Producers and exporters of garments in Thailand are unsure of growth in 2015 because of economic uncertainty in China, the United States, the European Union, and other large markets. The Thai Garment Manufacturers Association (TGMA) predicted a wider than usual range of 0-5% growth for next year, and an expansion of 2-3% the industry as a whole.

These predictions take into account a weak recovery in the EU and US, a slowdown in Chinese growth, and the loss of EU import-duty privileges for Thai garments because of the country’s coup d’état in May of this year.

Exporters have been accelerating their shipments to the EU before their preferential trade status expires at the beginning of 2015. However, TGMA president Thavorn Kanokvaleewong does not believe that the loss of this status will have much of an impact, as the EU waives just 2.4% of their duty on Thai garments, compared to the standard rate of 12%.

Thai businesses have also compensated for the loss by raising their investment in other Southeast Asian countries, including Vietnam, Myanmar, and Cambodia. These countries have a lower cost of labor and have not lost their preferential trade status with the EU, providing companies a way around higher tariffs. Vallop Vitanakorn, a committee member of the TGMA, stated that over 30 Thai garment producers have set up factories in neighboring countries over the past several years.

There are other reasons to be optimistic about Thai exports. The ASEAN Economic Community (AEC) is set to come into effect in December of 2015, and will bring greater integration, flow of capital, and trade incentives for the ten member nations of ASEAN.

The Thai-Japan Economic Partnership Agreement is also positive for the Thai economy, as Japan seeks to move away from Chinese imports.

In the first eight months of 2014, total garment exports rose by just 0.86% year on year. Shipments to Japan, Hong Kong, and Europe increased, whereas exports to the United States fell.


About Nut Muengrit

Nut Muengrit has been doing business throughout Southeast Asia for many years and is on the board of directors of companies in Thailand, Vietnam, Hong Kong and Cambodia. He is knowledgeable in offshore incorporation and low-tax structures.
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