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Dressed For Success(HKTDC Enterprise, Vol 10,2007)

Garment Industry Focus


Hong Kong Trade Development Council Garment Advisory Committee Chairman Andrew Leung says Hong Kong responds quickly to international fashion trends
The Hong Kong fashion industry has been moving successfully upmarket since Hong Kong Enterprise was first published in 1967

The "Made in Hong Kong" label first seen on low-cost apparel is now synonymous with a renowned production, sourcing and servicing centre of quality garments and fashion that enjoys a high global reputation.

So says Andrew Leung, Chairman of the Hong Kong Trade Development Council's (TDC) Garment Advisory Committee and a keen observer of an industry that is a leading earner of domestic exports.

"The textile and manufacturing industries grew steadily from the 1960s onwards, thanks to population growth and the low cost of labour," Mr Leung explains. "As Hong Kong rapidly industrialised, the garment industry became driven by exports to international markets."

However, this gradual growth did not come without cost as Hong Kong's export success through the late 1950s and the 1960s generated trade friction that resulted in voluntary export restraints through a series of treaties, the first with the UK.

Yet, despite these agreements, Hong Kong's exporters continued to exploit their flexibility and adaptability to increase production and find new markets.

As a result, exports increased from 54% of GDP in the 1960s to 64% in the 1970s - indeed, Hong Kong was ranked the world's top exporter of garments from 1973-1977 and again in 1980-1985.

Today, the textile and garment industry employs approximately 40,000 people and provides some 55% of total domestic exports - despite the fact that the majority of production is located on the Chinese mainland and in other Southeast Asian countries.

"Hong Kong is no longer a manufacturing centre, but one of the world's largest exporters of garments and garment accessories and the fashion hub of Asia," claims Mr Leung, who is also Chairman of Sun Hing Knitting Fty Ltd.

While little in the way of actual manufacturing takes place in Hong Kong, those within the garment industry play a vital role in the global industry.

"Together with the TDC, our garment manufacturers have done a highly creditable job in raising Hong Kong's competitive advantage by taking the necessary steps to position the industry where it stands today," Mr Leung insists.

He says they have controlled costs through globalised production, and enhanced productivity and quality through intelligent use of technology and original designs. "Furthermore, they have devoted important marketing efforts to building brands," he claims.

Many of these achievements flowed from the mainland's "Open Door" policy, which was announced by the late Deng Xiaoping at the end of 1978 and marked a new era for Hong Kong's garment manufacturing industry.

"The Open Door policy meant that Hong Kong manufacturers had access to a labour pool in the Guangdong region of several million, instead of a total Hong Kong workforce of less than one million," Mr Leung explains.

The presence of numerous Hong Kong garment manufacturers in the mainland's Pearl River Delta (PRD) region was also responsible for bringing about several mutual benefits.

For example, Hong Kong factory owners created jobs, business owners had benefited from cost-competitive labour and the demand for raw materials helped establish a number of supporting industries and services.

"These days 80%-90% of materials used in the garment industry can be sourced within the PRD region," Mr Leung notes, adding that other high-quality or specialist materials are usually sourced from Europe and the US.

He insists few other locations can match the efficiency of the Hong Kong supply chain. "In other garment manufacturing locations it is common for raw materials to be shipped in, while, figuratively speaking, we have most things we need on our doorstep," Mr Leung explains, adding that growing wealth and booming demand for consumer goods on the mainland are opening new marketing opportunities for the garment industry.

However, despite these competitive advantages, the industry requires continuous adaptation, and Hong Kong companies are constantly striving to meet the requirements of a dynamic market.

The abolition of international textile quotas in 2005 brought about many changes in the industry, but also served as a timely call for the need to move further up the value chain.

"To enhance competitiveness in the global market, the challenge is how best to leverage on opportunities through maximising Hong Kong's advantages, including our entrepreneurship, creativity, versatility, and excellent hard and soft skills," Mr Leung notes.

However, he is confident that the industry can meet these ongoing challenges. "Over the years, the garment sector has made its mark in the global arena by rising to meet challenges of one kind or another," Mr Leung observes.

