Gap becomes the first U.S. apparel retailer to purchase from factories in Myanmar, which while opening up, is still plagued by strife, leaving companies to weigh cost savings against political risks. Lily Jamali reports.
Gap Inc is venturing into Myanmar. The apparel retailer, whose brands include Old Navy and Banana Republic, is the first from the U.S. to start purchasing from factories in the Southeast Asian nation. Professor David Simchi-Levi of MIT says Gap probably won't be the last: SOUNDBITE: DAVID SIMCHI-LEVI, PROFESSOR, MIT (ENGLISH) SAYING: "These are products where labor costs relative to product value is high. These are light products where logistics costs are relatively small. This, therefore, implies you want to move to countries or locations where labor costs are low." Myanmar has no minimum wage, unlike much of China, and Bangladesh, where the minimum wage has risen since a string of deadly tragedies at garment factories. Simchi-Levi says the nature of apparel production leads to a constant search for the lowest wage: SOUNDBITE: DAVID SIMCHI-LEVI, PROFESSOR, MIT (ENGLISH) SAYING: "It's easy to move manufacturing from one location to another location. It used to be we saw a move in China inland, to reduce costs. Now, we see costs from inland China to other countries focusing on low labor costs." Myanmar, however, remains fragile. After decades of military dictatorship, in 2011 Myanmar transitioned to a quasi-civilian government, prompting the U.S. to start lifting sanctions. American companies including Hilton, Coca-Cola, Ford, and General Electric have since moved in. But it's a risky place to do business for companies and workers making the products, says Tomas Ojea Quintana, the U.N. special rapporteur on human rights there until May. He says armed conflict between the military and ethnic groups and crimes against humanity still plague the nation. SOUNDBITE: TOMAS OJEA QUINTANA, FORMER U.N. SPECIAL RAPPORTEUR FOR HUMAN RIGHTS IN MYANMAR (ENGLISH) SAYING: "There is no rule of law in Myanmar. Those people who would work in the factories could not reach courts independent and impartial courts to protect their rights." President Obama cited these concerns when he extended some sanctions against Myanmar in May. Still, Commerce Secretary Penny Pritzker recently returned from a visit aimed at continuing to forge economic ties. SOUNDBITE: TOMAS OJEA QUINTANA, FORMER U.N. SPECIAL RAPPORTEUR FOR HUMAN RIGHTS IN MYANMAR (ENGLISH) SAYING: "It seems the U.S. has a dual policy with respect to Myanmar because on the one hand they're continuing to impose sanctions, but on the other hand, they're allowing and preparing the environment for U.S. companies to invest there and to settle companies." Quintana says American business can be a force for good in Myanmar. But for now, he fears the rewards may not be worth the risk. Gap's Made in Myanmar labels hit store shelves this summer.