36259011 supply chain in thai garment industry impact on women workers

Supply Chain in Thai Garment Industry: Impact on women workers!Final Report August 30, 2003

By Junya Yimprasert & Thai Labour Campaign

Supply Chain in Thai Garment Industry: Impact on women workers!

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Table of Contents Acknowledgements:............................................................................ 4 Introduction: ........................................................................................ 5 Part I ................................................................................................... 7 Overview of the garment industry in Thailand ................................. 7 History of Thai Textile and Clothing Industry................................... 8 The Role of Overseas Chinese Migrants in the Textile and Clothing Industry.......................................................................... 9 Part II ................................................................................................ 10 Thai Capitalists.............................................................................. 10 The Response to the Industry change .......................................... 10 Lessons Learned from the Collapse of the Biggest Textile Conglomerate Sukree Bodiratanangkura (Thai Blanket Public Co.)................................................................................................ 13 Establishing Connections with the Army.................................... 14 Signs of Crisis............................................................................ 15 Falling on the Bed...................................................................... 16 The Closure of Thai Iryo and Iryo Garment: The Same Company Tactics ....................................................................................... 17 Part III: .............................................................................................. 20 Thai textile and garment industry under quota system in 1974 1995 .............................................................................................. 20 Next step of post quota period................................................... 20 Multi-Fibre Agreement - MFA, explanation of WTO................... 20 Agreement on Textile and Clothing - ATC ................................. 21 What is its implication to Thailand? .............................................. 23 Quota System in Thailand ......................................................... 24 Changing after 2005 .................................................................. 25 What is the impact? ................................................................... 26 The role of Thailand Employer Associations ................................. 27 Master plan in textile industry........................................................ 28 Promoting to create Thai brands ............................................... 29 The promotion and support from the Board of Investment(BOI) 29 Part IV: .............................................................................................. 30 Value chain and Supply chain ....................................................... 30 Apparel production in value chain ................................................. 32 The Future of the apparel industrys structure............................... 32 Diagram of apparel industry structure in 2001 .............................. 33Supply Chain in Thai Garment Industry: Impact on women workers!

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Supply Chain Management ........................................................... 34 Standard Quick Response Schedule......................................... 36 Just in Time manufacturing........................................................ 36 Increased role of international agencies .................................... 37 Supply chain structure in Thailand ................................................ 39 New strategy to adjust to the globalization of production: ............. 40 Some Examples from Thai capitalists ........................................... 40 1) Control of the Whole Production Chain ................................. 40 2) Establishing Long Term Business Relationship (Bangkok Textile Group) ............................................................................ 42 3) The New Waves Adjustments to the Changes in the Textile and Clothing Industry................................................................. 45 Outsourcing through Subcontracting of Product........................ 47 Cheap wage structure................................................................ 48 Case of Bed & Bath workers ......................................................... 49 Bed & Bath Customers .............................................................. 53 Subcontract system; lesson from B&B ...................................... 54 B&B problems............................................................................ 55 Part V ................................................................................................ 57 Labour problems in the new employment system............................. 57 Burmese Migrant Workers............................................................. 59 Bibligraphy: ....................................................................................... 65


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Acknowledgements:This report was written by Junya Yimprasert. It is part of a team research project on the Impact of the Garment Industry on Women Workers in Thailand. The research team is Chalit Meesit from the Lawyer Council of Thailand, Rakawin Lee and Phan Wannaboriboon from Homenet and Junya Yimprasert and Prapas Sangsing from Thai Labour Campaign. This research is under supervision of Dr. Voravidh Charoenlert, Faculty of Economics, Chulalongkorn University. The research project is a part of global research in twelve countries, led by Oxfam International. The two years project intends to raise the level and concern of the situation of women workers in the garment industry worldwide. The Supply Chain in Thai Garment Industry was researched by the Thai Labour Campaign team lead by Junya Yimprasert and Prapas Sansing. Aranya Pakapat (CLIST) and Premjai Jaikla (TLC) translated the report. It was edited and proofread by Dennis Arnold (TLC). Without the hard work and support of every colleague from Thai Labour Campaign and friends, this report could not have been produced. My special thanks to every Thai Labour Campaign colleague, including Naowarat Suuasa-ard, Suthasinee Kaewleklai, Suntorn Boonyod, Sane Hongthong, and Sarayuth Jailak. I would like to salute the Bed and Bath workers for their courage and bravery to fight for their right and justice. The three months experience of working with them and witnessing their struggle has given me hope that workers in Thailand and throughout the world can live a better life. Without the Bed and Bath workers it would be difficult for the research team to get in depth information about Bed and Bath and subcontracting practices in the industry. We are profoundly grateful to the workers and individuals who bravely shared their stories with us, many of whose names cannot be mentioned. We are inspired by your courage and hope this report will be beneficial.


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Introduction:This report is the product of a joint project undertaken by Thai Labour Campaign and Oxfam International to conduct a study on the textile and clothing industry in Thailand, with a special concern on the situation of women workers. The fact is that behind the successful development of the textile and clothing industry in Thailand, women workers have been instrumental to that success and yet their contributions have not properly been addressed; this is our primary motivation in carrying out this study. Recently many changes have taken place at the industry as well as workplace levels as a result of free market globalization, this has raised overwhelming concerns on the impact borne by the women workers employed in this industry, both in Thailand as well as in other countries. The aim of this study is to identify the source of the problems and its impact on the women workers and to come up with policy suggestions for the government as well as the private sector to enact necessary measures to address the problems. The study expands on Thai Labour Campaigns efforts to collect data and research the business development of Thai capitalists in this sector as well as on the dynamics of the industry over the past 3 years of our work to promote labour rights among Thai workers. Many recent interviews with the stakeholders involved eg. government staff, employers, workers etc. had also been carried out to help us understand the issues concerned. Of the entire workforce employed in the industrial manufacturing sector, 23 per cent are employed in the textile and clothing industry making the industry the most intensive in terms of womens employment. Nonetheless the textile and clothing industry is one of the poorest in terms of working conditions. This study attempts to provide a thorough understanding of the dynamics of the industry and the impact of the changes for the workers that have taken place over time. Workers, who are the main stakeholder in the industry, are not yet well aware of the future prospects and changes brought by the new trade arrangements under the WTO that will soon affect them. Furthermore, much of the information concerning the employers strategies, particularly in altering the work arrangements that lead to a more severe form of worker exploitation, is not yet known to the workers. The difficult and sad life cycle of a majority of garment and textile workers begins as youths who migrate from rural areas to Bangkok for jobs. Having dropped out of school right after elementary or Junior High school, many of these young girls start their working life as domestic workers or at restaurants while many of the boys look for jobs at gas stations, nearly all of them dont even have ID Cards. These jobs are known to be underpaid, and in many cases undocumented. Once they are old enough to get ID Cards, they move to textile or garment factories. Many move from one workplace to another in a relatively short period in search of better benefits or pay, as they struggle to live with low wages and poor working conditions. Many single women workers share a small rented room with one, two or more single women friends and spend most of their time working at the factories until they reach an age, usually around 45, when the companies replace them with younger workers. What these workers have left is a prematurely aged body and many illnesses as a result of long years working in physically demanding, contaminated workplaces.


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It is sad to think how insignificant workers lives are within the capitalist system. In the perception of the employers and TNCs, what matters most is paying the workers the lowest possible wages and benefits while ensuring the highest productivity. In addition they aim to minimize their contribution to the workers scheme of social welfare and prepare mechanisms to easily close down their production without paying the workers their severance pay. The employers never take the time to learn even the names of their workers or even to see their faces. What they know is that a Thai worker fears to death losing his/her job when management just mentions how cheap and abundant the workers in China and Vietnam are and how little they demand of their employers. Based on the interviews conducted with the employers, nearly all share a common position that unions are an obstacle to companies attempts to increase their profits, and NGOs are seen as troublemakers whose advocacy work has lead to heavy inspections and pressure from TNCs on production methods. In the view of employers, workers demands are endless, and the employers want the government to change regulations such that they pay less compensation, and employers do not agree with the policy on the provision of unemployment benefits. To them workers are not at all responsible for their profit. In a country like Thailand where the social security system is not fully functioning and unemployment benefits are not yet in place, our point of concern is about the future of these women workers and how social welfare can function in order to take care of them when they become old. Thai Labour Campaign hopes that this study helps to present a clear picture of the realities of the textile and clothing industry in Thailand, and in particular the situation of the women workers. It is also intended to help stimulate initiatives of relevant groups and organizations that aim to solve the problems and bring happiness to these workers.


