Govt, employers urged to address labour rights issues if Myanmar is to become manufacturing hub of Asean
The easing of economic sanctions by Western countries in 2012 brightened the prospect that Myanmar would expand its non-resource exports through the expansion of its manufacturing sector.
However, experts warned that the turning Myanmar into a new manufacturing hub would be possible only when the government and employers, local and foreign, properly addressed several labour rights issues.
As the curtain has been raised and more foreign companies have set up production facilities in the country in recent years, Myanmar workers’ knowledge of labour rights has expanded, warned an activist who has witnessed a stronger desire among workers to form labour unions.
“Before, most of the workers had no idea about labour rights. We cannot say if labour rights have improved to meet international standards during this government’s term. But we cannot deny that many workers understand the importance of forming labour unions and move to establish them in many different areas,” said Eai Shwe Sinn Nyunt, founder of Labour Rights Defenders and Promoters (LRDP).
The organisation’s main mission is to support the establishment of labour unions across the country. Activities have been held across the country to raise awareness on labour rights and the right way to claim their rights.
“We are encouraging workers to form labour unions in their respective companies, townships, and regions. We have been training thousands from all parts of the country to be able to claim their rights democratically and peacefully. Our trainees can now guide other workers in their workplaces on how to claim their own rights. And we are also helping resolve disputes between employers and employees by negotiating with the authorities concerned and owners and representatives of the factories. We are striving for the interest of local workers. We have been undertaking capacity building programmes for workers, raising awareness on freedom of association, migration issues, human trafficking,” the lawyer said.
To her, more cooperation between employers and employees are inevitably needed for resolving the disputes.
“We usually do not encourage workers to walk on the streets for protests. Instead, we try to negotiate in a peaceful way,” she said.
According to the lawyer, most workers demand an official minimum wage; clean water and sanitation; transport shuttle services; and a line of communication with managers and supervisors to settle disputes. Setting the minimum wage could be the best way to end ongoing disputes, she said.
“The authorities have delayed the decision on minimum wage, saying it has to take into consideration many issues to avoid unnecessary problems. I guess they are afraid of price hikes. Businesses may take this opportunity to raise goods prices, and this will also hurt workers. Even when the minimum wage is set, it will remain difficult for workers to make ends meet,” she said.
Eai Shwe Sinn Nyunt noted that pay can barely cover the cost of food, let alone other necessities, like clothing and education of their children.
The minimum wage law was passed in 2013, but the enforcement has been delayed due to the need to conduct cost-of-living assessments.
With the plan to set the minimum wage in the middle of this year, the Labour, Employment and Social Security Ministry is now conducting surveys of more than 20,000 households in 108 townships to fix and balance the minimum wages throughout the country.
One of the surveys, carried out in the first two months of this year, was conducted in Yangon’s Shwepyitha Township, a largely working-class township.
It showed that monthly household incomes of people in the township ranged from Ks100,000 to Ks200,000, while all households reported expenditures of at least Ks200,000.
“In a family of four, they need at least Ks200,000,” said Tun Wai, a member of the survey team. He said about 70 per cent of the people there have to sell their possessions to pay for health and education.
More investment is expected to boost employment and workers’ incomes. In this regard, Myanmar has bright prospects due to the very low base of the manufacturing sector.
According to the Institute of Developing Economies (IDE), a unit of Japan External Trade Organisation, Myanmar's per-capita exports have remained the lowest among members of the Association of Southeast Asian Nations (Asean) for the past two decades. Per-capita exports of goods and services in 2010 were US$159, nearly half of $359 reported for Laos.
Though per capita exports more than doubled from 2005 to 2010, they have remained the lowest among Asean members since 1990. To date, its exports are highly concentrated in natural resources and primary commodities. The export of natural gas to Thailand alone amounted to 40 per cent of Myanmar's total exports in 2010. Manufactured goods constituted a lower share of all exports from Myanmar than for Cambodia and Vietnam.
Experiences of many countries have shown that foreign investment is the key to drive the manufacturing sector in the region. Foreign direct investment into Myanmar has been slow for the last two decades due to Western sanctions and poor investment climate. Furthermore, most FDI in Myanmar flowed into the energy sector, like hydropower and gas, but not into manufacturing, services, or agriculture. Myanmar is an exporter of food such as rice, beans and pulses and sesame seeds.
In a research released in 2013, IDE economist Toshihiro Kudo foresaw great prospects for Myanmar’s manufacturing sector. One reason lies in the fact that Myanmar exports low-quality primary agricultural produce but imports processed food. In this regard, quality seeds, farm management, improvement in post-harvest system, processing and marketing is necessary to export high-quality agricultural products.
Investment would also be attracted due to the fact that Myanmar links Asean with China and India.
"The recent 'Myanmar Boom' attracts many business missions and has thus far has a positive impact on both the Myanmar side and for potential investors. If Myanmar fails to meet expectations, however, the boom may function as an amplified speaker of negative news to the international business community," said Toshihiro Kudo.
To date, few foreign manufacturing companies have ventured into the country, hindered by Myanmar's regulatory framework.
All foreign companies wishing to operate in the country need permits, either from the Myanmar Investment Commission or ministries with jurisdiction over relevant industries.
According to the Grant Thornton Advisory Services in Myanmar’s “Doing Business in Myanmar” report released last month, the companies would also be governed by 14 labour laws.
