Garment exporters look for new markets to replace traditional destinations

At the 33rd edition of the "Export Garment Fair", a three-day event in Bangkok that kicked off yesterday, exporters shared similar views that they would have to look for new markets, as volatile exchange rates have caused difficulties for their trade in traditional markets, mainly in the European Union.

Thavorn Kanokvaleewong, president of the Thai Garment Manufacturers Association (TGMA), said China, countries in Europe outside the euro zone, and Asean markets could fit the bill, since they have high demand and relatively stable currencies.

"With its rising cost of labour, China has to import more garments. Emerging Asean countries are also seeing increased demand for garments, and Thailand is one of major suppliers to those countries.

Moreover, despite slowing business growth in Japan, its policy to reduce imports from China will brighten the opportunity for Thai garment makers to export more to Japan," Thavorn said.

Nevertheless, the TGMA projects that garment exports this year could face a contraction of 2-5 per cent, or flat growth at best, because of the sluggish global economy.

Thavorn said that since Thai garment exporters had relied heavily on traditional markets, mainly the United States and the EU, a contraction was likely.

As of last month, TGMA figures showed that the US was Thailand’s major garment export market, with a 35-per-cent share, followed by the EU at 21 per cent, Japan at 15.4 per cent, China at 5.4 per cent, and Asean at 5 per cent.

The US and EU shares have dropped continuously over the past five years, while those of China and Asean have gone up considerably.

In the first two months of 2015, garment exports contracted by 9.4 per cent year on year to US$435.43 million (Bt14.19 billion). Export to the US declined 7.9 per cent, to the EU by 17.12 per cent, to Japan by 5.29 per cent, to China by 1.7 per cent, and to Asean by just 0.08 per cent.

Thavorn said garment exports could rebound to positive growth in the second quarter if the global recovery gets stronger, while Thai exporters have tried to penetrate new markets.

Vallop Vitanakorn, adviser to the TGMA and president of Hi-tech Group, one of the country’s leading garment exporters, said the relative strength of the baht and deflation in the EU were weighing heavily on the apparel industry.

With a weakening euro, some garment exporters could not accept orders from the EU countries. Exporters have faced losses of about 10 per cent from trading in US dollars and could lose up to 20 per cent from trading in euros.

Yuttana Silpsarnvitch, secretary-general of the TGMA, said mainland China, Hong Kong and Asean were new potential markets for Thai garment exporters. With China seeing higher labour costs, it will need to rely more on imports.

Within five years, China could become a net importer of apparel. Thai exporters should start to study the demand in the giant China market and seek to capitalise on it to compensate for lower exports to traditional markets, he said.

Moreover, with the UEFA European Championship soccer extravaganza coming up next year in France, more orders for sportswear and uniforms have been placed with Thai manufacturers that have plants in Cambodia, Myanmar and Laos. Yuttana said many of those exporters had enjoyed orders from European countries for sportswear as they could take advantage of the Generalised System of Preferences privileges granted to those countries.

Thailand lost its GSP privileges late last year. Yuttana pointed out that exports from Thailand to the EU were now facing 12.5-per-cent tariffs, while those from Vietnam paid 9.5 per cent, and imports from Laos, Cambodia and Myanmar were tariff-free.So far, about 40-50 per cent of orders from European countries are placing to Thai producers since having long contracts and Euro countries such as England, Germany, Spain, and the Netherlands have normally used uniforms produced by Thai enterprises.