The Textile and Garment Industry Adds Value and Increases Quality to Improve Global Competitiveness

The Thai textile industry is pursuing a high quality, value-added strategy to succeed in the quota-free, competitive environment.

      Government-sponsored programs to advance the Thai textile and garment industry beyond OEM-based production to higher value-added design and brand development work are preparing the industry to compete in the post-Multifiber Agreement (MFA) environment.

      Thai textile and garment exports grew by 7% in the first four months after the January 2005 expiration of the MFA, compared to the same period in 2004. The industry is expected to continue its expansion and development due to significant private sector technology investments and government policies to improve textile production, garment designing skills and supply chain management.

      Mr. Virat Tandaechanurat, executive director of the Thai Textile Institute (THTI) believes that the textile and garment industry will grow and develop in the quota-free market due to the technology upgrades and value-adding enhancements the industry has made over the past five years. According to Mr. Virat, the textile and garment industry has invested more than US$45 million in imported machinery over four years for fiber manufacturing, spinning, weaving, dyeing, printing and finishing. A major spinning company just invested US$20 million for equipment to produce high quality yarn, he said.

      “We will now be able to increase sales without being restricted by quotas. This is a great chance for us. If we continue to upgrade our quality and technology, we can profit from this situation,” he said.

      Thai Textile Manufacturing Association President Phongsak Assakul agrees that quality and value-adding improvements are crucial for the industry’s success. “Each industry sub-sector must improve their products and increase value added in all stages including yarn, fibers and fabric. If we make higher quality products, we will face less competition,” he said.

      According to Mr. Virat, progress has been made in advancing quality levels, but there are still areas for improvement and opportunities for foreign investors to contribute to the industry’s development. (See sidebar for investment opportunities and incentives.)

      Most Thai textile entrepreneurs expect business to remain stable, according to the Office of Industrial Economics, while THTI anticipates 2005 export growth to be only slightly below last year’s 17% increase.

      In 2004, textile and garment exports generated US$ 6.4 billion, according to the Thai Customs Department, representing approximately 4% of GDP. Major export markets are the U.S., the EU, ASEAN, Japan and China.

      Mr. Virat outlined several strategies that have been undertaken by the Thai government and THTI over the past five years to improve the competitiveness of the textile and garment industry, such as the Bangkok Fashion City project, the creation of a Thai textile brand, a program to boost SME textile quality, and cluster development initiatives.

      The Bangkok Fashion City project was launched in 2000 with a US$ 46 million budget for an international fashion school, textile and garment industry development programs and fashion roadshows. (For more information about this project, see the February 2005 issue of the Investment Review available at www.boi.go.th under the publications section.)

      In 2000, the Department of Export Promotion hired a team of Italian fashion consultants who specialize in weaving, designing, dyeing and finishing to advise major Thai textile and garment firms on manufacturing fashionable textiles and garments. Mr. Virat said that in the past it was difficult to sell Thai textiles and Thai-designed garments because they did not follow fashion trends. The consultants are knowledgable about textile trends, colors and garment designs, and help Thai firms produce stylish textiles under the “Thai Textile Trend (T3) Style in Italy” brand. So far, 15 firms have gone through the three year manufacturing training program.

      Thailand has exhibited the T3 textile brand at five international fabric fairs in Paris, Hong Kong, Shanghai and Bangkok. Mr. Phongsak, who has participated in these fairs, said that international buyers react positively to the T3 textile brand. “By producing the fabrics that the market demands, we help to raise Thailand’s image among textile buyers. They realize that Thailand knows what’s going on. They see that Thai manufacturers have the fabric they want in the color they want.”

      THTI launched a project last year, “Trendy Fabric Manufacturing by SME’s,” to improve the competitiveness of smaller textile firms by helping them to upgrade their textile production quality. The project employs Asian textile industry consultants to educate SMEs about weaving, finishing, dyeing and printing. Five SMEs completed the program last year.

      In addition to enhancing product quality, THTI is helping to foster clusters and cooperation among various industry players such as spinners, weavers, dyers and garment manufacturers. In 2004, the Institute established five clusters of five to six factories to provide buyers with “one-stop” textile and garment services, improve supply chain management, reduce lead time and costs and work together to supply the textile needs of the domestic garment industry. There are also opportunities to extend the supply chain to the retailers using technology which enables a textile manufacturer to monitor customers' garment inventories or sales volume and adjust production as necessary.

Investment Opportunities and Incentives in Thailand’s Textile and Garment Industry
      Although a number of quality enhancing initiatives have been implemented in the Thai textile and garment industry, there are several areas where specialized technology and expertise is required, offering prospects for foreign investors. The Thai Textile Institute has identified the following areas where foreign assistance is needed most:
      • Advanced dyeing and finishing technology
      • State-of-the-art printing technology
      • R&D activities and technology to produce innovative and functional fibers and textiles such as breathable / waterproof fabric
      • Supply chain management technology and software
      • Commercial-scale fashion designers
      • Expertise in fashion branding and marketing for international markets

      The textile and garment industry is a priority sector, and the Thailand Board of Investment (BOI) offers investment privileges and incentives such as:

      Integrated Textile Industrial Zone/Estate Developers: Production of upstream and downstream textile products
      • 8 years corporate income tax holiday
      • Duty-free machinery imports

      Bleaching, Dyeing and Finishing Projects
      • Locating in a Textile Industrial Estate: 8 years corporate income tax holiday and duty-free machinery imports
      • Locating outside of a Textile Industrial Estate: Standard incentives according to zone

      Any Other Textile-Related Enterprise (locating on a textile industrial estate)
      • Duty-free machinery imports
      • Corporate income tax exemptions of between 5 - 8 years depending on zone

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