Minimum wage hike, flood fears might force electronics units to relocate

Gritsada Suptuaychone, secretary of the Electrical, Electronics and Allied Industries club under the Federation of Thai Industries, said it was possible for some factories, particularly those that are labour-intensive and can relocate their operations easily, to move out of Thailand. The two main factors that would lead them to relocate are high wages and uncertainty over government measures to prevent future floods.

Maxon Systems (Thailand), a South Korean electronic-components manufacturer, is an example of a firm that has already moved its operations to Cambodia, where it can afford the daily wage of Bt80. Maxon Systems had about 2,000 workers at its plant in Rojana Industrial Park.

Gritsada said assembly plants in the electronics industry could move their production facilities easily as the production process is not complicated.

"The electronics industry in Thailand has faced two serious crises - the impact from the tsunami in Japan and flooding in the home country. The manufacturers have been affected a lot. So they have to diversify risk by investing or relocating to other countries such as Thailand's neighbouring countries," he said.

Although the workforce in the neighbouring countries has lower skill levels when compared with Thai labour, electronics companies can train them to do the jobs. Apart from Cambodia, Burma is another interesting country for electronics firms as the minimum wage there is lower than in Thailand.

A source from Minebea, a giant Japan-based electronics firm in Thailand, said the company so far had not made any plans to relocate. However, any future plans to expand production in Thailand would be considered only after taking into account whether the government has a concrete plan to prevent flooding in the future and whether industrial estates invest in flood protection.

Minebea has manufacturing facilities in Lop Buri, Rojana Industrial Park in Ayutthaya, where its plant was inundated, and Bangpa-in, also in Ayutthaya.

A source from the Electrical and Electronics Institute said that according to preliminary estimates the export value of electronics components in the final quarter of this year would drop by between US$3 billion and $4 billion (Bt94 billion to Bt125 billion) because of the disruption caused by flooding. Export growth this year will decline by 5 per cent from about $30 billion in 2010. The institute will revise the forecast as many industrialists foresee export value dropping more than this estimate.

"We're keeping an eye on the manufacturers, whether or not some of them move out of Thailand," the source said. "We [the industrialists in this sector] have had discussions and there will be some firms that might move out of Thailand.

"Besides the floods and increase in wages, there is lack of clarity on privileges offered by the Board of Investment to flood-hit manufacturers, which could also be a factor in pushing them out of Thailand."