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Part I Overview of the garment industry in Thailand The textile industry is one of the most important industries in Thailand. The textile industry, which includes leather, shoes, and clothing products, has been a significant export industry in Thailand since Thai textile products were exported for the first time in 1972. Between 1985 -1996 the industry was the top in terms of generating revenue for the country. During this period Thailand had become one of the top exporters of textile products. The growth of textile exports continued for several years and in 1995 the country was ranked number 8 on the list of world exporters of textile products, leading South Korea, India and Mexico. 1 Over one million workers are employed in the textile industry, equivalent to 22.7 per cent of the workforce in the industrial manufacturing sector, 70 percent of whom are women. Each year the textile industry generates at least 200,000 million baht from the exports, equivalent to 5.7 per cent of Thailands overall export value. The textile and clothing industry is in fact an important industry for most developing countries, particularly in Asia. Out of the total world textile and clothing exports, 42 percent comes from Asia.1 And among the worlds low income economies, over 20 countries rely on earnings from the textile and clothing industry; Cambodia for instance earns 97 percent of its revenues from the textile and clothing industry.2 Although textiles and clothing no longer rank first among Thailands exports, the industry is currently rated 4th in the list of export industries in the country. In 2002, the top ten export products of Thailand include: Computer and spare parts generating USD 6,883.8 million, electric supplies USD 3,141.8 million, automobile and spare parts USD 2,713.9 million, textile and garments USD 2,480.4 million, ornament and jewelry USD 2,001.4 million, television sets USD 1,953.3 million, canned seafood and processed food products USD 1,855.7 million, plastics power USD 1,642.7 million, rubber USD1,568.8 million, and rice USD 1,437.3 million. The total export value of these top ten industries is equivalent to USD 25,729.1 million and accounted for 40.6 percent of the total export value of the country. 3 ] Despite the fact that the significance of the textile and clothing industry is on the decline, the revenue generated from textile exports is still higher than that of rice export, which is the major agricultural product of the country. Therefore many experts and those involved in the textile and clothing industry are anticipating that after 2005, when the quota system completely ends as stipulated by the WTO, a fierce competition among the textile exporting economies will take place. It is also predicted that many textile exporting economies will lose their export markets, particularly those which do not manufacture textile products themselves.1

Thai Textile Institute, The Project for Developing the Master Plan for Industries: the Textile and Clothing, 2002, Page vi 2 Interview: Mark Lavenson, UNITE, USA 3 Department of Industry Economic, the 2002 Industry Economic Summary and the trend for 2003, Ministry of Commerce, January 2003. Supply Chain in Thai Garment Industry: Impact on women workers!

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As for Thailand, there seems to be more pessimism rather than optimism that the country is likely to lose its competitiveness and hence its export markets for textile and clothing products which generated around 7 percent of GNP and employed 1,083,700 workers in 2000.4 The statistics presented here represent only those employed in the formal sector, excluding the textile and garment workers employed in the informal sector currently there is no accurate data on the number of workers employed in the informal sector. History of Thai Textile and Clothing Industry Thailand exported textile and clothing products for the first time in 1972, generating Baht 674 million in export value out of which 40 per cent were garments.5 Textile and clothing production grew to expand at an increasing rate. This was partly due to the growing domestic market and the expansion of the export market. During the peak time of expansion, garment and clothing production increased from 488 million pieces in 1975 to 946 million pieces in 1985 and 2,242 million pieces in 1992. 6 The emergence of the textile and clothing industry in Thailand was the result of strong economic ties, including technology transfer, capital relocation, as well as the transfer of the technical knowledge on business management from the fast growing economies in the Far East. Explicitly this technical knowledge used to build the textile and clothing industry in Thailand in the early period came from Shanghai, Taiwan, and Japan, brought by investors from those countries. Thus it can be said the Chinese were the main group who contributed to the creation of textile and clothing industry in Thailand. Textile and clothing was among the first industries created in the history of Thailand. According to Supatch Supachalasai of Thammasat University and Thailand Development and Research Institute (TDRI) Textile production with the use of machinery began in the period of Rama VI reign, 1922-1925 this was made possible after the country started to generate its own electric power in 1889. A group of Chinese from Shanghai brought with them the machinery for textile production. This was followed by the initiative of the Ministry of Defense which set up a textile factory in 1933 for the production of military uniforms. This led to the import of machinery such as the spinning machine (3,232 machines), weaving machines ( 72 machines) dyeing machine (1 set) and the machine to make cotton (1 set) into the country for the purpose of producing clothing for the Army in preparation for World War II. Thus the textile production in this period was characterized for national security purposes rather than commercial.7 After World War II the Army stopped textile production and rented the production facilities to the private sector. Sukree Bodiratanangkura , the renowned king of textile products of the 1980s in Asia, with his connections to the Army and the Banker Chin Sophonpanich of Bangkok Bank, then took over and developed the Thai textile and clothing industry to become the top in Asia.4 5

The Industry Promotion Department, Ministry of Industry Supatch Supachalasai, PhD., The Possibilities of Export and the Impact of the ASEAN Free Trade Areas(Textile Industry), Thai Development Research Institute, November 1996, p 2 6 Ibid, p 5 7 Ibid, p 1 Supply Chain in Thai Garment Industry: Impact on women workers!

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Since 1975 investors from Taiwan and Hong Kong started to relocate their production base in Thailand as they were motivated by the quota system granted to developing countries. However the relocation of production into Thailand during the period from 1980-1989 was a result of the rise in wages as well as in the value of local currency (currency appreciation).8 In the early period of the textile and clothing industry in Thailand, the families that had been involved in the textile business included the Adireksarn-Thai Textile Industry, the Photirattanangkul Thai Blanket Industry, the Darakanont- Saha Union which has a monopoly over the clothing equipment market, the Chokwattana Sahapat and Pan Group which control much of the clothing and shoe productions in the country, and is currently the worlds third largest subcontracting company for shoe production for NIKE. The Role of Overseas Chinese Migrants in the Textile and Clothing Industry Similar to how the other Thai capitalists expanded their business empire in other sectors, the growth of the textile and clothing industry in Thailand was only possible when the overseas Chinese migrants from the mainland China took the leading role, at the same time establishing personal connections with political elites, particularly those in the Army. The well-established connections brought about a vast interest in terms of business protection, capital, and at times certain privileges and the possibility to monopolize some sectors. In return a certain share of profits would be given to the politicians, making it possible for them to build strong political support as well as personal wealth. 9 Thus it would not be an exaggeration to say that many big capitalists in Thailand built their business empire through their personal connections with the political elite and the Army. After World War II Sukree Bodiratanangkura became the leader in the textile and clothing industry following his business move as importer of clothing and garments from overseas under the national economic recovery plan after the War.10

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Ibid, p 2 Phasuk Pongpaijit & Chris Baker, Economic and Politic of Bangkok, Silk Worm Book, 1999, pp 205 10 Ibid, 208 Supply Chain in Thai Garment Industry: Impact on women workers!

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Part II Thai Capitalists The textile and clothing industry continued to expand from the time Thai products were exported for the first time in 1972, especially in the early 1980s when investment in the sector was growing at an increasing rate. Investors from Hong Kong and Taiwan have been the main groups investing in Thailand in the textile and clothing sector. However after the MFA was replaced by the WTO trade rules, including the end of quota system in 2005, affiliation of China and Vietnam to the WTO, and new strategies of TNCs in the free market era, as well as technological advancement, the Thai capitalists had to make adjustments to the new system. Reduction in the production costs and the market risks as well as increasing productivity are fundamental in this adjustment process. The Response to the Industry change The government and the employers in the textile and clothing industry have been working to adjust themselves to the new international trade rules under neo liberal globalization. In particular, the Multi Fibre Agreement (MFA started in 1974) - which binds 2 trading economies on an individual basis, (Thailand had signed this Agreement with 18 countries in Europe and America) was replaced by the Agreement on Textile and Clothing (ATC), the new trading rule stipulated by the WTO when it was founded in 1995. Under the ATC, members of WTO have 10 years to make necessary structural changes in the textile and clothing industry based on the new trading rules of the WTO that will take full effect in 2005. In 1996, the government set up the Thai Textile Institute, which works under the Ministry of Industry. The Institutes task is to carry out studies, to give advice to entrepreneurs as well as to conduct training for the development of the textile industry. According to the Institute, the textile and clothing industry has always been one of the most significant export industries for Thailand, especially in terms of the high revenues it generated over the past 10 years. The Institute has also undertaken research work and formulated strategies so as to sustain the textile industry in Thailand. The Institute has also come up with a master plan for the textile and clothing industry as a way to prepare for the survival of the industry when the quota system ends and is replaced by the fullscale free market system, when competition will become especially severe among neighboring countries such as China, Vietnam and Mexico, Latin America. 8 In addition, since 1996 the Employer Association for the Textile Industry and the Foreign Trade Department under the Ministry of Commerce has engaged experts to carry out studies on the impact of the changes brought by the new trade rules. At the same time the Ministry of Labour has also enacted measures to support the employer by which it has formulated a plan concerning workers in the free market system. According to the Ministry of Labour, the plan aims to increase the ability of Thai entrepreneurs to compete, to keep jobs for millions of Thai workers and to minimize the negative impact on the overall economy.11

