Myanmar’s factories cling to life as power shortages persist

More than four years after the military coup, many factories in Myanmar are continuing to operate, despite crippling power cuts and other impacts of the country’s growing economic isolation. Industrial zones receive just four hours of electricity per day, forcing factories to rely mainly on diesel generators. While this adds to operating costs, locally-owned factories are finding ways to keep running, according to a leading industrialist from Yangon. “For us, we’re operating at a reduced capacity. We’re working with what we can get. Only foreign-owned businesses have completely shut down,” he said, adding that the situation is more dire in the Thilawa Special Economic Zone near Yangon than in the industrial zones in Myanmar’s largest city. The main cause of factory closures is the chronic lack of electricity. While generators can be used, they require fuel, which is constantly in short supply due to foreign currency shortages. Raw materials and machine parts that need to be imported are similarly affected. “Using diesel is expensive. Another issue is machine repairs when they break down. When machines need frequent repairs, it causes a lot of downtime,” the businessman continued. He added that there are some expectations that the problem could be alleviated soon by the introduction a new power source: liquid natural gas-fuelled generators operated by Hong Kong-based company VPower. Factory owners are negotiating with the company now, he said, but rates and the distribution start date have not yet been settled. Meanwhile, some factory owners have started installing and using solar power systems, he added. According to a labour rights activist in Yangon, the official rate for electricity for factories is 400 kyat per unit. But this more than triples to 1,400 per unit when generators are used. “They are definitely facing a crisis. If the electricity supply continues to be unreliable like this, some businesses will have difficulty continuing operations here,” he said. To cope with the situation, some factory owners have reportedly begun relocating to the Chinese town of Ruili, just across the Myanmar-China border. Many Myanmar citizens have crossed the border to find work in these factories, the labour activist said. Residents of Yangon receive only a few hours of electricity daily (Photo: Supplied) However, businesses that are more labour-intensive and less dependent on imported materials, such as those in the textile industry, continue to do reasonably well in Myanmar due to the very low wages of the country’s workers. Some garment companies have even relocated from Bangladesh to Myanmar to take advantage of the country’s cheap labour. In Myanmar’s garment industry, businesses are primarily run by owners from China, Japan, and Korea. They continue to operate despite major electricity challenges because they still receive the EU’s Generalized System of Preferences, and only have to pay workers 6,800 kyat a day, according to the labour activist. There are also other reasons these companies stay in Myanmar. One is the expense of relocation, especially if the company is heavily invested in its Myanmar operations. Potential worker compensation payments if factories close are also a consideration. But even these factors could be outweighed by others if the situation gets any worse, according to the labour activist. “While they are reluctant to close if the general crisis they’re facing continues to deepen, businesses could potentially stop operations,” he said. The military junta’s introduction of conscription last year has added a new twist to the troubles facing Myanmar’s factories. While the impact has been limited so far, some workers have already left to avoid being forcibly recruited into the military, said one factory worker in Yangon’s Shwepyitha Township. “Military service recruitment hasn’t put pressure on industrial zones yet. But when workers are returning home from work after dark, there have been cases of people being taken away for military service if encountered on the streets,” he said. The industrialist from Yangon said that reduced factory production capacity due to various crises could affect the country’s economy and gross domestic product. According to a United Nations Development Programme report released in April of last year, the country faces an economic crisis due to nationwide insecurity, civil war, and poverty, with 50 percent of the middle class having disappeared.

Myanmar’s factories cling to life as power shortages persist

While some businesses are managing to eke out an existence, others are struggling to stay afloat

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