US funds plan to integrate Asean textile industry

US funds plan to integrate Asean textile industry

Bangkok Post Published: 24/10/2009 at 12:00 AM, Newspaper section: Business

It all started with a book that R.J. Gurley read in December 2008, when he already had a tough job on his hands - to enhance the competitiveness of Asean textile industries.
Mr Gurley, a consultant, was sent to Thailand by a US government aid agency to take on the task.
"When I got here and we took on this role everybody said we've got to integrate to become competitive. But nobody had any idea how to go about it. Nobody had a plan," said Mr Gurley, a director for Asean Competitiveness Enhancement (ACE).

In 2006, the United States pledged to help Asean develop its economy. From the 12 priority sectors, Nathan Associates gave priority to textiles and tourism, which gave birth to a new strategy.

"They looked to the ACE project to come up with a strategy," said Mr Gurley.
Crisis in the 21st Century Garment Industry, written by the American industry expert David Birnbaum, later sparked an idea that became an action plan that Mr Gurley believes will put Asean at the cutting edge of the industry.

The core of the strategy is a fairly simple idea for a goal that seems hard to achieve.
Instead of buyers taking responsibility for more than 80% of garment production, Asean's textile mills will form a partnership that takes care of the whole production line. "Not only will intra-Asean trade increase through the partnership, but we will also see things done at a much faster speed," said Mr Gurley.
Part of the solution, however, is in understanding the problem. The low competitiveness of the Asean garment industry is a result of the quota system, which was implemented by the United States 40 years ago. The system ended four years ago, but both buyers and producers are still struggling with its after-effects.

All the factories did were the easy tasks from cutting until trimming, while buying countries such as the US supplied upstream elements such as fabric.
"This resulted in buyers that know nothing about garments, as they were doing the job of finding fabric for the factories. So buyer countries want to go back to before the quota system," said Mr Gurley.
Meanwhile, the "cut, make and trim" process, which lies in the hands of the garment factory, also faces problems as it represents only 6% of the retail value of the product.
According to Mr Gurley, Asean can no longer compete on labour cost with countries such as Bangladesh, which has a minimum wage of $25 per month, compared with $67 in Laos and $54 in Cambodia.

"To succeed, Asean must move up the value chain and compete on services. The most basic service is sourcing the fabric. But there is still a problem. Cambodia, for instance, has more than 300 garment factories that account for 85% of Cambodia's exports. However, it has no textile mills," he said.
"The garment factories in Cambodia don't know these fabric companies because for the past 40 years they didn't establish a relationship with these textile mills."
Therefore, Mr Gurley set up the Source Asean Full Service Alliance (SAFSA) early this year. "It won't just make you competitive. It will change the way businesses are done in the industry," he said.
The programme is currently in the process of accepting applications from 20 garment factories and 20 textile mills to form a partnership. Together, they will form a vertical supply chain. Cross-border partnership are preferred for the initial 20 applications.

With intra-Asean trade consisting of only 9.6%, or US$3.3 million, of Asean's total textile and apparel trade according to Trademap, ACE aims to resolve the issue of finding a partner and help the figure reach 15% within three years.

There has also been the launch of SourceAsean.com, an electronic market place linking Asean suppliers as well as global buyers, with which 400 to 500 manufacturers in Asean are registered.
"Buyers are looking for speed to market and these kinds of services. In order to get speed to market, Asean's going to have to integrate and act as a virtual borderless economic community," said Mr Gurley.

In order to compete, the ACE is also hoping to see the implementation of an Asean "green lane" in textiles and apparel, which would significantly cut time for delivering products from one country to another.
"We have the 10 governments supporting us and we have the industry supporting us," he said.
The Asean Federation of Textile Industries (Aftex) joined hands with ACE in June last year. So far, all chief delegates of 10 Asean countries have agreed to the project.

Asean governments are being asked for $1 million a year over the next three years to support the SAFSA project.

"No one country can survive alone in this changing world of sourcing. Utilising the strength of each country such as Thailand and Indonesia for the upstream products to turn out products with a short lead time is essential," said Aftex chairman emeritus Phongsak Assakul.

In reality, no one knows whether the $7.9-million project funded by the US Agency for International Development will revolutionise the textile industry or not.

But although some partnerships may not survive - marriages often end in divorce, as Mr Gurley puts it - everyone seems to agree that this strategy, which helps both buyers and suppliers, is a good step in moving the industry forward.