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Brands must divest from Myanmar

Since Myanmar’s military seized power in a brutal coup d’état against the civilian government in February 2021, plunging the nation into a bloody civil war that has resulted in the deaths of thousands of civilians, Arthur Svensson prize winner 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. Brands have been linked to dozens of suppliers accused of rampant labour abuses, including forced overtime, wage theft, unfair dismissal, gender-based violence and attacks on freedom of association.


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 labour 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?”


Conscription law as ‘forced labour’


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 could be called up to serve in the military for at least two years.


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. 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.


The conscription law can be considered a “form of forced labour,” particularly since suppliers can no longer ignore requests to submit workforce data to junta officials. The activation poses not only a significant issue for production stability and supply chain disruptions, but also a severe human rights risk.


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 the Danish company Bestseller, which has business relationships with 21 factories in Myanmar. Other retailers that are in the “stay” camp include Jack Wolfskin, Vaude and Adidas.


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 the global trade union 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 labour 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.”


Brands that stay cannot avoid working with the junta


There is simply no way that brands can say they’re not working with the junta, however indirectly, Khaing Zar Aung says. Brands may be making more profit from a low-cost country like Myanmar, 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 says. “I don’t see how brands can do due diligence in Myanmar.”


This blog is a shortened version of an article in Sourcing Journal, published 2. May 2024.

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