Garment sector needs incentives for foreign investment

11 Jan '11

3 min read

The President of the Thai Garment Manufacturers Associations (TGMA) – Sukij Kongpiyacharn said that Board of Investments (BoI) should transform its role from only managing overseas investment in Thailand to promote investment in foreign countries.

He added that companies which are investing in overseas countries must be exempted from the ambit of double taxation in order to encourage investment in foreign countries.

Mr Sukij also condemned the outdated laws of Thailand which are associated with the foreign business deals. As per these laws, domestic businesses which invest in the foreign countries are required to pay 30 percent corporate income tax in the country where the investment is made and another 30 percent in Thailand. In comparison to Thailand, Singapore, Malaysia as well as Hong Kong have much more favorable corporate income tax rules and therefore these countries have enormous foreign investments.

He added that only 30 to 40 companies from Thailand have made investments in foreign countries like China, Vietnam, Laos, Cambodia and Indonesia. The major challenges that are confronted by the garment manufacturers of Thailand include greater manufacturing costs due to the increase in the value of the home currency (baht) and higher wages in the domestic industries, has forced the manufacturers to think about foreign investments, particularly in the neighboring countries.

In this connection, it must be noted that if the overseas expansion is not profitable, it is better to focus within the country. He further added that several industrial giants like Saha Pathanapibul Plc, a subsidiary of the consumer goods conglomerate – the Saha Group are hesitant in investing abroad as the incentives are not very lucrative.

The TGMA is gearing to put up a proposal regarding an 85-million-baht worth apparel product development centre to the Industry Ministry, which will reduce the design costs for the purchasers by 70-80 percent and act as a catalyst for the sellers as well as the purchasers.

The honorary adviser to the TGMA executive board – Vallop Vitanakorn revealed that the appreciating baht, higher minimum wages and the dearth of workers had forced the garment units of Thailand to make investments in neighboring lands in order to reap the benefits from low labor costs prevailing in those countries.

He further added that, the textile as well as the garment industry in Thailand is facing a dearth of 30,000 workers, at present. This shortage is likely to touch 100,000 in the long-run. Of the 700,000 workers employed in the garment and textile industry, around 450,000 are engaged in the garment units.

The United States constitutes the biggest export market of Thailand as the country exports 38 percent of its textiles and garments to the US, 30 percent to European Union, 7 percent to ASEAN countries, 6 percent to Japan and the remaining 19 percent to Africa and Middle East.

Fibre2fashion News Desk - India

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