TEIJIN POLYESTER (THAILAND): The weakened baht has helped an industry many thought doomed, and prompted more investment by a major Japanese fibre producer

Thailand's textile industry was coming apart at the seams until the baht began to plunge in value last year.

Economists and analysts had branded the labour-intensive sector, traditionally one of the country's biggest export earners, as a sunset industry.

‘Our headache now is that the number of customers is decreasing, but the suppliers that cannot complete in the international or domestic market will have to cease operations’
MASAYUKI MARUYAMA
President

It had been losing market share to rival producers in countries with much lower wages and production costs, such as China and India.

But the sun suddenly began to rise again when the baht was floated in July last year. The industry regained most of its competitiveness and is looking to return to its former glory as a vital element in an export-led economic recovery.

Ready to ride the new wave is the Teijin Group of japan, which has been in Thailand for
more than 30 years. Despite the recession it has pumped 900 million baht into expansion of its production base in Thailand.

But it has no further plans for growth in the current fiscal year during which it will focus
maximising use of existing plant.

In 1967 it established Teijin Polyester(Thailand) using the latest technology, after previously supplying vast quantities of material to Thai manufacturers.

It was the first integrated polyester plant in Southeast Asia. Production of staple fibre began in 1970, followed by filament yarn in 1971 and spun bond fabric in 1994.

"We used to export raw materials front Japan to Thailand. Then we wanted to replace imports in domestic production, which was more cost effective, but our founders thought, we should have a production base in this region as it was fooling to grow in leaps and bounds," said

Masayuki Maruyama, president of the Teijin Group in Thailand. The Japan-based group is the world's 15th largest producer of polyester, with an annual production capacity of 600,000 tons of fibre of which the Thai operation accounts for one-third.

The Japanese parent has invested more than 13 billion baht in Thailand in the past 31 years. Teijin's presence in Thailand today spans many fields. Apart from Teijin Polyester Thailand, it has established Teijin (Thailand) for the production of polyester staple fibre and polyester filament yarn; Teijin Industrial Park in Ayutthaya, the Thai Nam Siri weaving company; Teijin Cord Thailand, which makes polyester cord used in making vehicle seat belts; and Teijin Unitika Spunbond (Thai),

Teijin (Thailand) was adversely affected by the baht's depreciation when it reported heavy losses caused by its exposure to unhedged foreign-currency loans.

It countered the problem by increasing its capital by three billion baht. As local investors
bought shares worth only 490 million baht, the parent company in Japan made up the balance.

Teijin Polyester (Thailand) raised its capital from 340 million baht to 548 million to take up shares in Teijin (Thailand).

Teijin (Thailand) was previously owned 49% by Teijin Polyester (Thailand), and 51 % by Teijin of Japan. After the capital increase, Teijin Japan held 75.5% and Teijin Polyester (Thailand) the rest, . The focus of operations in Thailand has changed markedly over the years from meeting domestic demand. Now 40% of products are exported and 20% are sold as raw materials to companies which ship out the finished product.

But it has maintained its policy of supplying the domes-tie market at competitive rates when compared with world prices. The company also offers incentives to companies that export products made from its raw materials.

"We produce raw materials, so exporting these directly means the value is lower. The best thing for us is to do is to supply our raw materials to weaving and garment facto-ries, which add value and the margins are higher.

"About 80% of Thailand's textile exports are in garment form, so our priority is to supply enough good quality raw materials to our exporter customers. But if domestic consumers cannot use our products we would focus on direct exports," Mr MaFuyama said.

"There is too much competition in Thailand," he said, adding that only the fittest would survive the recession.

"Our headache now is that the number of customers is decreasing, but the suppliers are still there. So companies that cannot compete in the international or domestic market will have to cease operations."

Support from the parent company was very important in marketing and obtaining finance, for example when Teijin (Thailand) increased its capital by three billion baht.

Teijin of Japan, famous for its polyester products, supplies information on new developments in fibre production and equipment from its research centre.

Mr Maruyama noted that although wages in Indonesia were one-ninth the level in Thailand and electricity charges one-quarter, the textile industry still had a future in Thailand.

But it was essential to avoid having all eggs in the same basket. So Teijin had diversified into making value-added products by establishing operations in Indonesia, China and Italy.

It had also established Teijin Unitika Spunbond in March for an estimated one billion baht as a joint venture with the Unitika group of Osaka, which is famous for producing spunbond, a heat-resistant and waterproof material used in car-pets, automobile parts and other industrial uses.

Teijin sees a good market for spunbond and plans to lift annual production from the current level of 4,000 tons to 10,000 within two years to meet world demand that is esti-mated to be growing by almost 8% a year. About 80% of its products will be exported.

In Thailand, Teijin, supplies 65% of the polyester fibre for blending with cotton, and 25% of the market for all types of polyester.

But declining profit margins have fored the company to focus on trying to maintain production at full capacity, especially for export, while keeping stocks to a minimum.

Worker lay-offs would increase profits only slightly, but would be a bigger burden on society, Mr Maruyama said, adding the company employed about 2,000 people in Thailand.

Despite higher costs than in Indonesia, the productivity, skills and sincerity of Thai workers was much higher. This was why Teijin had been reducing the number of expatriate staff and replacing them with locals, he said.

Teijin Polyester (Thailand) Ltd
Established: 1967
Major shareholders: Teijin Ltd of Japan, Bangkok Bank Plc, Thai-MC Co
Registered capital: 548.2 million baht
Main businesses: Manufacturing and distribution of polyester fibre
Subsidiaries: Teijin (Thailand), Teijin Industrial Park, Teijin Cord, Teijin Unitika Spunbond
Number of employees: 1,092

Worldwide
Headquarters: Osaka and Tokyo
Number of countries: 8
Number of employees: 17,607
1997 gross revenue: 608.1 billion yen
1997 net profit: 9.79 billion yen