Manufacturing crisis and power costs a threat to business

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Manufacturing crisis and power costs a threat to business

Speakers at a recent seminar led by the Federation of Thai Industries (FTI) painted a rather bleak picture for the local manufacturing landscape, with the rising costs of electricity as well as wages causing many businesses to seriously consider relocating to neighbouring countries.

The vice-chairman of the FTI stated Thailand had been suffering from a major manufacturing labour shortage for some years now. He said the problem is likely to be exacerbated over the next three to five years because the current influx of foreign workers is likely to drop significantly as they return to their homelands to take advantage of their improving economies.

There are around 1.42 million foreign workers from Myanmar, Laos, and Cambodia registered with the Labour Ministry, but these neighbouring countries’ economies are estimated to grow at an average of six percent this year and between 6.5 and 7.5 percent next year. That kind of growth will almost certainly entice large numbers of foreign workers to return to their homelands.

The manufacturing industry in Thailand will also face added pressures with the rise in power costs. These are expected to reach five baht per unit in 2015, up from 3.96 baht per unit at present. That will represent a 26 percent increase and, allied with further rises in wages in the industrial sector, could see a number of manufacturers start relocating to cheaper countries such as Cambodia, Laos, and Myanmar.

The wage rise pressures, which have largely been unexpected, as well as the rising costs of electricity were cited as the key factors leading to many business operators considering their options with regard to whether they stay in Thailand or move offshore.

The FTI said many manufacturers had sought state assistance for their energy costs, using the threat of relocation as one of their bargaining chips.

While there is an acceptance that the overall Thai economy is improving, many manufacturers are not happy with the potential for further increases in the minimum wage, presently at 300 baht per day.

FTI members also expressed dismay at the relatively high cost of international calls in Thailand and the limited options offered by the small number of Telco operators. The seminar was also told that 3G broadband services remain inefficient.

The FTI vice-chairman was also critical of the government-promoted Special Economic Zones (SEZs) that are being planned for the provinces of Trat, Songkhla, Tak, Sakaeo, and Mukdahan. The SEZs are aimed at bringing in high-tech industries, but the vice-chairman believes they would not attract as much business as the government hoped.   

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