Thai textile and apparel exports declined 2.13% in value terms in 2002 to US$5.15 billion after already falling 5.7% in 2001.

Although prices declined under pressure from US buyers, this is a clear sign that Thai textile and apparel industries will face sharp difficulties after the full removal of textile quotas by the end of 2004.

Sales to the US decreased 3.29% in 2002 at US$1.96 billion. The US remains by far Thailand's largest customer with a 38% share in total sales of textiles and apparel.

Shipments to Japan also declined in 2002 but exports to the UK were up 5% while sales to China and South Korea rose 24% and 16% respectively, at the same time.

Labor costs and investments

While Thai apparel exports are actually confronted with a high level in labor costs, textile shipments benefit from recent investments.

Total apparel exports were down 5.65% in 2002 to less than US$3 billion after decreasing by 6.21% in 2001. The fall is mainly explained by a 12% decline in sales of MMF apparel at US$669 million while exports of cotton garments slightly increased in 2002, at US$1.2 billion.

Textile exports were up 3.2% in 2002, reflecting an ability to improve profit margins by shifting to specific value added products.

For instance, exports of household textiles steadily rose from US$131 in 1999 up to US$152 million in 2002. Shipments of MMF staple fiber yarns rebounded in 2002 after growth in sales was interrupted in 2001.

Exports of MMF staple fibers and filaments also rose in 2002, returning to the level reached in 2000.

Far from surging imports

As a clear sign that textile production resists China's threat, imports of textile fibers and yarns were down in 2002 while fabric imports were far from surging.

Although developing direct exports, Thai textile industry could suffer from a fall in domestic apparel production as a result of lower garment exports in the coming years.

No less than 30% of 1,500 garment factories could shut down after textile quotas will have been removed by importing countries, according to the main industry association, the Thai Garment Manufacturers Association.

This is mainly due to a lack of investment in the last decade, president Suchart Chantaranakaracha recently said to domestic newspapers.

Other producers continue shifting to production of quality apparel in order to overcome surging competition from China.

Authorities just launched a new quota allocation system aimed at reducing costs. They intend reducing quota trading and therefore prices by verifying that quota buyers are really exporting Thai-made apparel to the US, the EU or Canada.

The new system was also implemented to limit illegal re-exports of apparel from China, by using Thai quotas.

Various apparel companies already complained about the additional paperwork resulting from the new rules, however.