KResearch projects that the value of Thai textile and garment exports may contract as much as 5.0% YoY in 2013, or remain static, though shipments to ASEAN and Japan should continue to grow. In particular, within ASEAN, these exports should continue to do well because many foreign garment manufacturers have added factories in this region.
The main challenges that Thai textile and garment manufacturers will continue to encounter this year are how to sustain their competitiveness and overcome rising production costs amid an upswing in the Baht forex value that will likely drive up export prices, thus undermining future purchase orders. To cope with these challenges, domestic manufacturers may need to focus on adding value to their products consistent with the Board of Investment's new investment promotion policies that will shift toward high-tech industries. They may also need to enhance labor productivity, explore new markets and cheaper production bases with neighboring nations as a timely investment option.
Looking ahead, if this trend continues, it is expected that the major portion of revenues earned by downstream producers will shift toward repatriated income that they receive from overseas plants; however, direct export income earned by upstream producers should continue to be satisfactory since their products remain competitive. However, this would also depend on government policy of promoting outward foreign investment through tax incentives. If such incentives favor greater foreign income repatriation, that would help offset any export shortfall seemingly ahead.
Factors that should be monitored include the Thailand-EU Free Trade Agreement and TPP membership. If Thailand can reach those agreements, that would benefit the Thai textile and garment industry substantially, though there might be some sensitive issues affecting other industries and the public interest, e.g., intellectual property rights protection on foreign patents and other registrations vis-à-vis pharmaceuticals, plants, animals and geographical indications (GI).