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12 Jul 2012

Industry

Thai Textile/Garment Exports, 2H12: Growth Hinges on ASEAN Demand (Business Brief No. 3316 Full Ed.)

คะแนนเฉลี่ย

Although the value of Thai textile/garment exports in 1H12 was not very flattering due to the adverse Eurozone debt crisis and eroding export competitiveness, it is expected that these exports will improve with many more purchase orders that will likely come in during 2H12, while Thailand should be able to maintain growth in some export categories, namely synthetic fibers, apparels and underwear in ASEAN, plus garments, underwear and household textiles in Japan. Given this, overall textile and garment exports in 2012 should not decline much this year.

We at KResearch expect that the value of Thai textile/garment exports in 2012 will be about USD7.3-7.6 billion, down (-)8.0 to 12.0 YoY, as demand in the EU and US may fall substantially. However, exports to ASEAN and Japan should grow. Particularly, ASEAN has been a key driver for our textile/garment exports, because they have become the largest export market for us in those categories since last year. In addition, since ASEAN will soon become one of the world's largest production bases for textiles and garments, Thai manufacturers are being urged to make greater inroads into the region to help offset shortfalls to traditional markets, while we are preparing for the AEC integration in 2015, wherein we will be a key production base as well.

The direction of our textile and garment exports in 2H12 will largely be affected by a combination of factors. Externally, they include the Eurozone debt crisis that will inhibit consumer spending and demand for our exports. In addition, a growing market trend of quicker consumer response, prompting foreign buyers and suppliers to look for import sources that have greater logistical advantages, and/or lower labor costs. Internal factors hampering our exports include high production costs as a result of minimum wage hikes and labor shortages. These factors are increasingly undermining our export competitiveness.

Looking ahead, amid eroding export market shares, Thai textile/garment manufacturers, especially OEM manufacturers, should seek lower production sites abroad, especially in Cambodia, Laos, Myanmar and Vietnam, to help bolster their competitiveness, while OBM manufacturers are advised to study export markets thoroughly to better meet consumer needs there. To stay afloat, however, manufacturers should avoid pricing competition, and instead concentrate on utilizing advanced technologies to improve cost competitiveness. They are also urged to improve their supply-chain management, with a focus on expanding networks via partnerships or joint-ventures that can eventually help enhance their product development to better respond to market needs. A priority should also be placed on R&D innovations that will allow them to tap into high value markets, where technical and organic textiles can be added that may support other industries such as automobiles, pharmaceuticals and agriculture.

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