Thai garment manufacturers are conducting their own surveys to find potential places for new offshore plants. The plan is to strengthen their export competitiveness, whether or not bilateral free-trade talks with major trading partners prove successful.

The manufacturers have drawn up foreign business plans, because they are afraid major export rivals are rushing to conclude a free-trade agreement (FTA) with the US, Thailand's biggest apparel importer. With an FTA, the export rivals will enjoy not only low import tariffs, but also favoured export conditions to access the US market.

Thai garment exporters hope caretaker Deputy Prime Minister Somkid Jatusripitak will gear up Thai-US free-trade talks during his visit with relevant US agencies in Washington and New York this week.

During a recent seminar, garment manufacturers shared the same views, saying the FTA was not necessary for them if their competitors had the same level playing field. However, with free-trade agreements, the export rivals would benefit from low import duties and be able to offer more attractive prices.

In addition, the Kingdom's political uncertainty has delayed the Japan-Thailand Economic Partnership Agreement's signing ceremony, despite its conclusion months ago. Thailand will lose export benefits, because Japan is one of its top five export markets.

At present, Thai garments exported to the US are subject to an average import tariff of 27 per cent. The FTA would bring the duty down to zero.

The industry employed about 1.2 million workers and generated US$3.16 billion (Bt119 billion) in foreign-exchange income last year.

For instance, the Nice Apparel Group, the biggest Thai-owned garment manufacturer, recently reported that India and China held a great potential for the company's investment expansion in the next five years. The study also focused on Bangladesh, Cambodia, Indonesia, Malaysia, Burma, Pakistan, the Philippines, Sri Lanka and Vietnam.

Managing director Prasop Jirawatwong said the study focused on competitive manufacturing factors rather than relying on FTA benefits. The offshore expansion will strengthen the company's export competitiveness in the long run.

The study named India as an important source of raw materials, particularly cotton, and possesses IT manpower and ports for facilitating shipments.

Meanwhile, China maintains a small gap in labour costs compared with Thailand. A survey conducted by a European research company reported that the estimated total cost per minute of labour in China is 0.40 euro (Bt29.25), while Thailand's is 0.90 euro.

However, Prasop said the company had to consider other risk factors before making a decision for an investment plan.

The company spent Bt100 million to set up its first offshore plant in China, with a total of 600 employees. Production will focus on both expoMug rt and domestic markets.

Thai Garment Manufacturers' Association (TGMA) president Dej Pathanasethpong said many Thai garment-makers were planning to expand their investment in neighbouring countries like Cambodia and Vietnam.

Vietnam, in particular, has skilled labour and facilities to support garment export. The Vietnamese government is trying to gain World Trade Organisation membership, in order to enjoy free-quota exports. In addition, the country is working closely with the US government to form an FTA for lower import-tariff privileges.

Dej said manufacturers had moved their manufacturing operations out of Bangkok to upcountry, a policy aimed at not only reducing labour costs, but also fostering social development.

"Everywhere we move to, business has created a new community and benefits to the locals in terms of career opportunities, property development and employment," he said, adding that each manufacturing plant upcountry employed at least 500 to 800 workers and even up to 3,000. Due to uncertainty over the FTA talks, some manufacturers have delayed plans to move their factories upcountry.

Trax Intertrade is one Thai garment manufacturer that has shifted its expansion plans from Thailand to Vietnam, due to the delays in FTA negotiations.

The FTA is an important catalyst driving Thai garment firms to achieve manufacturing integration and encourage fabric diversification and development.

Both fabric and garment manufacturing have a combined investment of Bt220 billion in the Kingdom. Of that, spinning, yarn production and the printing, dyeing and finishing industries account for Bt200 billion, with the remainder going for garment production.

Textile researcher Supat Supatchalasai called FTAs a double-edged sword: they help countries snare market share from competitors, but the struggle might be joined without privileges.

"If Vietnam can accomplish bilateral free-trade talks with the US, what would happen to the Thai textile industry, and what should we do?" he asked.

The European Union is also negotiating FTAs with African, Caribbean and Pacific nations. These countries would enjoy zero-tariff market access to the EU, a privilege that would impede products from outside FTA regions from the EU market.

Supat added that the FTAs would create trade diversification of raw-material imports. The import of raw materials from different sources would encourage product development in each country.

Former TGMA president Suchart Chantranakaraj said the FTA would create a domino effect in the Thai textile industry, forcing Thai manufacturers to restructure both manufacturing and management to take bigger orders, in accordance with customer demand.

Consequently, manufacturers would achieve "critical mass" production, which would be a key factor to progress on product development. Huge production volumes will revive the Kingdom's nearly dead weaving and bleaching, dyeing, printing and finishing industries.

"The critical-mass orders would create more jobs for those industries instead of importing finished fabric like now. Small volumes would causes losses, but bigger volumes would strengthen supply-chain management," noted Suchart. "We have to be concerned most with FTAs with the US and Japan, because those two countries control 58 per cent of the Kingdom's garment exports."

Dej said the Thai garment industry should focus on producing more value-added production, such as fabrics for medical use and shields against radiation.