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| Textile,
Garments and Fashion Accessories |
Garments and
Textiles
 Thailand
has a long history of textile and clothing production. However,
the modern garment and textile industry was established relatively
late compared with other east and Southeast Asian countries. The
Ministry of Defense first imported textile machinery from Germany
in 1936 for military purposes. Private textile mills emerged shortly
after the Second World War in response to textile shortages. Production,
which greatly expanded by the 1950’s, suffered from low cost imported
cotton textile from Pakistan resulting in government protection
in the form of import restrictions. The Investment Promotion Act
in 1960 saw the takeover and expansion of military owned mills,
and those that closed before the import restrictions were created.
Local entrepreneurs and Chinese investors from Shanghai and Hong
Kong were the key players in the consolidation, with Japanese firms
forming joint ventures with Thai textile companies a few years later.
The 1970’s found
government policy mixing protection, promotion and restriction together.
Import tariffs were extremely high, up to 100 percent, protecting
the industry from subsidized products and regional competitors.
Throughout the decade, restrictions were placed on the industry
prohibiting capacity expansion and the establishment of new textile
firms. While the laws were not entirely effective in limiting capacity
or expansion as companies imported machinery without registering
it with the Ministry of Industry, their abolishment in 1987 resulted
in large increases in investment, machinery imports and establishment
of new companies.
The importance
of textile and clothing manufacturing to Thailand’s economy is readily
apparent. Combined, they are the second largest export commodities
in the country registering over U.S.$ 5.2 billion in 1999, surpassed
only by computers and parts exports. The industry consists of approximately
2000 garment firms, 250 weaving firms and 150 spinning companies
employing over 1 million workers.
 The
export of garments and textiles from Thailand is heavily influenced
by membership in the Multi-Fiber Agreement (MFA) and Agreement on
Textiles and Clothing (ATC). The MFA, which started in 1975, oversees
a textile quota system in place for the export of garments and textile
from developing countries to the USA, Canada, European Union (EU)
and Norway. The ATC, signed in 1995, started a 10-year transitionary
period, which is incrementally raising the quotas on textiles and
clothing, fully eliminating them by the year 2005, integrating the
sector fully into GATT principles.
The MFA initially
proved to be beneficial to Thailand as it curtailed the exports
of clothing and textiles from Hong Kong, South Korea and Taiwan,
allowing local firms to develop markets. By the 1980’s, Thailand
was using its full quotas and the agreement started to hinder exports,
particularly with the U.S, which placed embargos on Thai clothing
for exceeding quotas in 1985.
The Department
of Foreign Trade administers the textile quota allocation to Thai
exporters by granting them Textile Export Licenses for products
entering the American, Canadian or European markets. The available
quota is divided into two parts: the basic quota and the residual
quota. The principal quota (usually 70 to 80 percent of the export
quota available) is distributed free annually to exporting firms
on the basis of their past export performance. The residual quota,
usually the remaining 20 percent, is allocated on a monthly basis
and can be sought by new firms, or ones already holding principal
quotas. The system favors large exporting firms who can monopolize
the rents because of their historical performance, and forces new
firms to concentrate on non-quota markets including Japan, and ASEAN
countries.
While the clothing
and textiles industry in Thailand was founded on low cost labor,
its future depends much more upon modernization and change. Export
totals, which reached a high of US$ 6.5 billion in 1995, declining
to US$ 5 billion dollars by 1998 reflecting the challenge of rising
labor costs in Thailand and the shift towards more capital intensive
production offering greater efficiencies in the industry worldwide.
Low cost producers in China, Indonesia and Turkey provide significant
competition to Thailand in labor intensive production, while Hong
Kong, Korea, Italy, the U.S. and other countries have firm holds
on the higher technology garment and textile market.
The Thai government
has responded to the problem by borrowing from the Asian Development
Bank and the World Bank to finance industrial rehabilitation. The
Thai Textile Institute has been set up to stimulate the upgrading
of the industry and manage the distribution of funds in the form
of soft loans to finance renovation.
The Thai Textile
Institute is focusing its efforts on improving the competitiveness
of local garment and textile businesses. Emphasis has been put on
the upgrading of existing machinery with modern technology for greater
efficiency along with keying on human resource development to improve
the knowledge, and competency of textile industry management and
workers through seminars, training and education. The Institute
has tried to guide Thai textile and clothing manufacturers to operate
similarly to those in countries with developed industries improving
their design, management, brand-name development, or to establish
business relationships with foreign firms.
The success of
the Thai government initiatives to modernize the clothing and textile
industry along with the adaptability of the individual companies
will largely determine if the industry remains an integral part
of the economy, or if it is indeed a ‘sunset’ industry as some have
predicted.
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