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

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

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Final Report

August 30, 2003

By Junya Yimprasert &

Thai Labour Campaign


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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 industry’s structure............................... 32 Diagram of apparel industry structure in 2001 .............................. 33


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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 Campaign’s 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 women’s 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 don’t 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 Thailand’s 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 world’s 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 Thailand’s 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.


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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 The Industry Promotion Department, Ministry of Industry 5 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


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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 world’s 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

8 Ibid, p 2 9 Phasuk Pongpaijit & Chris Baker, Economic and Politic of Bangkok, Silk Worm Book, 1999, pp 205 10 Ibid, 208


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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 Institute’s 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 full-scale 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

11 Junya Yimprasert, Labour Focus, February 2003


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Data on Thailand’s Textile Export in 2001 Value (Million US$)

2001 2000 1999

1.Textile 5,266.1 5,588.30 5,115.30

1.1 Articles of apparel and clothing accessories

3,164.4 3,372.70 3,104.80

1.2 Woven fabrics and yarn 1,192.5 1,309.70 1,225.80

1.3 Household textile 149.5 151.1 131.4

1.4 Synthetic filament and staple fibres 224.1 249.9 198.3

1.5 Embroidery and lace 92.9 83.3 74.7

1.6 Fishing nets 53.8 51.7 49.6

1.7 Shawls,scarves,mufflers,viels 7.1 5.6 5.9

1.8 Other made up articles,dress patterns 34.2 31 21.9

1.9 Other fabrics 347.7 333.3 303.4

1.9.1 Handkerchiefs 4.6 4.7 5.3

343.0 328.6 298.1

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$) Growt

h : % Proportion : %

COUNTRY 2001 2000 1999 2001 2000 1999 2001 2000 1999

1. U.S.A 2,030.2 2,108.9 1,848.3 -3.73 14.1 0.54 38.55 37.74 36.13 2. JAPAN 334.3 368.8 362.9 -9.33 1.61 3.98 6.35 6.6 7.09

3. UNITED KINGDOM

238.9 252.5 237.4 -5.4 6.35 1.02 4.54 4.52 4.64

4. HONG KONG 156.6 189.8 180.6 -7.51 5.12 -8.91 2.97 3.4 3.53

5. GERMANY 148.8 177.1 183.0 -5.95 -3.26 -3.4 2.83 3.17 3.58

6. U.ARAB EMIRATES

139.3 156.0 157.4 -0.71 -0.89 -5.69 2.65 2.79 3.08

7. CANADA 112.6 117.6 101.6 -4.28 15.78 -0.26 2.14 2.1 1.99

8. NETHERLANDS 108.9 117.1 102.4 -6.93 14.27 4.22 2.07 2.09 2

9. FRANCE 108.8 136.5 138.6 -0.27 -1.54 1.34 2.07 2.44 2.71 10. BELGIUM 108.5 133.9 132.0 -8.99 1.41 -2.84 2.06 2.4 2.58

11. SINGAPORE 97.5 87.3 95.3 11.66 -8.33 14.66 1.85 1.56 1.86 12. CHINA 96.1 111.7 83.2 -3.94 34.27 0.14 1.83 2 1.63

13. ITALY 89.5 114.1 114.7 -1.54 -0.49 -4.92 1.7 2.04 2.24

14. INDONESIA 78.8 85.1 49.5 -7.4 71.76 21.04 1.5 1.52 0.97

15. PHILIPPINES 73.1 72.1 64.3 1.42 12.12 57.54 1.39 1.29 1.26

16. MALAYSIA 67.7 73.1 70.8 -7.32 3.22 15.13 1.29 1.31 1.38

17. SOUTH KOREA

66.6 57.8 59.4 15.13 -2.64 82.04 1.26 1.03 1.16

18. SAUDI ARABIA 65.1 85.9 108.8 -4.24 -1.07 -5.51 1.24 1.54 2.13

19. INDIA 56.6 61.6 56.1 -8.1 9.87 9.2 1.08 1.1 1.1

20. SPAIN 53.7 62.1 61.3 -3.38 1.29 4.97 1.02 1.11 1.2

TOTAL 20 COUNTRIES

4,231.7 4,568.8 4,207.6 -7.38 8.58 1.7 80.36 81.76 82.25

OTHERS 1,034.4 1,019.5 907.8 1.46 12.31 -3.65 19.64 18.24 17.75 TOTAL EXPORTS 5,266.1 5,588.3 5,115.3 -5.77 9.25 0.71 100 100 100

Source: Department Of Business Economics With Cooperation Of The Customs Department More details can be viewed at http://www.moc.go.th/thai/dbe


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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 2000-2002 Export Market

Export Value (Million USD) Growth Rate (%) (%)

2000 2001 2002 2000 2001 2002 2002 USA 1,800.7 1,703.1 1652.5 14.1 -3.9 -4.5 55.4 Europe 755.8 675.2 648.8 3.2 -10.7 -3.9 21.8 Japan 242.0 219.7 188.4 -4.3 -9.2 -14.2 6.3 Asean 60.0 59.8 56.9 21.3 -0.2 -4.9 1.9 Total 2,858.5 2,684.8 2,546.6 9.4 -6.1 -5.2 85.4 Other Markets

510.9 475.4 435.1 4.4 -7.0 -8.5 14.6

Grand Total

3,369.3 3,160.2 2,981.7 8.6 -6.2 -5.7 100

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. He 12 Yesterday’s 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 “Kimyong-nguan” 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 government’s 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 Army’s 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 Sukree’s 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.

13 Wirat Saengthongkham, Sukree Bodiratanangkura ”The ending of the king of textile”, http://thannews.th.com/than41/1299/t204.htm 14The 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


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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 re-invest 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 Sukree’s 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, Thai-American 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 5th 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 company’s' 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 that

18 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


16

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 company’s' 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 family’s 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 other


17

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 finally

21 Interviewed a union organizer


18

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 didn’t 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 company’s 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 company’s 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 Thailand’s 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 development


21

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


22

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 unrestricted

50 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.


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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 MFA’s 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)

Integration rate on liberate import textile in 1990 (percent)

One Two Three

3 yrs. (1995-1997)

4 yrs. (1998 – 2001)

3 yrs.

(2002-2004)

16

25 of phase one

27

of phase two

16

17

18

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 wouldn’t face much of an impact”.24

54 ibid, p.17. 56 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


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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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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 world’s 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

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.


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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 Thailand’s 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 it’s 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 http://tgma.thailand.com 59 Thai Rath newspaper, 18 March 2003. 60 Interview Mr. Komsun Vijitvikrom, director of Bo-Bae Export Service Center, 21 May 2003.


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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. Thai Garment Manufacturers Association (TGMA); 465 member factories 2. Thai Synthetic Fiber Manufacturers’ Association (TSMA) 3. Thai Textile Manufacturing Association (TTMA) 4. Thai Weaving Industry Association (TWIA) 5. Association of Thai Textile Bleaching, Dyeing, Printing and Finishing Industries

(ATDP) 6. Thai Silk Association (TSA) 7. Union Textile Merchants Association(UTMA) 8. Bobae Garment Association (BOBAE) 9. 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.


28

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 sector’s roles in improvement. 61

61 Brainstorming on “Masterplan for each industry; textile and garment.”

World Fashion Center: Thai government's dream

The 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 clothing…Moreover, 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]


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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 hasn’t 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 No. of projects capital (million baht)

No. of local employment

1998 21 676 12,210 1999 24 1,657 12,430 2000 47 3,124 23,426 2001 17 838 9,024 2002 11 1,433 13,118 Total 120 7,728 70,208

Source: the Board of Investment

62 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 Company’s 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 in

63 Dr. Tuenjai Somboonwiwat, Supply Chain Management and Quick Response, TTIS p. 27 64 Cut & Sew, January 2003, p.44 65 http://www.bangkokbiznews.com, 23 August, 2002. 66 ibid


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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 organization’s 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 Levi’s 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 scale—modularization; 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 have

67 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


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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 E-Manufacturing; 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 industry’s structure The future for manufacturers who want to survive post-2004 rests in full-service factories building long-term collaboration with the world’s leading retailers.72

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


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Diagram of apparel industry structure in 2001

Weaving 65,590 workers 741 factories

Synthetic Fiber Spinning Dye, Screen & garment 15,340 workers 60,470 workers decoration 40,460 workers 17 factories 149 factories 46,750 workers 2,641 factories

405 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 up fully packaged production, which means every part of the clothe production process is under control and money is not flown out, particularly in the procurement section.


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Value added can be made by reducing the administration process by using a more convenient administrative system tool, EDI. The Tax Department, Port Authority of Thailand and Foreign Trade Department brought in this system to transfer info faster instead of using traditional messengers. “The Foreign Trade Department developed a system in issuing apparel export guarantee documents by bringing in EDI to increase effectiveness for servicing apparel exporters. Exporters are able to register as EUI (electronic user interface) members since 1 January 2001. Currently, 108 exporters have applied to be members. (Manager Newspaper, 2 August, 2002) Manufacturers for TNCs are attempting to add value by producing a full package in producing one product. Clear examples can be seen in the case of Sahapat Group, Saha Union Group or even in Nunyang Group (Nanyang’s products covers fibre, thread and weaving). Supply Chain Management

Source: Junya Yimprasert, Thai Labour Campaign.

