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Published on July 12, 2007

The sudden closure of a Samut Prakan clothing company with the loss of 4,950 jobs will not have a spillover effect, according to the president of the Garment Manu-facturers' Association.

Angry workers protested outside Thai Silp Southeast Asia Import Export Co yesterday as the closure raised concerns about the effect of the strong baht on exporters.

"The strong baht is just one of the factors that led to this tragic ending," said Dej Pathanasethpong, who said the garment industry was moving towards brisk growth.

Dej attributed the closure to wrong business policies. Thai Silp, launched in 1980, had experienced growth with strong demand from US companies. However, its main American client slashed its order by 70 per cent last November. That could have led to the company seeking orders through price-cutting, he said.

"It could have suffered from low margins and once the baht appreciated against the US dollar, the loss mul-tiplied and it could not

continue the business," Dej said.

He said the strong baht had also hit many econo-

mic sectors, particularly the agricultural sector, which relies solely on local raw materials.

Thai Silp's workers were in shock after arriving yesterday and seeing the notice of the company's shutdown. They responded angrily in King Kaew Road after Thai Silp's owners - the Unopas family - failed to show up to finalise compensation.

At press time, they had taken control of both sides

of the road, blocking traffic both ways and vowing to camp on the road until the compensation issue was resolved.

They also refused to

move to the province's city hall, as requested by Samut Prakan Governor Anuwat Methiwibunwut.

Provincial Labour Protec-tion and Welfare official Sakda Chettacharoenniran said he could not locate the company owner. Workers had not selected their representatives for negotiations over the sudden closure.

Sakda said the Labour Pro-tection and Welfare Depart-ment would allocate some money from the Bt200-million Employee Welfare Fund to assist workers for the first one or two months. But they must apply for this assistance, which takes about 90 days.

Labour Minister Apai Chandanachulaka said it was calculated that the company would have to pay compensation of Bt150 million or face legal action.

He instructed the Social Security Office (SSO) to pay layoff compensation at a rate of 50 per cent of the workers' wages for six months and urged the provincial employment office to help find employees new jobs in the same area.

Apai said he had instructed officials to survey factories facing closure because of the strong baht in order to launch further assistance.

Labour Protection and Welfare Department chief Padungsak Thephasdin na Ayutthaya said Samut Prakan had 9,000 plants and officials must closely watch them.

However, he said, in Thai Silp's case, it had not shown any sign of closing. And he understood the abrupt shutdown was not related to the strong currency but possibly because its products were found to be substandard and orders were cancelled.

The closure prompted the Thai Garment Manufacturers' Association to call an urgent meeting of committee members to draw up measures to stem a chain reaction in the entire industry.

Ginaform Bra Co, which closed last September, faced a marathon conflict with its labour union over compensation for 1,400 workers. It settled all claims last month.

The abrupt closure of Thai Silp even surprised Nike, one of its main customers.

Chris Helzer, director of international trade, expressed his surprise at the closure, saying that as a current active customer it only learnt about the shutdown yesterday.

"Nike's orders with Thai Silp have remained fairly constant in recent years and our plan was to continue working with the factory. Nike is one of several customers of the factory. Nike hopes factory management will move forward in a responsible manner, including fulfilling obligations to their employees," he said.

Nike works with over 40 apparel factories in Thailand.

Thai Silp has Yawalak Unopas as its president. As shown on its website, the company's major customers are Nike Apparel (USA and Europe), Adidas (USA and Europe), Jantzen and S Group (USA).

Half of its output goes to the US, 40 per cent to Europe and 10 per cent elsewhere. Depending largely on the US market means the company is at risk due to the dollar weakening against all other currencies. The stronger baht means lower revenue in baht terms when the dollar income is converted.

A source from the banking industry, who asked not to be named, said that Thai Silp's creditor bank had been informed that the closure was due to losses from the baht's appreciation.

"The creditor will have to see how to restructure the business so that it can resume operations," he said.

Deputy Commerce Minister Oranuj Osatananda said the baht's appreciation was just one of many factors that had led to the shutdown recently of several garment factories, which have been hit hard by fierce competition from China, Vietnam and Indonesia.

The strong baht should not be made the culprit for the shutdown, given that many other industries have been hit harder by the weak dollar, she said.