1. The Workmen’s Compensation Act, 1923.
2. The Employment statistics Act, 1948.
3. The Employment and Training Act, 1950.
4. The Leave and Holiday Act, 1951.
5. The Factories Act, 1951.
6. The Shops and Establishments Act, 1951
7. The Employment Restrictions Act, 1959.
8. The Overseas Employment Law, 1999.
9. The Labour Union Law, 2011.
10. The Settlement and Labour Dispute Law, 2012.
11. The Social Security Law, 2012.
12. The Labour Organisation Law, 2012.
13. The Employment and Skills Development Law, 2013.
14. The Minimum Wage Act, 2013.
Source: Grant Thornton Advisory Services in Myanmar
A shortage of skilled labour poses a challenge, particularly when the Myanmar Foreign Investment Law sets a rule on local staff employment. A foreign-owned entity formed under a permit issued by the MIC must hire at least 25 per cent local staff within the first two years. The ratio would be raised to 50 per cent in the next two years and 75 per cent in the third two-year period.
Low wages in Myanmar are attractive for labour-intensive industries like garments and shoes, which need to shift their production bases from countries where wages have risen recently.
At present, salaries are set as a monthly rate. Aside from wages, employers are required to contribute 3 per cent of salaries to Social Security. As healthcare services are provided by the government, employers are required to pay compensation to accident-related injuries, but the compensation is limited: no more than 3 days of compensation if the injuries does not result in the total or partial disablement or injuries that do not result in death or permanent total disablement caused by an accident which the employee is directly attributable to.
With the enactment of the Labour Union Law in 2011, the government has officially allowed workers to form labour unions and associations. To date, about 1,500 labour unions have been formed all over the country.
Win Shein, director-general of Factories and General Labour Laws Inspection Department under the Ministry of Labour, Employment and Social Security, said his ministry really welcomes the establishment of labour unions in several areas and factories respectively.
“We encourage them if they undertake their tasks systematically. We are also helping those who want to form labour unions. We have been providing short-term trainings to employees working for factories and businesses in Yangon, Mandalay and Bago regions since June last year. To date, we have trained more than 10,000 workers,” he said.
Yet, some workers still resort to protest.
On February 9, more than 2,500 workers from four garment factories in Shwe Pyi Thar Industrial Zone staged a joint protest. The companies are E-land Myanmar, Ford Glory Garment, Red Stone Garment, and Costec International joined the protests. Ford Glory is owned by a Chinese businessman, and Red Stone is a Japanese venture, while the other two factories are run by Korean businesspeople. All the workers were on streets demanding salary increases and better working conditions.
The workers’ demands included some common points: an increase in their basic salary from Ks30,000 to Ks60,000; a minimum wage; permission to open labour union offices in factory compounds; and paid leaves and holidays in accordance with the Leave and Holiday Act of 1951. All the protesters called for the increases of basic salary by Ks 30,000 [about US$30].
Some workers have reportedly been staging sit-ins in front of their factory compounds since January 28. On February 12, government authorities headed by the Deputy Minister of Labour, Employment and Social Security and representatives from the firms negotiated with labour leaders about the salary increases, but they failed to reach an agreement.
Myo Min Min, an employee of E-land Myanmar and president of Shwe Pyi Thar Township Labour Union, said he does not see much improvement in the labour rights issue, despite the approval to form labour unions.
“If our laws are strong enough and those who are investing in Myanmar are responsible enough, there will not be any disputes. Employers do not want to accept labour unions as their counterparts for negotiation in case some disputes occur. Most of them think their dignity can be hurt by negotiating with labour unions,” he said.
According to Myo Min Min, more than 1,100 workers from E-land Myanmar joined the protest, and about 900 of them are female. They have vowed to intensify their protest after the failure of discussions with the authorities on February 12.
Ford Glory offered Ks 900 incremental increase in pay per day; Red Stone offered Ks500; Costec International offered Ks300; and E-Land Myanmar offered Ks 400. Dissatisfied, the workers are planning to march on the streets again in the third or last week of February.
“The authorities said they came to mediate. But we do not really think they are there for mediation. They always said workers should not stop working and sit in front of the factory. From our point of view, they seem to favour the employers rather than employees,” he said.
Aye Sandar Win, president of Costes International’s Labour Union, insisted that their demands were really fair, and they wanted the employer to follow the existing labour laws.
“We will go on the protest until they accept our demands,” she said.
Win Shein said there may be no other way to solve the dispute, aside from taking the matter to court.
Manufacturing hub of Asean
Win Shein also cautioned that recent protests over labour rights may deter Myanmar from becoming the next manufacturing hub of Asean.
“We want the workers to continue working and claim their rights. I believe employers will not neglect their performance if they do well in the workplace. Stopping the works and sitting outside the factory will have an impact on the national productivity. On the other hand, the workers will not get their daily allowances, so there may be some negative impacts on their families. It is not a win-win situation,” he said.
Eai Shwe Sinn Nyunt of LRDP rejected the official’s point of view.
“Many firms investing in these sectors are doing business in Myanmar due to cheaper labour costs than other Asean countries. The more workers know about labour rights, the more conflicts between employers and employees. It is usual,” she said.
She added that many factories were registered as citizen investments but actually owned by Chinese business people in order to reduce tax payments.
“Some authorities know of such kinds of investment but pretend not to know. This may hurt the government’s incomes from taxes. We no longer want companies that do not provide any rights for their employees,” she said.