Many garment companies are referring to the ‘supply chain’ since the production process today is a part of globalization, Thai manufacturers have to adjust themselves and follow the trend.

In each process of value chain, there is much coordination and information technology to link, for example sales information is linked with the factory or with the procurement section.


35

Value chain is directly related with procurement, manufacturing, transportation, information technology and customer satisfaction. All of these are the supply chain; one component of value chain.73

The development of supply chain management linking upstream to downstream industries is a very important issue which local and foreign entrepreneurs have learned to improve business competence over many years, particularly since 1992, when the world was entering globalization and internet technology was increasingly being used. The Thai government and private sector, particularly the Industry Ministry, the Thai Textile Development Foundation, together with Columbia Sportswear Company and Rungsit University cooperated in studying the apparel industry to improve the supply chain in the Thai textile industry. The Thai Textile Institute set up a training project on ‘supply chain management’ in 2002 by experimenting with factories to join the project.

Supply Chain Management (SCM) was brought about to reduce problems on managing stock and problems caused by supply and demand. SCM will help businesses more quickly respond to customer needs. At the same time it leads in time of design, and deliveries resulted in stock decreases and products in line with customers’ needs at a specified time.74

A document of Thai Textile Institute stated that “it is not just supply or SCM each organization has to study, what follows are principles, abbreviations and many technical terms which they have to pay attention to. For example, ERP (Enterprise Resource Planning), EDI (Electronic Data Interchange), ECR (Efficient Consumer Response), WMS (Warehouse Management System), 3PL (Third Party Logistics), VMI (Vendor Manage Inventory), SRM (Supplier Relationship Management), CRM (Customer Relationship Management), QRM (Quick Response Manufacturing), Cross Docking, B2B (Business to Business), B2C (Business to Cumtomer), ERP (Enterprise Resource Planning), EDI (Electronic Data Interchange), ECR (Efficient Consumer Response), WMS (Warehouse Management System), 3PL (Third Party Logistics), VMI (Vendor Manage Inventory), SRM (Supplier Relationship Management), CRM (Customer Relationship Management), QRM (Quick Response Manufacturing), Cross Docking, B2B(Business to Business), B2C (Business to Customer) and many others. Therefore, business is trying very hard to reduce costs and increase profits by increasing capability in management.”

Large buyers of Thai merchandise threaten to switch their suppliers to other countries if compliance with quality, cost, and delivery requirements cannot be met. In order to combat such threats, various government agencies and the Thai Garment Manufacturers Association have spent the past few years on initiatives to develop six standards75 designed to awaken the industry and improve the country’s supply chain performance. The goal is to use these standards to certify textile and garment factories, thus making them attractive to foreign buyers.76

The Institute proposed that “The root cause that results in buyers demanding a more responsive supply chain is ‘demand uncertainty.’ Three strategies to solve the problems are 1) reduce uncertainty 2) avoid uncertainty), and 3) hedging against uncertainty,77 which is the decrease of lead-time.

73 http:// www.thaitextile.org/ttnews.asp?whichpage=2&ttnews_id=1792, 10 May 2003. 74 Intertransport Logistics, 26/11/45 75 Human Right, quality assurance, productivity, merchandising and product development, electronic data interchange and quick responses standard, TTIS, page 40 76 Emerging quick response standard for Thai garment industry, TTIS, page 35 77 ibid, p.38.


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Receive Send Receive Receive Start Ex-factory Design Sample Confirmed Raw matls Cutting Order

Development Procurement Garment Manu. Lead Time Lead Time Cycle Time QR2 Time

Queue Time Queue Time

Total Production Cycle Time, QR2

The table below represents time of each production process at normal rate.

Standard Quick Response Schedule

Total Production Cycle Time Category Development Lead Time

Procurement Lead Time

Garment Manufacturing Cycle Time

For initial Order

For Repeated Order

Polo/T-shirt 5 30 30 90 60 Men’s Shirt 5 40 30 90 75 Women’s shirt/blouse

5 40 30 90 75

Sweater 5 40 30 100 90 Parka/jacket 7 50 40 120 105 Cotton pant 5 40 30 100 90 CVS pant 5 40 30 100 90 Dress/skirts 5 40 30 100 90 Track Suits 7 45 40 110 100 Source: Thailand Textile Institute, Supply Chain Management and Quick Response

Just in Time manufacturing The manufacturing structure was certainly changed from the improvement of old procurement to the ‘Just in Time’ system. This system is not used only in the apparel business but also in other products such as food. Its key is not to stock products in large amount but to check the stock each day and order accordingly. It changes the order system by reducing the quantity of orders but increase orders on the day of the order. Therefore, manufacturers have to adjust themselves by producing lower quantities while


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producing as fast as they can to serve customer needs and reduce the production process to make the whole system more profitable.

Increased role of international agencies

Generally, an agent company receives a commission payment of each order plus 5 percent of the price that factory gets. Agencies take care of trade bargaining and the brand name Company’s interest. They receive payment in the form of commission, not wages and credit. For example, a brand name company sets the price but if the agency can bargain with a manufacturer for a lower price, that agency will gain that margin as its commission.

Former Bed & Bath management. Agencies have increased its importance in globalized manufacturing. It creates trade alliances with factories around the world. For example, Li & Fung Company is a successful example of a middle-man between manufacturing and delivery. Bed & Bath received orders in Thailand, usually from an agency office in Thailand. The factory had to pay five percent commission for every order to agencies after exporting the finished product. If NIKE knew of a situation like this, the agency could be investigated on the issue. Mr.Bird, owner of HADDAD, immediately phoned Mr.Suthep asking why the agency was not selective when looking for a manufacturer without investigating the working conditions, capacity or labour standards. When we found out about the Bed&Bath factory’s move to Mae-Sod, near the Thai-Burmese border, the truth was more disclosed. The idea of Li&Fung clarifies the capitalist viewpoint. “Our target is to deal with a factory and make it produce 30 – 70 percent of the whole factory’s capacity. We do not want to be an important part of the factory. Just 30 percent can make us the biggest customer of the factory. Another aspect we need is flexibility so we need not to have any factory depend only on us. We also gain interest from the factory if it has other customers.”

“If Li&Fung does not own a factory, how can we say that we are in the production line? Actually, we are part of the production line because in 15 stages of the process of the value chain, we have been involved in 10 stages.”78 Model of Li & Fung: Agency Corporation

Li & Fung is a member of the Li & Fung Group of companies, which also includes privately-held Retailing and Distribution businesses. With an annual turnover of around US$4.2 billion, Li & Fung employs about 5,000 people worldwide.

http://www.lifung.com/about/index.html

Li & Fung can be regarded as an

78 Supply Chain Management: Hong Kong Style, Harvard Business Review, sept – October 1998


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example of a garment company who turned itself into an agency by using value chain and supply chain systems in developing to become a transnational company in a few years.

The homepage of Li & Fung’s website stated “As a Supply Chain Manager across many producers and countries, Li & Fung provides the convenience of a one-stop shop for customers through a Total Value-Added Package: from product design and development, through raw material and factory sourcing, production planning and management, quality assurance and export documentation to shipping consolidation.”79 It also emphasized that “LFD Manufacturing is a leading contract manufacturer of Fast Moving Consumer Goods for various multinational and local companies. LFD Manufacturing has plants in Malaysia, Thailand, Indonesia and China that are tailored to customers' specifications and high expectations on quality. Over 3,000 world famous brands have been manufactured under the LFD Manufacturing name, ranging from over-the-counter (OTC) pharmaceuticals to foodstuffs, personal care, car care, cosmetics and household products.”

Li & Fung’s business is to administer the supply chain “If we receive an order from one retailer in Europe for ten thousand clothes, this is not easy for our office in Korea to outsource products in the country nor easy for our office in Indonesia to outsource for local manufacturers. For this kind of customer, we might have to buy fibre from a Korean factory, then dye and weave in Taiwan; thus, we must select fiber and then send it to Taiwan. For a Japanese company, they have the best zip and button but it’s manufactured in China. So we go to YKK, a big zip company in Japan, to order directly from factories in China. Then, we consider the quota system and labour situation, so we choose that final production and garment should be done in Thailand, so we send all the materials to Thailand. Since our customers need on time delivery, we divide orders among five Thai factories…. Within five weeks after receiving the order, 10,000 clothes reach stores or shops in Europe. All the clothes are the same quality and the material seems like it’s from only one factory. This is a new type of value added. It is a real production of the world which we have never seen before. The brand tag says ‘Made in Thailand’ but they’re not Thai products.80

79 http://www.lifung.com/about/index.html 80 Supply Chain Management: Hong Kong Style, Harvard Business Review, sept – October 1998


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Supply chain structure in Thailand Diagram of supply chain s

Source: Junya Yimprasert, Thai Labour Campaign

In the future, customers might allow us to finish only in one month; so we need to look at the supply chain. It is effective if the system and customer management structure is actually strong on time raw material. Our main task is sewing. The supply chain is like a jigsaw puzzle, we have to combine it to be complete the picture. If one piece is lost, problems surely happen. Good management is, thus, very important.”

