This June, Singapore will host the inaugural SAFSA Global Forum, where top players in the world’s textile and garment industry are expected to partner with ASEAN suppliers under a new system that could change the way the textile/garment industry does business in the Association of Southeast Asian Nations (ASEAN) region, if not the world.

Initiated and developed by USAID’s ASEAN Competitiveness Enhancement (ACE) Project in cooperation with the ASEAN Federation of Textile Industries (AFTEX), the new Source ASEAN Full Service Alliance (SAFSA) program became reality in April with the induction of 14 virtual vertical factories (VVFs) as founding members.

A VVF consists of a garment factory and a textile mill who have agreed to work together under SAFSA to maximize efficiencies along the supply chain and offer a value-added full-service product to global customers. In August 2009, the ASEAN Economic Ministers collectively recognized SAFSA as a benchmark or model for the integration of other ASEAN priority sectors.

R. J. Gurley, Director of the ACE Project.

R. J. Gurley, Director of the ACE Project, explained that SAFSA is a three-year program to promote ASEAN as the full-service supply chain leader in the global textile and garment market. ASEAN will be the pioneer of an integrated full-service approach.

“SAFSA is a key part of our strategy to enhance the competitiveness of ASEAN textiles and apparel industry,” said Gurley. “It’s about teamwork. A company that joins SAFSA must commit to work closely with other companies within one or more VVF partnerships to produce and deliver quality full-service products on time and at reasonable prices to meet global customers’ needs. Meanwhile, SAFSA will work closely with and on behalf of its VVF members to facilitate introductions and meetings with global buyers.”

Global buyers that have already registered their interest in SAFSA include leading brands such as Perry Ellis, Polo Ralph Lauren, Hanes, PVH, JC Penny, VF Corporation, Avon Products, Guess, Nordstrom, Debenhams, Benetton, Max Mara, Hugo Boss and H&M.

Interested ASEAN suppliers are encouraged to join the SAFSA program. Before a company can be accepted it must find a prospective VVF partner and both must undergo an audit of 19 SAFSA service standards. For more information, visit www.SourceASEAN.com/safsa.

SAFSA Story

Declining demand for ASEAN textiles and apparel due to the global economic crisis, in combination with increased competition from China and other source markets since the end of the quota system, provides the contextual background for SAFSA.
“The textile and apparel industry is very unique because for more than 40 years it was regulated by a quota system rather than by GATT (the general agreement on tariffs and trades),” Gurley explained. “Free trade agreements rarely included this industry. The industry was defined and constrained by quotas, and that created some problems.”

Under the quota system, textile and garment factories were simply order takers. The clients themselves undertook all the value-added tasks such as design, materials sourcing, marketing, research and development. Many clients even had to assign dedicated people to suppliers’ mills and factories to perform quality control tasks—to ensure that what was produced in one source markets was comparable in quality to what was produced elsewhere.

When the quota system ended, it suddenly became a buyers’ market. Even the very largest global apparel buyers could start to look at single sources for their requirements—based either on price alone or on value-added services. SAFSA, a pilot program designed and managed by USAID’s ACE Project, is a determined bet on the latter.

ACE is part of the larger ASEAN-US Enhanced Partnership, which was signed in 2006 as a means for US to support ASEAN in its efforts to become a community of nations in 2015. ACE’s economic development focus on textiles and apparel is the result of a survey of ASEAN’s priority sectors to determine which had the greatest potential to grow and benefit from greater regional integration. ACE indentified tourism and textiles and apparel as the sectors which had the greater potential for enhanced integration and global competitiveness.

In 2008, its first year of operation, USAID’s ACE Project surveyed the textile and apparel industry and found that all the goods and services necessary for an fully-integrated textile and garment industry were available in ASEAN—the textile mills, garment factories, spinners, dyers, trims, etc. “But they were not all available in a single ASEAN country,” Gurley said. “There are few fully-integrated supply chains within any one individual ASEAN country.”

