T Shinawatra, Aust partner await FTA
Published on Oct 6, 2004
T Shinawatra Thai Silk (Thailand) Co Ltd, a family business of Prime Minister Thaksin Shinawatra, is negotiating with an Australian fashion designer to form a joint venture that benefits from low import tariffs under the Thai-Australia free-trade agreement.
Negotiations are expected to be finalised soon so that operations can start next year when the FTA goes into effect. T Shinawatra would hold a 70-per-cent stake in the company and the rest would be owned by the Australian designer, said Montigan Lovichit, store manager of the company. She declined to identify the designer.
The joint venture would have at least Bt10 million in registered capital, which would partly be used to set up a new showroom, she said. Both sides are putting together a business plan to ensure smooth operations.
Under the joint venture, T Shinawatra would be responsible for supplying the silk, as well as marketing and manufacturing clothing and other products. The Australian firm would design the joint venture’s clothing.
The products would be sold domestically and exported to Australia and other markets, including the United States and the United Kingdom.
The Thai-Australian joint venture would strengthen export competitiveness for both companies to better cope with the imminent liberalisation of the textile market under the World Trade Organisation, which seeks to end export quotas at the end of this year.
Due to the change, competition in the world’s textile exports is expected to heat up, particularly from countries with cheaper manufacturing costs such as China and India, said Montigan, who is also president of the Thai Silk Association.
Teaming up with the Australian designer would pave the way for T Shinawatra Thai Silk to offer fashionable garments and products under the joint venture’s brand name, she said.
The Australian designer operates six retail outlets in Australia. Two years ago, the designer expressed an interest in using Thai silk in her clothing, and she started looking for a supplier in Thailand.
“We are good partners with the Australian designer. We want to move ourselves from being a silk fabric manufacturer to producing other products while the Australian side wants to have a supply source for silk,” she said.
T Shinawatra Silk once tried its hand at designing but did not succeed. As a result, the company decided to stick to its strength, making silk.
The Thai-Australia free-trade agreement prompted the designer to move its manufacturing base to Thailand to take advantage of the impending low tariff rate and cheap labour cost, Montigan said.
The Thai silk industry is also facing high raw material costs due to a domestic supply shortage. As a result, the government needs to focus on encouraging farmers to produce more quality silk worms and good cocoons to ensure quality silk yarn, she said.
In addition, Montigan suggested the import ratio restrictions for silk yarn should be revised to bring down raw material costs. Currently, the government requires silk buyers to buy one lot of Thai silk for every two imported lots they buy.
The system has forced silk manufacturers to buy silk yarn at higher prices, she said.
“We may lose export opportunities if Thai silk exporters cannot offer attractive prices, which now are 30-per-cent higher than Indian silk,” she said.