Garment Enterprises Transfer To Southeast Asia, Manpower Costs Continue To Rise

Since 1990s, in order to find a low wage labor force, Foreign garment enterprises We began to build production bases in mainland China. But in China's major cities, the minimum wage has risen to 1.5 to 1.6 times in the last 4~5 years. Facing the pressure of rising costs, foreign garment enterprises begin to promote the strategy of "China plus one (China +1)", seeking to build new factories outside China, and constantly transfer production to Southeast Asia.

Wages of laborers in Southeast Asian countries are rising rapidly. The minimum monthly salary in Indonesia, Vietnam and Kampuchea in 2015 was 20 to 30% higher than in 2014. In some countries, the minimum wage will reach 80 to 90% of the major cities in China.

For garment enterprises that transfer production bases from China to Southeast Asia for the purpose of obtaining low wage labor force, the cost rising factor is formed. Businesses are being forced to take action.

But recently, wages in some Southeast Asian countries are rising faster than in China. The wage rise rate in 2015 was the highest in Kampuchea, 28%. The minimum wage of major cities in Indonesia increased by more than 20% in 2015, to about 27 thousand yen (about 1406 yuan). It is close to 90% of China's major cities such as Beijing and Guangzhou. At the same time, it reached 2.6 times the minimum wage of Indonesia in 2010.

The wage boom in Indonesia has also extended to outside the capital Jakarta area. In 2015, the second largest city of surah Ba Asia's lowest wage exceeded Jakarta for the first time. Sew Industry and other labor-intensive industries, there has been a trend of withdrawal.

In other countries, wages are rising rapidly. Vietnam's minimum wage rose to 2.3 times that of 2010. Kampuchea surged to more than 2 times in just 2 years. Wages in Vietnam and Kampuchea are about half of that in China. If the minimum wage rises in China, Vietnam and Cambodia remain unchanged, they will catch up with China in about 5 years according to the current wage rate.

The background is that as the economy grows, the pressure on the lower income class demanding higher wages is strengthening. Vietnam's wage increase in 2015 was about 15%, much higher than the price increase (around 4%).

Japan's industry has asked Prime Minister Ranjig to control wage increases below 10%, but failed to agree. In Kampuchea, the party that promised to raise the minimum wage in the campaign platform won a big victory in the election, and the wage increase was determined to be about 30%. The labour intensive clothing industry accounts for 60% of its exports, and the cooperation factory of UNIQLO has also been stationed.

Acceleration of wage increases will affect clothing Enterprise cost management and business plan, enterprises will have to adjust strategy.

On the other hand, if the rise in wages leads to the improvement of living standards and the development of the middle class, it will bring benefits to the garment enterprises.