Contractors seek remedy

The new government should increase the minimum wage in steps over four years and revise up base prices of state construction projects to reflect the impact of labour costs, say contractors.

"Contractors are highly concerned about [a wage increase to 300 baht a day]. They keep monitoring whether the policy can really be implemented and what the details are," said Polpat Karnasuta, president of the Thai Contractors Association.

"Even a gradual increase will have an impact on them. A sudden increase will cause a larger impact."

Mr Polpat said wages made up 20-30% of total construction costs. The new minimum wage, if fully implemented, would raise construction costs by 6%.

"We hope [the government] will have other measures instead of raising wages," he said. "Even if the government raises the minimum wage, the labour shortage problem cannot be solved."

Currently, the industry employs 2.9 million workers and is in need of another 100,000, met by foreign workers. The caretaker government made agreements with Cambodia and Laos to bring in more worker but the number remained insufficient.

Kasikorn Research Center forecasts construction materials prices in 2011 will rise by between 4.5% and 5.5% from 2010, up from 2.3% during 2009-10.

Somchit Dermtoranin, an economist at the Bureau of Trade and Economic Indices of the Internal Trade Department, said an increase in the minimum wage would have a major impact on the construction sector. The consumer price index would be minimally affected because the main factor affecting consumer prices is energy costs.

The construction materials price index this year has risen 5.8%, with steel up 10.8%, cement 12.1% and concrete 2.1%.

Anukool Tuntimas, executive vice-president for human resources and general administration at Ch. Karnchang Plc (CK), said the company would be hard hit if the minimum wage increased to 300 baht. "Wages are our major cost," said Dr Anukool.

He called on the government to offer additional measures to soften the impact of higher wages.

Thailand's third largest contractor currently employs 3,000 workers, all Thai, at its construction sites nationwide. "In the end, we hope the government will introduce other policies to help affected companies if the wage is going to be raised that much," he said.

Since public-sector construction work accounts for as much as 70% of CK's total portfolio, the company believes the government should lift the reference prices of these projects to help offset the higher minimum wage.

Anan Amarapala, vice-president of Italian-Thai Development Plc (ITD), said the company was looking forward to additional measures from the government if wages rise.

He also said the minimum wage of 300 baht should not be applied countrywide as it was not practical. The government should give the sector time to adjust, he added.

ITD, the country's biggest contractor, employs tens of thousand people.

Kritsada Chandchamratsang, the secretary-general of the Thai Contractors Association, said the government should allow more foreign workers.

Due to the labour shortage, companies are already compelled to offer more than the minimum wage.

"The government should therefore allow market mechanism to work instead of distorting the market by raising the minimum wage," he added.

Vallop Vitanakorn, vice-chairman of the Thai National Shippers' Council, warns the policy was likely to cause a flood of illegal foreign labourers.

Foreign workers are entitled to receive the minimum wage under the labour protection law, which also complies with International Labour Organisation regulations, said Mr Vallop

Thanit Sorat, vice-chairman of the Federation of Thai Industries, agreed the wage increase would encourage business operators to employ labourers from neighbouring countries.

A minimum wage of 300 baht per day works out to US$260 per month, compared with the current rates of $50-60 in Burma, $60-70 in Cambodia and $70 in Laos, he said.