European market study Myanmar home decoration & personal accessories
European imports of home decoration and home textiles totalled €120 billion in 2014, of which 40% came from developing countries at a value of €48 billion. While China is by far Europe’s leading supplier of home decoration and home textiles, Southeast Asia is an important production area with four countries (Vietnam, Indonesia, Thailand and Malaysia) ranking among the leading suppliers outside Europe. European imports show an annual import growth rate of 2.5% from 2010-2014, which indicates that the market recovered from the economic crisis in 2007-2009. Current European economic forecast data suggest that the growth trend is likely to continue.
At an abstract level, the European market for home decoration and home textiles comprises four different market segments (high-end, mid-high, mid-low and low-end) that offer opportunities for suppliers from developing countries. The main market trends for home decoration and home textiles in Europe are currently the trends for individuality/originality, functional and appealing products from emerging markets, sustainable/ecological/fair products and the growing importance of alternative trade channels such as direct supply. Value chain integration is on the rise. The market demands closer cooperation, greater efficiency, transparency along the supply chain and shorter lead times.
In a survey conducted for this research among 25 European importers and consultants, the sources indicated the highest market demand is for product groups such as recycled products, bags, home textiles, scarves and other textile accessories, basketry, seasonal decoration as well as wooden items, while there is less demand for small bamboo and rattan furniture, carpets, paintings, sculptures etc. The sources provided detailed information on competitive prices for a number of products and provided feedback on import experience with Cambodia, Laos and Myanmar. They suggested that Cambodia, Laos and Myanmar should not try to compete with cheap products from China or India. Instead, the countries should focus on high quality, developing their own style and functional, unique, contemporary design as well as sustainable materials.
Among the three countries that were part of this research, Myanmar is the second-largest exporter of home decoration, home textiles and gifts to the European market, with a value of US$12.396 million for selected HS codes in 2015, while Cambodia is by far the most important exporter with a value of $44.874 million and with imports from Laos amounting to $0.391 million. All three countries are lagging far behind Vietnam, with an export volume of $441.975 million, which can serve as a benchmark.
Basketry and wickerwork is traditionally the most important export product from Myanmar in home accessories, home textiles and gifts. With a total export value of basketry to Europe of $1.7 million, nearly half of all official basketry exports from Myanmar went to Europe (the total exports of basketry from Myanmar in 2015 were $3.7 million). However, since 2015, the main product groups in the home decoration, home textiles and gifts sector imported from Myanmar to Europe are 1) suitcases, bags, wallets, 2) home textiles, and 3) scarves and accessories of textile materials. While still of minor importance in 2014, exports of all three groups exploded in 2015. This strong growth is thought to be due to industrial manufacturing unit(s) in the garment industry. Belgium, Germany, France, the Netherlands and the United Kingdom were the main European importers of home accessories, home textiles and gifts in 2015.
Myanmar has a population of 54 million people and a gross national income of $1,280 per capita. With a minimum wage of $2.8 per day, Myanmar has a very low wage level even for regional standards. As for the production of home decoration, home textiles and gifts in Myanmar, seven main groups of producers can be identified: 1) rattan ware producers, 2) the textile industry, 3) lacquerware producers, 4) woodworking companies, 5) silver and bronze ware and sea shell products manufacturers, 6) stone carving, gemstone pictures and jade producers and 7) companies producing baskets from recycled material.
The companies in Myanmar are mainly focusing on handmade production. The textile industry provides the most employment, with about 30,000 workers at production level. Woodworking companies employ about 10,000 people. About 3,000-3,500 persons derive their income from basket weaving or lacquerware production. Stone carving, gemstone pictures, jade, sea shell products, silverware, bronze and recycled baskets account for another 6,000 workers. In total, the industry is estimated to employ more than 50,000 persons at production level alone. In addition, income is generated for a large number of raw material suppliers, such as rattan or lacquer sap collectors, and there is further employment at the finishing and trading level.
The goods are mainly produced for three markets: domestic consumers, the tourism market and the export market. While up to 90% of rattan ware is produced for the export market by 10 companies, for all other products, except recycled baskets, more than 90% is produced for the local market.
The main ministries in charge of the industry are the Ministry of Commerce with its trade promotion organisation Myantrade, the Ministry of Industry with its SME Development Department and SME Center and the Ministry of Natural Resources and Environmental Conservation with its Forest Department. Each product group has its own producer association. Most associations are young, having only been created in the last two years, and can only provide few services to their members. The Myanmar Arts and Crafts Association (MACA) represents different handicraft producers; though for the time being only in Yangon. Ongoing initiatives particularly include the EU-funded MYANTRADE Development Program that supports the Myanmar government in implementing the National Export Strategy. Three UK-funded projects address issues of sustainable sourcing of rattan and bamboo raw material.
Rattan ware, lacquerware and textiles are regarded as being the three main product groups of home decoration, home textiles and gifts with the highest export promotion potential. The most promising product group for export in Myanmar is rattan ware. The industry has a large workforce and a number of experienced exporters. It has a good raw material base and absolute competitive advantages for producing useful, standard household items. The cost of rattan weaving at household level is said to be 40% cheaper than in Vietnam. Basketry was the most important regular handicraft export product group over the last five years, with multiple container loads of exports every month. Big European companies show additional interest in rattan ware from Myanmar.
The second most promising product group is lacquerware. Myanmar is one of few countries that produce entirely handmade lacquerware products for home decoration. The industry generates income for a large number of cottage producers. There are some companies with initial export experience aiming at increasing exports. There is modernisation potential, as advanced technologies can be introduced. The third most promising product group are textile products. The textile industry has the broadest production base of all interior decoration and gift products. However, the industry is very much oriented towards the national market. None of the companies assessed has direct export experience. Products need adaptation to European market requirements.
The main general barrier hindering export to Europe is Myanmar’s history of relative isolation, which has led to a strong lack of international market links, market knowledge and understanding of customer requirements and market trends. This concerns all product groups. Second, companies do not receive much support from associations and the government in terms of trade promotion support and training services, resulting in little innovation. The main barriers hindering rattan ware exports to Europe are inefficient input supply; lack of innovation and less competitive finishing; loose organisation of weaver groups; a risk of child labour; limited market contacts and knowledge. The main barriers hindering the export of lacquerware to Europe are outdated production techniques; lack of food-safe colours and inputs for high quality finishing; few market contacts and limited market knowledge. The main barriers hindering the export of textiles are the lack of design innovation; non-use of AZO-free dyes and the lack of export experience among companies.
There is a lot of potential for Myanmar to benefit from experience sharing with Vietnam, by learning from its more sophisticated and competitive methods of product finishing for rattan ware and new ways of more efficient and eco-friendly lacquer processing. In the textile industry, there is the possibility of direct purchasing of silk yarn from reeling centres in Vietnam. Companies and associations in Myanmar are keen to assess company organisation models and technologies in Vietnam and to learn from Vietnamese specialists. The handicraft exporters’ association VIETCRAFT can be a role model for the recently established associations in Myanmar. An exchange programme on organisational development and services of handicraft associations would be very helpful and would be welcomed by the associations in Myanmar.
Based on activities such as direct sourcing of rattan raw material, improved weaver group management with the introduction of CSR certification, the modernisation of finishing facilities and increased market exposure, the rattan ware industry has the potential to become a larger-scale exporter on the European market, competing with Indonesia and Vietnam. The expected impact would be that 10-15 companies double their current combined export turnover of $3.7 million per year. The number of weavers should increase accordingly by 3,000.
Based on activities like the introduction of improved drying facilities and food-safe colours, the diversification of the product range and increased market exposure, the lacquerware industry should be able to start exporting to Europe. The expected impact would be that 10 companies increase their current turnover by 50%, which would be equivalent to $2 million per year. The number of employed workers and sub-contracted household producers should increase accordingly by 750 persons.
In the textile industry, activities such as improved sourcing of quality cotton and silk, the introduction of AZO-free dyes, the innovation of product designs and increased market exposure should make it possible to open up export to Europe and achieve a more dynamic development. The expected impact would be that 6-10 companies increase their current turnover by 50%, which would be equivalent to $1.2-$2 million per year and an employment of 470 workers.
After long years with trade sanctions, the improvement of trade promotion services offers great potential for helping the industry develop. The capacity of both the governmental organisation Myantrade and the industry associations should be strengthened to provide better services. Certification schemes should be introduced.
The total impact of upgrading the value chain to be expected within a five-year period is an estimated increase in exports of $7-8 million per year and 4,220 new jobs. Such an impact would be highly favourable for developing a positive project business case and would be much higher than the investment needed. Therefore, a support project is recommended to increase the export of home decoration, home textiles and gifts to Europe.
As for the Social Responsibility Risk assessment conducted, most of the companies assessed are particularly important for women’s employment and provide income opportunities for women. Thirty per cent of the companies assessed are managed by women. There are high risks with regard to child labour at family level in rural villages and regarding unfair employment terms, e.g. for rattan weavers, which should be addressed with a certification scheme. Moderate risks, for which improvements are suggested, exist regarding occupational safety and health, excessive use of natural resources, environmental pollution and corruption.
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