Video #16 - Malaysia: Textile Competition

Tuesday, January 10, 2006

sources | lesson plan

BACKGROUND INFORMATION

The textile industry in Malaysia was a cottage industry until recent times. Then Singapore implemented increases of over 200% in the minimum wage for textile workers over the course of 15 years, and companies began to relocate across the border. The textile and apparel industry of Malaysia was ranked as the country's fourth largest export earner in 2001, bringing in just under $2.7 billion. The workforce of 150,000 employees ranks it as the second largest source of employment in the country.

The textile industry in Malaysia is divided into two major segments: fiber-weaving, yarn-spinning, clothing manufacturing and dye and print industry; and the manufactured garment products and other fabric accessories-- such as gloves, bags, hats, carpets-- plus textile machinery and equipment.

The apparel sector is facing rising costs of production due to a tight labor market and increasing wages for workers. The government approved 218 textile manufacturing projects. In addition, a large number of textile mills are known to be operating without any manufacturing license.

Among the major export markets for Malaysia's apparel industry, the U.S., Europe and Canada currently impose annual quotas on the volume of apparel that can be imported from Malaysia. Malaysia's Ministry of International Trade, in turn, sets quotas for individual exporters. However, those quota restrictions are expected to be lifted in 2005, as part of a general opening of world trade.

Since quotas have driven Malaysia's textile business, the bulk of exports have consisted of "low-end commodity apparel" or items that are manufactured under contract. In order to compete with countries with lower labor costs (such as China, Indonesia, Vietnam and Thailand), Malaysia's industry must now move into higher-value commodity apparel and specialty markets. Experts agree that the country must also deal with the high cost of labor, a tight labor market and a lack of research and development.

The dependence on contract manufacturing means that Malaysia is weak in terms of design and product planning capabilities, distribution and marketing capabilities. Instead of creating original Malaysian brands or names, Malaysian manufacturers produce for major world brand names, including: Adidas, Arnold Palmer, Active Wear, BUM Equipment, Calvin Klein, Christian Dior, Gucci, Guess, Donna Karan, YSL, Levi's, Nike, Padini, Polo, Ralph Lauren, Reebok, Slazenger, Pierre Cardin, Camel, Mizuno and Montagut.

Malaysia's dyeing, printing and finishing sub-sectors are outdated. There is a need to upgrade existing facilities and encourage additional capability and capacities. In the accessories subsector, manufacturing is confined to buttons, sewing threads, interlining, elastic bands and zippers. To cater to the requirements of the modern fashion apparel sector, the types of accessories and the range within each type must be increased. Other concerns include the shortage of skilled workers in textile science and technology as well as fashion design and marketing. Also, Malaysian workers need to be trained in the more sophisticated computer based automated processes.

Recently, the effect of the SARS epidemic has also hurt the Malaysian industry. As a result, the Malaysian Garment Manufacturers Association (MGMA) asked the Ministry of International Trade and Industry to further lower duties on fabric imports from 15% to a 0-5% range. (Tariffs had already been cut from 20% to 15% in 1999).

Still, the industry's internal efficiencies must be improved if the country is to compete when the WTO agreement to eliminate tariffs and quotas comes into effect in 2005.

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SOURCES

"Malaysia: SARS Fearing Domestic Textile and Apparel Industry." Agencies, Bharat Textile.com, April 25, 2003

"Rebuilding Malaysia's Textile and Apparel Industry." www.mier.org.my/mierscope/chaynee14_9_2002.pdf Loehman, Karine and Gilles Valentin, "Malaysia: Facing up to the cost conundrum." Fashion Business International, March, 2002.

Yen, Angie, "Malaysia Sector Summary: Textile." British High Commission, April, 2003. www.britain.org.my

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LESSON PLAN

GRADE LEVEL/SUBJECT:

10-12 grade Economics, International Relations, World History, Geography, International Baccalaureate Programs (IB), Current Events.

PURPOSE:

To present activities to be used in a variety of classroom situations in order to enhance student understanding of the Asian economy and its significance globally.

OBJECTIVES:

Students will be able to:

1. Describe the history of the textile industry in Malaysia.
2. Analyze the economic impact of the industry on the Malaysian economy.
3. Evaluate the competition in the textile industry among neighboring nations.
4. Forecast the future if the textile industry in Malaysia.

MATERIALS:

1. Background information provided.
2. Resources on Malaysia's textile industry available at your school's Media Center and the Public Library System in your area.
3. Background information available through Internet "search engines."

ACTIVITIES:

May be assigned as group activities or as individual tasks. They may also be designed as preparation for related presentations either by individuals or groups.

1. Locate Malaysia and its main competitors in the textile industry on a map of Asia.
1. Use charts and graphs to show the growth of the textile industry in Malaysia and neighboring countries in Asia in the past ten years.
1. Develop a time line of events in the textile industry of Malaysia.
1. Create an ad campaign to promote Malaysia's textile industry in the world.
1. As the leaders of one of the textile industry's organizations in Malaysia, write a document making recommendations for governmental action to increase development and improve the industry's competitive edge.

EVALUATION:

Individual assignments should be graded by the teacher using established criteria.

Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale: Content 1 = Superior (A) Creativity 2 = Excellent (B) Clarity 3 = Good (C) 4 = Fair (D) 5 = Poor (F)

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