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Pay hike could force out Japan firms

Apr 03. 2012
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By Nalin Viboonchart
The Nation

3,554 Viewed

Thailand's minimum wage hike may force Japanese companies to relocate to neighbouring countries if they operate at a loss, while labour disputes in the country are expected to increase, Japanese investors said yesterday.

The impact on SMEs remains a concern even for foreign investors. The Finance Ministry yesterday raised the possibility of granting a tax deduction to SMEs for the increase in wages to help the largest group of manufacturers. 

Kazushige Nagura, executive adviser to Vuteq Thai, a parts supplier for Toyota and Isuzu, said the wage hike has also affected Japanese companies. Investors have to wait and see whether they can survive from higher labour costs. It might take three to six months to learn the result. 
“The government should have discussed this policy with the private sector first. In fact, it announced this as a policy. When the policy is implemented, the private sector has to abide by the law,” he said. 
If manufacturers cannot continue because of red ink, they might move to Burma, Laos or Cambodia, he said. 
Vuteq has three companies under its wing with some 500 workers. It is trying to reduce other costs to stay afloat. 
Supachai Manusphaibool, managing director of MR & TS, a labour law consulting company, agreed that wages in Thailand should be lifted, but warned that a sudden 40-per-cent jolt will shock the market. SMEs will be hurt the most, resulting in supporting industries getting hit. 
Manufacturers would adopt various measures to lessen the impact from the wage hike. Transferring to another country is one of the solutions. Some will lay off workers, while some will trim bonuses. 
“Migrant workers from Thailand’s neighbouring countries will increase. And the serious problem is that labour disputes and protests will increase markedly,” he said. 
The rise in wages would fuel domestic consumption, so those industries that can manage will benefit from the increased demand in the domestic market, he added. 

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