Firms relocating for cheaper labour costs
Industrialists have raised concerns that the higher minimum wage is a key factor driving many labour-intensive manufacturers to relocate to less developed neighbouring countries.
At a seminar on investment strategy in Cambodia, Laos, Myanmar and Vietnam held yesterday by the Board of Investment of Thailand (BOI) and the Federation of Thai Industries, Thaveekij Jaturajaroenkhun, chairman of TK Garment, said the higher minimum wage had a strong impact on the group’s business. It is building a new factory in Banteay Meanchey province in northwestern Cambodia, about 50 kilometres from Aranyaprathet district of Thailand’s Sa Kaew province.
Construction is expected to be complete by next year with investment of about Bt1 billion.
The group also has invested in Sisophon Industrial Park in partnership with a local investor in Cambodia. The industrial park is on 300 rai (48 hectares) in Banteay Meanchey province.
“We have a labour-intensive garment-manufacturing facility in Mae Sot district, Tak province, which previously benefited from lower labour costs,” Thaveekij said. “However, with the government’s policy to increase the minimum [daily] wage to Bt300, which will be applied in outer provinces by next year, investments in Mae Sot will get no benefit from cheap labour any more.
“Investments close to the border in neighbouring countries such as Cambodia will bring an advantage, as minimum wages in those areas are still between US$50 and $60 [Bt1,575-Bt1,890] a month. They have been awarded GSP [Generalised System of Preferences] privileges of between 15 and 17 per cent for exports to Europe,” Thaveekij said.
The GSP is designed to assist the economies of developing countries and reduce poverty.
Tak Sriratanobhas, vice president for joint-venture projects and international trade at Mitr Phol Sugar Corp, said the group had expanded its investment in Laos to exploit lower labour costs. Its vision is to invest in a turnkey value-chain project in Laos comprising research and development of sugar-cane strains, plantation, sugar production, the production of ethanol from molasses, and the use of bagasse for fuel in biomass power plants and in particle-board and fertiliser factories.
Vasana Mututanont, deputy secretary-general of the BOI, said entrepreneurs interested in investing in Cambodia, Laos, Myanmar and Vietnam needed to investigate many significant factors affecting manufacturing, including location, labour, and investment capital.
The good management of operational costs, especially on labour, is a crucial factor for those entrepreneurs to raise their competitive advantage. There are also tremendous opportunities in neighbouring countries for Thai investors to expand their businesses, Vasana said. However, Thai investors so far have shown less interest in moving into these countries than their counterparts in other Asean countries such as Singapore and Malaysia.
