Six top garment makers fleeing to low-wage Burma
At least six leading garment manufacturers plan to set up plants in Burma in the second half of the year after the country has made clear moves towards democracy and flexibility in its investment laws.
Initial investment capital for starting each new plant is expected to average US$10 million (Bt300 million), for a total of $60 million. Rangoon |will be the first city that Thai investors explore, since it has more highly developed infrastructure than elsewhere |and is a port gateway.
Vallop Vitanakorn, an adviser to the Thai Garment Manufacturers Association (TGMA), said that producers planned to invest in Burma this year foreseeing higher competency of the country to serve as a new manufacturing base for both domestic supply and export to third countries.
He said high output was planned for each plant, creating employment for about 1,000-3,000 labourers.
“The general election on April 1 will show that Burma will not move backwards. This will ensure that the country will have a clearer policy to promote growth and revise rules and regulations to facilitate investment,” Vallop said.
The Burmese government is planning soon to amend its investment law, which has been unchanged for 24 years. Burma’s labour costs are one-third lower than Thailand’s.
TGMA president Sukij Kongpiyacharn said the current shortage of labour in Thailand and the plan to raise the minimum wage next month to Bt300 a day has encouraged the country’s 15 largest garment manufacturers to relocate to neighbouring countries.
During the past year, Thai garment producers have invested a combined $200 million to set up new plants in other Asean countries, including Cambodia, Vietnam and Laos.
Sukij said more than 10 local apparel producers would set up new plants in Burma this year.
“Factories in Burma will be larger than the other plants that Thai investors have set up in other Asean countries. Burma is the highest-potential destination for investment, since it has large domestic market as well as being an export base to third countries,” Sukij said.
He added that given the unreasonable policy of the Thai government to increase wages in the country, which it says is aimed at improving living standards and reducing the income gap, Thai enterprises would not expand new business here.
As a result, the value of garment exports would face flat growth this year and tend to remain unchanged in the following years. The export value of Thai garments total about $3.25 billion per year.
Garment manufacturers have high hopes that the government will decide to delay its policy to increase wages for skilled and unskilled labourers on April 1. The industry in October filed a petition to the Central Administration Court calling for such a delay.
Vallop said enterprises had questioned the appropriateness of raising wages at a pace that is not in line with efficiency developments. More than 30 per cent of garment enterprises, which are small and medium-sized enterprises, could face bankruptcy as they shoulder higher production costs, while worker competency has not been raised.
Enterprises are unable to raise their retail prices to offset rising costs of production amid the difficulties of global economic growth. Therefore if they cannot cope with higher production costs, they will have to shut down, he warned.