July 1, 2008

Bangkok Weaving Set to Cut Energy Costs

By Nareerat Wiriyapong, Bangkok Post, Thailand

Jun. 30--Bangkok Weaving Mills Ltd expects to achieve total revenue of about two billion baht this year by cutting energy costs and squeezing benefits from brand creation.

The group, which operates five factories for an integrated textile business, has created four brands including Piumino mattresses over the past four years. The brand is now exported to markets such as India, said managing director Phongsak Assakul.

The factories spin, weave, dye, finish and fabricate units for consumers in Thailand and abroad in the US and Europe such as Wal-Mart and Calvin Klein.

"Our business has generated revenue on target for the first six months. For 2008, we will be able to maintain the revenue of about US$60 million we recorded last year," said Mr Phongsak, also the president of the Thai Textile Manufacturing Association and vice chairman of Thailand's Board of Trade.

About 80 percent of the revenue is generated from overseas markets with the rest from domestic sales, he explained.

"By integrating our production from spinning to fabrics, we are able to cut logistics cost and inventories. Also, we can react quickly to any change in customer needs," said Mr Phongsak.

In terms of energy costs, the group has partly switched from oil to coal because coal prices are increasing at a slower pace than those of oil.

He said the textile and garment industry, which employs 1.1 million people, has lowered manufacturing costs by moving labour-intensive operations to neighbouring countries in order to enjoy tax privileges for exporting to US and European markets.

In Laos, Cambodia, Burma and Vietnam, factories are exempt from taxes, so they can export to Europe with cost advantages compared to manufacturers in China, where they have to pay 15 percent tariff.

Also, the Japan-Thailand Economic Partnership Agreement (JTEPA) has allowed Thai manufacturers to export to Japan with a 15 percent handicap against Chinese manufacturers.

Those preferences help strengthen price competitiveness of Thai products against rivals from China in the key export markets, Mr Phongsak said.

Despite the appreciation of Chinese currency by 11 percent, the Thai baht has risen at a faster rate of almost 20 percent. On the other hand, export subsidies given by the Chinese government have decreased from 17 percent to 11 percent presently and could go down further, he added.

Despite the tough business conditions and stiff competition, the Thai textile industry has generated a trade surplus every year. With total exports of 1.16 trillion baht over the past five years, the sector posted an accumulated surplus of 700 billion baht for the country over the period.


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