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1 August 2016
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High hopes for Thai fashion products

Industry encouraged to make own brands

The export value of Thai fashion products is expected to reach 1 trillion baht a year in the next five years as the country is on the right track to compete globally, according the Thailand Development Research Institute (TDRI).

The target is well above the current export value of 620 billion baht for fashion goods, including garments, textiles, leatherwear, jewellery and accessories.

TDRI’s president Somkiat Tangkitvanich said the Thai fashion industry should penetrate Asean member countries, especially its closest neighbours, where economies, and by extension purchasing power, are due to grow very fast.

He said Myanmar’s GDP was forecast to grow 8.3% annually during 2016-22, while Laos could see 7.3% growth and Vietnam 6%. Thailand’s annual GDP growth, by contrast, is projected at 3.6% over the same period.

Producers in the Thai fashion industry, however, should also adjust themselves to be more competitive. Dr. Somkiat said they need to create and produce their own brands in order to attract higher margins and brand awareness, as opposed to solely functioning as original equipment manufacturers (OEM).

“They should develop themselves to be original brand manufactures (OBM), whose profit margins are as high as 30%, or original design manufacturers (ODM), whose profit margins are around 15%,” he said.

Dr. Somkiat added that Thai fashion producers should further focus on adding value to their products to attract the luxury segment since they can no longer compete downmarket, as their labour costs are much higher than their competitors in other Asean states such as Vietnam and Indonesia.

He said creating their own brands would not only help increase the export value of the Thai fashion industry, but would also help build up the country’s own brands to compete on the world market.

Thavorn Kanokvaleeewong, the president of the Thai garment manufacturers association (TGMA) said there are only a handful of companies in the Thai fashion industry that are OBMs or ODMs, while up to 90% still operate as OEMs with low margins.

The TGMA has also encouraged Thai fashion makers to create their own brands with new designs that can compete well upmarket.

“Asean countries and Japan are major markets that we should focus on as they are also interested in Thai products,” said Mr Thavorn. He added that the Thai garment industry was one of the targeted sectors that the government aims to support under its cluster policy.

According to TGMA data, the export value of Thai garments dropped 7% to 90 billion baht last year, largely because of the global economic slowdown, high operating costs, high wage costs and greater competition.

Mr Thavorn said the garment sector should invest more in research and development and improve its manufacturing equipment to meet global standards.

First published: Bangkok Post on Monday, August 1, 2016