Thai garment makers moving to cheaper Vietnam

Rising local production costs have pushed five major Thai garment manufacturers to relocate to Vietnam, transferring combined investments of 1.5 billion baht.

Sukij Kongpiyacharn, president of the Thai Garment Manufacturers Association (TGMA), said the Democrat Party’s election promise to increase minimum wages by 25% over the next two years is certain to reduce industry competitiveness.

The party’s promise is not based on inflation or other factors such as labour skill development, he said.

Mr Sukij said the garment industry kept its pay above the minimum wage to prevent workers from moving to the electronics industry. A 10-hour shift will cost garment manufactures about 350 baht if the minimum wage is 296 baht.

“The government should have a clear policy regarding support for this industry,” he added.

Vallop Vitanakorn, an honorary adviser to the TGMA, said the five factories moving to Vietnam would start operations this year, employing 24,000 workers since labour is cheaper there.

The five are Hong Seng Knitting Co, Hi-Tech Apparel Co, Nice Apparel Co, Liberty Garment Co and Golden Thai Industry Co.

Mr Vallop expressed concern that more may move to cheaper-labour countries such as Vietnam, Bangladesh, Indonesia, Cambodia and possibly Burma due to the declining trend in Thai labour.

One problem is employee retention, as 10-20% of workers drop out of the industry after returning home upcountry to harvest crops.

“This results in an inconsistency in the labour supply after training,” said Mr Vallop.

Thailand now has about 1,600 garment factories, down sharply from 2,600 in 2005, he said. If labour costs continue to rise, only 500 to 600 factories will be left five years from now.

However, Mr Vallop said there should not be an unemployment problem in the industry if garment factories do move abroad, as the government is inviting Japanese SMEs to set up here. They will require 350,000 workers.

He predicts direct exports will eventually decline while indirect exports, which now amount to 4-5 billion baht a year, will increase.

Meanwhile, the TGMA is targeting export growth of at least 5% this year from USD3.2 billion last year on increased orders from foreign customers turning away from China due to rising labour costs there. – Dtinews

Tags: Thai Garment Manufacturers Association