Chaiyapong Wetmamontien, president of Liberty Group.81

“The profits we gain for sewing one clothe is around 8 – 20 baht. For this amount, we have to pay for thread, needles and machines by ourselves. So sometimes we work 12 hours but our wage is only 160 baht (around 4 US dollars) per day.”

Manop, former Bed & Bath worker. Liberty Group grew from an agency company, “Previously, we were an agency; receiving orders and cutting, and they sent products to over 50 suppliers for stitching. Our customers are brand name importers and agencies located in Thailand. These customers were small. After a period, the company changed to produce adult wear and became popular with world famous sportswear and casual wear brandnames.”82

Chaiyapong Wetmamontien, President of Liberty Group 81 Cut & Sew, January 2003, p.44. 82 ibid, p.42

Brands

Agency

Small brand

Regional office

Regional office

Country

Country’s office

Manufac-turers

Manufac-turers

Sub

sub

Manufac-turers

Sub


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The Liberty Group is an example of a manufacturer who attempted to adjust to keep track with the changing apparel industry “The Company employs over four thousands workers, having the capacity to produce 800,000 clothes per month. Our 2002 sales were around two billion baht. That’s a twenty percent increase compared to last year after we extended the factory in 2003. Today, our capacity is one million four hundred thousands clothes per month and lead time is around 60 – 120 days up according to product type and readiness of materials.” Mr. Chaiyapong expected that high competition will reduce profits two-fold. “Today our profit is ten percent. But I expect that in the future profit will lessen to five percent. If we want more profit, we must increase our sales by extending our capacity. We are expanding our factory to produce high quality products because customers not only consider the price but also the stability and credibility of suppliers. If customers have to pay ten or twenty percent more for an order in Thailand with quality guaranteed and in time delivery, they will be pleased to do so and not go to other manufacturers since the ‘Just in Time’ system has much influence. In ordering raw materials, we use Just in Time system too. Seventy percent of materials are foreign and thirty percent are domestic. Foreign materials mostly come from China, Taiwan and Europe.” 83 The garment industry has high exploitation at every level from suppliers, agencies, large and small factories to subcontractors. They make profits by exploiting the lower level producers, and some of them take advantage of the system to gain profit by producing nothing.” New strategy to adjust to the globalization of production: Some Examples from Thai capitalists

1. Expansion of investment to cover all the production chains (Saha-Union, Sahapat, Nan Yang)

2. Establishing long term business relationship (Bangkok Textile Group) 3. Adjustments to the changes in the textile and clothing industry (Oriental

Garment, Nice Apparel, etc.)

1) Control of the Whole Production Chain Since 1995 there have been several changes in the textile and clothing industry

around the world – the changes have taken place at all levels including TNCs, retailers, business agents and sub-contracting companies, each one is related to each other. In the free market system, all parties make their own adjustments for survival and maintaining the returns on their investment. One strategy is to expand business investment to cover the supply chain in order to ensure the money circulation within the Group. In Thailand companies that are operating in the textile and clothing sector can be characterized mainly as sub-contracting companies which on average make around 10 per cent in return after subtracting the production costs.26

83 ibid, p.43 26 Information gathered from interview


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Saha-Union • The investments cover 4 industrial sectors: 19 companies in textile and clothing

manufacturing; 3 companies in electronics and computer; 11 power companies in China; and 30 companies in retail and service sector.

• Revenue (2002): 8 textile companies generated the gross revenue of Baht 6,864 million - Baht 2,724 million from export and Baht 4,139.1 million from the domestic market; 3 shoe companies generated a gross revenue of Baht 3,177.7 million - Baht 2,768.9 million from export and Baht 408.8 million from the domestic market; 8 companies manufacturing plastics, rubber and metal products generated a gross revenue of Baht 2,890 million – Baht 1,687.6 million from export and Baht 1.202.4 million from domestic market.

At present Saha-Union and Sahapata are the largest textile and clothing conglomerates in Thailand. As for the medium sized companies, they are Nan Yang Group and Bangkok Textile Group. All these business groups have now expanded their business in the supply chain as well as in the retail and service sector. For the supply chain, the basic raw materials of the textile and clothing industry include fabrics, buttons, needles, and threads. Thus it has been a trend among the large textile companies to expand their investment in the production of these raw materials, which at the end of the day ensures the money circulation within the Group. The rationale behind this is that, in clothing manufacturing, the cost of these basic raw materials is 60 per cent of the overall production cost. Saha-Union Group Saha-Union was established by the Darakanont Family, who is a relative of Tiem Chokwattana of Sahapat Group. The two Groups started their business in 1972 and have expanded their investment into other industries. For textile alone, the Group owns 8 factories covering the whole production chain.

Sahapat, Pan Group, Bangkok Rubber Group and Saha-Group Sahapat’s investments cover many industrial manufacturing sectors including textile, clothing, shoes and others. The Group adopts the same strategy of investing in the whole production chain – basic raw materials, equipment etc. In this Group Sahapattana Inter Holding Co Ltd is the main company under the management of Mr Boonsit Chokwattana, the Group has more than 250 subsidiary companies. The business of Sahapat covers 12 sectors: Garment, Textile, Leather, Shoes, Cosmetics, Home Equipment, Food and Beverages, Electronics, Electrical Equipment, Sport Equipment, Logistics as well as sales agent companies.27

The Group also invested in building infrastructure including industrial estates and factories for rent to other companies. The industrial estates are scattered in many regions of Thailand such as ‘Ban Pan Industrial Estate’ and ‘Rojana Industrial Estate’ in Ayuttaya, ‘Sri Raja Industrial Estate’ in Chonburi and ‘Kabinburi Industrial Estate’ etc.

27 Cut & Sew, Nov. – Dec. 2000


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At present, Sahapat through its subsidiary companies – Bangkok Rubber and Pan Group - is also one of the most important sub-contracting companies of many big brand-name shoe products such as Nike, Clarks, Marks & Spencer and Scholl. In 2002 the total export value of the Pan Group alone was as high as USD155.47 million, equivalent to 33.7 percent of the overall export value of sport shoe products from Thailand. The Pan Group which is one of the Partner Groups of NIKE has 10 per cent of NIKE’s orders, second to Feng Tay and Pou Chen28 which have 18 per cent and 17 per cent respectively.29 NIKE has been using training facilities of Sahapat Sri Raja industrial estate for its training courses on shoe manufacturing organized for executives from around the world; in the past these training courses were organized in Indonesia. 30 In the textile and garment sector, Sahapat owns 33 garment companies and 17 textile companies. The number of companies in this sector reaches 64 if counting also the companies which produce basic production materials and other equipment needed in the manufacturing of textile and clothing.31

Nan Yang Group Chawalit Tuangsittisombat set up Nan Yang Company in 1957. Nan Yang started out

as a garment factory before many more factories covering tread spinning, textile, colour dye and screening were formed under the Nan Yang Textile Group. Apart from owning factories in Nakornsawan province of Thailand, the Group has opened factories in Laos since 1994. 32 At present the Nan Yang Group owns 13 factories33 Out of the total workforce of 8,000 employed by this Group, more than 5,000 workers are employed in the garment factories.34

Factories owned by the Nan Yang Group are: Nan Yang Textiles, Nan Yang Knitting, Nan Yang Fabric, Pioneer Garment, Nan Yang Garment, Charter Print, Novelty Apparel, Finetex, Trimax, Trinity Embroidery, Unimex Apparel, Nuovatex, and Gromax Trading.

2) Establishing Long Term Business Relationship (Bangkok Textile Group) Bangkok Textile Factory – Problem of Cotton Dust Survived but Continued Violating Workers’ Rights Bangkok Textile Company and Thai Durable Company are among the oldest textile companies in Thailand, along with the Thai Blanket Textile Industry (TBI). These two companies havr experienced many business crises and survived to this day. Both are notorious for being hostile against trade unions throughout their history.

“My father started out this textile company by beginning with raw cotton fabrics. In the old days this type of fabric was called 12 pond fabric and sometimes 10 pond fabric. After weaving, the clothes were sent to the whitening and indigo dyeing

28 The world first and second largest footwear producers, both companies are Taiwanese 29 Pan Asia Footwear Public Company annual report 2002, p 1 30 Cut&Sew, Sept. – Oct. 2001, p 16 31 Cut & Sew, Nov. – Dec. 2000, p 20 32 Wiboon Taungsitsombat, 50 Years under the Monarchy Patronize. 33 www.nanyangtextile.com 34 Cut & Sew, Jan. – Feb. 2001, p. 21


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process, styles which farmers and peasants liked to wear. His initiative was aimed to substitute the import of foreign fabrics. At the beginning we had only 50 textile machines and we hired technicians from Shanghai to supervise the production. Our business started in 1950.”

