Myanmar should regulate labor unions to help attract more Chinese investment

Over the weekend, some Chinese netizens vented their anger over an incident in Myanmar, in which hundreds of local strikers attacked a Chinese garment factory and briefly detained seven Chinese employees. The Myanmar government needs to restrict the power of local labor unions according to relevant laws to better protect foreign investors’ legitimate rights.

In 2016, there was a sharp decline in foreign direct investment ( FDI) flowing into the Southeast Asian country, dragging down the momentum for its real economic growth. The amount of FDI approved between April and December 2016 stood at $ 3.5 billion, marking a sharp contrast from the roughly $ 9.5 billion registered in the 2015- 16 fiscal year.

The Myanmar government is moving to attract more foreign investment while the nation ramps up efforts to optimize its foreign investment structure. Energy projects are usually the most attractive to foreign investors, but the Myanmar government seems to want to guide foreign investment into other industries which could generate more added value and play a bigger role in boosting employment in the country. Labor- intensive manufacturing has great significance in this context.

The Chinese garment factory creates jobs for about 500 Myanmar workers. The attack on the factory was carried out by some staff because the company refused to rehire a member of a powerful local labor union who had been absent from work without asking for leave and breached the labor contract with the firm, according to media reports. The strikers also reportedly demanded bonus rules be renegotiated. The Chinese Embassy in Myanmar said on Friday in a statement that it had asked the Myanmar side to take effective measures to ensure the safety of Chinese individuals and the interests of Chinese businesses.

Wage increases should be in accordance with Myanmar’s economic growth. The immoderate use of labor unions to improve worker’s welfare or seek interests for union members is likely to hurt foreign investors’ enthusiasm, especially in increasing investment in labor- intensive manufacturing sectors, leaving the Myanmar economy as the ultimate victim. The Myanmar government needs to help harmonize and balance foreign investors with local labor unions. At the least, local authorities must ensure labor unions operate under a legal framework.

China is Myanmar’s largest source of foreign investment in terms of cumulative investment but there is a general lack of experience for Chinese companies on how to deal with labor unions. As China and Myanmar share a large potential for economic cooperation, Myanmar needs to ramp up efforts to regulate its labor unions if the nation wants to attract more Chinese investment.