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Junya Yimprasert, Labour Focus, February 2003


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Data on Thailands Textile Export in 2001

1.Textile 1.1 Articles of apparel and clothing accessories 1.2 Woven fabrics and yarn 1.3 Household textile 1.4 Synthetic filament and staple fibres 1.5 Embroidery and lace 1.6 Fishing nets 1.7 Shawls,scarves,mufflers,viels 1.8 Other made up articles,dress patterns 1.9 Other fabrics 1.9.1 Handkerchiefs

Value (Million US$) 2001 2000 5,266.1 5,588.30 3,164.4 3,372.70 1,192.5 149.5 224.1 92.9 53.8 7.1 34.2 347.7 4.6 343.0 1,309.70 151.1 249.9 83.3 51.7 5.6 31 333.3 4.7 328.6

1999 5,115.30 3,104.80 1,225.80 131.4 198.3 74.7 49.6 5.9 21.9 303.4 5.3 298.1

Source: Department Of Business Economics With Cooperation Of The Customs Department More detail: http://www.moc.go.th/thai/dbe


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Major Export Markets of Thai Textile 2001 Value(Million US$) COUNTRY 1. U.S.A 2. JAPAN 3. UNITED KINGDOM 4. HONG KONG 5. GERMANY 6. U.ARAB EMIRATES 7. CANADA 8. NETHERLANDS 9. FRANCE 10. BELGIUM 11. SINGAPORE 12. CHINA 13. ITALY 14. INDONESIA 15. PHILIPPINES 16. MALAYSIA 17. SOUTH KOREA 18. SAUDI ARABIA 19. INDIA 20. SPAIN TOTAL 20 COUNTRIES OTHERS TOTAL EXPORTS 2001 2,030.2 334.3 238.9 156.6 148.8 139.3 112.6 108.9 108.8 108.5 97.5 96.1 89.5 78.8 73.1 67.7 66.6 65.1 56.6 53.7 4,231.7 1,034.4 5,266.1 2000 1999 Growt h:% 2001 2000 -3.73 14.1 Proportion : % 1999 0.54 3.98 1.02 -8.91 2001 38.55 6.35 4.54 2.97 2.83 2.65 2.14 2.07 2.07 2.06 1.85 1.83 1.7 1.5 1.39 1.29 1.26 1.24 1.08 1.02 80.36 19.64 100 2000 37.74 6.6 4.52 3.4 3.17 2.79 2.1 2.09 2.44 2.4 1.56 2 2.04 1.52 1.29 1.31 1.03 1.54 1.1 1.11 81.76 18.24 100 1999 36.13 7.09 4.64 3.53 3.58 3.08 1.99 2 2.71 2.58 1.86 1.63 2.24 0.97 1.26 1.38 1.16 2.13 1.1 1.2 82.25 17.75 100

2,108.9 1,848.3 368.8 252.5 189.8 177.1 156.0 117.6 117.1 136.5 133.9 87.3 111.7 114.1 85.1 72.1 73.1 57.8 85.9 61.6 62.1 4,568.8 1,019.5 5,588.3

362.9 -9.33 1.61 237.4 -5.4 6.35

180.6 -7.51 5.12

183.0 -5.95 -3.26 -3.4 157.4 -0.71 -0.89 -5.69 101.6 -4.28 15.78 -0.26 102.4 -6.93 14.27 4.22 138.6 -0.27 -1.54 1.34 132.0 -8.99 1.41 -2.84

95.3 11.66 -8.33 14.66 83.2 -3.94 34.27 0.14

114.7 -1.54 -0.49 -4.92 49.5 -7.4 64.3 1.42 71.76 21.04 12.12 57.54 15.13

70.8 -7.32 3.22 59.4 108.8 56.1

15.13 -2.64 82.04 -4.24 -1.07 -5.51 -8.1 9.87 9.2 4.97 1.7

61.3 -3.38 1.29 4,207.6 -7.38 8.58 907.8 1.46

12.31 -3.65 0.71

5,115.3 -5.77 9.25

Source: Department Of Business Economics With Cooperation Of The Customs Department More details can be viewed at http://www.moc.go.th/thai/dbeSupply Chain in Thai Garment Industry: Impact on women workers!

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Many efforts to study the prospects and the impact of the Thai textile and clothing industry under the new WTO trade rules were not unexpected as the industry had gradually lost its competitiveness in the world market. Thailand went from 8th in the world of exporters for textile and clothing products in 1995 to 16th in 2001. All parties involved were trying to minimize the negative impacts caused by the change on their part. However on the part of the workers, little has been done to anticipate the impact on them. Thus this study carries the task of presenting and projecting the impact caused by the fierce competition among the textile exporting countries on the workers and offer possible strategies for the labour movement to cope with the upcoming crisis when the industry will be fully liberalized in 2005. Data on Thai Textile and Clothing Exports 2000-2002Export Market USA Europe Japan Asean Total Other Markets Grand Total Export Value (Million USD) 2000 1,800.7 755.8 242.0 60.0 2,858.5 510.9 3,369.3 2001 1,703.1 675.2 219.7 59.8 2,684.8 475.4 3,160.2 2002 1652.5 648.8 188.4 56.9 2,546.6 435.1 2,981.7 Growth Rate (%) 2000 14.1 3.2 -4.3 21.3 9.4 4.4 8.6 2001 -3.9 -10.7 -9.2 -0.2 -6.1 -7.0 -6.2 2002 -4.5 -3.9 -14.2 -4.9 -5.2 -8.5 -5.7 (%) 2002 55.4 21.8 6.3 1.9 85.4 14.6 100

Source: Export Promotion Department and Thai Textile Association

Lessons Learned from the Collapse of the Biggest Textile Conglomerate Sukree Bodiratanangkura (Thai Blanket Public Co.) The lessons learned from the collapse of the business empire of the Bodiratanangkura family are worth analyzing in detail since Sukree was once renowned as the king of the textile business of Asia in the 1980s. Sukree Bodiratanangkura, who set up the family business empire in the textile industry, was a poor overseas Chinese migrant who left China for Thailand in 1916 during the same period as others, including Chin Sophonpanich of the Bangkok Bank. As mentioned earlier, Sukree started his textile business during World War II with the support of the Army and the political elite; this was the same case as other businessmen. After the War there was no other major crisis in the country for the next 20 years. In this period many tycoons emerged: including Chin Sophonpanich, Utain Tachapaiboon, Kiat Sriphengphung, Taworn Pornprapa, Sukree Bodiratanangkura , Tiem Chokwattana, Chuan Rattanarak, Damri Darakanont; apart from Lamsam and Wangli who had successfully built their business empire already.12 Based on the analysis of Thansetthakit Newspaper through the article Sukree Bodiratanangkura: The Collapse of Asian Textile Tycoon, Sukree came to learn about the clothing business at the age of 15 when he helped his relatives by selling clothes. He12

Yesterdays Chao Sau, http://216.89.134/road/20011216/oage4,shtml


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began by setting up a business of his own during World War II when many ran away to the provinces during the War but Sukree continued running his business amidst the gunfire and bomb blasts. He was then able to open a garment shop called Kimyongnguan in Sampeng (China Town of Bangkok). After securing the personal connections with the Army, 1949 was the golden year of Kimyong-nguan when it got the concession and became the only clothing supplier for all the governments departments. Later it signed a rental contract with the Army for the use of tread spinning production facilities belonging to the Army near Soithong Temple.13 Despite the tremendous success of Sukree, who started from a small clothing shop in China Town until he was named the Asian Textile Tycoon of the 1980s, his business empire collapsed within the period of his lifetime. The Nation 14 reported that Over the last two decades, this business group was the biggest textile exporter in the country with market share to the US and other major countries accounting for 60-70% Wirat Saengthongkham from the Manager Newspaper wrote that He is one of the Chinese-Thai who got wealthy from the destruction of war as did others, in particular, Chin Sophonpanich, Chuan Rattanaraksa. If the modern economic historian pays attention they will find a number of facts that prove their wealth immerged by taking advantage of the weakening of the state power in controlling the economic system.15 Establishing Connections with the Army Sukree started his business from supplying clothing for the Army, he got the concession to be the only supplier for military clothes for the Army during World War II, and took over the operation of the Armys textile production facilities. Later he got Chamnarn Penchart son in law of General Tanom Kittikajorn involved in the business through a joint venture. With Chamnarn, Sukree set up a textile factory in Bangkaen called Thai Blanket Textile Industry (TBI) and supplied military clothes for the Army.16 Wirat Sangthongkam elaborated this relationship further, the relationship between Sukree and Chamnarn Penchart was instrumental to the expansion of TBI in the textile industry in 3 respects: first, it paved the way for Sukree to secure the business relations with the Army; second, it helped him to secure the financial support necessary for the business expansion as it was known that Chamnarn, apart from being the son in law of General Tanom, was a CEO in Saha Banking.The Bank became the main supporter of the TBI group; and third, Sukree was able to establish business relations with foreign companies, especially in Japan. 17 Sukrees personal connections with the Army continued to the present days; some of his children also married with members of the Army and involved them in the management of the companies such as Major Charoensak Thiengtham son in law of Sukree who became the top level management of Iryo and Iryo Garment.

