Contents

• Q & A with Director General
  Pramode Vidtayasuk of the Royal
  Thai Government's Department of Industrial Promotion
• The New Government in Thailand:
  Old Political Personalities in a New
  Governing Coalition
• Current Situation of Labor Standards for Trading in Thailand
• Thai University, Bank, Royal Family Assist Rural Communities

Thailand Facts

• Capital: Bangkok
• Population: 65 million (July 2007 est.)
• Land Area: 514,000 sq. km.
• GDP per capita: $8,000 (2007 est.)
• Currency: baht; exchange rate is approximately 33.5 baht per U.S. dollar
• At the outset of the 21st century, the textile industry in Thailand produced the second largest amount of export revenue, behind computers and peripherals.
• In 2006, the Thai economy grew 5%, with exports up 16.9% over 2005; however, textile exports lagged, growing less that 10% over the same time.
• The textile industry generates employment for about 1 million Thais.
• According to the Royal Thai Government’s Department of Export Production of the Ministry of Commerce, the machinery and technology used in textile production are mostly obsolete and there is little research and development of new products, resulting in low production efficiency, products of medium and low quality, plain properties, a lack of diversity, produced
  en masse at low prices. Only medium and large factories employ advanced machinery and cutting machines. Production costs consist of raw materials (65%), labor (20%), and other expenses (15%).
• Lower wages and greater foreign investment in rival countries like China and Vietnam have led to higher production prices in Thailand, especially for lower quality textiles.
• Medium- and high-quality products remain competitive in Thailand, with 50% of exports destined for the United States.
• Most production is done on a subcontracting, made-to-order basis.
• The Thailand Textile Institute (TTI), created in the late 1990s, works to share information among producers, upgrade products, overcome competition obstacles, enhance efficiency, and to reinforce competitiveness by studying foreign markets.
• The Thai Department of Export Promotion (DEP) claims that modernization and efficient management in the textile production process will produce quality clothing at reasonable costs with punctual delivery, which must happen before China and Vietnam come to dominate the market.
• The DEP has promoted various trade exhibitions through its “Design in Thailand” program, including the Bangkok International Fashion Fair and the Bangkok International Leather Fair, among others.
• Laem Chabang Port, 110 km south of Bangkok, is central to Thailand’s largest industrial zone. Operations began in 1991. The port has emerged as a key port on the Asia-North America and Asia-Europe shipping networks. It is a major distribution hub to South China and Indochina.

Sources: CIA World Factbook, Department of Export
Promotion (Ministry of Commerce, Royal Thai
Government), Thailand Textile Institute,
Runckel & Associates.

Status of the
U.S. – Thailand Free
Trade Agreement

• The proposed U.S.–Thailand FTA would increase trade and investment for both countries and yield net benefit for Thailand. However, negotiations between the two countries still must address a list of challenging issues to reach a successful conclusion. The agreement sought by the United States is the most comprehensive of the FTAs that Thailand has attempted. The negotiation agenda includes issues such as intellectual property rights, investment, environment, labor rights, textiles, telecommunications, agriculture, electronic commerce, and government procurement.
• In the four rounds of talks held to date, market access for sugar, rice, and trucks are among the thorniest of the differences between the two countries. Further, some sources have speculated that the Thai government launched negotiations without consulting adequately with the bureaucracies in charge of the controversial areas. Whatever the reason, negotiations between the countries have not progressed as rapidly as the American and Thai business communities would like.

Sources: CRS Report for Congress — Thailand: Background and U.S. Relations; Thailand–U.S. Free Trade Agreement; and the U.S.–Thailand Free Trade Agreement (FTA) Business Coalition.

Foengfurad Mungtavesinsuk
Assistant Professor,
Department of
Textile Science,
Kasetsart University

We thank Foengfurad Mungtavesinsuk for responding to our questions about the status and development of the Thai apparel industry. She is an assistant professor in the Textile Science and Technology Department at Kasetsart Univeristy where she works to educate the future managers of the industry.

Q. How has the apparel industry in Thailand changed over the past 15 to 20 years?

A. The Thai apparel industry started to expand during the period from 1988 to 1992. Some of the companies that were established then have doubled, tripled, or in some cases, expanded to a hundred times their original size.

From 1993 to 1997, we saw the highest number of new apparel companies joining the industry. This was followed by a period of financial crisis and economic slowdown in Thailand from 1998 to 2002. Nonetheless, during this period over a hundred new companies were established.

The period from 2003 to 2007 witnessed the end of the quota system, which caused a slight slowdown in the sector, but segments of the industry experienced growth. The export data show that there was a decrease in quantity but an increase in value of the products exported during this time. Apparel firms also became much more aware of issues of concern in the global marketplace, such as labor and social welfare protection, environmental protection, and product safety.

Looking forward, Thailand will still be attractive for buyers, particularly as a niche market, with firms that are quick to respond to market needs, changes in fashion, and product development.

Q. Is there a Thai style when it comes to apparel and textiles? If so, what are its defining characteristics?

A. Mostly, Thai fashion follows international trends but with more detailed and colorful styles. For example, by tradition, each day of the week has a color associated with it: Monday is yellow, Tuesday is pink, Wednesday is green, Thursday is orange, Friday is blue, Saturday is purple, and Sunday is red. If people do not know what to wear on a given day, they can choose a color and an outfit based on what day of the week it is.

