Hong Kong textile manufacturers have signed a deal to set up their first industrial park in Yangon, which they expect will slash production costs by at least half.

Workers at the 200-hectare facility in the former capital of Myanmar will be paid about a fifth of those employed in mainland factories.

Liberal Party lawmaker Felix Chung Kwok-pan, representing the textiles and garment constituency, made the deal on behalf of 12 manufacturers to rent half of the 400-hectare Thilawa Special Economic Zone, co-built by Myanmar and Japan.

“We will start the construction work in mid-2015 and hope the factories can start operating by the end of next year,” Chung told the South China Morning Post.

The manufacturers will retain their production plants on the mainland to keep things “flexible”, he added.

The land is rented for US$52 million annually for 50 years.

Chung said the Hong Kong manufacturers planned to employ at least 30,000 Myanmese workers at the market salary of US$100 to US$120 a month.

“The salary level is only one-fifth of the mainland workers. All products exported from Myanmar enjoy duty-free access to all EU countries after [Western counties lifted] economic sanctions on the country,” Chung said.

“We expect it would – at a very conservative estimate – trim at least half of the cost in contrast to the production in China.”

Chung, honorary life chairman of the Hong Kong Apparel Society, was confident that the manufacturers – who will invest US$2 million to US$3 million in the industrial park – could break even in one to two years.

To avoid conflict of interest, Chung is not an investor but the industry plans to set up a worker training centre in Yangon with Myanmar’s labour ministry. Experts from Hong Kong’s Clothing Industry Training Authority could be sent as coaches.

Jimmy Ng Wing-ka, vice-president of the Chinese Manufacturers’ Association, said he could not see a trend for manufacturers moving their factories from China to Myanmar, as low production costs were not their only concern.

“Logistics also matter. If you plan to export the products to United States not the European Union, there would be no reason for you to move to Myanmar due to the flight path,” he said.

But Ng admitted that the appreciation of the yuan had nibbled away at their profits which drove some factories to move from south to northwest China.

Link: http://www.scmp.com/news/hong-kong/article/1445682/hong-kong-textile-manufacturers-move-production-myanmar?https://na14.salesforce.com/a0vd00000016n22