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Wirat Saengthongkham, Sukree Bodiratanangkura The ending of the king of textile, http://thannews.th.com/than41/1299/t204.htm 14 The Nation, 14 March 2000 15 Wirat Saengthongkham , The lesson learn of Sukree Bodiratanangkura, The Managers Magazine, September 1999 16 Wirat Saengthongkham, Sukree Bodiratanangkura The ending of the king of textile, http://thannews.th.com/than41/1299/t204.htm 17 Wirat Saengthongkham, The lesson learn from Sukree Bodiratanangkura , the Manager Magazine, September 1999 Supply Chain in Thai Garment Industry: Impact on women workers!

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Sukree continued to expand his business empire by way of joint ventures with foreign investors from Japan, France, and the USA. His business approach was to reinvest profits generated from one company by opening up new factories. This led to conflict with many foreign investors, and then he would find new business partners. Sia Kree is a real investor, and always put money in new factories whenever there was an opportunity. After setting up Thai-American company, he continued by setting up a new dye factory in Samutprakarn.18 In 1972 Sukree, with his business partner from Japan, opened up a garment factory called Thai Iryo Company, and soon after set up the Thai Iryo Garment. Many of Sukrees children also opened clothing factories, among them Par Garment Group was the best known. The TBI Group was later listed in the stock exchange of Thailand; by this time it had 26 companies covering spinning, textiles, dyeing and garments. 19 The business empire of TBI was concentrated in Wipawadeerangsit on over 1,000 rai of land (6.5 rai per hector). The major factories included Thai Blanket Textile, Thai Melon Textile, ThaiAmerican Textile, Thai Iryo and Thai Iryo Garment. The 5 companies employed around 20,000 workers. A former worker of Iryo Garment recalled the golden years of the company: During that period, the whole town was full of the pink and white colors of uniform. Sukree Bodiratanangkura followed in the footsteps of other Chinese migrants by establishing personal connections with the political and army elite; at the same time he found new strategies and technical know-how so as to maintain and expand the business empire.20 Signs of Crisis The signs of crisis began in November 1996 when the Thai Blanket Textile company announced its closure. This was followed by the 4 month long workers protests as the company failed to pay them compensation; the compensation was finally paid in February 1997. The workers protests gained much public attention as they were trying to raise funds to support the picket line through dance activities. In late 1997 the two largest textile companies, American Textile and Thai Melon Textile, employing more than 8,000 workers, announced a temporary factory shut down. This announcement once again gained much media attention. The Nation on 5 th December 1997 reported that Coming as a shock last week to the textile industry were reports that two of Thailand's biggest textile companies temporarily suspended their production because they had failed to pay their electricity bills worth Bt131 million..With an estimated annual turnover of nearly Bt1 billion from their factories, the companies' moves surprised the industry. Others in the industry wondered, ''What are the companys' real problems? How come these large textile companies cannot pay their electricity bills?" There were two observations: first, the company had a plan to close down and escape from the new labour protection law effective in 1998. The new labour protection law stipulates an increase in compensation payment for workers; the previous law stipulated the maximum compensation of 6 months but the new law requires that18

Wirat Saengthongkham, Sukree Bodiratanangkura The ending of the king of textile, http://thannews.th.com/than41/1299/t204.htm 19 Phasuk Pongpaijit and Chris Bager The Politic of Bangkok 2002 20 Wirat Saengthongkham, Sukree Bodiratanangkura The ending of the king of textile, http://thannews.th.com/than41/1299/t204.htm Supply Chain in Thai Garment Industry: Impact on women workers!

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companies pay 10 months maximum. Thus, according to some observers, the two biggest textile companies decided to close down before the new law came into effect. The industry source speculated that the factories' owners decided not to pay the electricity fees not because they did not have enough money, but because the companys' owners wanted to lay off the 8,000 employees. By allowing the factories to go bankrupt, the companies are exempt from huge compensation payouts to laid-off staff. However, he also suspected the owners might have concentrated too much on their polyester businesses and neglected the factories which generate smaller incomes to the empire. Another source said that it is possible the companies experienced financial mismanagement since 1996 when the export sector started to slow down [The Nation, 5th December 1997]. Other observers pointed to the problem of mis-management by the eldest son of Sukree, Chutipat Bodiratanangkura, who was tasked to run the familys textile business succeeding his father and at the time was married to a daughter of the family who own a group of companies including the Hilton Hotel known as Nai Lerd Group. Chutipat then had to run both the factories and the hotel, and because he seemed to like managing the hotel better than the factories he abandoned the factory management. The case of TBI shows quite clearly the development of the textile and clothing industry in Thailand. In summary the textile and clothing industry expanded during the period of World War II when the government gave concessions to the private sector to supply military clothing to the Army. Although the TBI finally collapsed, it did not necessarily lead to the bankruptcy of the Bodiratanangkura; the family still possesses wealth in many other businesses. The real victims in this case are obviously the thousands of workers who were employed in factories owned by the TBI Group, many of whom had been laid off without full compensation. Falling on the Bed The Bodiratanangkura family was not only one of the most colorful business families, but also one of the families that made use of the falling on the bed method when its closed its business down by trying to avoid paying workers in most of the factories that they closed down. It is as if the company collapsed but not the owner. The companies under the TBI Group found it convenient to declare the company bankrupt while the owners were not at all affected. The workers laid off by these companies went on protest for several months demanding compensation payment as well as unpaid wages that were due to them. For instance, at the Thai Blanket Textile in 1996 when the workers organized a Thai dance party to raise funds to support their picket line. Another example cited was the Thai Melon Textile and Thai-American Textile which was closed in late 1997 and mid 1998 respectively before the new labour protection law of 1998 which requires the employer to pay a higher compensation amount to dismissed workers, it came into effect in 19 August 1998. Moreover a similar pattern could be found at Par Garment which had been notorious for workers rights violations since it was established in 1988 until it was shut down on 17 December 2002. Par Garment was owned by relatives of Sukree Bodiratanangkura. The company declared bankruptcy while the production facilities in other places belonging to the same owner were still operating. Up till present 149 dismissed Par Garment workers have not been compensated what they are entitled to, although courts have ruled in favor of the workers. The authority in charge has obviously failed to force the employer to respect the law and the court ruling. While the otherSupply Chain in Thai Garment Industry: Impact on women workers!

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factories under the same management still continue their production for some famous foreign brand-name products; these companies also engage some small sub-contracting factories when they receive orders exceeding their own production capacity. Today the dispute between Par Garment and the dismissed workers involving the unpaid compensation payment of over Baht 8 million has not yet been settled. One after another these companies have used the same tactics by letting the companies fall into bankruptcy as way to escape their accumulated debts and their obligations to the workers. Even after selling the assets following the proclamation of bankruptcy, in most cases nothing is left for the workers. The case of the Thai Blanket Textile was even more obvious than others regarding the tactics used by the management to escape its responsibilities to the workers. Before the company declared a factory closure, the government needed the land for the construction of an express way and that was used as the reason for relocation of the plant. However, in the end more than 800 workers could not work in the new unworkable factory and started their protest for a compensation package in November 1996. In order to raise funds for the protest, the TBI workers set up a Thai dance floor to attract the public, and that unusual and entertaining protest attracted the attention of both the public and media. The employers and government were under pressure to pay serious attention to the case. The government decided to increase the land price to the TBI group so that the company could pay the workers. In the end the company gained from this struggle, the compensation was Baht 40 million, but the land price was more than Baht 100 million. This amounted to using the workers protest to bargain with the government. This is the tactic used by many employers, not just the Bodhiratnangkura group.21 Since late 1997 Thai Melon Textile and Thai-American Textile started to lay off workers at companies where 8,000 had been employed. And in July 1998 the companies announced the closure - by that time around 5,000 workers were still employed by the companies before the new labour protection law became effective. The dismissed 5,000 workers went on protests for 2 months before they received the compensation payment. The Closure of Thai Iryo and Iryo Garment: The Same Company Tactics Since 15 September 2000, 1,236 women workers of Thai Iryo and Iryo Garment have been protesting the company management, Major Charoensak Thiengtham, Mr. Nikorn Prachuabmoh, and Miss Vorachan Thiengtham for not paying our rightful compensation as they had promised when announcing the closure of the companies on 30 August 2000. Until today the management has not paid us our compensation worth Baht 52 million. Statement of the Iryo Garment Union On 30 August 2001, the management of Thai Iryo and Iryo Garment declared company closure without paying compensation to the dismissed workers. The compensation amount owed to the 1,236 dismissed workers is worth Baht 52 million. The workers protested for several months for their rightful compensation. After the unsuccessful protests, the Iryo Garment workers filed their case with the police and finally21

