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Published on July 16, 2007

So is Thai Silp South East Asia Import Export, the company that closed this past week with the loss of 5,000 jobs only to be thrown a lifeline by banks and the Thailand Textile Institute.

However, Bangkok Rubber has the advantage of manufacturing its own brand, Pan, which is sold domestically and internationally.

"The company has been hit hard by the strong baht, just like Thai Silp. But because it makes its own brand it is more flexible and can adjust its business strategy," said institute executive director Virat Tandaechanurat.

FN Factory Outlet, the producer of Fly Now high-end fashion clothing, was an OEM, too. However, it created its own brand to compete with international fashion names. Today, Fly Now is a success at home and abroad.

These success stories hearten the institute. It has worked hard to get OEMs to become original-product manufacturers. This has helped many survive unexpected, short-term negative factors.

Virat said about 10 per cent of the country's textile and garment manufacturers - around 4,500 - could be forced to close at any time. One solution is to shift to higher-value products.

 "Many operators pay more attention to high-tech textiles, which need advance-production technology, to avoid price competition with cheap products from China and Vietnam," he said.

Since the baht appreciated local manufacturers and exporters have had to improve their production processes and penetrate markets where they are not competing with cheap products from China, Vietnam and India.

While the baht was blamed for the brief closing of Thai Silp it seems the real problem lay with its decision to produce cheap goods to fill unused capacity.

With lower profit margins, it could not continue when the baht got strong and further squeezed those margins.

According to Deputy Prime Minister and Industry Minister Kosit Panpiemras, many businesses realise the need for productivity efficiencies and original brands if they are to stay alive amid tough competition and globalisation.

"We will never compete in the global market in terms of labour and production costs. What we can do is differentiate and make more value-added products by upgrading technology and creating our own brands," he said.

Meanwhile, the government has launched stricter measures and higher standards to encourage manufacturers to improve their environmental management and to make "green" products.

This is necessary for a competitive edge.

"Going green is necessary for those who would like to penetrate markets in developed countries, particularly in Europe and the United States," said Charuek Hengrasmee, president of the Electrical and Electronics Institute. He added that manufacturers suffered from the baht factor, rising raw-material prices and changes to the tax system.

Deputy Industry Minister Piyabutr Cholvijarn said operators should focus on reducing production costs, particularly energy and machinery. The ministry has a fund to help small and medium-sized entrepreneurs, too.

Large businesses can lose out to small- and medium-sized entrepreneurs in the global markets if they are unable to adjust business plans.

"All operators should learn the tricks of survival in a rapidly changing world. If they are stubborn enough to keep competing in disadvantageous fields it will be too late for them to change their strategy," he said.

Chalida Ekvitthayavechnukul

The Nation