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Published on September 26, 2007

"We could import more Thai garments after the implementation of Jtepa [Japan-Thailand Economic Partnership] but the continued baht strength will prompt us to drop the plan," a high-level management source at the trading firm, who did not want to be named, said in Tokyo yesterday.

"We want the baht's value back where it was three years ago," the source added.

The baht's strength has become the most important factor for Japan, Thailand's major trading partner.

Although the Jtepa is scheduled to be implemented on November 1, orders placed in Thailand will not increase significantly.

The high-level management source suggested that the Thai government consider measures to weaken the baht. This strategy will make prices more attractive for Japanese trading firms and lead to more orders for Thailand.

The baht has strengthened more than the currencies of China and Vietnam.

The company, which is the biggest importer of Thai garments into Japan with total orders reaching 31 trillion yen (Bt8.6 trillion), accounted for 6.5 per cent of Japanese imports from Thailand last year.

Under Jtepa, tariffs on Thai garment exports to Japan will be eliminated, compared with an average current tariff of 10 per cent, depending on the item.

The source added that Thai garment manufacturers have quoted higher prices than competitors from China and Vietnam. The company imports some Thai products that are still popular in the market such as sportswear and garments made from natural raw materials.

"Thai garments are good products which meet the company's demand, so we're thinking of importing more," the source said, adding that Thailand exports low-end apparel to Japan.

According to the Export Promotion Department, China is the biggest exporter of garments to Japan followed by Italy, Vietnam, the US, South Korea and Thailand.

Thailand's total exports to Japan reached ¥13.44 billion in the first half of this year, a 12.27-per-cent decline. In comparison, China's exports accounted for 82 per cent of Japan's total garment import value of ¥1.22 trillion in the same period.

The source added that the company is placing more orders in China because of the low labour cost there and also because of its geographical proximity to Japan, which saves transportation time and costs.

Vietnam, another export competitor, also has low labour costs and highly efficient manufacturing. However, the country still has to import some raw materials from Thailand, the source noted.

The source pointed that Thailand's garment production efficiency is the same as Vietnam's but the kingdom has the advantage of more locally sourced raw materials.

The company is also considering setting up garment manufacturing operations in some Asian countries like Thailand, India, Vietnam, Bangladesh and China. However, with the exception of Thailand, the other countries are considered low labour cost centres.

But the strengthening Chinese currency, increasing wages and the Chinese government's export policy will prompt the company to reconsider its investment in China.

Achara Pongvutitham

The Nation

Tokyo