Sector Overview: The Fashion Industry in Thailand - Source: Royal Danish Embassy - Bangkok Danish Trade Council

Sector Overview:
The Fashion Industry in
       Thailand

        Source:
Royal Danish Embassy –
       Bangkok
 Danish Trade Council

Sector overview: The fashion industry in Thailand
                Source: Royal Danish Embassy – Bangkok Danish Trade Council

Introduction

The fast-growing Thai fashion industry, encompassing leather, jewellery and garment industries, contributes
to Bangkok’s creative and energetic ambiance. However, fashion is still a young industry in Thailand
compared to European fashion houses, as its first brands appeared only some 25 years ago. Nevertheless,
in terms of market range, the Thai fashion industry has grown to cover near the whole prêt-á-porter sector:
women’s, men’s, and children’s fashions are all well-represented in Bangkok’s shop windows.

Fashion in this report will focus on the garment, leather based and gems and jewellery industry.

Thailand has strong traditions for high-quality fabrics such as Thai silk. Today, the industry has an important
contributing role to the country’s economy, accounting for approximately 17 percent of total GDP.

The government has taken action to further strengthen this industry by setting up the “Bangkok Fashion
City” project launched in February 2004, which serves to turn Bangkok into a fashion hub in the South East
Asia region and into a world fashion centre by the year 2012. The cabinet has approved a budget of THB 1.8
billion (DKK 282 million) plus THB 487.9 million (DKK 76.5 million) from the private sector for the project in
2005. Its goals are to promote all aspects of Thailand's fashion trade covering textiles, garments, jewellery
and ornaments, footwear and leather industries on a grand scale and to establish the image of Bangkok as a
centre of fashion designs.

Full liberalization in textile quotas under World Trade Organization (WTO) commitments that came into effect
January 1, 2005, has caused tougher competition between WTO member states in global textile markets
and Thailand is becoming less competitive against cheap labour countries such as China, Indonesia, India,
Pakistan, and Vietnam. Thai manufacturers should manufacture higher quality products in order to compete
with high quality product countries such as Hong Kong, Korea, and Taiwan. Furthermore improvement of
logistics and supply chain systems is a must in order to gain better efficiency and promptness in the industry.

2: Market indicators

2.1: Market structure

The far most central sector in the fashion industry is textile. It consists of six different industries (the
synthetic fibre industry, the spinning industry, the weaving industry, the knitting industry, the garment
industry and the industry of bleaching, dying, and finishing) with the garment industry being the largest in
terms of production output.

The Thai textile industry is pursuing high quality, value-added strategy to succeed in the quota-free,
competitive environment. The quality of the fabrics in Thailand is generally high and continuously improving.
The silk quality is especially good, and Thailand is particularly strong in design such as Jim Thompson silk.

The government-sponsored programs to advance the Thai fashion industry beyond OEM-based production
to higher value-added design and brand development work are preparing the industry further to compete in
the Post-Multifibre Agreement (MFA) environment.

To be prepared for the MFA the textile and garment industry has invested more than US$45(DKK 268)
million in imported machinery over four years for fibre manufacturing, spinning, weaving, dyeing, printing and
finishing.

The numbers below show the increase in imports and exports from Thailand of textile and clothing. The
development should be considered in the context of Chinas rapid growth within the last years particularly
within textile and clothing industry.

The major import countries within garments is China, Hong Kong, Italy, Spain, Japan, within fabrics; China,
Taiwan, Japan, Hong Kong, South Korea and within fibre import it is Australia, USA, India, Japan and Mali.

2.2: Market size

The fashion industry is a major contributor to the Thai economy, accounting for approximately 17 percent of
total GDP. It is the largest manufacturing industry in Thailand, with more than 4,500 factories employing
more than one million people, roughly 20 % of total employment in manufacturing.

In addition, with annual exports of more than US$ 6 billion (DKK 35.68 billion) per year, textiles and
garments rank as one of the nations leading export industry, with garment exports accounting for 60 % of
total export. In 2003 Thailand ranked as the 13th largest exporter of garments, with a 2 % share of the global
export market.

Analysts expect the industry to enjoy continuous growth, despite of the rising fuel prices, which have
affected production cost. Additionally most producers and exporters work on gradually improving product
quality in order to meet the requirements of the international market.

As much as 50% of the earnings from Thailand’s fashion houses come from tourists, who have been
surprised by the Thai fashion industry with its abundance and small fashion houses. The former
governments focus on this industry has helped it grow into twice as many local brands from the total two
decades ago, as well as penetration on the international market. Five Thai design firms were in 2005 invited
to join the ‘White’ trade fair, an annual international fashion showcase held in Milan.