Interviewed a union organizer


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decided to gather at the Klong Laung police station when three direct employers reported themselves per the arrest warrant issued by the station. The negotiations between the workers representatives, police and the three owners took place from 11 AM until 10 PM on October 25. At the end the employers agreed to pay all back wages on the following Monday. However, once again it was confirmed that workers cannot trust the capitalists since the employers didnt keep their promise. The workers had to demonstrate and nearly 300 workers launched a protest at the Ministry of Labour for several months until end of January after the court declared the company bankrupt and the workers had to be involved in the process of selling the companys machines and equipment. Again, at the auction of the machines and equipment, the workers experienced another dirty trick of capitalists who worked together to bargain the prices of everything down much lower than their estimated value. In the end the workers of Iryo Garment who were in the service of the company from 3 to 15 years could only get around 45% of their compensation money. However, after a year of the collapse of Iryo Garment, Vorachan Thiengtham was showing her face in High Society and has opened up her agent company call Tigress Trading Company Ltd., which sells golf clothes. The lesson of the Bodhiratnangkura group is, therefore, one of many important lessons learned for the Thai labour movement and workers to understand the pattern of capitalists. The business was built up with ties to the military regime and politicians. The group made used of connections to negotiate for their profit, even workers themselves have been used by the Bodhiratnangkura group to negotiate a better deal with the government.My Tigress Trading Copany Ltd., Tigress is a trading company specializing in garments field. The areas covered by us are from design, material sourcing, research and development, in-house pattern making, sampling, finding suitable manufacturers, shipping and through to exporting. We have a strong and experienced staff who have all been in this field for many years and who are open to adapt new ideas in time with fashion and trends and our reputation has been second to none. We are a group of apparel experts who have strong sourcing capabilities, production facilities and know how to get deliveries on time. Moreover, we have long established links with the apparel industry in Thailand and its related associations all over Asia. Our relationship with the manufacturers extends to Cambodia, Laos and Vietnam. On our fabric and accessories side, we have well established relationships with China, Hong Kong, Korea and Taiwan. Our Quality Control team travels to manufacturers as often as needed on our customer's behalf to make sure that the products are being made on time and to our customers standards. http://www.mytigress.com


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Chronology: Thai Iryo Garment Struggle 30 August 2000: The Company announced a closure and informed the workers to come and collect their compensation and unpaid wages in mid August. The company failed to pay the workers when the time came. September 2000: The workers tried to follow up with the company on the unpaid compensation and wages, and decided to file their case to the police as well as at the Ministry of Labour. 6 October 2000: The dismissed Thai Iryo and Iryo Garment workers organized a peaceful rally outside the residential house of Supa Bodiratanangkura, mother of Chutipat Bodiratanangkura who owned most of the Thai Iryo shares. 7 October 2000: Thai Iryo and Iryo Garment workers filed their cases with the police, and demanded law enforcement against the employers for violating the labour law concerning compensation. 9 October 2000: Thai Iryo and Iryo Garment marched to the Ministry of Labour to follow up their cases with the Minister Prayut Siripanich. 11 October 2000: The workers went to protest at the Thai Buddun Company which is a subsidiary company under the Thai Iryo. Thai Buddun is owned by the Thiengtham Family who was also a shareholder of Thai Iryo. At Thai Buddun the workers met with Orawon Thiengtham and Worajan Thiengtham, when the workers demanded that their compensation be paid to them. At the same time that was also the opportunity for the workers to inform the workers at Budden about the behavior of the management. 13 October 2000: Nikorn Prajuabmau, management of the Thai Iryo company came to the union office to meet the workers representatives; the main issue concerned was compensation payment. However at the end of the meeting, Nikorn simply said we do not have the money to pay for compensation. 14 October 2000: The workers joined the commemoration event for those who died in the massacre of14 October 1973. The workers talked to the people and the media about their problems. 16 October 2000: The workers went to the Labour Court because the management had earlier requested a Court Order to dismiss the 11 Employee Committee who had accepted the dismissal with 2 months compensation in the first place. (The dismissed employee committee had to file their case to the Court for the rest of the compensation) 17 October 2000: The workers and another 200 workers of Thai Durable Company went to the Industrial Council of Thailand located at the Sirikit National Convention Centre to submit a letter to the president of the Council. However the president was not available, and his secretary received the letter for him and promised to inform the president about the workers problem. 31 October 2000: The employer paid the second installment of compensation amounted Baht 7 million for 1,217 workers. For the remaining Baht 43 million, the company promised to pay on 25 November, 2000. The workers felt uncertain about the promises made by the management as there had been several times in the past that the management failed to keep their promises. 6 November 2000: 120 workers went to the Ministry of Labour to demand the Government Social Fund which the Ministry of Labour had promised to pay since 28 October 2000, the workers had never received the money. Finally, with the order of the Deputy Labour Minister, the workers received the money on 7 November 2000. March 2001: The protests ended and the machinery was sold for compensation. May 2001: After selling the companys machinery, workers received 45 per cent of their rightful compensation.


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Part III: Thai textile and garment industry under quota system in 1974 - 1995 Next step of post quota period After the quota system ends, I can see what's going to happen. The consumers will have more choices; they can choose where to buy cheaper products. In the future, we must compete on time. Customers may choose to buy near their houses so I think we must compete in quality or have our own brand which is a good quality product. In the past, Thai exporters produced to customer orders. What I know is that the mother company orders and specifies the products to exporters in Thailand. Most Thai producers face a problem of having not enough quotas for export." Mr. Nopadol Srawasee, the director of Textile Trade Section, Foreign Trade Department, the Ministry of Commerce. The issue most studied and the cause of concern in the garment and textile industry is 'What will Thailand do after the end of the quota period in 2005?' Academics from many different institutes and the Industry Ministry set up the Thailand Textile Institute in 1998 as an information resource center for developing the garment and textile industry. Also, the Ministry of Commerce set up a working group on 28 October 1999 to prepare the Thai textile industry for textile and garment liberalization in 2005 by studying, analyzing, directing and setting up measures to serve the free market. The institute issues a bimonthly magazine 'Cut & Sew', which also includes brainstorming on the chief plan of textile and garment development in Thailand (see appendix I). Since 1997, the related employers associations and many academics have studied the impacts on the garment industry and how to develop the garment industry after liberalization under the WTO. It addresses the quota system that Thailand used from the time it joined the MFA in 1974 and the ensuing regulation of Agreement on Textile and Clothing (ATC), since January 1, 1995. ATC is under the same quota allocation system as MFA, but it will be phased out. In the ten-year period of liberalization under ATC, has Thailand been capable of adjusting for free trade? The important issues concerning liberalization which are always claimed regard higher competition and free relocation of capital to seek the lowest cost. But labour costs in Thailand are higher than China and Vietnam which lessens Thailands competitiveness.

Multi-Fibre Agreement - MFA, explanation of WTO "The Multi-Fibre Arrangement (MFA), or the Arrangement Regarding International Trade in Textiles, entered into force in 1974. It extended the coverage of the restrictions on textiles and clothing from cotton products to wool and man-made fibre products (and from 1986, certain vegetable fibre products). The stated objective of the MFA was "to achieve the expansion of trade, the reduction of barriers to such trade and the progressive liberalization of world trade in textile products, while at the same time ensuring the orderly and equitable developmentSupply Chain in Thai Garment Industry: Impact on women workers!

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of this trade and avoidance of disruptive effects in individual markets and on individual lines of production in both importing and exporting countries". A further aim was "to further the economic and social development of developing countries and secure a substantial increase in their export earnings from textile products and to provide for a greater share for them in world trade in these products". Operationally, the MFA (like the cotton arrangements) provided rules for the imposition of quotas, either through bilateral agreements or unilateral actions, when surges of imports caused market disruption or threat thereof in importing countries. In imposing quotas, importing countries were obliged to observe consultation provisions and specific rules and standards both in determining a situation of market disruption and when introducing and maintaining restrictions on exporting members. As a norm they were required to allow for an annual growth rate of six per cent in the quotas. A statutory body, the Textiles Surveillance Body, carried out a monitoring and reporting function and also handled cases of disputes. The MFA was terminated on 31 December 1994 upon the entry into force of the WTO and its Agreement on Textiles and Clothing (ATC) on 1 January 1995.22 MFA had formal status in setting the rules and regulations concerning international trade on textiles and garments from 1974. It was extended to cover conditions on producing cotton, wool and synthetic fiber (since 1983, it covers fiber made from some plants). The purpose of MFA is to achieve the trade extension, reduce trade barriers and promote the progress of liberalization in the garment industry. At the same time, it guarantees that this kind of trade development proceeds fairly, in a disciplinary manner and avoids impact on individual markets, also in the production system of the individual as importer and exporter. "Other goals are economic and social development in developing countries, to guarantee that these countries gain increased revenue from garment and textiles and to open a greater proportion of the global market of garments and textiles." In practice, MFA (like the agreement on cotton) sets the rules in allocating quotas, whether in bilateral or multilateral agreements, when that import has an impact on halting markets and when it is dangerous to the importing countries. In allocating quotas, the importing countries have to comply with the rules, regulations and standards to help in preventing a market crisis and to enforce and control exporting countries. According to the rules, member countries were given permission to increase quotas at 6% per year. The Textile Control Board inspects and considers MFA disputes after 31 December 1994.

