In this, her second report on Thailand's textile industry, Niki Tait looks at projects aimed at preparing Thai manufacturers for the global market and assesses the sector's post-quota future.

In the three years from 2002 to 2004 Thailand's textile and clothing industry invested around US$12.5 billion in upgrading its dyeing, finishing, weaving, knitting, and spinning facilities. Most of the machinery was imported from Germany, Italy and Switzerland, and some from Taiwan and Japan.

Servicing overseas customers in the future, though, is not just a case of investing in new textile technology and innovations. It is also about forming strategic partnerships and networks. The industry needs to supply 'one stop shop,' quick response and replenishment services in order to remain competitive.

Since 2001 the Department of Export Promotion has been working on a project to help develop and integrate the Thai textile and garment industry for the global market. Experts from Italy have advised participating companies on producing world class ready-made clothing and how to make greater use of domestic resources.

Twenty companies involved in the project have formed a group named 'Thai Tex Trend' (T3) to show how they have improved their manufacturing techniques, added value, and broadened their product ranges. After just three years, sales at these companies increased by 20-50 per cent.

The Thai textile industry is also developing technical textiles for various weaving, knitting, and nonwoven applications. In addition to clothing, these products are used for car seat covers, safety belts, fireproof insulation, conveyor belts, diapers and bandages.

Not only does the domestic market have huge potential since Thailand currently imports nearly all of its industrial textiles, but export markets are projected to grow by 48.5 per cent between 2002 and 2010 in south Asia, by 44.8 per cent in north east Asia, and by 40.7 per cent in South America.

Fashion City Project

Main shirt production using the Eton UPS

Believing, however, that fashion is the future of Thailand's textile industry, the government has allocated $45 million to the Bangkok Fashion City Project, which was launched in February 2004.

The project hopes to make Thai fashion a regional leader in 2005 and become one of the world's fashion hubs in the year 2012.

The aim is to shift Thailand's clothing production from OEM to ODM and eventually to OBM. At the moment Thailand's fashion industry is primarily OEM (Original Equipment Manufacturing) or cut, make and trim.

It must instead become the designer and producer of commercial brands, then eventually create its own brands and assume the role of trendsetter whilst upgrading its status from low-end product manufacturer to middle to high-end to add more value to the finished goods.

The fashion marketing strategy to reach these goals is three-fold: to develop fashion resourceful people; develop fashion business inter-linkages; and develop a Fashion City image for Bangkok.

The Bangkok International Fashion Academy (BIFA) has been set up at Chulalongkorn University and will over a graduate diploma programme in fashion business and short-term programmes in fashion design, fashion technology and management, and fashion merchandising.

To help develop the Fashion City image for Bangkok various projects are taking place. These include Bangkok Fashion Week where leading designers will promote their collections; fashion trend workshops; competitions; overseas roadshows; and the production of a series of reports to promote Thailand's Top Fashion to the world's media.

Strengths of the Thai textile and clothing industry

Sewing production at Goldmine Garments

With buyers free from the limitations imposed by quotas there will be great changes in their buying patterns over the next few years.

Customers will buy from fewer countries and from fewer companies, consolidating their buying territories to a more manageable number. Key requirements, apart from price, stable companies and countries, human rights and environmental issues, reliability, short lead times and value added customer services.

The industry in Thailand is totally vertical, incorporating fibre production, spinning, weaving, knitting, dyeing and finishing, home textiles and garments. Garment production caters for all types of products for all types of markets.

Thailand provides a good business environment and is internationally accepted as being both politically and economically stable. There were major economic problems in 1997 but these have gradually improved, with an 8.89 per cent growth in GDP during 2003. The country's industrial and business infrastructure is sound, with good road, air and shipping links, stable power and water supplies.

There are less environmental, social and ethical issues in Thailand than other ASEAN and Far Eastern countries. Thai labour laws and ethical codes of practice help ensure compliance to customers' individual ethical standards.

Most Thai exporters have developed long-term relationships with their buyers and have proved themselves reliable in terms of delivery and quality - two issues that are as important as price in many customers' supplier rankings.

Many companies also offer additional customer services such as vendor inventory management, and by forming themselves into clusters will soon be able to offer customers a wider range of products and services and larger quantities.

With many products the price gap between clothing made in China and that made in Thailand is only around 10 per cent.

Uncertainties surrounding China's rising exports and the potential safeguard backlash from the USA and EU are making many buyers cautious. They do not want to place large orders with China only to find export/import rulings change while their goods are either in manufacture or in transit.

As a result, early 2005 garment orders indicate increases for Thailand both from existing customers and new customers in the USA and Europe.

Indeed export orders during 2004 increased by an unprecedented 12 per cent, compared to a 1.5 per cent growth in 2003. Orders to France, for example increased by 58 per cent, and to Italy by over 30 per cent.

Japan has also begun to regard China as a big threat, and as a result orders to Thailand have increased by almost 15 per cent. The ratification of the new FTAs under negotiation will further enhance the industries export potential.

Weaknesses of the Thai textile and clothing industry
The textile industry exports more than 50 per cent of its production, and the clothing industry imports over 50 per cent of its raw materials. One of the main reasons for this discrepancy is that with Thailand making most of its exports on an OEM basis it is the buyer who tends to dictate the fabric and may not be aware of what is available locally.

Buyers demanding shorter lead times also need to understand what is available locally.

Thailand is not as cheap a labour country as many of the Far East clothing producers. Its labour costs are higher than the Philippines and more than double that of India, Indonesia, Sri Lanka, Vietnam, Pakistan and Bangladesh.

It is increasingly difficult to get workers into the industry, with many preferring the hi-tech sectors. Although managers are well educated, there is a shortage of high-level technical skill within the industry - particularly in clothing - and until recently little technical training for clothing at university level.

This, in turn, has had an effect on the efficiency level of many companies. The country's industrial engineers, for example, tend to be industry general with graduates preferring industries such as electronics and automotives. Clothing industry industrial engineers tend to be trained within companies.

The Thai Garment Development Foundation has been set up to help address the need for technical training, whilst the BIFA will tackle design, marketing and merchandising skills.

A further weakness in the industry is its low level of information technology sophistication, though many companies are beginning to recognise and address this with a view to improving customer service.

The quota situation has resulted in a certain level of complacency within many companies. As long as they had the quota, they got the order. With this scenario now changed, companies that have not developed in size, technical and marketing sophistication, and productivity will not survive.

The current exchange rate between the US dollar and the Thai baht is unfavourable to business. The weak dollar affects the competitiveness of Thai exports to the US, particularly compared to currencies more in line with the dollar.

Until the end of the quota period up to 99.9 per cent of all exports were made on an OEM basis according to key spokesmen for the industry. Buyers are beginning to demand a more ODM approach to supply and those who do not respond will not survive.

Niki Tait, C.Text FTI, FCFI heads Apparel Solutions which provides independent assistance to the apparel iustry in the areas of manufacturing methods, industrial engineering, information technology and quick response.

The author would like to thank the Thailand Garment Manufacturers' Association for arranging for her to visit over 20 key companies, organisations and personnel within Thailand's textile and clothing industry.

Stoll automatic fully fashioned knitting machines