Pongsak Assakul, 50 Years Thai Textile under the Monarchy’s Patronage, Page 84

Bangkok Textile Company was set up in 1950. The company adopted a similar

management strategy as the Thai Blanket Textile Industry (TBI), by involving Japanese investors through a joint venture for business expansion. The situation of the textile and clothing industry in Thailand became more intense after 1970 (when the Thai economy experienced the problem of oversupply of goods); in this period the volume of exports had gone up. In 1973 the industry faced problems concerning the quota system causing some disruptions in export activity. Then again in 1988, the oil crisis broke out. It took another 5 years before the situation returned to normal.”35 During the crises, Bangkok Textile Company was selected as the only official supplier of piece dyed cotton fabrics to Mark & Spencer in Thailand. At the same the company supplied color fabrics for famous brand-name clothing companies such as Polo, Banana Republic, Gap, Nautica, J. Crew, Nike, Tommy Hilfiger etc.

While the company was experiencing a constant growth over the years, the other side of the picture was the growing illness among the workers caused by inhaling too much cotton dust. Somboon Srikamdokkae, former union leader at the Bangkok Textile Company who began working in the factory in 1976, along with many other workers started to become sick. Diagnoses of doctor’s in 1992 showed the workers were ill of lung infection disease caused by inhaling too much cotton dust at work for long periods of time; especially Somboon, 60% of her lung capacity has been damaged

The company rejected the doctor’s diagnoses. The management also rejected the hospital certificates presented by the workers who suffered the same disease and went to Rajawitee Hospital for diagnoses. Some of the hospital certificates were received by the management but they were not submitted to the Social Security Office for Compensation Fund benefits”36

In response to the management’s attitude and behavior, Somboon began to organize other workers who also suffered from occupational hazards and diseases to demand for the rights. “Although we have provisions in the Labour Protection Law and collective bargaining agreement that concern workers’ benefits on the basis of occupational health and safety, my sickness was denied by the personnel manager, and I had to process the claim myself to get health benefits from the Compensation Fund.”37

The management did not want to accept that the workers were sick, and filed many court cases against the doctors’ diagnoses, and even demanded for replacement doctors, but the new doctors had the same diagnoses regarding the workers’ illness.

“The company rejected the doctors’ diagnoses and filed a case against 36 sick workers and demanded that the court issue an order to withdraw the diagnoses of the doctors from the Social Security Office’s Compensation Fund.”38 According to Somboon, out of 1,700 workers at the company around 500 workers suffered from the lung infection disease due to the cotton dusts problem. 300 workers have received their benefits from

35 Pongsak Assakul, 50 Years Thai Textile under the Monarchy Patronize, page 84 36 Somboon, Srikhamdokcare, “ The missing of life and breath: the Group of Victims of Occupational Health and Industrial Diseases, 2003, page 46 37 Ibid, p 30 38 Ibid, p 100


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the Compensation Fund, but there are 200 workers who have been waiting already 8 years for the court ruling on whether they are eligible to receive benefits from the Compensation Fund. These stories give us totally contradicting pictures: between the success in business expansion and the realities of the workers who not only experienced physical pain but also mental and emotional pain in the process of their struggles’ for their rights and justice. “Over the past 10 years we pursued the fight for justice and for the workers suffering from industrial hazards and diseases to get their rights. There were more than 100 cases which we had taken up. Sometimes we won and sometimes we lost. We have also joined with the Assembly of the Poor in demanding the government enact a law concerning the initiation of an Occupational Health and Safety Institute at the workplace level.

[Somboon Srikamdokkae, President ‘Victims of Occupational Health and Industrial Diseases’]

“When I get sick, it feels terrible as I cannot breath. I feel very tired and have difficulty breathing, especially when I want to go to sleep. Then I have a headache, cough and feel dizzy. The headache is horrible, it comes any minute and makes me feel really sick.”

Sureerat Yoorobrieng, Aged 51, Worker of Bangkok Textile Company who suffers from bysinosis disease.

Thai Durable Company

Thai Durable Company was set up in 1959 by Saman Opaswong, Thongdul

Tanyawut and Jarin Tirachaimongkol. The company was one of the three biggest textile companies from the early period of industrial development in Thailand. The company enjoyed constant growth over the years. However, similar to TBI of Sukree Bodiratanangkura , Thai Durable Company, on their attempt to expand its business, predicted wrongly by purchasing over 100 Rai of land in Bang-poo and built more factories including tread spinning, garment, textile, as well as shoe accessories. Thus, when in 1972 the Thai economy experienced a contraction due to the problem of oversupply of goods and high oil prices, Thai Durable Company was hit hard by these crises…and the way out was to sell the land in Bang-poo to Saha-Union. 39

And the crisis faced by Thai Durable Public Company became far too difficult to heal and subsequently led to a take-over when it was hit by the problem of speculation in the stock market led by Rages Saksena (BCC case). One of the company’s share holders said that “When we decided to sell our stocks to the Tienjin Group, totaling 60 million shares at the price Baht 28/share, Rages came to demand for his commission from those who sold the stocks through him. He asked for 3 Baht per share, and in total he must have got around Baht 80 million.”

If we were to compare this commission to the total value of the company assets, it is very small. But if we were to compare this amount with Baht 70 million which the new management team of the company prepared as compensation payment for 700 workers – based on the company’s plan of cost reduction after the take –over, then we can see how big this commission was”40 However, the workers of Thai Durable Textile never have

39 Thai Durable Textile, 50 years Thai Textile under the Monarchy patronize, p 54-55 40 Jittisak Nanthapanich, Unclothe the Financial Wizard, Infinity Press, , 2001, p 28


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received their dismissal compensated. Many workers are still fighting in court for their right to reinstatement and compensation.3) The New Waves – Adjustments to the Changes in the Textile and Clothing Industry

Thai Durable Workers Struggle Thai Durable Company (TDC) was set up in 1959, around the same time as the Thai Blanket Textile and

Bangkok Textile. TDC manufactured fabrics for the domestic market as well as for export. Workers at the TDC formed a union in 1981. Since the formation of the union, the workers have exercised their collective bargaining rights for the improvement of wages and other benefits.

Chronology of Thai Durable Campaign

15 February 2000 - The Thai Durable Textile Labour Union submitted a collective demand to TDT asking for a raise of one Baht per day raise for every worker as well as a two-month bonus.

24 April 2000 - TDT management maintained that the decision on wage increases is the company's sole jurisdiction, and not the workers, essentially denying the workers' right to collective bargaining.

30 May 2000 – TDT announced the closing down the plants in response to the CBA demands of union. The workers start a protest inside the factory.

14-15 June 2000- About 20 unidentified persons hid in the company's compound and sprayed fire-extinguisher chemicals on the protesting workers. Fourteen workers had to be hospitalized.

22 June 2000 - A group of approximately 200 men "broke" through the company gates and attacked over 200 women union members engaged in a sit-in. Again the police witnessed the incident but no action was taken.

27 July 2000 The workers submitted appeals to Prime Minister Chuan Leekpai as well as the Minister of Labour and Social Welfare and sent a package to the United Nations High Commission on Human Rights.

18 September 2000 - Several union leaders are illegitimately arrested and questioned. The workers protest outside the police station.

17-21 October 2000 - Three Thai Durable Union leaders attend ASEM People Forum in Seoul.

26 October 2000- The Ministry of Labour orders the company to reinstate all the workers and asks the Labour Relation Committee to judge the dispute. Only 680 workers were reinstated. 390 workers were refused when they tried to return and are still protesting at the Ministry of Labour demanding to be reinstated

18 November 2000 - A fire broke out at the A2 building of the Thai Krieng Durable factory.

23 November 2000 - The Company announced an emergency close down and ordered 532 of the reinstated workers to stop working without pay, even though few of them worked in the fire-damaged sector. The company announced that the factory would be opened again on the 23rd of December 2000.

23 December 2000- Only about 200 workers were reinstated. The company announced that 184 would be reinstated on the 8th of January and 142 on the 1st of February.

28 December 2000 - The company signed a Debt Definitive Restructuring Agreement for 670 million baht worth of debt with the Bangkok Bank.

4 January 2001 - The Manager Newspaper reported that Wing Wah, a company from Hong Kong, bought 51% of the Thai Durable Textile company shares and became the majority shareholder.

8 January 2001- Only 48 workers were allowed to return instead of 184 as promised. There are still nearly 200 union workers waiting to return to work after the fire and another 390 union workers are still protesting, having never been reinstated after the June 1st lock-out.

At present - The union leaders are still fighting for the rights and justice. They have started a cooperative among the dismissed old age women workers to sell food.


