(source: Thailand Investment Review, October 2017)
As the 11th largest exporter of apparel and clothing accessories in Asia, Thailand is one of the few countries that has a full range of activities across the entire value chain of the textile industry, from upstream to downstream, ranging from fiber production, yarn spinning, fabric weaving and processing, all the way to fashion design and garment production. With a long history in the textile industry over the past five decades, Thailand now has 4,700 textile and clothing manufacturers employing over 500,000 people with an export value of roughly THB 216 billion (USD 6.45 billion) in 2016, contributing approximately 3% to Thailand’s total exports. The retail value of domestic apparel market has seen a steady CAGR of 3.5% from 2011.
Originally known as a labor-intensive industry, Thailand’s textile industry is undergoing a profound transition, shifting towards high-tech, value-added products. According to the Thailand Development Research Institute (TDRI), Japan, Korea, and Taiwan are excellent examples of places that integrated technology and newly adopted innovations into the supply chains of their respective textile industries. With the prioritized national agenda to fully upgrade Thailand’s capabilities in the textile industry, and within the broader reforms being ushered in through Thailand 4.0, the country is following in the footsteps of these developed states.
Synthetic fibers – diversified opportunities
In transitioning to higher value-added products, Thailand’s textile industry has leveraged its considerable expertise in the petrochemical sector.
Home to high-quality downstream products in the petrochemical sector, Thailand has developed its capabilities in R&D as well as the production of oil-based synthetic fibers to feed into a wide range of main end-use products including apparel, automotive, non-woven, and hygiene applications. Synthetic fibers range from polyester, nylon, rayon, and acrylic. Currently, Thailand is ranked as the ninth-largest polyester producer, with over 621,000 tons produced in 2016, and the fifth-largest acrylic producer in the world, producing about 114,000 tons in the same year. On the other hand, owing to cutting-edge technology and high capital investments required for the production of synthetics fibers, key players are the joint ventures and subsidiaries of multinational companies such as Indorama Polyester, Teijin Polyester, and Thai Toray.
Over the years, synthetic fibers, especially polyester, have increasingly grown in popularity worldwide. Accounting for over 60% of global fiber consumption, synthetic fibers are highly preferred due to their durability and exceptionally long-lasting properties compared to natural fibers. According to the Office of Industrial Economics (OIE), Thailand’s man-made fibers production, including cellulose and synthetic fibers, and local consumption have year-on-year growth rates of 6.4% and a double-digit growth rate of 12.3%, respectively.
Functional textiles – an emerging market
The importance of Thailand’s R&D of textile fibers, both natural and synthetic, is being emphasized to cater to more diverse end-use applications. This is making functional textiles an emerging market that is changing consumer behavior.
According to the International Trade Administration, the global market value of functional textiles is expected to exceed THB 310 billion (USD 9.3 billion) by 2017. Given rising demand, a CAGR of 4% is expected throughout 2017. The Asia-Pacific region accounts for over 50% of the market, the largest worldwide. With Thailand ranked as the 28th largest exporter of functional textiles, there are roughly 730 technical textiles producers ranging in 12 functional textiles categories including Medtex, Mobiltex, Agrotex, and Hometex. Medtex and Mobiltex are two categories that are achieving high growth. Producers in the functional textile categories include Asahi Kasei, Perma, Saha Seiren, PJ Garment, and TP Corp.
Due to its versatility, favorable growth in this sector is mainly driven by the increase in adoption by various end-users, which receive direct benefits in the robust growth in end-use industries. For example, the domestic market value for Medtex reached THB 20 billion (USD 0.6 billion) in 2016. Globally renowned as a regional medical hub, Thailand’s healthcare expenditure is accounting for 4.6% of the total GDP in 2015, the highest in the ASEAN.
Acknowledging the gap in opportunities in emerging markets, Thailand pursued groundbreaking technology through decades of intensive R&D. Recently, “smart fabrics” which contain six special characteristics, including UV protection, and anti-bacterial and flame-retardant properties, were invented by Thai researchers. Another relevant example is Thai Num Choke Textile, an eco-design and DEmark-awarded weaving factory, which eagerly invested in the production of newly-invented car bumpers made from pineapple fiber.
THTI’s long-term plan rolled out
Beyond textiles, Thailand is emerging as a fashion hub in Asia having hosted regional and international fashion shows including Bangkok International Couture Fashion Week, Elle Bangkok Fashion Week, and the Bangkok International Fashion Fair. These iconic events allow the country to simultaneously showcase its fashion industry and cultural heritage to the eyes of those who are fashion savvy in the region and beyond. Thailand is also a home to popular Thai designer brands, including Naraya, Sretsis, Dry Clean Only, and Disaya, which have successfully made their debuts on global fashion runways.
To reboot Thailand’s textile industry in an increasingly competitive market as well as to reinforce the ambitious goal of elevating Thailand as a global fashion leader, the Thailand Textile Institute (THTI) launched the long-term “Thailand Textile and Fashion Industries Development Strategy 2015 - 2030” plan.
The plan consists of three phases and numerous measures have been adopted to support this long-term scheme. The measures include the establishment of an industrial fashion zone, fiber pilot plant, a yarns, fabric, and fashion product development center, in addition to a regional fashion academy.
The BOI’s attractive investment packages
Apart from the THTI plan, the BOI is granting attractive investment packages for investors. First are tax incentives including a reduction in corporate income tax for 3-8 years together with an import duty exemption for machinery and raw or essential materials used in manufacturing export products. To underscore the importance of R&D, a 300% R&D expense can be deducted. Non-tax incentives include the permission to own land and facilitation of visas and work permits.
To this end, focused support from the government to elevate the country’s textile industry to an advanced level with high-tech elements that build on smart materials but also fashion design, will lead to new opportunities in an increasingly important sector, for which Thailand will be on the cutting edge.