Another example of the Thai sense of style related to color is how Thais dressed during the celebration of the 60th anniversary of His Majesty King Bhumibol Adulyadej's accession to the throne in 2006 and His Majesty’s 80th birthday in 2007. Thai people expressed their feeling of immeasurable loyalty to the king by wearing yellow clothing, because the king was born on Monday and yellow is the color associated with Monday. During that time, yellow dye stuff was out of stock in all of Asia for a while.

After the king recovered from being sick, Thais wore pink because a Thai astrologer had forecast that pink was good for the health of His Majesty.
Such an astonishing sight could never occur elsewhere in the world except here in Thailand.

Q. What effects have the end of the international textile
quota system had on the apparel industry in Thailand?
How does the industry compete with China and Vietnam?

A. The quota system used to be a big problem for the Thai textile industry during the period of “order in big quantity and at low price.” After these types of orders moved to China with the end of the quota system, the Thai industry focused on high quality and small to medium-sized orders with quick order fulfillment times. In this environment, apparel companies that had good management could develop strategic partnerships with buyers.

As compared with China and Vietnam, Thailand has only a few companies that can produce large orders at low prices. However, Thailand can definitely compete in the long term with more sustainable production orders at the middle to high-end, because overall the education, communication, and transportation systems in Thailand are more advanced than in some other Asian countries. And with today's oversupplied market, the buyer should be thinking more about market efficiency to get the right product, not just the cheap product — that is, a reasonable quantity at a reasonable price instead of a huge quantity at a cheap price. In the new market concept, Thailand is a sustainable partner for buyers.

Q. How does the Thai government help or hinder the apparel industry there?

A. To add and create further value, the Thai apparel industry must improve and develop into a professional industry. The government has launched a number of projects to help the industry become more professional, such as Project 13, Invigorating Thai Business (ITB), which focuses on productivity improvement, design and product development; the New Entrepreneur Concept; the Bangkok Fashion City; a consultant fund; and the Manufacturing Development to Improve Competitiveness Program (MDICP), which focuses on supply chain, logistics, and branding.

Q. How do Thai apparel and textile companies move up the value chain and stay “ahead of the curve” in regards to anticipating demand for new styles?

A. Local brands follow fashion trends and have their own collections that change with the seasons. To be competitive with the international brands in Thailand, local companies try to refresh their brands, review the brand's standing in the market, and improve their product development, operations, and professionalism. Thai apparel and textile companies need to team up as a cluster for full-package service to buyers, such as doing the sourcing, design, and predevelopment for the buyer to reduce the cost for the buyer but increase the value of the product.

Q. How are Thai garment managers and workers trained? What training does Kasetsart University provide to the industry in Thailand?

A. There are training programs for the apparel industry offered by the government, universities, and the private sector, but most of the training takes place on the job. Kasetsart University gives seminars, provides in-house consulting, and short-course training. For example, our training in the area of design and product development focuses on design and branding concept, design and production data (technical design), technical wording in English with type and style, visual merchandising, merchandising management, international size standards, pattern construction, construction and fitting, collection presentation, and exhibition and display. Our training program on productivity improvement focuses on garment industry engineering, time standards and target set-up, production planning, production systems, line balance, factory layout, and team spirit communication and leadership. And our training program on market opening focuses on design and product development management, company strategy, marketing strategy, and business planning.

Q. How do Thai apparel companies finance their operations? When in need of further financing, do they go to a commercial bank or is family investment in the business still the dominant practice?

A. Thai apparel companies finance their operations by going to the commercial banks. Thailand has a lot of local and foreign-owned banks, even banks focused on the small and medium-sized enterprise (SME) sector.

Q. What do Thais want in the clothing that they buy? What can U.S. brands do to be more visible in the Thai market?

A.The big U.S. brands are already in the Thai market and enjoy a high market share. Thai people will buy the international brands with good quality and high fashion. For more visibility in the Thai market, American firms might want to engage in some activities related to social responsibility in order to get good publicity.

Q. In your opinion, how can U.S. apparel SMEs start doing business in Thailand, for example sourcing unique garments for retail stores in the Mid-Atlantic region? Or selling niche apparel items, such as accessories, in the Thai marketplace?

A.For some Thai SMEs, the cost is too much to show their products to international buyers at international exhibitions, or they do not have the time to devote to developing foreign partnerships that would serve a niche market in the U.S. So it’s a problem to get the right product at the right price.

International programs, through academic collaborations that serve as a bridge for both countries (Thailand and the U.S.), will possibly help businesses run smoother and in a sustainable way. For example, before U.S. students come to Thailand, they could work with a U.S. apparel retailer to identify the apparel and niche products that the retailer would like to source from Thailand. During their study in Thailand, the students could do the sourcing for the retailer in partnership with Thai students under the faculty member’s advice. Alternatively, they could find Thai retail stores that could sell niche apparel items from the U.S. in the Thai marketplace. This could be a special project for the faculty and students in design and product development or merchandising programs which could carry on for many years.

Top