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“For the past 9 years, Khun Chawalit had worked with dedication to Thai Iryo Company, and the company was very successful in terms of clothing manufacturing. When Thai Iryo had too many orders and needed to outsource some of the production, Khun Chawalit then became one of the sub-contractors. It started out with 3-4 sewing machines to make Jackets. The business was doing quite well; also this was supported by Thai Iryo.”41

Chawalit Nimlaor, Oriental Garment 42 This new generation of entrepreneurs in the clothing industry emerged between

1977 and 1987 which was the booming period of the industry. The companies of this category include Nice Apparel, Oriental Garment, Asia Garment, Castle Peak, Thai Garment, etc. The owners of some of these companies usually started out as employees of Iryo Group, Thai Garment and Lian Thai Textile, and sometimes they are called ‘alumni’ of Iryo.

It would not be an exaggeration to say that Iryo Garment was the school to train these new entrepreneurs in the textile and clothing business. The new entrepreneurs who played a leading role from 1997 onward after the collapse of Bodiratanangkura Group include Chawalit Nimlaor of Oriental Garment and Wiroj Amatakulchai 43 of Nice Apparel – both were management employees of Iryo Group. When the opportunity came, they began to take small orders from the company and used their homes as a production base, apart from working as employees of the company. And finally they began setting up their own factories, some of which got bigger than the company they used to work for.

These new waves have increasing influence over the textile and clothing industry. Apart from Chawalit and Wiroj, there is Boonchoo Pongchalerm of Castle Peak Holding who was a former employee of Lian Thai Textile.44

Thai Garment is a leader in this kind of business adjustment established in 1966 by Hong Kong business groups, and it has expanded to over three manufacturing factories, employing over 7,600 workers.45

Nice Apparel, Oriental Garment and Castle Peak Holding are now taking orders from the famous brand-names. Their business success has led to the opening up of new factory premises, and each Group employs at least 3,000 workers. The Groups also have increasing bargaining power when they have to deal with the government.

And each plays a key role in many employer associations. One of the Nice Apparel‘s advertising slogans says, “Nice Apparel Group: Unveil the world of sportswear”

Chawalit Nimlaor once interviewed said “Oriental Garment was established in 1982. In the beginning we were a sub-contractor of Thai Iryo. And later I was able to contact some overseas buyers. We were quite fortunate to have the support of the BOI (Board of Investment of Thailand, the author) in 1985 so I could expand our business. This helped me to plan better, that is to product 100 per cent for export, 55 per cent for the European market, 40 per cent for the USA and 5 percent for others.”46

Boonchoo Pongchalerm of Castle Peak Holding is another example of those who were able to set up his own companies after gaining substantial experience working in a garment company “I used to work for Thai Garment Company in the position of manager.

41 Thai Textile Federation, 50 years Thai Textile under the Monarchy patronize, 2540 42 Former President of the Thai Garment Manufacturers Association, 1996-2000 43 43 Former President of the Thai Garment Manufacturers Association 1986 -1996 44 See, Thai Textile Federation, 50 years Thai Textile under the Monarchy patronize, 2540 45 Thai Labour Campaign, report of survey to companies producing for US Universities, 2002 46 Thai Textile Federation, 50 years Thai Textile under the Monarchy patronize, 2540, page 36


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At the time I earned Baht 5,000. I worked there for 4 years and later moved to Lian Thai Textle Company for another 2 years ”47 Nowadays Castle Peak is a garment company which has many subsidiary companies, employing thousands of workers. ---------------------------

Outsourcing through Subcontracting of Product

“Before I owned a garment business, I used to be a hairdresser. My earnings as a hairdresser was enough for my little child but when my child grew up I tried to go into the clothes sewing business. My mom had sewn clothes, I learned this business from her, then I invested but I lost money every month in the beginning.”

An owner of subcontractor from Bed & Bath In the supply chain structure, one important change is the transfer of supplies by canceling direct manufacturing to outsource production to other manufacturers. To be established as a subcontractor seems simple with even a small amount of capital, even a hairdresser can begin this kind of business. Another form of establishing a subcontractor is by former employees in the garment business. There are many examples of successful business that have originated from small subcontractors and expand to large business groups, such as Nice Apparel Company. “Previously I worked in the production section of Nunyang Garment Company. I supervised the production section in that garment factory and then I operated a small subcontracting shop for 5 – 6 years. At that time, the economy was quite good, I had a large quantity of jobs.” B shop. The subcontracting system has every level of entrepreneur, from large enterprises to home based business; they all have to invest for raw materials and be in direct contact with customers. Large enterprises administer big factories and have large investments. But small subcontractors, as discovered through interviews, use their houses as a working place and then slowly expand. Examples of growing businesses like this can be seen in Grandeur, Nice Apparel and others. “At first, we had ten sewing machines and subcontracted jobs for six months.” Said the Grandeur owner.

“When large jobs were received for the first time, Bed & Bath Company received cheap price orders in a large quantity and they needed to be finished quickly. We had to maintain our credibility so we must finish in time. Credibility means continuous orders. This made us subcontract jobs like a chain to fill orders in time.” “We can subcontract from any subcontractors or factories but we must finish orders. For example, when we receive an order for 5,000 polo t-shirts, the factories fix the date to receive finished jobs, for example we received the order on the 20th of this month and have to finish it by the 6th of the next month. The factory sets the price and multiplies by two as expenses for thread, needles and other devices.” A Shop

47 Ibid, page 72


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Small producers in Thailand mostly depend on the subcontracting system. These producers are very skillful. Some parts of production which require low skill labour are sent to home based subcontractors.84 Subcontractors are always at risk. Everyone interviewed stated that they have no bargaining power on price; in fact they get a very low price. Even a company producing for brand name products mentioned that, “Previously, we bargained for a higher price. Today, customers walk in our factory and seem like the owner since they order us to do many things.” -Grandeur Garment Company.

Cheap wage structure “Subcontractors like us face difficulty in finding workers because we have no benefits like a company but we are not cruel like most companies.” Said owner of A Shop.

“Concerning competition in Thailand, in part it was expensive in the beginning. Don’t forget that garments are easy to produce so other countries can do the same business. Today, Vietnam has high skill in garment production but labour is cheap which means costs are cheap too. If I were ADIDAS or NIKE, I’d send orders to Vietnam.”

Tianchai Mahasiri, vice president of Thai Garment Employees Association.

Capitalists always say to workers that expensive labour costs means low competitiveness with foreign countries, particularly China, India and Vietnam. These three new born stars have high labour quantity and serve well the idea ‘Race to the Bottom’ as another level of production base after Thailand, Malaysia and Philippines. Thus, Thai employers always threaten workers if they call for higher wages that the business will lose profits and they will have to move to China. But in reality, capitalists themselves also stated that labour cost is not the main factor. When we look at overall expenses, Thai production is cheaper than Chinese. “Thai workers still have high skill, at the same time, Thailand has other advantages, such as a stable political situation… Thailand is like bomb shelter. It means that when other countries have problems, orders are sent to Thailand… even though the price in Thailand is higher compared to others, it’s just ten percent which is an acceptable rate.”85 In the financial report of Pan Asia, one company in the Sahapat Group, it stated that labour cost proportion in the production structure was at 8% and decreased to 6%.86 Of all factories in 2001, the garment industry has the highest proportion in the number of enterprises, labour and export revenue.

84 Supat Supachalasai, p.9 85 Interview Tianchai Mahasiri, Managing Director of Lian Thai Company and member of the Thai Garment Association board. 86 Junya Yimprasert and Christopher Candland, Can Corporate Codes of Conduct Promote Labor Standards? Evidence from the Thai Footwear and Apparel Industries, Asian Monitor Resource Center, 2001


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Table showing cost structure in ready to wear garment, 2001.

Description Ratio of production cost (percent) Cloth 74 Labour wage 14 Energy 1 Machine Depreciation 1 Others 10 Total 100 Source: Dr. Supat Suphalachasai, Thammasat University.

Table showing expenses in shirt production Description Ratio of production cost Main raw material 50 Miscellaneous 15 Other materials 5 Labour 20 Source: Garment Development Foundation, 1996, p.56 Table comparison of labour and workers

Description 1995 1996 1997 1998 1999 2000 Workers 1,143,890 1,117,220 1,113,550 1,096,900 1,085,800 1,083,700 Factories 5,096 4,864 4,849 4,654 4,554 4,557 Employment rate decreased)

26,670 3,670 16,650 11,100 2,100

Value added (baht/person)

208,785 227,681 241,976 247,867 241,962 249,474

Source: Textile Industry Section, Industry Promotion Department. High labour cost is always claimed as the main reason for production base relocation. Capitalists always cite high labour costs to call for flexibility or bargaining with the government to support the industry and allow deregulation as much as possible. Among many employers claims about exploited workers which the Thai Labour Campaign has helped in the past several years, one claim that is often heard is that if workers demand too much, they employer will move the factory to Vietnam or China. Or they claim that if workers organize a union, the employer will move to China since Chinese workers are diligent, patient, skillful and work for cheaper wages. But when we look at the figure of production structure, labour cost is just six, fourteen or twenty percent of the total production cost. It is just 0.4 – 0.5 percent of a product value. Thus, labour cost should not be the main variable in the decision on production. It should be that labour cost is the most variable factor in the whole supply chain. If we look at each section of the supply chain, labour is the group with no bargaining power for their own benefits, as the employer, agency, wholesaler, retailer and brand name company have strength to bargain. Each group in the supply chain has already created bargaining power to protect its benefits and profit. Currently, not over five percent of workers around the world in apparel production have organized trade unions and are capable to create bargaining power with their employers. Case of Bed & Bath workers


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Bed and Bath are brave, not slaves, struggle for dignity and liberty. Wining the victory. Bed and Baht Fight Fight!

