Five years after the military coup in Myanmar, the country is no longer simply a “high-risk sourcing destination” but a full-fledged “war economy,” according to a joint op-ed published this week by Myanmar trade union leader in exile Khaing Zar and IndustriALL Global Union General Secretary Atle Høie. The shift, detailed in reports from IndustriALL and other sources, has profound implications for international businesses and the ethical sourcing of goods, particularly within the garment industry.
The warning comes as Myanmar’s economy continues to be reshaped by the ongoing conflict following the February 2021 coup. While foreign exchange shortages eased somewhat in late 2024, according to a report from fulcrum.sg, the fundamental issues of military control over financial systems remain deeply entrenched. The garment sector, once a significant contributor to the country’s economy, remains a key source of hard currency for the junta, with exports reaching US$5.5 billion in 2022, falling to $4.46 billion in 2024, as reported by IndustriALL.
The Junta’s Financial Control
The core of the problem, experts say, lies in the military’s tight grip on Myanmar’s financial infrastructure. The World Bank reported that in 2022, Myanmar’s garment exports totaled US$5.5 billion. Despite a dip to US$4.46 billion in 2024, exports still generated significant revenue for the regime. A substantial portion of these earnings, particularly from the garment industry, are not flowing freely into the economy but are being “captured and redirected” by the military authorities, as detailed in economist Sean Turnell’s work, The Military, Money, and Myanmar: Breaking the Nexus.
Central Bank of Myanmar (CBM) directives demonstrate this control. In September 2024, the CBM mandated that up to 75 percent of foreign currency earned from trade, including crucial garment exports and natural resource sales, be channeled towards priority imports like fuel and edible oil. This system of forced currency conversions, multiple exchange rates, and restrictions on outward payments effectively centralizes foreign exchange control, ensuring the junta maintains financial leverage.
Europe’s Role and the EBA Scheme
Europe remains a significant importer of textiles and clothing from Myanmar, with approximately €2.8 billion worth of products entering the region in 2024 alone. Much of this trade benefits from the EU’s “Everything But Arms” (EBA) scheme, a preferential trade arrangement designed to support developing countries. However, IndustriALL argues that these duty-free imports are inadvertently bolstering the military regime’s financial capabilities.
The op-ed by Zar and Høie explicitly calls for a “responsible exit” from Myanmar, arguing that continued trade under the current circumstances is effectively funding the ongoing conflict. This position is gaining traction among labor rights advocates and international organizations concerned about the human rights situation in Myanmar.
Impact on Garment Workers
The consequences of the war economy extend beyond macroeconomic factors, directly impacting the lives of garment workers. While specific data on worker conditions in 2026 is limited, the ongoing instability and repression create a climate of fear, and uncertainty. The IndustriALL report highlights the vulnerability of workers facing intimidation, arbitrary arrests, and restrictions on their rights to organize and bargain collectively.
The situation is further complicated by the disruption of supply chains and the increasing difficulty of conducting due diligence to ensure ethical sourcing practices. Brands face growing pressure to demonstrate that their operations in Myanmar are not contributing to human rights abuses or supporting the military regime.
Calls for Responsible Exit
IndustriALL’s call for a responsible exit isn’t simply a demand to cease trade. It emphasizes the need for a carefully managed transition that prioritizes the protection of workers’ rights and minimizes the negative consequences for those dependent on the garment industry. This includes ensuring fair wages, providing social safety nets, and supporting independent trade unions.
The organization advocates for a coordinated approach involving governments, businesses, and civil society organizations to develop a comprehensive strategy for disengaging from the Myanmar economy without abandoning the workers who rely on it. This strategy must address the complex challenges of supply chain transparency and accountability.
The situation in Myanmar remains fluid and deeply concerning. The country’s transformation into a “war economy” presents a significant ethical and practical challenge for international businesses and policymakers. The next key development to watch will be the EU’s review of the EBA scheme and whether it will take steps to suspend or modify trade preferences in response to the deteriorating human rights situation and the junta’s control over the economy.
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