Hong Kong has always had a strong apparel industry and, for many years, it has been a low cost manufacturing and supply base for the global industry. But with China's imminent accession to the WTO, Hong Kong needs to take a different tack, writes Julie King.

The Christmas lights are going up all over Hong Kong at the moment, and even some of the traditional pre-holiday sales have started. Retailers are looking forward to a prosperous Christmas and two very happy New Years (Western and Lunar), as consumer confidence appears to be returning to the region.

Even beleaguered British retailer Marks and Spencer has performed better than expected in the Asian market, and in particular in its 11 Hong Kong stores. But what is happening in the design and manufacturing side of the clothing and textile industry in the region? Hong Kong has been synonymous with the textiles and clothing industry for decades, but how accurate is the current perception or understanding of the industry in the special administrative region today?

Business rethink
For many years Hong Kong was used by the industry as a low cost manufacturing and supply base, exporting worldwide, but now the mood is changing in the region as new factors such as China's prospective accession to the WTO prompt a business rethink.

Over the next five years Hong Kong's textile and clothing exports are expected to decline, as China significantly increases its importance as a major world supplier. The answer for many firms is to be pro-active in sourcing, range development, and design, to increase their customer service levels and focus on providing a wide range of customer add-ons to generate new business and sustain existing customers. Sophisticated communications and new technologies are also being implemented and adopted eagerly throughout Hong Kong and Asia to give firms a competitive advantage.

Today the textiles, clothing, and footwear industry still accounts for almost 50 per cent of Hong Kong's total domestic exports. However, exporters are trying to change their image with a wider range of services to help them compete worldwide. Patrick Chan from the Trade Development Council's (TDC) Fashion Office says "Companies are now promoting Hong Kong as a service economy, offering sourcing and manufacturing for a wide range of products and accessories throughout Asia, a one-stop shop".

Changes in buying patterns
A recent survey by Arthur Anderson, commissioned by the Hong Kong Innovation and Technology Commission, highlighted changes in buying patterns from key markets such as the US, EU, and Japan. Unsurprisingly the survey found that prices and lead times were reducing while product specification, order frequency and mid-season variations were increasing from all the major markets. The fact that Hong Kong industry has been responding to these factors for many years, developing offshore manufacturing and sourcing over a decade ago indicates the pro-active stance suppliers have been taking in the region.

Joseph Leung of underwear and nightwear suppliers Chi Shing Ltd tells a familiar story. Six years ago lead times for his mail order clients were running between three to four months, today the same client is looking at between 40 and 60 days. "The only answer to such terms is to increase production capacity and invest in new technology," he believes. "Although price and quality will always be deciding factors for many customers."

Perhaps one of the fundamental changes for suppliers in the region has been the location of new manufacturing plants. The majority of manufacturing is now done in mainland China, easily shipped across the border from Hong Kong where the costs are substantially lower in terms of both labour and overheads. Suppliers are also sourced from a range of other countries where quality standards are rising, such as South Korea, Vietnam, Thailand and even as far away as South America.

The industry is responding to the ever-increasing demands of the global market and the mood is upbeat since the bleak days of the Asian economic crisis back in 1997. The turmoil in Indonesia has also helped lift local business as buyers, especially those from the EU, look for new regional suppliers at short notice and turn to Hong Kong.

Design is a critical factor
The report also identified design as a key factor, critical for sustaining and developing the region's textile and clothing industries. Certainly manufacturers in the region are becoming more design aware. One indication is the growing trade in colour and fashion forecasting books.

Virginia Lau from Carlin International's Hong Kong office has noticed a significant increase in the sales of their publications locally. "Many retailers and manufacturers are buying more of our books this season, even though the trend business is quite competitive in Hong Kong," she says.

The scene is certainly much better than it was two or three years ago and Lau feels that an increased interest in design and demands from overseas buyers for added creative input has prompted the buying surge. "We know many of our customers buy other trend publications too, or use forecasting information from the Internet; design has become more important to them and their business."

Chan recognises the importance of design in developing Hong Kong's image as a centre for high quality, innovative products, but is mindful that: "For a city, which is what Hong Kong essentially is, it has a relatively short history of fashion design. There was very little until the mid-1980s, but now we are seeing new talents emerging and helping to introduce them to international markets."

The TDC recently took several Hong Kong Fashion designers to high profile fashion weeks in New York, Sydney and Tokyo, and local names such as Barney Cheng, Flora Cheong-Leen and Joanna Chu Liao have begun to break into markets worldwide. The new generation of designers is willing to take chances, is more aggressive and eager to develop new ideas and has a more positive outlook on the future of Hong Kong's traditionally strong garment industry.

Upcoming designers are just as keen to keep the level of exports high, and to increase it from the 1999 level of HK$83.7bn. Increased liaison between the suppliers and strong new design talents could be the key to helping Hong Kong's lights shine even brighter in 2001.

The Arthur Andersen & Company report was launched with a public conference on October 25 2000 and was called "The 1999/2000 Techno-Economic & Market Research Study on Hong Kong's Textiles and Clothing Industries". It was commissioned on behalf of the Innovation & Technology Commission of the Government. For more information, visit the Arthur Andersen website at www.arthurandersen.com or call the Hong Kong office on (852) 2852-2222.