The luggage giant Samsonite is considering reducing product sourcing in Europe and China and shifting more manufacturing to Thailand and Vietnam. The move would allow it to take advantage of tariff reductions that took effect on Jan 1 under the ASEAN Free Trade Area (AFTA), and also duty-free exports between Thailand and India.

The higher cost of labour in China has narrowed the cost gap with countries such as Thailand and Vietnam, said Ramesh Tainwala, president of Samsonite Greater Asia, during a visit to Bangkok last week.

As well, he said, China had higher shipping costs than Thailand, while Thailand also has very highly skilled workers.

"We expect to increase production orders in Thailand and Vietnam by 200-300% in 2010," he said.

Samsonite's subcontract manufacturing operations in Thailand currently produce 50,000 pieces a month and will increase to about 200,000 units in 2010.

Samsonite currently sources women's handbags and wallets from Thailand and exports them to India and China. The company will source more travel luggage from Thailand this year.

Mr Tainwala said more manufacturing would also be moved from Europe to Asia.

"Sales of Samsonite in Asia now represent about one-third of our business. We believe that the whole centre of gravity for the wealth of the world is moving to Asia," he said.

The company expects Asia to account for 50% of its global sales in a few years. It expects its business in Asia this year to grow by 25-30%.

To achieve its goal, the company will open about 100 retail stores throughout the region over the coming 12 months, bringing its total to 800. Of the 100 additional stores, about 40 would be opened in China, 22 in India, 12 in Indonesia, two in Thailand and the rest in other countries.

Samsonite now has operations in 28 countries in Asia.

"We will increase the marketing and advertising budget for Samsonite in Asia to US$57 million in 2010, more than double the $22 million we allocated in the region in 2009," Mr Tainwala said.

Samsonite plans to spend $120 million for marketing and advertising worldwide in 2010, up from $84 million.

Mr Tainwala said 2009 had been an extraordinarily challenging year for Samsonite because the global recession curbed travel and along with it luggage purchases.

However, rapid action by governments worldwide to stimulate their economies helped spur a recovery, he said. As a result, Samsonite estimated its sales in Asia rose 9% in 2009, against its earlier projection of a 12% decline.

US sales were estimated to have declined 14%, against an earlier forecast of a 22-24% contraction, but European sales were expected to be down 18%, worse than the 14% drop forecast earlier.

Samsonite's global sales as a result were estimated to have fallen 12% from 2008, better than the 18% contraction projected earlier.