The Thai textile industries, have become increasingly important to the Thai economy since the 1980s and, are now facing difficulties to compete in the world market. On the one hand, wages in Thailand have increased consistently since the late 1980s while important competitors such as Indonesia and the Peoples Republic of China (P.R.China) have lower wages than Thailand. Moreover, during 1988-1991, Thai wage rates increased around 10 per cent a year while wages in Indonesia and P.R. China increased only 9 and 9 per cents, respectively. This reduces the countrys advantage of low wages and makes the industries competitiveness periodically decline. On the other hand, the environment of international trade in textile products has become more competitive. According to the final act the GATT Uruguay round, textile products will be liberalized under GATTs transitional 10 year period. Moreover, the AFTA agreement is the other factor pushing a more competitive environment. Therefore, this study has been concerned with evaluating the competitiveness of industries in both the short run and long run. In the short run, the empirical results indicate that the Thai textile industries still have competitiveness comparing with Malaysia and Indonesia. Moreover, in order to consider short-run competitiveness, two external factors should be taken into account

source of debt financing and the structure of textile tariffs. In the long run, these industries can sustain competitiveness if Thailand can minimize the gap of growth between its labour productivity and its real wage rates. Therefore, from this study, three policies are recommended. Firstly, the government should minimize the gap of the cost of debt (interest rate) between foreign and domestic sources. Secondly, the structure of textile tariffs should be reformed. Thirdly, a development of labour productivity should be undertaken by both the private and public sectors in order to sustain long-run competitiveness.