BURMA: KOREAN FACTORY OWNERS COMPLAIN

C O N F I D E N T I A L RANGOON 001358

SIPDIS

STATE ALSO FOR EAP/BCLTV; TREASURY FOR OASIA JEFF NEIL
USPACOM FOR FPA

E.O. 12958: DECL: 10/22/2013
TAGS: PGOV PREL BM
SUBJECT: BURMA: KOREAN FACTORY OWNERS COMPLAIN


Classified By: CDA a.i. Ronald K. McMullen for Reasons 1.5 (B,D)


1. (C) SUMMARY: Since the U.S. import ban became law on July
28, 10 of the original 35 Korean-owned garment factories in
Burma have closed. The remaining 25 factories are hanging on
by filling European orders, but are continuing layoffs. Laid
off workers have returned to their home towns and villages
because of a scarcity of jobs in the Rangoon area. END
SUMMARY.


2. (C) Two Korean factory owners and the Korean Embassy's
Commercial Attach told EAP/BCLTV Director and Poloff on
October 22 that of the original 35 Korean-owned garment
factories and suppliers in Burma, 10 have closed since the
start of new U.S. sanctions in late July. The 25 remaining
factories are relying on orders from Europe to keep their
production lines open but are still being forced to lay off
additional workers.


3. (U) The two factory owners questioned the intended target
of the U.S. sanctions, complaining that their workers had
only lost their jobs and could simply return home, while
foreign investors were the only ones really hurt. The Korean
owners said they had lost huge sums of money since the
sanctions, but they couldn't take their capital goods out of
the country, mainly because the plants are legally owned by
Burmese front companies that won't allow the move.


4. (U) One of the owners said his factory employed 1,200
fairly well-educated workers. Of them, one third could read
and understand English, and over 200 others were university
students. A factory job was appealing to university
students, as it could bring more social mobility, at $17 to
$20 a month pay, than any other job a university graduate
could land. Once laid off, their workers had to return to
their home village as there were not many other options for
employment in the Rangoon area. The owners said they were
not aware of former workers being forced into the sex trade,
and they thought this outcome was unlikely.


5. (C) In an ironic twist, one of the remaining Korean
factories was trying to expand its production line but
couldn't because of difficulty hiring laid off workers. The
workers wouldn't take the new jobs because of the expensive
daily commute to the new factory on the other side of town.


6. (C) COMMENT: The Korean owners' complaint about being
the target of sanctions is sour grapes. The BCLTV Director
pointed out to the two owners that they knew it was risky to
invest in Burma, and that import ban legislation had been
discussed for years. Interestingly, the Koreans admitted
that about 100 Chinese, Hong Kong, and Taiwanese-owned
garment factories were able to close down, pack up, and ship
out all their plant equipment just before sanctions took
effect, primarily because they had not created Burmese front
companies when setting up operations in Burma. The Korean
decision to go with a Burmese front company seemed more
advantageous during start up, but now proves to be a major
mistake when trying to flee the country. As for workers and
the sex trade, this is another source that supports the view
that laid-off garment factory workers have returned to their
villages or have sought other, albeit scarce, jobs in other
sectors and have not yet made the sex trade their number one
choice for follow-on employment. That said, Rangoon does in
fact have a large enough sex industry, as well as
entertainment industry, to absorb workers laid off from the
garment factories.


7. (U) This message has been cleared by EAP/BCLTV Director
Judith Strotz.
McMullen