Many business organisations in Myanmar have lodged objections against improving daily wages as approved by the National Committee for Designating Minimum Wage earฌlier this month.
The committee has decided to set the minimum wage at 4,800 kyat, a 33 per cent increase from the current rate of 3,600 kyat. All businesses with 10 or more workers have to apply the same daily minimum wage across Myanmar.
Businesses, either foreign or local, can lodge a complaint with the decision by January 16. According to the law, the new wage will come into effect after 60 days of public comments.
Maung Maung Lay, vice president of the Union of Myanmar Federation of Chamber of Commerce and Industry, said it was not a prudent decision to tackle the minimum wage at this point.
“It was a mistake, risky, controversial. The country is not that ready,” he said.
“Respective companies try to maintain their businesses prudently by offering incentives, benefits, etc. to attract and maintain their workers or associates. Why control or contain them or limit them? Let them be independent and control the work force according to the market.”
He said Myanmar should attract foreign direct investments (FDI) on low minimum wages, as the nation’s merits and productivity ties were questionable.
“Now, things are in jeopardy. Everyone is greedy. In the United States, the State of New York, which seems to have somewhat higher minimum wage than the others, even has many challenges. Myanmar’s dilemma is not unexpected,” Maung Maung Lay said.
“With the current scenario, FDIs can be endangered. Employment can be effected. Reputations tarnished. We could expect hard times unless some remedies are found,” he said.
He said employers, employees, labour unions, authorities and non-government organisations should have sympathy, empathy, understanding and knowledge to holistically and collectively resolve the issue.
“If not, I dare not dream about the transformation, to bypass even some neighbouring States,” he said.
Kyaw Win, vice president of the Myanmar Garment Manufacturers Association, said a 33 per cent hike in labour costs within two years could pose a “heavy burden” on employers, as it was a very rare practice globally.
“We are still at the infant stage of industrialisation. We are fully aware that the minimum wage needs to be reviewed, given the higher living costs. But businesses should develop at the same time,” he said.
He said the government should strike a balance between the wage hike and the growth of small and medium enterprises. He warned of potential negative impacts on job opportunities for the unemployed.
“Even at the current wage, there are hundreds of people who want to get employment at garment factories. If the wage is higher than what it should be, then it will be hard for us to hire new staff. For example, if we can spend US$1,000 (Bt31,768) for labour costs, we can hire three staff at around $330340. But if we have to pay $500 per employee, we can only hire two staff. So, it will negatively impact on our productivity,” he said.
According to Kyaw Win, garment workers in Yangon region usually earn around $150 in takehome pay per month, more than double of those in Bangladesh, a country with higher productivity than Myanmar in the garment industry.
“Increasing labour costs with the lack of improvements in productivity will put a lot of pressures on employers. Only 2030 per cent of garment factories in Myanmar are owned by locals. It makes sense to attract FDI only with an enabling work environment. It should be a winwin for both employers and workers,” he said.
He said most of the factory owners had decided the minimum wage should be 4,000 kyat, an 11 per cent increase over the current wage. In this regard, they have lodged a complaint to the authorities so the proposed wage can be fairly reviewed before it takes effect.
There is a need to “reach a consensus before making such an important decision. It should not be approved by major votes,” he said.
Aye Tun, vice president of Myanmar Industries Association, shared a similar view. He said the higher wage would lead to more struggles for CMP (cutting, making and packing) businesses.
“It may lead to misunderstanding among foreign investors. They may even consider Myanmar an unstable and insecure market. Then decisions to do business here may be delayed or even cancelled,” he said.
Aye Tun urged the government to take the importance of the consumer price index into serious consideraฌtion.
Despite rising concerns by local businesses, foreign investors still believe in the future of Myanmar thanks to its strategic geographical presence.
According to Aung Naing Oo, director general at the Directorate of Investment and Company Administration and secretary of the Myanmar Investment Commission, investors’ interest in Myanmar is still on the rise despite some concerns over the wage hike.
“Some labour intensive factories would not be happy with this but I do not think the majority of them will move to other countries, since the country of origin [Myanmar] is attractive,” he said.
Sangchai Chotchuangchutchaval, chief executive officer of Patkol Public Co, the pioneer of the dairy business in Thailand which has an office in Yangon, said the proposed increase would not affect the economy in the long run.
“In the meanwhile, it may affect some sectors but at this rate (4,800 kyat), it is not considered very high,” he said.
“This is likely to have good results to increase power consumption in Myanmar, leading to economic growth,” Sangchai added.
Lanlila Chitsom, commercial manager at Bangkok-based United Offshore Aviation Co, said it would affect a bit to the nation’s economy but investors are still keen on investing in Myanmar.
The proposed 4,800 kyat “is still lower than the rate of other countries in Southeast Asia including Cambodia, Thailand and Vietnam,” he said.
Pakpoom Vetvitayanuwat, associate at Decha & Co, said the impact was likely to affect different industries and businesses, depending on their labour-intensity, profitability and margin for increased productivity.
“The impact in certain foreign businesses in Yangon may be minimal, given that they have hired employees with higher salaries than the new wage and many businesses have already raised wages to attract good employees,” he said.
Pakpoom said improvement of infrastructure, efficiency of labour, purchasing power and predictable policies may reduce the negative effects caused by the wage hike, which may result in unpredictable adverse effects to the existing investments and incoming FDI.
Uwe Weber, managing director of European Forum for Economic Cooperation, said an increased minimum wage would increase production costs. However, if complemented by a broader effort to offer comprehensive sustainable production services, it will contribute to position Myanmar as a top destination for customers and brands.
“This would market Myanmar as a responsible production country, with beneficial implications in terms of its integration into the increasingly sustainability-oriented Asean economy,” he said.
Weber said higher wages would substantially contribute to improved working and living conditions of women, who constitute the majority of the workforce employed in Myanmar’s manufacturing industries.
“When women earn higher salaries, they are better able to secure education and healthcare for their households. This is more relevant in a country such as Myanmar where many workers are domestic migrants, whose income plays a key role in ensuring livelihoods of families in rural and remote areas,” he said.
He believes acknowledging higher wages can serve as an instrument to strengthen social cohesion and integration.