Garment firms look abroad for help

The garment industry in Thailand sees no future or prospect for new investment due to severe labour shortages, with all eyes on investments in neighbouring countries with cheaper labour for producing exported goods, says the Thai Garment Manufacturers Association (TGMA).

Burma, Laos and Bangladesh are among the countries where the TGMA is encouraging members to invest, said Vallop Vitanakorn, the TGMA secretary-general.

Of the 1,600 factories in Thailand's garment industry, at least five are moving to foreign countries, where low-wage workforces are plentiful, with planned investments of 200 million baht each. Those five are among the 80 large-scale garment factories located in the country.

"We would call this period a labour crisis. Right now we have a shortage of 50,000 to 60,000 people in the industry, and it should definitely reach 60,000 by next year," said Mr Vallop.

A main contributor to the shortage is the fact that prices of agricultural products have been increasing, shifting labour from the garment sector to farming, he said.

Thailand has 400,000 people working in the garment industry.

Still, he warned investors about drawbacks in neighbouring countries. For example, sanctions are imposed on Burma by the United States and the European Union. Meanwhile, Laos has a population of only 6.3 million, limiting its workforce, said Mr Vallop.

The garment industry is expected to decline by 10% from last year with a value of US$3.3 billion, said Mr Vallop. Although orders in the fourth quarter will come from Europe and the United States, the industry next year is expected to grow by 5% and will focus on Japan.Mr Vallop said Thailand's garment exports were not particularly focused on Japan in the past, since most of the orders were small lots, and that Japan was serious about high-quality products.

"At the start of the financial crisis, the government looked for a new market for us. While we can't compete with countries like Bangladesh and those in the Middle East, our main target apart from Europe should be Japan," he said.

Japan currently imports 84% of its garments from China due to the short transport distance, the abundance of raw materials and cheap labour. However, this is going to change because Japan believes it is risky to invest so much in China, said Mr Vallop.

In order to increase Thailand's garment market share in Japan, Thai business operators need to understand Japanese garment trends, he said.

Japan's Ministry of Economy, Trade and Industry provided a budget of 11.5 million yen to support advisers to come to Thailand and offer help to factories.

Japan currently imports $22 billion worth of garments, but only 1.2% or $270 million from Thailand. The number is expected to increase to 5% by 2012, which will increase Thailand's exports to Japan from 8% to 30% of the total garment market, or 1.1 billion baht.

Mr Vallop said it was not only a labour shortage but also better corporate income tax rates offered by other countries that have led to the crisis. Thailand imposes 30% corporate income tax across the board.