Slogan of Bed and Bath workers. The struggle of 350 Bed & Bath workers in October 2002 – January 2003 shows the picture of the new production process of Thai apparel business owners. The employers of Bed & Bath Company shut down the factory in a situation which seemed like bankruptcy, leaving their entire burden behind and taking all their money to live happily in the USA. Over 900 workers here were left without anyone to take responsibility. The case may have been kept quiet, this was the intention of the employers. Examples of bad practices like this case can be seen in the past. Iyro Garment or Par Garment, where employers thought that after disappearing for several years they could silently open a new factory under a new name, that these employers could then reappear without taking responsibility to the old laid off workers. But the case of B&B is different. Most of the workers had less than a few years of experience, so they gave up and began to seek new jobs. But over 350 workers still fought and protested at the Ministry of Labour for over three months to push for the responsibility process and bring the employers to court. Finally, they were able to push for more protection measures and some of them received a compensation payment from the government. But the workers are still trying to seek legal action against the employers.


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Chronology of B&B struggle

7 – 21 October 2002 – Over 600 workers went to the Ministry of Labour asking for an investigation of the company’s status since their employers disappeared and shut down the factory without compensation and owed wages to around 900 workers. 21 October – Over 400 workers decided to struggle at the Ministry of Labour. The struggle lasted three months. 22 October – Workers’ representatives handed the letter to the Labour Ministry calling for 1.take legal action with their employers after finding them 2. Investigate workers’ contribution to the Social Security Fund paid by employers 3. Investigate reasons for factory closure. While the workers called for their employers to be caught, the officers in the Ministry put pressure on them to proceed with the Ministry‘s solution which can be seen in many cases when workers received no compensation. 24 October –The turning point of the situation came when Mr. Suwat Lipatapallop, Minister of Labour, while sitting in his car was surrounded by the workers. The workers were able to meet face to face with him asking him to speed up the investigation. This resulted in the decision on 25 October, labour officers in Samutprakarn province issued an order to the employers to pay 301 workers 1,128,022.50 baht. And the Samutprakarn court issued arrest warrants for Mr. Chaiyapat Photikamjorn and Miss Oyporn Songpornprasert, the employers, and cancelled their passports. 1 November – Around 300 workers marched from the Labour Ministry to the National Police Center to hand the letter to the Chief Police Commander to speed up the arrestment. 4 November – The workers marched to the NIKE office in Bangkok calling for the company to take part in responsibility, they carried banners such as, “NIKE, we produce for you what can you do to help us.” 18 November – Solidarity Forum at the Labour Ministry with B&B workers. 23 November – At 8.30, the workers marched to the ‘Conference of Asian Political Parties’ asking for justice; the conference was organized in Shangri-La Hotel. Assembly of the Poor also marched to this conference. 29 November – The workers rallied at the US embassy asking for it to put pressure on the Thai government. 10 December – The workers submitted open letters to the UN High Commissioner and to the deputy director of ILO office in Bangkok. 17 December – The workers submitted an open letter to PM at the Government House. 19 December – Thai Labour Solidarity Committees and 300 members of labour alliances visited B&B workers at the Ministry building and set up a forum “Law must be justice, workers are not slaves.” Also they declared together an intention to push the Ministry to solve labour rights violations immediately. 4 January 2003 – The workers sew T-shirts and cotton shirts to gain money for their struggle at the Ministry. 9 January – 6 p.m., seven workers’ representatives shaved their head protesting slow performance in solving their problem. 31 January – Ending of first phase of the struggle of 171 workers after 3 months. February – Solidarity Factory of former B&B workers was established. They used ‘Made in Dignity’ as a logo for production. 40 B&B workers work this factory and continue to follow their employers to be punished under the law.


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This factory shows the production system under globalization and liberalization. The investor tried to avoid risk as much as possible by renting assets like machines and cars from two large banks; Bangkok Bank and City Bank. The factory received orders over its capacity, even though the workers worked around 20 hours per day production could not finish on time. So some orders were subcontracted to over 40 small producers with the expectation of higher profits. This is the same practice as other large and medium garment factories; directly receiving orders from customers and agencies or those factories receiving quotas. Diagram of Bed & Bath production process

Source: Documents and interviews of Bed & Bath workers; from manager to section supervisors.

The Bed & Bath factory was established in 1994 by Mr.Chaiyapat Phothikamjorn and Miss Oyporn Songpornprasert, his wife, who jointly administrated the factory. The Phothikamjorn family has been in the apparel business for twenty years and owns many factories; Bed & Bath, Penny Industry, Top Line (Chaiyapat also hold shares in this company), Kennet Textile and Lintech Textile (alliance factory). These five factories are

Lintech Textile

Kennet Textile

Bed &Bath

Top line Penny

Sub Bangkok

Sub Bangkok

Sub Mae Sod

Sub Mae Sod Sub

Korat

Sub Bangkok

Sub Bangkok

Sub

Sub


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members of TGMA which was administrated by some members of Phothikamjorn family. The family holds the biggest shares in Bed & Bath and Top Line.

Orders were distributed among these five factories; Bed & Bath received the highest amount of jobs so workers there worked very hard. The B&B factory also passed on orders to around 40 subcontractors employing between 10 – 250 workers. Among these subcontractors, 8 were located in Mae-sod on the Thai –Burmese border. These eight subcontractors are home based enterprises hiring Burmese workers well below minimum wage. Furthermore, B&B distributed orders to over 20 home-based subcontractors in Bangkok.

But this does not mean there was no competition among factories in this family. One former B&B workers said that the administration and customer contacts are separated from each company. Each company, even tough the members of management are from the same family, was independent. These managements would talk together only when one company lacked jobs and they would ask the other one if it had extra work. Each company found customers on their own and sometimes they competed with each other by lowering price among them. For example the elder brother proposed 13 baht as the price while the younger proposed 15 baht so the elder got the order. This was particularly the case with Mr. Chaiyapat from B&B, he always reduced prices in order to get customers’ orders.

All companies used the same system, if one company received orders over its’ capacity it subcontracted.

Bed & Bath Customers


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In the last month before B&B closed down, the company produced for many brand names in 60 logos. It produced for popular brand names such as NIKE, ADIDAS, LEVI’s, HARLEY DAVIDSON, and for many other smaller brands and shops in the USA ordering through agencies like HADDAD; the biggest agency in the USA. “We produced for LEVI’s, NIKE and another 3 – 4 high quality brands. For example, for LEVI’s adult clothes we got good prices. NIKE’s children’s wear prices were a little bit lower. The quality is nearly the same but adult clothes require a higher quality than children’s wear because I think that kids grow very fast so kids wear clothes for less time. Another reason is that children’s wear have no limit of quota, if a company can get a large order they can export in large amounts. Children’s wear is more focused on a beautiful and colorful look rather than quality which differs from adults. Adult clothes focus on quality and neatness which means the level of cut and sew is different too.

Subcontract system; lesson from B&B “My shops receive orders from different sources. Formerly, I had received from B&B but now I cancelled it. When they closed down the factory, it owed us money. B&B paid only 40 percent to every subcontractor. Now I get orders from Grandeur, it distributes quality orders for export products and cotton.” (Shop A) “Subcontractors and garment companies have to be together. If the companies face problems, small subcontractors like us are affected too. We produce in the same system as companies but our prices are a little bit cheaper.” (Shop B)

The same situation occurs with Lian Thai, Par Garment, Hua Thai and many other garment companies. B&B sent orders to sew by many subcontractors in Bangkok, Mae-Sod and Korat. Our research team interviewed four subcontractors producing for B&B in Bangkok; all of them are home based enterprises with 10 – 20 sewing machines, and we found that their problems are as follows:

Every home based enterprise does not have trade registration. Tax is paid by deducing 3 percent of their revenue and the company is

responsible to pay. Subcontractors have to pay for devices such as needles, thread and scissors. Subcontractors survive in the business because they do not pay for

accommodation, water and electricity. Working Conditions

- No social security - No benefits - No minimum rate wage system - Payment up to piece rate or target system

B&B subcontracted jobs to over 40 small enterprises; the workers could remember that 21 enterprises in Bangkok have a total of 550 sewing machines, in Korat 250 sewing machines, also with 7 – 8 subcontractors in Mae-Sod. This means an estimated 1,100 total workers were employed by subcontractors. This figure does not include workers employed in factories under the Phothikamjorn family and allied factories which total an estimated 2,000 workers. Information from interviews found that workers in home based enterprises are not protected under labour law since it is not a registered enterprise.


