The below chart from the WSJ is interesting:
As the WSJ report notes China still have some infrastructure advantages, but also:
But Southeast Asia also faces enormous hurdles, including underdeveloped legal systems and problems with corruption. There is also the possibility that costs could spiral more than expected as workers learn more about wage gains in China and press for raises.
The rising wages in China have not gone unnoticed with many foreign companies taking into account where to base their new facilities. Bloomberg in June 2010:
Ford Motor Co. said it will build a $450 million car factory in Thailand, its first wholly owned plant in the country, undeterred by fatal anti-government protests in Bangkok earlier this year.
“As China faces labor shortages and higher wages, Thailand will be among Asia’s most attractive destinations for new investments by automakers,” said Charl Kengchon, managing director of Kasikorn Research Center Co., a unit of Thailand’s third-biggest bank. “Thailand has the most developed infrastructure for the auto industry in the region.”
On a related point of lower wages in Thailand, Korn in an interview with an Australian newspaper last month said:
So Thailand’s Finance Minister, Korn Chatikavanij, has come up with a very big idea, albeit a simple one – raise workers’ salaries. ”What’s the cost to the country to significantly increase this minimum wage?” he posits during our recent interview.
‘The most significant thing about the Foxconn matter was that overnight the owner was able to double salaries. That means he could afford to do it,” he says.
As for the cost to business of higher wages, Korn says: ”I would reduce their tax, that’s the quid pro quo, and then I pick it up through higher consumption. But I need to do more work on how this would impact on costs and competitiveness.”
Korn’s thinking betrays not just his own government’s immediate dilemma but a longer-term Asian leadership conundrum – how to confront unexpected political and economic challenges as working-class aspirations and education rise.
”I’m thinking, what’s the cost to the country to significantly increase this minimum wage, by order of the Ministry of Labour? If there’s a time to do it, it is now.”
BP: Interesting. Not sure that a significant increase in the minimum wage is the best solution – PPT reports “[i]n the Thai press he said something about a big rise and then holding the wage fixed for five years”. Wouldn’t 10 percent increases per year for the next 20 years be a better solution and provide an opportunity for businesses to adjust than a sudden big rise then fixing wages?
h/t to Jotman
*yes, this should have read USD500 million and not USD500.