By Francis Chan

CONTRACT manufacturers in the textile and apparel sector in Singapore must expand overseas to remain profitable.

That is the advice from the Textile and Fashion Federation of Singapore (Taff) which said this is probably 'the only way' they can ensure continued growth.

Taff said setting up operations overseas can help local contract manufacturers - many of which are small and medium-sized enterprises (SMEs) - mitigate the higher labour and operational costs here.

Despite having their headquarters in Singapore, many local firms have relocated their manufacturing plants abroad to more cost-effective locations.

Many of the 128 Singapore-based apparel manufacturers operate out of countries as far afield as Madagascar and El Salvador.

Local firms contributed close to $6 billion in apparel sales last year. Although that amounts to only 2 per cent of the global apparel market, it is still a marked increase from just $3.2 billion in 2003.

Taff's secretary-general, Mr Chris Koh, told The Straits Times that Singapore-run apparel manufacturers are now among the largest suppliers to many renowned international brands.

They include American brands such as Gap - the world's largest clothing company - and sportswear giant Nike.

They are also among the top three suppliers for Macy's in the United States and German brand adidas. But despite the success of the Singapore apparel industry in the export markets, local sales remain modest.

'The domestic export for apparel manufacturing here is very small - between $300 million and $400 million,' said Mr Koh. 'But despite our size...the sector is growing very rapidly.'

Mr Koh explained that although many SMEs in the industry face common issues such as the lack of financing and manpower constraints, they can still tap strategic partnerships to expand abroad.

'It is not impossible, and firms don't even really need to invest a lot to venture abroad,' he said. 'What companies can do is to partner factories in other markets like Vietnam, for example.'

The challenge for SMEs, he said, was finding a partner with the right 'chemistry'.

'You need to be able to trust your partners,' said Mr Koh. 'So do your checks within the industry to ensure your potential partner has a strong reputation and a sound credit rating.'

Mr Koh also said that the global apparel industry is now in a 'consolidation stage' so industry players can look forward to new opportunities on the horizon.

Taff said that a mission involving nine local firms, under its Apparel Singapore initiative, will be heading to Tokyo on Oct 13. The firms will be meeting Japanese buyers from popular fashion chains such as Muji and Uniqol to explore business-matching opportunities.

This article was first published in The Straits Times on October 01, 2008.