Agreement on Textile and Clothing - ATC The Agreement on Textile & Clothing is a multilateral agreement under the WTO used to replace the MFA to prepare member countries to enter the free trade rules of the textile and garment industry. ATC continues in bilateral agreements that Thailand has made with 18 countries over the past 30 years.22

see: http://www.wto.org/english/thewto_e/whatis_e/eol/e/wto02/wto2_28.htm#note1


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According to ATC, Thailand has entered bilateral agreements with the following countries: USA, Canada, Norway and 15 EU countries (Austria, Belgium, Greece, Italy, Netherlands, Luxemburg, Germany, Denmark, Spain, Finland, France, Great Britain, Ireland, Portugal and Sweden) in exporting textiles and garments under two Commerce Ministry regulations.50 Source: Export Promotion Department, Commerce Ministry ATC is like a new wine in an old bottle, the MFA, since Thailand still depends upon markets under the agreements with the 18 countries. But ATC 'is a multilateral agreement which used to be a major plan for global textile trade, a substitute for the MFA and it made the textile business run freely by phasing out the MFA and it brought textiles to GATT within 10 years, 1995-2000. After 2005, the textile trade will be liberalized without anymore quotas." This means that the textile trade will run freely under the WTO without any barriers, which also covers garments. The textile products cover 4 kinds: tops and yarns, fabrics, clothing and made-up textile products. The four agreements both classify and quantify garment and textile products from Thailand that are permitted to enter each separate market over the course of the ATC. The Thai Garment Manufacturers Association [TGMA] stated that The agreement seeks to phase out textile quotas created by the MFA over a ten-year period ending on January 1, 2005. The ATC contains the following key elements: 1) Product Coverage 2) Quota Integration Process 3) Transitional Safeguard Mechanisms 4) Establishment of a Textiles Monitoring Board 5) Other General Provisions The Department of Foreign Trade (DFT) under the office of the Ministry of Commerce oversees Thailand's adherence to the ATC garment and textile quota system. Separate systems for garments as well as yarns and fabrics are used to allocate quotas to the four markets. Typically, the available quotas are divided into two main parts, the principal and residual quotas.23 The ATC board was set up to prepare the Thai textile industry to go into the open textile market in 2005. It was stated that "ATC has objectives to make global textile trade liberalized, cancel the control of import quantity within 10 years from 1995 to 2004. And after 2004, the world textile trade will be liberalized without anymore quotas."53 The working group of the board also reported that "However, in the period of textile liberalization under ATC, it appears that importing countries do not attempt to liberalize their own textile trade under the ATC, particularly in importing products under control. Only 15 percent of products are liberalized. Thailand gains benefits from the list of 16 unrestricted products; 4 from EU, 4 from Canada (1 list unrestricted and 3 lists unrestricted in part) and 8 lists from USA (3 lists unrestricted and 5 list unrestricted50

Regulation of the Ministry of Commerce regarding garment export to countries which made agreement with Thailand (No.4) in 2002 and the regulation of Ministry of Commerce on garment export to countries which made agreement with Thailand (No.6) in 2002. 23 http://tgma.thailand.com/Real%20Garment/mainquota.htm 10 June 2003 53 ibid, p.17. Supply Chain in Thai Garment Industry: Impact on women workers!

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in part). Thus, within 10 years, most Thai textiles and garments will still be under control until the end of ATC."54 This is not different to attempts of liberalization by many other global trade organizations which have uneven liberalization and are controlled by major influential countries like USA, Canada and EU. What is its implication to Thailand? A continuing constraint upon the industry was the MFA which allocated quotas on exporter members. In the early years of the agreement, it helped Thailand by curtailing sales of the three biggest textile exporters, Hong Kong, the Republic of Korea and Chinese Taipei.56 The MFAs quota restrictions helped to facilitate the domination of the global garment trade by garment TNCs (transnational corporations). They did this by securing quotas, through their subsidiaries, allotted to developed countries. .So many small and medium garment firms either became part of the TNCs subcontracting chains or closed shop.57 Ten years of transitional period of textile and garment liberalization Phase Period (year) Growth Factor52 method, increase rate from bilateral agreement on textile (percent) 16 25 of phase one Integration rate on liberate import textile in 1990 (percent) 16 17 18

One Two Three

3 yrs. (1995-1997) 4 yrs. (1998 2001)

3 yrs. 27 (2002-2004) of phase two Source: Textile Department, Foreign Trade Department

Many countries fear China after liberalization, as investors could move their production base there since labour costs are cheaper than their countries, including Thailand. However, it is expected that China will continue to be under the quota system until 2012; Thai entrepreneurs think that this can relieve constraints in competition with China If any export products from China cause an impact on the market, the US can immediate apply Special Specific Safeguards with China. Thailand wouldnt face much of an impact.24

54 56

ibid, p.17. Textiles Industry in Thailand, The impact of Liberalisation: Communicating with APEC Communities, APEC secretariat, November 1998. 57 See: Tie-Asia,http://www.tieasia.org 52 Growth Factor is the increasing rate specified in ATC within 10 years of transitional period of each description, ibid, p.22 24 Cut and Sew, Jul Aug. 2002, p. 31 Supply Chain in Thai Garment Industry: Impact on women workers!

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Quota System in Thailand Textile exporters were unsatisfied after Mr.Adisai Photaramik ordered to amend textile regulations which prohibit transfer of quotas to each other. [Exporters who have been allocated quotas but not for manufacture and export, sell quotas to each other. The writer's explanation.] They do not export but just sell their principal quota. The minor measure to deal with the problem is to cut the principal quota to 20% to establish a central quota for newly emerging exporters. The Thailand Garment Manufacturing Association threatened that foreign customers are not pleased with this measure since Thai exporters lack flexibility and good quota administration and warned Adisai to review it. If customers take order back, who is going to be responsible for it!' Prachachart Newspaper, 10 - 13 Jan 02. Principal quotas, usually 70 to 80% of the export quota available, are distributed annually to exporting firms on the basis of past export performance. The residual quota, that is, the quota left over after the principal quota is given out is allocated on a monthly basis and can be sought by any exporting firm, including those already holding principle quotas or new ones as well. If a new exporting company can obtain part of the residual quota in one year, it will be entitled to an export quota allocation from the principal quota the next year. Thai Garment Manufacturers Association The Thai Garment Manufacturers Association (TGMA) has a lot of influence and a major role in allocating quotas. The principal quota, usually 80%, is allocated among 460 exporting firms which are TGMA members. Moreover, since the quota is limited, some member firms secure quotas to sell to other firms at an expensive rate. Thus, they do not manufacture for export but gain profit from reselling quotas, in Thai these kinds of firms are called 'Sleeping tigers waiting to eat'. Furthermore, there is process of cheating quotas or disguising quotas. The EU is able to detect that products sent under quota in reality are exported from China and there was an investigation on the case. This inspired the Foreign Trade Department to create a new allocation system and seriously inspect the quotas. This authority's measure made firms, who benefited from the old allocation system, very unpleased.' Amidst the high competition in textiles and garments, Thailand became a product laundry base for exporters, who exploit for their own benefit before exporting by using tactics of buying quotas from Thai firms. The case became more serious after EU importers found that products exported from Thailand had false origins.. Another tactic used is the products are simply not delivered to Thailand. They are exported from Hong Kong to Singapore and then to European countries but the export documents are made and issued in Thailand stating that the products came from Thailand. This is done in cooperation with shipping firms. Another tactic is establishing chain companies in Thailand but its mother company is located in China and products are sent to Thailand for sewing. Sometimes products are sent to Thailand but sometimes they are not. Cloth is imported by one company and then exported under another company. (Krungthep Thurakij, 10/12/2002)


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What is the quota system?In exporting textiles, there are 2 laws under the Ministry of Commerce: Regulation on garment export administration to be contracted by countries with Thailand (no.4 and no.6, 2002) The quota system limits quantity of textile and garment exports of each contracted country within 1 year. In Thailand, the Foreign Trade Department is taking responsibility of allocating quotas'. "Quota allocating to export firms who have a history of exporting products in past years is called the principal quota. Previously, the quota was allocated under this system because pioneers in textile trade shall receive quotas at the same quantity as they were capable to export in past years." "When there are not enough quotas, what should be done? The answer is to borrow quotas among exporters by claiming flexibility and liquidity. But there is truth in that 'nothing in the world is free', quota trading eventually happens. Exporters who have long been in the business surely have large quantities of quotas and change it as a commodity for increasing profits. So new exporters who get large orders from the USA and Europe seek quotas and the quota price is turned to be unsurprisingly high. So the quota becomes precious gold." Source: Foreign Trade Department, Ministry of Commerce.

