When entrepreneurs in the garment industry launch a business in newly industrialising countries, they often begin by adopting the cut-make-package (CMP) model, in which a garment factory is contracted to cut fabric, produce a product such as a dress, and then package it to be ready for shipment to another company.
Moving beyond the CMP stage is a challenge for all newly industrialising countries, and perhaps more so for Myanmar, according to industry experts.
While transformation from CMP to an all-inclusive company may take only a couple of years in other countries, Myanmar-based garment businesses have barely budged beyond CMP since the rise of the sector in 1993.
“When compared with neighbouring countries, we have lagged behind in many sectors such as banking, technology and investment,” said Tun Tun, central executive committee member of the Myanmar Garment Manufacturers Association.
“We have been doing CMP in Myanmar for two decades but other country has already moved on to the FOB system,” said Aung Min, Chairman of Myanmar CMP association.
Under FOB – free-on-board or sometimes freight-on-board – retailers place orders from highly capable and well-financed factories that are then responsible for producing the garments in their entirety and arranging for shipment.
The retailer makes a purchase and is largely uninvolved in the production process.
The CMP model is not limited to the garment sector. Manufacturers of footwear, electronics, kitchenware, car parts, lenses and cameras and others all use this system. In Myanmar, there are 105 companies operating under the CMP system.
Myanmar’s garment sector has 400 factories and employed 350,000 in 2016.