independent, credible social audit is a very important part of that—to satisfy themselves that they are sourcing from a responsible supplier.” Conducting effective human rights due diligence may not be easy and there are fewer viable options today that require “more rigorous review’ to identify, but “it can be done,” he added.

Adidas, Bestseller, Jack Wolfskin and Vaude have cited their participation in a social and environmental compliance initiative for factories known as the Multi-Stakeholder Alliance for Decent Employment in the Myanmar Apparel Industry, or MADE in Myanmar, as one of the reasons they think they can still make a difference.

Funded by the European Commission, MADE in Myanmar has faced under fervid opposition, including from IndustriALL, which said that the program, as implemented by the German developmental organization Sequa and the European Chamber of Commerce in Myanmar, “effectively funds Myanmar’s military junta” by providing “vital foreign exchange which sustains the military regime and facilitates the purchase of arms, ammunition and fuel.”
“Myanmar’s trade unions—which were banned by the junta—have condemned this program as a sham, designed to whitewash labor rights abuses and provide political cover for garment brands who find Myanmar a cheap and convenient sourcing location,” it and other unions wrote to EU leadership in February. “The regime continues to arrest trade unionists and use military force to suppress protests and worker activism. …Given the impossibility of conducting due diligence in an environment where freedom of association is not possible, the MADE in Myanmar program is untenable.”

Despite the many security and logistical hurdles stemming from armed conflict, plus the challenge of getting the private sector to stick around as conditions regress, the EU is “very committed to keeping our presence in the country,” Ranieri Sabatucci, European Union ambassador to Myanmar, told Sourcing Journal. The trading bloc’s partners, he added, have been “very clear in passing the message that we are now needed more than ever.”

Karina Ufert, CEO of EuroCham Myanmar, agreed that by working with stakeholders, brands can “leverage their presence to ensure better working conditions.” EuroCham Myanmar, she said, is working with the Myanmar Garment Manufacturing Association to “ensure the flow of fact-based information” about the recruitment process and the right to appeal, as well as engaging with one of the trade union federations on the ground to “get their perspective and guidance for the brands and factories to protect workers’ rights.”

For Khaing Zar Aung, however, the situation is less equivocal—and far more personal. Her brothers and nephews have had to leave the country, she said, and some of their friends have gone missing. And even if non-military-owned factories are asked to make army uniforms, she said, how could they possibly refuse? Between suppliers paying soldiers for “security” and their provision of food and drinks to officers at the myriad checkpoints to keep the peace, there is simply no way that brands can say they’re not working with the junta, however indirectly, Khaing Zar Aung said.

Brands may be making more profit from a low-cost country like Myanmar, she said, but they’re sharing those same profits with the military. She shares IndustriALL’s view that programs like Made in Myanmar are “propaganda” that do not truly represent garment workers.

“This is a failure of due diligence,” Khaing Zar Aung said. “I don’t see how brands can do due diligence in Myanmar.”

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