Quotas are allocated to export firms by the Ministry of Commerce. The ministry divides quotas to principle quotas which are 80% of the total quotas and are given to members who have had good performance and about 20% of quotas are given to newly permitted exporters with a two-year contract.

Changing after 2005 Whatever safeguards are put in place after 2005, the simple truth is that China already the worlds largest textile manufacturing and exporting nation will dominate the sourcing business from 2005.55 Entrepreneurs around the world are able to run free trade without control of exports and imports or limiting quotas. In brief, the world free market is a market that is free of taxes, quotas and limitations to import & export. Dr. Suthabodi Sattabusaya, 2002.

55

Roger Trede, Strategy Talk, Cut and Sew, November December 2001, page 21


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What is the impact? "In the past, the textile industry depended on the quota system and the USA has been a major market. If no quota exists, Thai manufacturers would have a hard time" warned Mr. Narongchai Jiarapongpakorn, director of Garment Industry Development Foundation of Thailand. [Source: www.bangkokbiznews.com, 23 August 2002] This opinion was emphasized by Mr. Suchart Juntranakarat, president of Thailand Garment Manufacturer Association, "The US is by far the largest market for Thailand's garment exports, representing 52% of the total value, followed by Europe (22%) and Japan (8%) with these three regions accounting for more than 80% of shipments. Thailand's exports will certainly suffer from a slump in Japanese and American economies. However, the recession will not affect only Thailand but every country in the region exporting garments.58 More than a million garment workers across Bangladesh may lose their jobs by 2005 when the ready-made garment sector will lose guaranteed access to its main markets in the European Union and the USA. [Bangladesh National Congress [BNCC], Bangladesh]. Many agree that the adjustment process after the quota period is to build competitiveness and seek new markets such as China, Indo-China and the Middle East. The capacity building includes promotion of entrepreneurs to create their own brands, to elevate markets and to respond to customers needs. The government launched a project named 'Supply Chain Management' in 2002 and promoted the 'Electronic Data Interchange-EDI' system. The Thai government allocated over 2,000 million baht to promote Bangkok as the new 'World Fashion Center'. Although the liberalization will begin on 1 January 2005, today constraints and bargaining power are created by major consumer nations like USA and EU. These nations accelerate Thailands negotiations on bilateral trade agreements, and textile is one topic in the negotiations. As we can see in the news, Mr. Adisai Photharamik, Minister of Commerce, stated that EU member countries handed a proposal to Thailand persuading us to open bilateral trade on textiles with the EU immediately, saying its unnecessary to wait for liberalization under the WTO on 1 January 2005." [Kom Chud Luek newspaper, 25/11/2002] The president of TGMA expects that after canceling quotas, which made exporting nations plunge into higher competition, he believes that some Thai textile factories would disappear from the business since 30 percent of over 1,000 factories have low competitiveness. Also, he did not think that Thailand would lose sales or export value to other nations since factories are capable of adjusting and gaining market shares.59 Bo-Bae Garment Export Center has a different view that "Small manufacturers in Bo-Bae (Bangkok) produce for small and medium shops which do not link with the quota system. The quota gained is not over 5 percent. Therefore, the crisis did not affect us since Bo-Bae has its own customers; these customers are small and medium sized enterprises around the world. Our strategy is to get these small and medium sized customers to buy as much as possible from us."60

58 59

http://tgma.thailand.com Thai Rath newspaper, 18 March 2003. 60 Interview Mr. Komsun Vijitvikrom, director of Bo-Bae Export Service Center, 21 May 2003. Supply Chain in Thai Garment Industry: Impact on women workers!

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The role of Thailand Employer Associations The employers associations in the textile and garment industry, dating back to around 1960 1970, was established before the employees associations and has a major role in working and negotiating with the government on trade measures, investment promotion and government support of the industry. Currently, there are 9 associations covering textile, fiber, garment and merchants, the export member companies number over 460. They are: 1. 2. 3. 4. 5. 6. 7. 8. 9. Thai Garment Manufacturers Association (TGMA); 465 member factories Thai Synthetic Fiber Manufacturers Association (TSMA) Thai Textile Manufacturing Association (TTMA) Thai Weaving Industry Association (TWIA) Association of Thai Textile Bleaching, Dyeing, Printing and Finishing Industries (ATDP) Thai Silk Association (TSA) Union Textile Merchants Association(UTMA) Bobae Garment Association (BOBAE) Thai Fashion Brandname Association (TFBA)

In the textile and garment sector these firms have a very important role in quota allocation, and influence in putting pressure on the government to promote and support the industry by urging the government to launch the 'Bangkok, Fashion Town' program.


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World Fashion Center: Thai government's dreamThe Ministry of Commerce is pushing the nation to be the Asian Fashion Center - the Ministry of Commerce stated Thai fashion businesses are expanding, they are expected to develop as the Asian Fashion Center by linking with three industries: textile & garment, jewelry and leather and shoes. Two billion baht has been put into the project it was ordered to launch a project to make Bangkok as fashion town within three years: 2003 2005. [Manager Newspaper, 10/11/45] Mr. Somsak Thepsutin, of the Ministry of Industry, disclosed after being chair in the opening session of a seminar on the project 'Successful examples: Thai business rehabilitation', that the 1997 economic crisis resulted in the slow down of textile and garment exports. Normally, this sector had an export value worth 3,000 million US dollars or 120,000 million baht. However, the Industry Ministry has a policy to push for exports by planning to promote Thai brand names. Recently, the brand 'Thai-go' is a pilot project for medium quality clothing. Another project is currently in discussion with the Prime Minister to get permission for a brand called 'Thaksino' for high quality clothingMoreover, the budget proposed is 2,443 million baht for the 'Bangkok: Fashion Town' project over three years (2003 - 2005). The purpose is to promote a good image in the international fashion business. The proposed budget includes: 1,164 million baht for developing the industry, 285 million baht for designing, brand development 853 million baht, and for public relations 140 million baht. [Siam Rath newspaper, 26 December 2002]

Master plan in textile industry The Thai Textile Institute was established in October 1996 to promote and develop the textile industry. It also established a master plan with aims to sustain the industry, build the industry as a revenue source to gain foreign money and to create employment by a) building business components for textile and garment to be in a full package, and b) building competitiveness with foreign nations. Its policies comprise of a) developing Thailand as trade and fashion center in South and South East Asia b) raise product quality and standards and have more diversity c) improvement of effectiveness and management d) promote and connect the industry e) promote and support the bleach-dye industry f) human resource development and g) government and private sectors roles in improvement. 61

61

Brainstorming on Masterplan for each industry; textile and garment.


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Master plan objectives To direct the textile and garment development in the next ten years. To lay a policy framework in textile and garment development to be consistent with national economic development and international trade opportunities. To establish the role of the Industry Ministry and related state and private bodies in directing policy with effectiveness and in consistency. To acknowledge problems and obstacles in industry development. To set up strategy, measure and action plan in the period of the National Economic and Social Development Plan no.9 (2002 - 2006). Promoting to create Thai brands Mr. Suchart Juntranakarat, the president of TGMA stated that creating our own brand Thai Go can promote value added products, if we can make our brand popular, the price would be three times higher62 The Industry Ministry has a policy to proceed with the project by pushing for exports. Recently, Thai Go is the pilot project of brand name creation for medium quality markets and another one is in the discussion with the PM to ask permission for using Thaksino as a brand for high quality market. Also, the Bangkok Fashion Company will be established to deal with these brands. [http// Mass Communication of Thailand, 25 December 2002.] The promotion and support from the Board of Investment(BOI) The Board of Investment (BOI) has provided a lot of support to promote investment for exports from Thailand. In the textile sector, from 1998 2002 BOI supported 120 projects which claimed to have created 70,208 jobs. BOI tax exemption and investment promotion should aim to create employment but when looking into the cost of support, it hasnt done its job to promote and protect Thai labour. BOI stated in their website on the Legal implications of Labour management that: In general Thai labour laws provide for considerable freedom in managing labour, in many countries it is not legal to discriminate on the basis of age or sex. Perusal of personal ads in Thai newspapers finds employers narrowly defining their needs: the successful candidate must be male, under 35 years of age, not a member of labour union, and at least 150 cm in height, etc. www.boi.go.th/english/business/labour_issures.html#labour, 2001 Year 1998 1999 2000 2001 2002 Total Source: the Board of Investment No. of projects 21 24 47 17 11 120 capital (million baht) 676 1,657 3,124 838 1,433 7,728 No. of local employment 12,210 12,430 23,426 9,024 13,118 70,208

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Mass Communication of Thailand, 25 December 2002.