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From this figure, it leads to assumptions that the invisible labour force, or informal workers, in garment production for export number four times the formal worker figure in statistics, which shows around one million formal workers. Shop B further explained that “One problem of subcontracting is that as device and tool prices get higher, they have to be responsible for it. Today the thread price is sixty baht per kilogram. We don’t know how much thread we will use in each order we get. Another problem is financial flow. Some of them have weak financial status. When subcontractors receive orders, they sign a contract with the factory but they never pay in advance. The normal practice is when they finish and give the bill to the factory, they must wait for payment for twenty days or a month. Factories calculate the price of the order. The factory calculates by doubling its price, so we get double the price of what the factory gets, but we have to pay for production expenses. The first reason that factories subcontract jobs is to avoid air shipment (in case the factory cannot finish in time, it has to load goods by air), the second reason is because the factory received orders exceeding its capacity; so some of the jobs are subcontracted. This system allows the factory to get higher profits, for example, production inside a factory gets 10 baht profit but subcontracted jobs gain 4 – 5 baht more profit. If the factory subcontracts many orders, it may get millions of baht. (Interview former B&B supervisor) Subcontractors also said that they have no bargaining power with customers and bargaining power with the factory rarely happens. In some orders they get 5 or 10 baht, some order they get only 2-3 baht. “Most factories set low prices prepared for bargaining, if we can bargain we may get a little bit higher, but sometimes we cannot bargain at all.” (Shop B)

B&B problems Here below are workers’ testimonies on working condition inside the factory. The workers here worked very hard overtime, sometimes they worked after midnight. Their employer also put methamphetamines in the drinking water to keep them awake and make them work longer.

I’ve been working at Bed and Bath for five years, we always have lots of orders, not many holidays, and we even have to work on the national holidays. We sometimes work nonstop for 3 days and 3 nights. We are very exhausted but we have to do it because we are forced to do so. If we refused to work, our wages would be deducted. Though our body is so sore we cannot stop, sometimes we fell asleep while working. We cannot stop otherwise all the wages earned for the past three days will be deducted. There was one time when my colleague brought a lemon, she was fined 2,000 baht [USD50]. She was crying because she didn’t earn much, I tried to beg the employer not to deduct her salary, but the employer refused. So I asked him to deduct her 300 baht per week, but he still deducted 2,000 baht. My friend is pregnant, when the employer found out he was angry with her, he yelled at her saying that ‘you didn’t even have enough to eat, how dare you get pregnant. Another case was when my friend’s child was sick, so she wanted to take leave to bring her child to the hospital. He said ‘Will your child die if you do not take him to the hospital? I won’t let you go. Finish your work!’


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The personnel department will inform us in advance that customers will monitor the factory. They told us that Haddad, and Nike will monitor the factory and that we have to be ready and have to lie to the customer. He said that the customer will ask us, “Do you work OT? We have to say “No!” But in reality pregnant workers work OT and on Sunday as well. We sometimes work until 2 a.m. or till dawn, but we have to say that we work OT only at up to 8 p.m. Whenever we lie, they said that we have to lie. Also what is important is that we have to have a cloth-mask and safety glasses. If we lie we will get paid 400 baht.” I was afraid of being raped when I had to go home late. My husband would scold me when I returned home, he said what have you been doing until 1a.m., 2 a.m., 3 a.m.? If we cannot finish the work, employers and friends would not let me go back home. My husband likes to scold me and he beat me up one or two times. For my daughter, when she stays with me I have no time to look after her while she went to school and I was concerned about her safety so I send her to stay with my sister. When I don’t have money to send her to my sister she would be unhappy and beat or scold my daughter because she doesn’t want to look after her.


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Part V Labour problems in the new employment system Picture of labour problems today

In the capitalism era, what every capitalist wants is the lowest costs and highest profits. To do this, capitalists largely adjust themselves to reduce cost, increase productivity, reduce risks, reduce responsibility and cancel direct tax conditions and avoid social tax payments like compensation and social security. When workers call for this kind of social safety, what capitalist certainly want most is to decrease is 'wages'. From our study, the conclusions are as follows:


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1. Increasing productivity. The topic mostly talked among investors is supply chain management; reducing the production process, increase technology and decrease labour.

Workers are ordered to work harder and faster. The company uses higher technology machine to increase productivity which even forcing workers to stand all day, they unable to sit and work as before. Workers in a garment factory in Bangkok said that "Now I feel very oppressed while standing to sew, without a chair. The sewing machine was level with my chest and I have to stand while sewing. The company trained 20 workers as the first group on June 20. If possible, it will increase the number of workers trained at rates of 20-60-80. The company improved existing machines and leveled the sewing machine base up. This policy was brought in from China." The worker explained that the company wanted more effectiveness and forced workers to do multitask of a multi-process at the same time. Workers cannot sit down, they can walk and continue another production process quicker. Currently, some union committees are trying this kind of production. My point of view is it seems like we are in the IT period but we are moving back to Stone Age. I don’t think it's successful because of the great difference in technology if comparing to China, from my experience in China. The factories there improved almost everything. Machines are new and workers there are younger than here. They are 18 - 19 years old but we are 30 - 35 years old and up, surely we cannot stand up while sewing."

Motivation building (Target system) This system is widespread in the garment and shoe industry. It motivates workers to work in the target system. The factory sets targets or the piece rate system for individual workers or in teamwork. This system ignores labour laws and the factory holds targets finished as the main aim. Regardless of whether workers finish in time or more than 8 hours, the legal working hours, the workers still get paid at the same rate. "The wage system here is according to the target finished, the minimum wage payment is problematic such as workers sew for profit of 30 - 40 baht but we have to pay 169 baht plus overtime payment of 1.5 times the wage. In the minimum rate pattern, we have to select only skillful workers." Said an owner of the shop A. The owner also stated that "After calculation, we know that we cannot hire in the minimum rate system. We have to use piece rate system; our production system is the same as in the factory." "This system uses teamwork. Jobs are continuously done like a production line. If one colleague works slowly, jobs get stuck, other workers would put pressure on that person and that one has to speed up; this means members put pressure on each other in the team." Said one garment worker.

2. Flexibility

2.1 Increasing production through outsourcing or subcontract. It is certain that subcontracting is used in many levels, in almost every TNC. LEVI's Company used to have its own factories but then it closed them down and hires agencies to subcontract manufacturing. This allows them to not take responsibility for labour laws or workers. The president of the Textile and Garment Workers Federation of Thailand stated that "The impact on workers does not only come from the factory, there are many


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other mechanisms which put pressure at every stage of supplying; for example, ADIDAS and NIKE do not take any responsibility but gain the highest profit.

2.2 Decrease legal protection. The deregulation of laws in the working

condition like working hour (do’t understand??). For example, several Thai employers associations have an attempt to push the government to fix the hourly rate payment instead of the current daily wage payment.

2.3 Reduction of permanent labour. Many companies and even state

enterprises now have a policy on no new employment. Most of the job that is needed is employed through temporary kind of employment or subcontract out the job. This is due to the fact that they all try to avoid the social costs that they have to provide for workers. After 2005 it’s estimated that 30% of small scale manufacturers will be eliminated and thousands of workers will be forced into the informal sector, further undermining the workforce’s legal protection.

3. Employment of unprotected migrant workers. Burmese Migrant Workers

“There are migrant workers working in my factory. At the beginning the workers did not have ID cards and there was a lot of trouble with the police. Sometimes the police came to the factory to inspect and arrest them. At the time we were not used to that so we were shocked and afraid. Later we were able to talk to the police and settle the matter.”

Grandeur Garment

It is estimated at present that there are more than one millions migrant workers in Thailand, including those with legal permits and those without. Over 80 percent of the migrant workers in Thailand are Burmese nationals, most of whom have migrated to Thailand because of political and economic reasons. But due to the lack of legal status, many Burmese immigrants have been living and working in exploitative conditions. Since the early 1990s there have been a growing number of new factories opening in Maesod on Thai-Burmese border. According to BLSO, hundreds of factories in Maesod employ around 90,000 workers, most of whom are Burmese nationals. Even the workers who do not have a problem concerning their legal status in Thailand are still poorly paid; on average the wage paid to migrant workers in the area is between 40-60 baht or 30-50 percent of the daily minimum wage. These factories mostly produce garments and leather products for export. Since the government’s policy concerning registration of migrant workers was enacted, only 350,000 workers registered the first year the policy was implemented. This was only around 30 percent of the total number of migrant workers in Thailand. In the meantime the registered workers found no improvement in terms of legal protection of their rights. According to a statement issued by Yaung Chi Oo Workers Association (YCOWA): on 23


