Introduction
The fast-growing Thai fashion industry, encompassingleather, jewellery and garment industries, contributes to Bangkok's creativeand energetic ambiance. However, fashion is still a young industry in Thailand compared to European fashion houses, as its first brands appeared only some 25years ago. Nevertheless, in terms of market range, the Thai fashion industryhas grown to cover near the whole pret-a-porter sector: women's, men's, andchildren's fashions are all well-represented in Bangkok's shop windows.
Fashion in this report will focus on the garment, leatherbased 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'seconomy, accounting for approximately 17 percent of total GDP.
The government has taken action to further strengthen thisindustry by setting up the "Bangkok Fashion City" project launched in February2004, which serves to turn Bangkok into a fashion hub in the South East Asiaregion and into a world fashion centre by the year 2012. The cabinet hasapproved 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 goalsare to promote all aspects of Thailand's fashion trade covering textiles,garments, jewellery and ornaments, footwear and leather industries on a grandscale and to establish the image of Bangkok as a centre of fashion designs.
Full liberalization in textile quotas under World TradeOrganization (WTO) commitments that came into effect January 1, 2005, hascaused tougher competition between WTO member states in global textile marketsand Thailand is becoming less competitive against cheap labour countries suchas China, Indonesia, India, Pakistan, and Vietnam. Thai manufacturers shouldmanufacture higher quality products in order to compete with high qualityproduct countries such as Hong Kong, Korea, and Taiwan. Furthermore improvementof logistics and supply chain systems is a must in order to gain betterefficiency and promptness in the industry.
2: Market indicators
2.1: Market structure
The far most central sector in the fashion industry istextile. It consists of six different industries (the synthetic fibre industry,the spinning industry, the weaving industry, the knitting industry, the garmentindustry and the industry of bleaching, dying, and finishing) with the garmentindustry 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. Thequality of the fabrics in Thailand is generally high and continuouslyimproving. The silk quality is especially good, and Thailand is particularlystrong in design such as Jim Thompson silk.
The government-sponsored programs to advance the Thaifashion industry beyond OEM-based production to higher value-added design andbrand development work are preparing the industry further to compete in the Post-MultifibreAgreement (MFA) environment.
To be prepared for the MFA the textile and garment industryhas invested more than US$45(DKK 268) million in imported machinery over fouryears for fibre manufacturing, spinning, weaving, dyeing, printing andfinishing.
The numbers below show the increase in imports and exportsfrom Thailand of textile and clothing. The development should be considered inthe context of Chinas rapid growth within the last years particularly withintextile and clothing industry.
The major import countries within garments is China, Hong Kong, Italy, Spain, Japan, within fabrics; China, Taiwan, Japan, Hong Kong, South Korea and within fibre import it is Australia, USA, India, Japan and Mali.
2.2: Market size
The fashion industry is a major contributor to the Thai economy, accounting for approximately 17 percent of total GDP. It is the largest manufacturing industry in Thailand, with more than 4,500 factories employing more than one million people, roughly 20 % of total employment in manufacturing.
In addition, with annual exports of more than US$ 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
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