Labour shortage, wage costs cause some Japanese investors to move out

Petchanet Pratruangkrai
The Nation July 28, 2012 1:00 am

Some Japanese investors, who form the largest foreign business community in Thailand, plan to relocate to neighbouring countries because of high concern over the serious shortage of labour, rising wages, and the aftermath of last year’s flood disaster.

Although confidence in the Kingdom has improved this year, a rising number of Japanese firms plan to relocate part of their manufacturing to other Asean countries, particular Myanmar and other neighbouring nations, according to a joint study released yesterday by the Japanese Chamber of Commerce and the Japan External Trade Organisation (Jetro) Bangkok.

The survey of 374 Japanese firms in Thailand from June 1-29 showed that 65 per cent were facing negative impacts from the rise in the minimum wage and inadequate labour force. Only 22 per cent said they suffered no impact from these problems, and 7 per cent said they had been affected positively.

Jetro chairman Setsuo Iuchi said Japanese investors in Thailand were most concerned about labour-related issues.

“Some Japanese enterprises have already moved part of their manufacturing to other countries, such as car-part [suppliers] to Cambodia, mainly because of the lack of labourers. Labour-intensive industries will continue to move out of Thailand for the same reason,” Iuchi said.

With another round of adjustments to the minimum wage nationwide coming early next year, Japanese firms said they would face higher labour costs, and profit would be decreased. As a result, selling prices needed to be increased.

Iuchi said businesses had been struggling to cope with higher labour costs. Some enterprises need to review their management structure including payment systems, restriction of new employment, expected outflow of employment, and employment conditions.

The survey also found that most Japanese enterprises had a positive outlook on growth of the Thai economy in the second half of this year after sentiment shrank because of the flood last year.

In particular, businesses related to automobiles and retail have shown the highest confidence. However, the level of their recovery varied from 0-100 per cent depending on the efficiency of the enterprises.

Japanese investors also indicated that they were investing more capital in Thailand this year at Bt107 billion, an increase by 64.6 per cent from Bt65.47 billion in 2011.

Because of the shortage of labour in Thailand and the progress towards the Asean Economic Community, more Japanese firms said they would set up new production bases in other Asean countries.

Myanmar is the most popular site for new production bases among Japanese investors, followed by Indonesia, Vietnam and Cambodia. Indonesia is the most interesting market for future trading, followed by Vietnam, India, Japan and Myanmar.

To increase Japanese investor confidence, enterprises have called on the Thai government to implement a flood-prevention plan, provision of quick and precise information in English, enhancement of the reinsurance system, and prompt refunds of import duty for flood-affected enterprises.

Link:  Labour shortage, wage costs cause some Japanese investors to move out

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