Furthermore Thais are very fashion conscious which make a demanding home market. Still the 10 million
tourists arriving in Thailand every year helps spark new ideas and provide a ready supply of customers for
Thailand’s fashion industry. The ancient appreciation of beauty, a modern sense of style and decades of
production experience make Thailand an obvious location for foreign fashion business.

3: Market trends

The Thai fashion industry has been heavily promoted within the last couple of years. The government seeks
to secure 1.2 million jobs within the industry, as well as educating 6,000 ‘fashion people’, consisting of
designers, merchandisers, and production specialists. This should mainly be done through the “Bangkok
Fashion City” project. It involves the improvement of the overall quality of design, marketing and
manufacturing. Further, the project is going to help achieve an even higher level of skilled labour.
Additionally, the project is concerned with the education of designers. The New York based “Fashion
Institute of Technology” has expressed interest in establishing a fashion university in Thailand and a fashion
school run by the Italian “Accademia Italiana Design Institute” is already present in Bangkok.

The Thai government has worked through several projects and work programs to establish Thailand as a
competitive country in the region. The objective is to facilitate trade and investment, as well as to promote
sustainable growth.

Thailand’s garment industry has been one of the country’s top export earners since 1985, placing the textile
industry second in the top 10 export ranking. While Thai craftspeople are well respected for their artisanship,
inward FDI (Foreign Direct Investments) will bring in an augmentation of product design improvement and a
more solid establishment of Thai brands and products. Research and development to upgrade design and
branding, technology and machinery modernization will be encouraged so that the industry can be
transformed from being highly labour intensive to one that is highly innovative.

Nevertheless the latest few years have become tougher for Thailand in terms of competitiveness because
the countries that produces cheaper textile products, especially China have taken the position as market
leader and hereby have the main market share in Asian, EU and US markets. Nevertheless the export of
high quality garment has been increasing and offering the opportunity for Thailand to compete in the global
market of textiles. The Thai government’s support through the Bangkok Fashion City project will help
increase the textile and clothing’s trade competitiveness in developing the quality of Thai products to be well
accepted and competitive.

Meanwhile, Thai businessmen have begun to focus on better production and marketing, as well as gearing
up for new markets, with continual efforts to penetrate these new territories. In addition, the public sector has
increased its role in supporting the local fashion and jewellery industry.

4: Market assessment

The range of products and services that Thai companies can offer Danish companies are viewed as
promising. First, the quality of fabrics are generally high, especially the quality of Thai silk. Secondly, there
are benefits to be reaped from the skilled workforce, which are experienced in producing garments requiring
complex constructions or detailed sewing. Furthermore, the continuous education of Thai designers helps to
ensure a high level of design all the way around. The “Bangkok Fashion City” project supports further
development of a skilled workforce and the education of designers.

Given the existing level of high quality fabrics and the development of Bangkok into a regional and world
fashion city, makes the Thai market interesting for Danish companies to invest in production facility in
Thailand. It is easy and cheap to get clothes sewed and designed in Thailand. The labour costs in Thailand
are relatively cheap and Danish companies can benefit from the good quality.

Although a number of quality enhancing initiatives have been implanted in the Thai fashion industry, there
are several areas were specialized technology and expertise is required, offering prospects for Danish
investors. Some of the most important are: State-of-the-art printing technology, advanced dyeing and
finishing technology, R&D activities and technology for fibres and textiles, and supply chain management
technology and expertise in fashion branding and marketing.

According to Thailand Board of Investment the following opportunities are present on the Thai market.
Within the respectively sub industries there are different opportunities, but overall there is a need for
marketing and expertise and innovative thinking within the industry.

About the Source:

The Royal Danish Embassies in Bangkok is part of the Danish Trade Council, Royal Danish Ministry of
Foreign Affairs, which is the official export and investment promotion agency of Denmark. The Danish Trade
Council has approx. 350 employees, of whom approx. 280 are based abroad at embassies, consulates
general and trade commissions on approx. 100 markets. The Danish Trade Council advises and assists
Danish companies in their export activities and internationalization process according to the vision: We must
be the partner preferred by enterprises in international trade and investment activities.

The Work in the Danish Trade Council follows specific procedures and quality guidelines that are described
in our internal quality manual. In this way our customers are secured the best possible quality under the
varying working and market conditions that at any given point of time are in force for the respective
embassies, consulates general and trade commissions.

Royal Danish Embassy
10, Soi 1 (Attakarn Prasit)
South Sathorn Road
Bangkok 10120
Tel + 66 2 343 1125
Fax + 66 2 213 1752
www.ambbangkok.um.dk

To read more articles on Textile, Industry, Technical Textile, Dyes & Chemicals, Machinery, Fashion,
Apparel, Technology, Retail, Leather, Footwear & Jewellery, Software and General please visit
http://articles.fibre2fashion.com

To promote your company, product and services via promotional article, follow this link:
http://www.fibre2fashion.com/services/article-writing-service/content-promotion-services.asp