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Published on September 5, 2007

Garment firms have lowered their export projections for the year due to gloomy prospects in the United States and fiercer competition in the global market.

Dej Pathanasethpong, president of the Thai Garment Manufacturers Association, told a seminar yesterday that after expecting flat or small growth, the industry was now expecting a fall of 4-5 per cent in exports.

The "Global Apparel Production: Trend and Challenges" seminar was held by the Bangkok Bank.

Dej said the expected drop was mainly because the global market picture remained unclear. The textile quota with the US ended in 2004, while the baht's appreciation has affected operators and some factories have closed.

Growth of clothing exports last year was 2.8 per cent. However, the garment and textile industry is expected to decrease by 1-2 per cent this year, he added.

"Right now, the global market is still turbulent. But I believe the picture will be clearer next year and the industry will be back to a normal situation. The textile business is expected to recover," he said.

In spite of the negative outlook in the short run, Thailand's textile sector still has high potential to grow in the global market and companies can compete with foreign operators, Dej said.

His positive angle for the industry outlook is based on Asia being a major player in the world textile and clothing market. Last year Thailand was ranked 11th for exports to the US and its ranking increased to ninth recently.

The market share of Asian textile exports to the US grew from 48.25 per cent in 2001 to 59.83 per cent in 2005. Meanwhile, Asia's share of textile exports to Europe increased from 51.67 per cent to 57.91 per cent.

Asian products are still attractive for the world market. The downward trend of the business makes it unattractive for new players in other countries to participate in the industry, Dej said.

He added that most Asian countries had a suitable environment for producing clothing and textiles, including business climate, labour, raw materials and supplier reliability.

He said labour costs were not a significant factor in lowering the Kingdom's competitive potential in the global market. Thai workers can contribute a high export amount compared with other countries.

In 2006, the country's export value per worker was US$6,000 (Bt205,800) compared with $5,600 and $4,433 for Vietnam and China, respectively. As a result, Thailand is still a key global player.

According to figures from the Commerce Ministry, garment exports in 2004 grew by 8.3 per cent, accounting for 3.2 per cent of all exports. However, garment exports are set to account for only 2.07 per cent of all exports this year.

Dej said small and medium-sized enterprises in the clothing sector should invest in the Mekong Subregion, which includes Burma, Laos and Cambodia. These countries also have great potential to grow in the global market.

As president of Thong Thai Textile, Dej said his company's operations had not relied on banks' financial support in terms of working capital. With the downward trend, the company is cutting costs and using its own funding.

 Virasak Sutanthavibul, executive vice president of Bangkok Bank, said the bank remained supportive of its customers in textiles and had not changed loan conditions. However, the downward trend of the industry had been taking place since 2004, after its quota was cut by the US. The stronger baht has also affected the industry.

Meanwhile, logistics company DHL yesterday unveiled its latest annual export survey, which showed that Thai companies were still confident about export prospects despite the economic slowdown.

The survey showed that the economy was forecast to remain relatively stable in the second half of the year and to expand over the next three years. About 30 per cent of respondents expected the overall economy to improve from 2008 to 2010.

The survey also showed the negative impact of the strength of the baht on international trade, while the global economy was considered among all industry groups as the next most significant factor.

About 69 per cent of respondents said converting the strong baht into the US dollar had a negative impact on their businesses. More than half of respondents expected the baht to weaken in the second half of 2007, helping all export sectors.

Somruedi Banchongduang

 The Nation