He believes that in the face of fierce global competition, Hong Kong's garment industry needs to keep moving upmarket to supply sophisticated products with original designs. "Our competitive edge lies in the superb quality and swift response to fashion trends and market demands," Leung maintains.

The Hong Kong garment industry is capable of producing either a wide range of quality products in bulk or specialised items within a short lead time. "The industry has also earned a worldwide reputation for unique quality, expertise, workmanship and flexibility," Mr Leung adds.

Hong Kong's hard-earned reputation as a global sourcing hub attracts international trading houses and major retailers including Macy's, JCPenney, Karstadt Quelle, C & A, Sears, Target and Carrefour, specialty chains the calibre of The Gap and mail order houses such as Otto and Great Universal Stores.

Many international premium designer labels - such as Calvin Klein, Donna Karen, Ralph Lauren, Tommy Hilfiger and Yves Saint Laurent - also source clothes in Hong Kong through their buying offices or other intermediaries.

To meet their diverse needs, the garment industry invests heavily in capital-intensive and advanced machinery. "As an industry, we should not only focus on competing on cost alone but also on the various ways we can add value to our products and services," Mr Leung insists, citing diverse ancillary activities such as sales and marketing, quality control, designs and new-product development.

He perceives that design has become increasingly important over the years, and notes that many young Hong Kong designers have become important players in both the local and international markets.

"We are seeing more and more young and talented home-grown designers emerging, bringing new and exciting design concepts to the fashion market - which can only bode well for the industry as a whole," Mr Leung says.

Indeed, medium- to high-priced fashion clothing bearing Hong Kong designer labels is being sold or has been sold in renowned department stores overseas such as Bloomingdale's, C & A, Harrod's, Isetan, Macy's, Marui, Mitsukoshi, Nieman Marcus and Seibu.

In addition, a few well-established local manufacturers have entered into the retailing business, either locally or in overseas markets, and many have retail networks with their own labels in major global cities including Beijing, London, New York, San Francisco, Shanghai, Singapore, Sydney, Taipei and Tokyo.

The introduction of innovative new wrinkle-free, water-resistant, washable, soft-stretch and environmentally-friendly fibres and fabrics such as viscose, lyocell and acetate, has buoyed demand in many different areas.

The use of microfibre has also been gaining more attention, thanks to its light weight and superior body-heat retention.

"Hong Kong garment makers have been quick to respond to these new materials and work closely with clients to maximise their use," assures Mr Leung.

Looking to the future, Mr Leung says the demand for shorter production cycles means Hong Kong garment manufacturers must continue to be creative, bring products to the market earlier, and be better and more effective than their competitors.

"We realise we face some tough challenges ahead - however, I believe we have the right platform and experience to continue to be successful over the years to come," Mr Leung concludes.

Still Showing The Way

The clothing industry has evolved over the past several decades to become a major contributor to Hong Kong's economy - and its consistent growth shows no sign of slowing down.

It is the second-largest manufacturing employer in Hong Kong, with 1,649 establishments hiring 29,236 workers as of June 2006, and is the leading earner in terms of domestic exports - contributing 40% of the total in the first nine months of 2006.

Latest figures show that Hong Kong's total exports of clothing rose year-on-year by 3% to HK$162bn, thanks to many manufacturers relocating production to sidestep the quotas re-imposed by the US and the EU on mainland-origin clothing.

This development has greatly boosted domestic exports of clothing, which surged 18% from January-September 2006, while suppressing re-exports, which slipped 1%.

Exports to the US rose slightly by 2% in the first three quarters of 2006 and shipments to the EU increased by 5% in the same period, with exports to major EU markets like France and Germany growing by 2% while Italy maintained a 30%-plus growth rate.

Product-wise, Hong Kong's exports of woven wear rose by 5% in the first three quarters of 2006, with woven wear for women/girls and men/boys climbing 5% and 7% respectively, while knitted wear for men/boys recorded 7% growth and other apparel articles increased 7%.