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Korea: Textile makers seek new fit |
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2004-7-27
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 Circa 1970 saw garment makers and fabrics suppliers touching dizzy heights of success as they propelled domestic economy up to 30 percent, sewing together the "Miracle on Han River."
The machines at KN Wool Textile Co.''s factory in a cozy nook in South Gyeongsang Province are whirring away, filling U.S. orders for the 2005 spring-summer season, but it is not enough.
"We used to have buyers lining up at our doors. Now, it''s the reverse. The industry is visibly struggling," says Chae Byung-ho, in charge of the wool maker''s exports to the United States and Canada.
However, 1990’s, saw the downhill, with Korea being nudged aside by competitors from less developed nations and by 2002, their contribution to the nation''s manufacturing output had shrunk to less than 20 percent.
Now, the former economic drivers are rapidly approaching a cliff - the end to textile quotas worldwide on Jan. 1, 2005.
Last year, those countries accounted 19 percent of Korea''s $15.3 billion textile exports.
But with the removal of quotas China and India will be giving a stiff competition to rest of the world.
Korea already has felt the brunt of China''s low-cost production.
"Already, we have lost our edge to Chinese players. In the past, we used to be able to attract buyers if our fabric was a bit more expensive than that from China. Now, we need to be very, very generous when pricing," says Chae.
The WTO estimates Korean textile exports will decline by nearly $1 billion next year and about $2 billion in 2006.
Worldwide, textile industry workers fear they could be squeezed out of the market completely in the long run. But, for consumers, the lifting of the quotas may be a blessing.
As the ‘quota premiums’ get eliminated, extra costs related to quotas will automatically go, leading to the local manufacturers slashing costs.
KN estimates that a T-shirt made from its fabric could cost about 20 percent less.
Included in those extra expenses are the kickbacks textile and
clothes makers give to the Korea Textile Trade Association and the Korean Apparel Industry Association, both in charge of distributing the quotas imposed by the World Trade Organization.
But the future may not be so bleak, according to the handful of bigger, profit-making garment makers.
"Early on, we began expanding our global reach because we knew the domestic market would soon hit a limit," said Park Eun-jung, a spokeswoman for On&On, the nation''s second-largest clothing company.
"We want to jump into Russia, Taiwan, Hong Kong and a couple of Southeast Asian countries," said Park.
On&On also subjects a select group of its operations management personnel to strenuous training so they can be dispatched to target regions on demand.
The top garment maker uses its overseas plants to serve consumers in both the country they operate in and other markets as well.
Several companies have made breakthroughs, introducing healthier and more efficient material to the public.
One such case is Aron Textiles. After seven years of research, the firm recently developed cloth made of minerals that protect the body from harmful substances.
Textile federation reports also show that Korea lags behind developed nations in terms of manufacturing technology and design, with domestic firms investing comparably less than Japan and the United States.
But the industry has a lonely battle to fight because the government''s hands are tied down due to WTO guidelines.
At most, the ministry hosts textile fairs and exhibitions to earn back some of the public''s interest in the sector.
Last month, the Korean Apparel Industry Association released a report saying employment in the textile sector was nearly halved to 33,011 from the 64,395 in 1998.
The Korea Federation of Textile Industries said according to a nationwide poll it conducted this month on 200 textile manufacturers, the industry widely forecast a slow third quarter due to anemic domestic demand and exports.
About one third said they expect third quarter production to decline 10 percent on-quarter, while another 20 percent forecast a 10 percent fall.
Domestic sales were not expected to fare any better, with more than 70 percent of the respondents projecting either a slowdown or similar volumes. Nearly 80 percent were negative about quarterly exports.
Understandably, textile stocks have long been classified as unprofitable.
"I''ve seen a slight upturn in recent months as raw material prices have begun to stabilize, but in the long run, things don''t look so bright," said Yoon Hyo-jin, an analyst at LG Securities & Co. who manages shares of Hyosung Corp. and Kolon Industries, both fairly large textile firms. |
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