Consider Indonesia, Thai garment firms told
Amid the increasingly stifling competition at home, garment companies should look abroad, particularly within Asean, where Indonesia offers the brightest prospects, Kasikorn Research said yesterday.
In trade, the Indonesian economy has grown favourably, helping raise disposable household incomes and purchasing power for clothing. This is especially evident in the steady growth seen in garment sales there over the past four or five years, which has been consistent with garment imports from Thailand.
The value of foreign direct investment into Indonesia’s textile and garment industry has continued to increase. With Asean economic integration in 2015, it will inevitably draw in more FDI, thanks to its large workforce and competitive labour costs.
Opportunities exist in Indonesia’s garment market due to rapid urbanisation, clear demand for apparel and similar fashion tastes. Growing spending power there also offers opportunities to Thais to set up clothing outlets in the teeming cities.
KResearch expects Thai garment exports to Indonesia to expand by 43 per cent to US$8 million (Bt246 million) this year and increase steadily until the Asean Economic Community (AEC) takes effect in 2015, thanks to high economic growth in Indonesia and efforts by Thai garment exporters and shopping-mall investors.
Although sales of Thai garments can easily grow in the $11-billion Indonesian clothing market thanks |to the quality and reputation of |Thai products – making it easier for other Thai brands to enter Indonesia – Thai entrepreneurs must recognise several challenges, too. Among these is competition from other foreign garment suppliers that have located production bases there. This is a big challenge for Thai garment firms in Indonesia.
Thai garment companies intent on setting up there should pay close attention to frequent changes in local regulations and stringent labour laws. Another factor may be the skill level of Indonesian garment workers, some of whom seem not to be adept at intricate work, though their sewing skills are generally good. Increased FDI into Indonesia may also give rise to labour shortages in the near future, the research house said.
The transition to the AEC over the next few years should provide good opportunities for Thai garment producers to make inroads into the Indonesian market before competition intensifies, it said.
