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Wage hike forces Thai firms hire Cambodians

Jan 06. 2013
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By The Nation on Sunday

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Thai factories have opted to hire Cambodian workers under a memorandum of understanding between Cambodia and Thailand after the Bt300 minimum wage policy came into effect for Thai workers across the country.

A total of 154 Cambodians – 118 men and 36 women – with work permit documents crossed the border in Sa Kaew’s Aranyaprathet district on Monday.

Four companies brought buses and vans to pick up the Cambodian workers, Lt-Colonel Benchapol Rawdsawat, deputy superintendent of Sa Kaew Provincial Immigration Division, said.
Although legal migrant workers are entitled to the Bt300 minimum wage, Thai factory owners can pay them less by making deductions from their salaries for electricity, water and accommodation expenses. Besides, they said Thai workers were too demanding.
He said Cambodian factories had complained that they were facing a labour shortage because locals have chosen to migrate to Thailand as they can enjoy three times higher wages. Cambodian factory owners also face protests from workers demanding a rise in monthly wages from Bt1,500-Bt2,500 to Bt4,500-Bt6,000.
Ranong Provincial Federation of Thai Industries chairman Krissana Iamwongnathee said the rise in the minimum wage adversely affected industries in the province where 32 factories are preparing to import machinery to replace labour. He said although machinery requires huge capital outlay, it is worth the investment in the long term. Others are planning to shift their manufacturing base to neighbouring countries after formation of the Asean Economic Community in 2015.
Ranong has more than 300 companies, which operate sea-food processing factories and hire more than 80,000 migrant workers.
He said the Federation of Thai Industries for 14 southern provinces all agreed they needed time to adjust and have called on the government to help business operators absorb the financial burden from the wage increase by financially supporting factories through grace periods. For instance, the government could support the wage rise at a ratio of 75:25 this year and 50:50 in 2014 and 25:75 in 2015 and in 2016 business operators wholly pay for the wage hike.
Trang Provincial Federation of Thai Industries chairman Withi Supitak said the wage rise would hurt small firms in the long term. Many factory owners in the province had adjusted by cancelling special welfare that they normally provide to staff in order to save costs, or by laying off workers who are not productive and hiring only high-quality workers. He believed companies would not close down immediately but try cutting costs first and determine within six months if they can survive.
As of now, eight factories in Tak closed down following the first round of the minimum daily wage increase of 40 per cent in April last year, putting 1,343 workers out of work.
Tak Provincial Federation of Thai Industries chairman Chaiwat Withit-thammawong claimed since the Bt300 wage had come into effect, factories would have to shoulder an 80 per cent increase in wage costs and thus would struggle to survive. They may have to take steps like slashing contributions to the social security fund from five to four per cent. Supportive measures by the government would not help them sustain their operations. It was likely that in three months, many factories, most of which are SMEs, would start to shut down one by one.
But Deputy Premier Kittiratt Na-Ranong has insisted that while the private sector faces higher costs, they would benefit in the long run because workers would have more purchasing power to buy their products.
He said it was time Thailand shifted from being a production base for labour-intensive industries to higher-quality products. He said factory closures were normal and he did not believe the wage hike was the main factor behind some companies closing down.
The government could not provide direct financial support to business operators by absorbing the wage rise but would help SMEs with liquidity and boosting business potential.

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