Retailer says the country is worthy of investments.
WASHINGTON – Gap Inc. began considering operating in Myanmar almost a year after the United States and the European Union formally eased sanctions on the former pariah state; it took another year of preparation before the company became the first U.S. retailer to make clothes in the country once known as Burma.
In June, Gap announced that it will be putting “Made in Myanmar” jackets and vests on its shelves later this summer.
Gap’s decision to invest in one of Asia’s poorest countries and the long process from conception to reality highlight the promise and potential hazards of the country as it re-enters the global economy. Being the first in Myanmar could give the company an edge — keeping its supply chain “flexible and nimble,” Gap executives say. In the fiercely competitive apparel market, staying trendy requires the speed afforded by a complex web of suppliers and factories that can react at a moment’s notice. But there are risks — to the company’s investment as well as its reputation — in working in a country without a minimum wage or reliable electricity. And the government’s precarious international standing, as its treatment of minorities, political dissidents, and journalists frequently draws outcries, only heightens the risk.
Lots of consultation
The retailer first started exploring the option last summer by meeting with local nonprofits, trade union leaders and officials. Sonia Syngal, who runs the company’s supply chain, worked with Gap’s team responsible for the company’s environmental impact and labor standards, led by Kindley Walsh Lawlor, to consider all aspects of sourcing from Myanmar, from human rights to anti-corruption policies.
In the fall, the Gap team reached out to Claude Fontheim, a labor lawyer and consultant with experience in brokering deals between apparel companies and international unions. By winter, the Gap team had a plan that included the outlines of a private/public partnership. The company announced in June at the U.S. Embassy in Myanmar that along with its factory orders, Gap would also work with the U.S. Agency for International Development and Hewlett-Packard on a women’s education program.
In addition to partnering with USAID, the company also consulted other current and former government officials, including Melanne Verveer, the former State Department ambassador-at-large for global women’s issues. A Gap spokeswoman said the company paid Verveer’s firm, Seneca Point Global, a “nominal fee” to consult on women’s empowerment in Myanmar.
The company’s Myanmar plan also includes at least a year of factory audits by an outside firm. Gap’s in-house team usually inspects factories to make sure they meet the company’s international labor standards, but in Myanmar the clothier decided to also contract with an independent auditor to check working conditions. That firm, Verité, inspected factories over six months and worked with suppliers to improve circumstances.
“We found, when we first assessed, that workers didn’t really have any idea of what they could expect in terms of payment, time spent on-site, limitations on overtime, days off — very basic-level benefits,” Verité CEO Dan Viederman said.
Viederman said Gap won’t allow his firm to discuss specifics but that the factories’ working conditions have improved since Verité began its inspections.
Viederman’s findings highlight the risk for Gap: The company has to create standards or it could be blamed for poor conditions later.
“There’s no lower-wage place to go with lower enforcement of labor conditions than Myanmar,” said Dara O’Rourke, a professor at the University of California at Berkeley who studies labor conditions.