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June, 420 Burmese factory workers were dismissed from their jobs for submitting a complaint about their working conditions to the Tak Labour Office. Prior to this, the workers had approached their employer and listed their demands, all of which they were legally entitled to under Thai law. The employer responded to the workers attempts to negotiate an agreement through legal channels by firing all of the workers and calling the police to arrest and deport them.” The Bangkok Post reported “a total of 379 Burmese workers were fired on June 23 after they went on strike for one week to demand a 20-baht wage increase, from 60 baht to 80 baht. The factory management claimed the workers had breached their contract by missing work for three consecutive days. The sacked workers were deported to Burma and advised to file a lawsuit against the firm later. This case confirms how bad migrant workers are treated in Thailand. Whenever workers demand that their employer abide by the law, they are arrested by the police and deported. Also, according to the news, more than 120 factory owners along the Thai-Burmese border have threatened to move or close if the operator of a knitting factory there loses a labour dispute worth 4.6 million baht. Suchart Wisuwan, chairman of Tak’s industrial council, said 127 operators were closely following the dispute between the Nut Knitting Partnership Limited and 34 Burmese workers. “If both sides can reach an agreement, they all win. But if the operator loses, both sides will lose in the end. Also, he said the employers threatened that “Factory operators may relocate or simply close. A production system worth more than 8 billion baht will stop and about 50,000-60,000 jobs will disappear.“ Two years ago when the government became more strict toward the employers engaging in the employment of illegal Burmese workers, many companies expressed their interest to move parts of their production to Ian (the Northeast region of Thailand).1


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The opinion of a former manager of Bed & Bath Prestige concerning the increasing employment of Burmese workers is, “I think Bed & Bath will find their business solution through the use of sub-contractors in Maesod. They cannot continue in Bangkok because each order received from overseas buyers only generates small profits considering the high wages in Bangkok. Thus the company plans to distribute orders to sub-contractors in Maesod. There wages are low and other expenses are also very low, this is the only way the company can survive and make profits. And in the future it is possible that the company will open factories there because there are plenty of cheap Burmese workers. Bed & Bath just started sending work to Maesod when it first moved to Prapadaeng. Following a series of incidents whereby Burmese workers started to demand their rights–

which in most cases the police would come in and deport them– many employers have threatened to close down their factories if the government pressured them to abide by the laws regarding employment of migrant workers. Most recently, the Ministry of Industry, which has played an important role in promoting Isan to be an industrial area (with emphasis on small and medium size factories), has tried to persuade companies operating in Tak to move their production to Isan as a way to avoid employing illegal

When the company received orders, Khun Nueng (Chaipat Photikamjorn, the owner) would select some orders to be sent to Maesod; this means when the raw materials arrived we would send them there for cutting, sewing, and sometimes including packaging and sometimes the products were sent to be packaged in Bangkok. Khun Nueng would make all the decisions regarding which orders were to be sent. Some sub-contractors in Maesod had as many as 80 sewing machines and could handle many orders. But all the products must be sent back to Bed & Bath for export. Actually it is easy to do the work through sub-contractors because there is no quota limit for children’s clothes, those who can get more buyers or more orders from abroad can export as much as they want. Khun Nueng was really planning to open new factories in Maesod and move all the production from Bangkok there. This was because he could not sustain his business in Bangkok with the prices the buyers were willing to pay. In Maesod this was more probable. But in the end he could not make it there either, and had to close down and run away. Sub-contractors in Maesod as I remember are: 1) D with 60 sewing machines 2) E –number of sewing machines unknown 3) F – 40 sewing machines 4) J number of sewing machines unknown 5) K – 80 sewing machines 6) L- 80 sewing machines 7) M – 80 sewing machines, this one can do both weaving and dye. Almost all the workers were Burmese. They were paid 40-50 baht per day per person. And because the sub-contractors’ shops are hidden inside or upstairs, outsiders could hardly know about their operations.”

Information from interviewed with the Bed and Baht workers


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migrant workers. Also according to the Federation of Thai Industry48 most companies that are now operating in Tak are foreign companies and employ mainly Burmese workers for the sake of low wages.” 2 Having an experience as an activist advocating the rights of Thai migrant workers abroad, particularly in Singapore and Hong Kong, confirms that all the problems faced by Thai workers overseas were nothing compared with how Burmese migrant workers are treated by their employers and the government’s polices in Thailand. What justifications does Thailand have to request other countries to respect and protect the rights of Thai migrant workers overseas when we can not do any better to protect the rights of Burmese workers?

48 www.fti.co.th


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Conclusion: Women workers in the garment and textile industry live on the verge of extreme poverty. They know that their job is the only thing preventing themselves, and sometimes their families as well, from ruin. They are struggling to realize very basic human rights, while factory owners main concern is maximizing profits and productivity; their concerned with increasing their wealth. The disparity of life conditions of these two parties, who rely on each other, is not only unjust, it is also inhumane. TLC conducted a survey of 200 workers at Bed & Bath Prestige Ltd about their daily expenses and how a worker could survive while receiving the minimum wage of baht 169. It was revealed that the workers spent about baht 80-120 per day just for food and transport (breakfast, lunch, dinner, coffee, fruits and public transportation). These basic expenses account for 50-70 percent of the workers’ daily wages. Then there are other expenses such as accommodation, electricity and water as well as other basic needs. Thus, under these circumstances, workers supporting a family and children are often forced to economize on food and consume less daily nutrition than required. Most workers live in debt for their entire life. The first day of receiving wage payment is also the first day of paying debts in order to borrow again the next day. In one case workers almost went on strike when management announced that workers’ wages would be paid through bank transfer. The workers rejected this payment method because there were extra costs involved, such as using automated teller machines, fees for getting an ATM card, as well as the cost of transportation to go to the banks. In almost every factory, workers in the supervisor position usually run a side business by selling certain products such as milk powder, cosmetics, clothes, food products etc. by giving workers credit and taking debt payments in installments, simply because workers cannot afford these items. The extreme economic problems faced by workers due to the low minimum wage results in a situation whereby young workers search for factories that offer a lot of overtime work so they can increase their earnings. Workers’ wages from overtime work for 3-8 hours are as much as 50 – 100 percent of their regular wages. Thus the reality of having to do a lot of overtime work due to low wages is often in contradiction with the standard concerning working hours set in ‘Codes of Conducts’ by TNCs. There have been many times TLC had to argue with companies statements that workers want to work over time. They have to recognize the fact that workers do not want to work over time but they do want to have the over time wages. In order for workers to be able to cover their basic needs and not have to work over time, the minimum wage will have to be increased by at least 50 per cent. Insurmountable economic pressure combined with more than 12 hours of work each day in hot and uncomfortable workplaces is the typical life for women workers in the textile and clothing industry. Physical and mental exhaustion makes them sleep soon after they get home in order to wake up the next day and rush to the factories. Thus there is a tendency that these women workers who are aged over 30 do not want or are not able to get married and have a family of their own. Of the 13 women workers at a bra and underwear factory TLC spoke with, only 2 were married. These women were aged between 29-45. A worker said “it is already very difficult to pay my own living costs; I do not want to have anymore burdens”. Another worker said “I get out of the factory at 10 pm


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almost every night, how is it possible to meet a good man.” Thus many are also denied their basic right to family life. We have seen the collapse of one union after another due to the aggressive union busting of employers, while the government turns a blind eye. Thai Labour Campaign strongly believes that the right to freedom of association and trade unions are the best means for workers to secure a better quality of life. This study describes the changes taking place in the garment and textile industry. The just in time demand of customers have caused the new model of supply chain management which is enabled by the advancement of technology and the internet. Outsourcing is the most profitable model of the production methods which starts from the TNCs level itself. This has opened up bigger roles of local and regional TNCs agents which provide this service and subcontracting of the production for the TNCs from design, samples, production and shipment in much less time [from 90-120 days to only 45 days]. Definitely the workers have been greatly affected by these changes. Directly workers are employed in more flexible employment in term of hours of work, low wages, harder and higher speed of work, less protection, and overall more vulnerable for exploitation, which is contrary to the direction of world global corporate responsibility promoted by TNCs. All TNCs codes of conduct are violated. There is no strong monitoring system applied to the labour rights area effectively. Currently most of the Corporations code is being monitored by the production standard monitoring firms which is checking in according to ISO style in which it cannot apply to the human labour force. Manufactures are adapting themselves to the monitoring structures by going around them. Workers are forced to lie, under threat of dismissal. If they tell the truth to corporate monitors they are afraid that there will be no orders coming to the company. Indirectly that is due to free trade, labour laws in many areas have been pushed to deregulation to be able to facilitate free trade as labour laws are seen as an obstacle to the ability of corporations to move around freely, invest freely and run away freely. After conducting this study we have serious concerns about many changes and challenges facing the garment industry. It seems there is a big gap of power between the policy changes to protect state quotas, and employers have great power to influence the government to promote and subsidize the survival of their businesses. On the contrary, workers have little to no bargaining power, no say with the government and no or inaccurate knowledge about what is going to happen in the future of their job security. It is important for every concern group to work together to struggle against the attempt of corporations to exploit workers under the free trade model. Human must come before corporate profit.


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Some Related websites: www.thaitextile.org www.thailabour.org www.industry.go.th www.fti.or.th www.labour.go.th www.lifung.com www.moc.go.th www.wto.org www.tgma.thailand.com www.bangkokbiznews.com www.nationmultimedia.com www.tieasia.org www.iwvaluechain.com www.nanyangtextile.com

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

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