For example, Thailand has a good number of textile mills, but there are no major textile mills in Cambodia and Laos. Cambodia has around 300 garment factories that specialize in cut-make-trim (CMT) and Lao has 50-60 garment factories.

“The solution, SAFSA, helps factories and mills in the ASEAN region form partnerships,” Gurley explained. “However, it is hard to pair up partners when nobody knows each other. They had worked the quota system for too long and just did not know much about others in the same industry, even those just across the border in neighboring ASEAN countries. So we developed SourceASEAN.com to provide the market information.”

Once both companies in the partnership are audited and accredited according to the SAFSA service standards, they are able to join SAFSA as virtual vertical factories (VVFs).

“Previously, there was no such thing as quality services standards in the textile and garment industry,” Gurley said. “There were labor standards, health standards, but no service standards that global buyers could rely on. Thus we had to develop service standards that would be recognized and accepted by the international textile and apparel industry.”

Gurley explained that the strict standards and audit requirements ensure that SAFSA VVFs represent the best ASEAN has to offer. “We want only top quality companies in SAFSA,” Gurley said. “We want to give global buyers the confidence that they are dealing with reputable and ethical suppliers that apply internationally-accepted standards to their operations.”

Gurley said some applicants dropped out when they realized that they would have to take the audits, which are undertaken by SGS, the world’s largest independent inspection, verification, testing, and certification company. “That’s good,” he said. “If a company cannot commit to an audit, then it is unlikely to commit to the three-year lifespan of the SAFSA program, and it is clearly not serious about becoming a global player.”

Once a membership application is accepted and the prospective partners are successfully audited, a VVF member of SAFSA is created. “The major benefit of membership is that SAFSA helps VVFs meet leading buyers,” said Gurley. “SAFSA also helps VVFs work effectively as teams as well as provides technical support, advice, training, and workshops so that they may better fill the needs of their clients.”

While SAFSA has worked on encouraging ASEAN’s factories and mills to form VVFs, it has also been busy seeking prospective clients. Buyers interested in joining SAFSA include many of the top US and European apparel brands, such as Perry Ellis, Polo Ralph Lauren, Hanes, PVH, JC Penny, VF Corporation, Avon Products, Nordstrom, Debenhams, Benetton, Max Mara, Hugo Boss and H&M.

Within days of SAFSA inducting its first members in Jakarta on April 19, two SAFSA customers, Guess and Debenhams met with many VVFs prior the SAFSA Global Forum. They committed to visiting the VVF factories and will attend the SAFSA Global Forum in June.

“We’re inviting VVFs and interested buyers to get together at the SAFSA Global Forum in Singapore,” said Gurley. “We are providing a venue and a format, but the business decisions are the VVFs’ own to make. SAFSA will not get involved in contracting.”

Gurley doesn’t expect fireworks and miracles. “This is a pilot project,” he cautions. “So we, SAFSA, AFTEX, the VVFs, and the buyers, have to understand that and patiently learn from our individual and collective mistakes. Ultimately we want to establish solid long-term partnerships between VVFs and their customers. This may take time. Meaningful successes often do.”
The ACE Project will end in 2013, but Gurley’s goal is for SAFSA to sustain itself as a strong and independent alliance of quality ASEAN suppliers under the purview of AFTEX. Through SAFSA, ASEAN’s textile and apparel industry is setting an example for other priority sectors. The ASEAN economic ministers have recognized this and are watching closely.

From being a regressive industry bound by quotas in 2005 to becoming one that is on the leading edge of regional integration in 2010, ASEAN’s textile and apparel industry seems destined for meaningful success.

For more information please contact:
ACE Project, ASEAN Competitiveness Enhancement, Nathan Associates Inc.
R.J. Gurley, Director, ACE Project ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )
Nuntana Tangwinit, Project Specialist - Textile & Apparel, ACE Project ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )