ASEAN: Regional Trends in Economic Integration, Export ... - USITC

national government source stated that the Roadmap is no longer a critical factor
influencing economic integration in the cotton woven apparel industry. 25
ACE Project’s SAFSA Initiative 26
The ACE project funded by USAID is likely to have a greater effect than the Roadmap in
increasing intra-ASEAN production. 27 It is designed to stimulate intra-ASEAN
production in order to increase the ASEAN region’s global competitiveness. To
accomplish this goal, the ACE project is supporting the restructuring of the ASEAN’s
textile and apparel sector so it can compete in the growing global trend of “fast fashion.”
As described above, the increasing competition in the global retail apparel market has
driven apparel buyers to seek one-stop sourcing and hold smaller inventories in order to
reduce costs. This has led them to place smaller orders for a greater variety of garments,
delivered in shorter lead times. Although countries that are vertically integrated are most
likely to have the means to develop “fast fashion” production, the goal of SAFSA is to
develop an ASEAN industry from which global buyers would be able to source fully
designed apparel that is produced with ASEAN inputs in ASEAN countries. 28
The use of virtual vertical factories (VVFs) 29 can enable the production of fast fashion by
linking suppliers and garment manufacturers in different countries. VVFs have the
potential to allow the various players in the production chain to exploit their comparative
advantages and market a complete suite of services to buyers, including design—a
function traditionally controlled by buyers. 30 In June 2010, there was a SAFSA Textile
and Apparel Global Forum held in Singapore. Eight buyers from the United States and
the EU were present, and 14 VVFs (textile mills and garment factories) attended. 31
Role of FTAs on Integration
FTAs are an additional driving force behind ASEAN integrated production. 33 For
example, the rules of origin under the ASEAN-Japan FTA require that cotton woven
apparel be produced from cotton woven fabric made in an ASEAN country or Japan.
Indonesia has doubled its fabric exports to other ASEAN countries since the ASEAN-
Japan FTA took effect in December 2008. 34 Companies based outside of the ASEAN
region may use ASEAN countries as a platform for duty-free exports to Japan under the
ASEAN-Japan FTA, and Indonesian industry sources attribute this success to the FTA. 35
To a lesser extent, the new ASEAN-China FTA will also permit non-ASEAN-based
firms to use ASEAN countries as platforms for duty-free exports to China. However, the
25 Ibid., March 2, 2010.
26 The ACE project’s initiative to develop “fast fashion” production.
27 Industry representative, interview by USITC staff, Kuala Lumpur, Malaysia, March 10, 2010; and
government official, interview by USITC staff, Jakarta, Indonesia, March 2, 2010.
28 Industry representative, e-mail message to USITC staff, April 30, 2010.
29 Virtual vertical factories (VVFs) are apparel factories and fabric weaving mills that would partner to
create finished apparel. Industry representative, interview by USITC staff, Bangkok, Thailand,
March 15, 2010.
30 Industry representative, interview by USITC staff, Bangkok, Thailand, March 15, 2010; industry
representative, e-mail to USITC staff, April 20, 2010.
31 Likhikiatikul, “Global Fashion Brands Sign 23 MOU with ASEAN Suppliers.” June 15, 2010.
33 Fee and Shannon, “Free Trade Agreements: Japan’s Free Trade Network,” March 16, 2010.
34 Industry representative, meeting with USITC staff, Jakarta, Indonesia, March 3, 2010.
35 Industry representative, interview by USITC staff, Bangkok, Thailand, March 15, 2010.
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