Impacts of Trade and FDI on Productivity, Management, and Work Place Condition: Evidence from Myanmar

Does trade and FDI liberalization promote sustainable economic growth in developing countries? Does this come at the expense of the safety of local workers, as many NGO activists claimed after the tragic factory accidents in Bangladesh and Pakistan? To date the evidence on these questions has been limited by the lack of causal evidence. While trade and multinational presence are strongly correlated with higher growth, productivity, wages and improved working conditions, the causal link is much less unclear.

Does trade and FDI liberalization promote sustainable economic growth in developing countries? Does this come at the expense of the safety of local workers, as many NGO activists claimed after the tragic factory accidents in Bangladesh and Pakistan? To date the evidence on these questions has been limited by the lack of causal evidence. While trade and multinational presence are strongly correlated with higher growth, productivity, wages and improved working conditions, the causal link is much less unclear. This project will exploit the rapid opening of Myanmar to trade and FDI as a natural experiment to address these questions. In particular I will compare the evolution of productivity, management and working conditions in around 250 textile/garment plants (a sector heavily impacted by trade and FDI) to a similar number of food plants (a sector relatively untouched because of quality and local taste issues). Myanmar is currently at the perfect stage for this research. It has just started getting access to the world markets through the lifting U.S. import sanction and EU General System of Preference (GSP) sanctions in 2012 and 2013, alongside a change in Myanmar’s FDI law in 2012. This provides an ideal setting to examine the impact of a rapid trade liberalization by comparing a heavily impacted industry (textile/garments) to a relatively untouched industry (food). This project also directly matches theme 4 (the role of export-oriented industries in driving growth) and a cross cutting theme (social compliance) of PEDL. Moreover, it offers excellent value for money in that I have already ran a baseline survey in Summer 2013 on around 400 firms so have built up a large firm database, contacts and initial firm and industry level data and contacts.