MANUFACTURERS in Myanmar have been told to shift their focus to productivity, following the government's approval of the country first minimum wage last week, said industry players.
Aung Thein, vice chairman of the Myanmar Industries Association (MIA) and managing director of Nibban Electronics, said in an exclusive interview that Myanmar was still competitive in comparison with other countries in Southeast Asia.
“But the competitive advantage may amount to nothing if productivity is very low. For example, in the textile and garment industry, if a Bangladesh worker can produce 10 casual outfits per day while a Myanmar worker can produce only five, it is impossible to pay very high [salaries] in Myanmar. If workers want more money, they should try to improve their skills and increase productivity,” he said.
Last week, Myanmar set the minimum wage at Ks3,600 per day (Bt100), effective September 1.
According to the law, the minimum wage will be reviewed every two years. It does not apply for enterprises employing fewer than 15 workers.
Despite the move, Myanmar’s wage remains the lowest in the region.
The minimum wage is US$250 (Bt9,000) a month in Thailand, $128 in Cambodia and $110 in Laos.
Last week, Vietnam’s National Wage Council approved a 12.4-per-cent increase in minimum wage for 2016, with it set to rise from $107 to $156. Zaw Min Win, vice president of the Union of Myanmar Federation of Chamber of Commerce and Industry, does not see the minimum wage as a problem.
“The wage is pretty fair for both sides. Currently, CMPs [cutting, making and packaging companies] are also doing well. Their income has also increased thanks to the dollar’s appreciation [against the kyat],” he said.
According to Aung Thein, some factory owners in Myanmar can comfortably abide by the law, while many others will face difficulties.
The latter will need to cut production costs and other expenses, or lay off workers. Some may shut down their businesses, he said.
“The minimum wage may pose difficulties to CMPs as their [profit] margin is very thin, entirely dependent on orders,” he said.
“If labour costs suddenly increase, it is usually hard to absorb these costs. The most important thing is to have a mutual understanding between employers and employees.”
His association is pushing for higher productivity. To increase the national productivity level, MIA has conducted training on operational management in cooperation with Malaysia’s Expertise Resources Association over the past few years.
Aye Thaung, chairman of the Shwe Lin Pan Industrial Zone, said that productivity would be the key as Myanmar was still experiencing a shortage of skilled labour. He said that some companies considered introducing automated systems.
“Workers have the right to claim a pay rise but at the same time, they need to work hard and should try to improve their skills,” he said.
Naing Lin Aung, a worker at the Toyo battery factory in the Shwe Pyi Thar Industrial Zone, is satisfied with the minimum wage although it is less than what some workers wanted.
“Before this, we expected it to be Ks4,000. But something is better than nothing. We welcome the move, as it is a turning point to ease the prolonged employer-employee tension,” he said.
“At least it has some positive impacts on workers. As for my factory, I guess things cannot change very much. But I am worried some textile factories cannot pay Ks3,600, as they are not profitable.”
Khin Maung Aye, owner of Lat War textile factory in the Hlaing Thar Yar Industrial Zone, is worried that fixing the wage may have impacts on national productivity.
“Different factories are in different situations … Not many factories have closed but I’m sure we will see a lot of layoffs in the next few months,” he said.
On September 1, when the minimum wage law took effect, more than 500 workers in the Hlaing Thar Yar Industrial Zone lost their jobs.
The Sabei Pwint textile factory was shut down, affecting 237 workers.
The Asia Rose textile factory laid off 196 workers, the Ayeyarwady dyeing and printing factory laid off 38 and more than 80 workers were laid off by the Shwe Swan Yi factory.
Aung Lin, president of the Myanmar Trade Unions Federation, anticipated negotiations between employees and factories are in the red.
Yet, he does not expect more protests, as workers’ wish for a minimum wage has been fulfilled.
He said some employers have removed employee incentives and some may reduce overtime expenses, which require double pay accordingly to the law.
Myo Aung, permanent secretary of the Labour Ministry, said that the authorities were keeping an eye on developments.
“We have implemented a system that is very new to Myanmar. So we need constructive cooperation from both sides – employers and employees,” he said. “We are now doubling efforts to ensure the minimum wage is paid in accordance with the law.
“We will also keep an eye on the real situation as we need to set a proper minimum wage every two years.”