Rising labour costs bring benefits

Vietnam’s garment industry is set to prosper from higher regional production costs

According to the Thai Garment Manufacturers Association (TGMA), rising local production costs have pushed five major Thai garment manufacturers to relocate to Vietnam, transferring combined investment of $50 million.

Vallop Vitanakorn, honorary adviser to the TGMA, said the five were Hong Seng Knitting Company, Hi-Tech Apparel Company, Nice Apparel Company, Liberty Garment Company, and Golden Thai Industry Company. Their factories in Vietnam were expected to start operations within 2011, employing 24,000 workers.

He added that “more Thai garment  businesses may move to more competitive-labour countries such as Vietnam, Bangladesh, Indonesia, Cambodia and possibly Myanmar due to the declining Thai labour trends.”

Sukij Kongpiyacharn, president of TGMA, said that Thai government’s consideration to increase minimum wages by 25 per cent over the next two years was certain to reduce the Thai garment industry’s competitiveness.

“The problem is also employee retention, as 10-20 per cent of workers drop out of the industry after returning home to harvest crops.”

Also, existing foreign manufacturing businesses in Vietnam plan to expand their production to take over work transferred from their other factories currently based in neighbouring countries due to increasing production costs.

Kenny Wong, financial controller of Hong Kong’s garment firm Smart Elegant International in Vietnam, said: “Compared with the other countries, labour cost in Vietnam is still cheaper and labour skills are not too much different compared with China. Besides, many of our overseas buyers also consider Vietnam an important and reliable base for manufacturing. And this is an important factor pushing us to continue to invest in Vietnam.”

He said his company was going to set up another factory in Ho Chi Minh City to move all production work from China in case the company could not afford fast-rising production costs.

“Right now we already have two factories in Ho Chi Minh City. The total planned manpower should be 1,800 workers,” he said.

However, Wong said that as more foreign textile and garment manufacturers were coming  to set up their factories in Vietnam, the pressure of labour supply would increase.  

“In this context, we need to offer more benefits and allowances to workers to keep them working for us,” said Wong.

“We are now contacting some vocational training centres in the central Vietnam and hope they can recommend their graduated students to work in our new factory next year. On the other hand, we are planning to build a dormitory for our workers to solve their living problem and the design of our new factory will be a modern one with facilities of canteen and air-con working environment so as to attract more workers.”