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Part IV: Value chain and Supply chain "The idea of value stream is to increase competitiveness to lead time, maintain quality, control stock and reduce costs in the supply chain.63 "Supply chain management is not buying cheap products, the essential aspect of SCM is not transportation but it is a cooperative between the beginning of stream, midstream and the end of stream of the apparel industry. If the cooperation proceeds well, then the Thai apparel industry will be strong." Mr. Mana Setthabutr, director of Textile Industry Development Institute, Cut & Sew, March 2003. "Supply Chain is an important tool to help us fight in the global market. In current competition, we have to use the brain more than low prices to get customers. Even our producers have very low production costs, we cannot compete with the lower price of Chinese products." Det Patanasetthapong, Thong Thai Weaving Co., Cut & Sew, March 2003. "Today, we are trying to do our best. We adjust and improve continuously by reducing costs, buying cheap and selling expensive, speed production with good quality, and emphasize sourcing companies and human resources. If we can do all of these things, we are a success. In the future, when there is no quota, we'll have no problems." Chaiyapong Wetchamontien, director of Liberty Group64 In the case of a producer unable to add value to their products, multinational companies will not choose that producer to be in their supply chain anymore.65 Thai Garment Export Companys brought information technology called 'EDI' to use and made it capable to communicate with JC Penney and deliver T-shirts within 30 days as specified. Oriental Garment Company lays new production lines by using computer systems in the cutting section, it saves 2 - 3 % of cloth.66 In production or service of food, drink, computers, clothes etc., the process begins with creating the product concept, product design, selection and order of raw materials, manufacturing, distribution, wholesaler, retailer and the final process is the consumer. We called it the 'Value Chain'. The value chain was created to add value and profit to products from the manufacturer, the supply chain, the market and consumers. It responds to the customers needs and time conditions. In this era of high competition, the consumer is like a god. The value chain relates to purchasing, manufacturing, distribution, and communication technology to deliver products to customers quickly with a beautiful package. Thailand has attempted to secure the apparel industry within the nation. After liberalization in 2005, the government will promote and support entrepreneurs to increase competitiveness and production capability by bringing 'Supply Chain Management' to the industry. Since capitalists said that the apparel industry has high competition, adjustments need to be made to increase effectiveness in manufacturing and in63 64

Dr. Tuenjai Somboonwiwat, Supply Chain Management and Quick Response, TTIS p. 27 Cut & Sew, January 2003, p.44 65 http://www.bangkokbiznews.com, 23 August, 2002. 66 ibid Supply Chain in Thai Garment Industry: Impact on women workers!

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competition and to reduce production time and cost. The Thai government promotes and creates many pilot projects in support of using technologies. Also, it supports funds to Thai employers in the form of development funds and by giving loans for purchasing machines, and improves factories. The Customs Department cooperates with the Port Authority of Thailand and the Ministry of Commerce by improving organizations documentation by bringing 'Electronic Data Interchange' (EDI) into the system. It helps expand information transferal; previously financial info was transferred, such as info transferred between a financial institute and manufacturers or between wholesalers and retailers. The new system fastens info transferring and makes it more convenient. Capitalists and economists call for every country to liberalize and market lead trade, decrease state control and deregulate. But that's not enough. In making a profit today, capitalism has to adjust itself too. Capital has to reduce costs at the bottom, reduce every risk, eliminate the non-profit process and sell at the best price. Cost reduction is at the heart of every business and manufacturer since it means value added. To do so, the management of the overall system must be effective and have the capability to reach the highest benefit from the whole chain: administration, manufacturing, transportation and distribution. Outsourcing has transformed supply chain dynamics in the apparel industry. Adversarial relationships were unsustainable, and collaboration was the only way to maintain profitability. With the driving forces of outsourcing and globalization, apparel manufactures are no longer in the same building or organization. More likely, they are spread over several continents in organizations with different cultures, languages, and business objective. For example, brands like Levis used to do it all operating their own U.S. production plants along with their core design and marketing activities. Now Levi Strauss and Company has closed the production plants that once dotted the southeastern United States and outsourced much of that production, and even product design.67 The important factor for effective 'Just in Time' supply chain management is the internet technology as stated by Kevin P. O'Brian, supply chain senior advisor of Ernst & Young Co. He stated, as it already has for many other supply-chain processes, the internet is creating an environment that will enable the next generation of manufacturing capabilities. Cap Gemini Ernst & Young (CGEY) believes that the next generation of manufacturing, which it terms Adaptive Manufacturing, will focus on: Building to demand at Web speed; Flexible production with smaller scalemodularization; self-organizing teamwork and processes; electronic signaling and intelligent agent-based execution; fully networked assets and expertise. Manufacturing organizations that have implemented adaptive manufacturing methodologies are realizing significant benefits. Typical results include: 30%-50% inventory reduction, 50%-70% production cycle time reduction; 5%-7% revenue increase; 10%-15% cost reduction.68 A factory that is produces for NIKE and GAP, is one pilot factory in Thailand improving their production in terms of machine lay out, labor management and reorganized teamwork. One worker there said that the company had a 6% profit increase after production improvement but workers did not get an increase in wage. Some of the workers cannot stand the pressure, so they decided to resign. This is because they have67

Eric Johnson, Dartmouth College, Tuck School of Business, http://www.ascet.com/documents.asp?d ID=1021 68 Kevin P. O'Brien, Supply Chai, http://www.iwvaluechain.com/ columns/columns.asp?columnld=823 Supply Chain in Thai Garment Industry: Impact on women workers!

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to work in a team under high competition among themselves to accelerate targeted jobs, which means they have to work harder, faster and have no time to rest or relax. Apparel production in value chain To open a garment factory is easy since no expensive devices and machines are needed, no high level of labour skill is needed and capital can be continuously accumulated, which is different from textile and bleach-dye factories. The subcontract system, therefore, is the beginning for many investors who have a major role in the apparel industry, which is regarded as the most labour intensive. This industry has over 3,000 factories, 90 percent of them are SMEs (small and medium enterprises), and each one employs between-1 200 workers. Large retailers in the USA like Wal-Mart, Liz Clairborne, VF Corp., J.C.Penny, Dillards and Sara Lee Corp., brought the 'supply chain' system into purchasing to reduce stock costs and manage raw material purchasing from both local and foreign sources. This system can quickly control purchasing/manufacturing orders and centralize distribution from one point in the USA. The supply chain is directly related to electronic commerce including E-Business, E-Procurement and EManufacturing; all of these are called E-Engineering and Electronic Data Interchange (EDI), also with a Bar Code (Uniform Product Code). The Export Promotion Department stated, Thai ready-to-wear garments will be in the USA after apparel liberalization September, 2000. The Future of the apparel industrys structure The future for manufacturers who want to survive post-2004 rests in full-service factories building long-term collaboration with the worlds leading retailers.72

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Roger Trede, Strategy Talk, Cut & Sew, November December 2001, p. 21.


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Diagram of apparel industry structure in 2001Weaving 65,590 workers 741 factories

Synthetic Fiber 15,340 workers 17 factories

Spinning Dye, Screen & 60,470 workers decoration 149 factories 46,750 workers 405 factories

garment 40,460 workers 2,641 factories

Knitting 118,520 workers 1,332 factories

Upstream

Midstream

Downstream

Source: Industry Department In the apparel industry, the basic divisions are upstream, midstream and downstream. Although, downstream is the most important aspect, in the production process all of them are closely related from upstream to downstream. One analysis on the survival of the industry after free trade is that the nation must have full packaging, upstream to downstream. The apparel industry has been very important in the history of Thailand, maintaining the highest export value for over the past ten years. In 1995 the Thai apparel industry had reached its peak when Thailand ranked eight in world market share. After then, Thai apparel role decreased and ranked fifteenth in 2001. Thus, the profit margins decreased because of competition together with higher dependency between upstream, midstream and downstream. The first industry in Thailand was textile trading (midstream) and then it began to go upstream and downstream respectively. In the world market, competition is very harsh both between local manufacturers and between multinational companies, also in the whole system from subcontractors to small retailers. Therefore, every production chain always attempts to reduce costs and expenses to the lowest possible level and cut unnecessary costs or non-value added costs. Or, in each production chain manufacturers in every level try to keep as much money as possible by setting

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