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Elections Raise Hopes for Thai Manufacturers

Industry executives hope that a new democratic government in Thailand will focus on increasing consumer confidence and private investment.

Campaign posters lined the streets of Bangkok prior to Thailand's elections on Dec. 23.

BANGKOK — Industry executives hope that a new democratic government in Thailand will focus on increasing consumer confidence and private investment, but they don’t anticipate an immediate boost to apparel manufacturing.

This story first appeared in the January 8, 2008 issue of WWD.  Subscribe Today.

“If our new government can gain the trust of the international community, we’ll be able to export more,” said Pattana Sudhirakuljai, executive director of the Thai Garment Manufacturers Association.

The People’s Power Party emerged victorious in the Dec. 23 elections with 233 seats in Thailand’s 450-seat parliament. Led by Samak Sundaravej, a close ally of former prime minister Thaksin Shinawatra, the party is negotiating with other political groups to form a coalition government. Sundaravej is expected to be the next prime minister, and has said he will pardon Shinawatra, who has been living in exile since being ousted in a military coup in 2006 and is facing corruption charges.

Shinawatra, who made his fortune in the cellular telephone industry, was never focused on stimulating the apparel industry, Sudhirakuljai said.

“He was only interested in the technology sector,” he said. “We are unhappy that his government ignored our sector.”

Somphol Manarangsan, a political economist at Bangkok’s Chulalongkorn University, said Thailand’s export sector is likely to suffer this year because of lagging economic conditions in the U.S., Europe, Japan and China. Although Thailand’s exports grew 17 percent last year, Sudhirakuljai said he doesn’t foresee them gaining more than 12 percent in 2008.

Dej Pathanasethpong, president of the Thai Garment Makers Association, said in an e-mail that he forecasts the garment-making industry to grow about 10 percent this year, partly because the new government will restore business confidence and domestic consumption will increase. He also noted that companies that survived 2007 are “strong with potential.”

Apparel exports from Thailand have been hurt by the strength of its currency, the baht, which reached a 10-year high last year, and lower prices from nearby countries, including China and Vietnam, Sudhirakuljai said.

“Vietnam doesn’t hurt us with quality, but they have cheaper price points,” he said. “Buyers are balking about the price. No one is happy with prices. Everyone has capacity, but to sell, we have to have capacity and prices.”

The U.S. is Thailand’s biggest importer of apparel. U.S. synthetic fiber garment imports from January through October rose 0.5 percent compared with the same period in 2006, according to the Thai Information and Communication Technology Center and the Customs Department. Overall, the growth rate of synthetic fiber apparel exports from Thailand dropped 2.3 percent in the same period. Exports to France, a major trading partner, dropped 11.4 percent in the nine months and shipments to the U.K. dropped 15.8 percent.

Cotton apparel exports did not fare well, either. U.S. imports in the nine months through October were 14.6 percent lower than the same period in 2006 — dropping to $612 million in value from $717 million. Imports of cotton apparel by Thailand’s other major markets also fell. Japan’s imports of the product category declined 16.6 percent, Germany’s imports fell 9.5 percent and the U.K.’s slid 5.4 percent. The overall growth rate of cotton apparel exports from Thailand dropped 10.7 percent in the period.