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NEWS UPDATES 1 September 2010

Lao garment industry benefits from rising Chinese labour costs

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The garment industry in Laos is benefiting from more orders as the cost of Chinese labor continues to rise, according to the Lao Garment Industry Association. Chinese labour costs in the garment industry have reportedly increased by 30 percent, causing international trading firms to order their merchandise from countries with lower production costs such as Laos, Thailand and Vietnam.

“Although there has not been any new investment in the Lao garment industry this year we are beginning to receive more orders as a result of the rising labour costs in neighbouring countries,” said one association official, adding that orders have risen by 15 percent over the past few months.

The president of the industry association, Onesy Boutsivongsakd, said yesterday that customers of Chinese garment manufacturers had started to order more products from Laos in the face of rising costs in China.

Yet with a shortage of labour in the Lao garment industry, coping with this sharp rise in business could become a major challenge, he said “We will need about 6,000 additional workers to increase output,” he said, pointing out that many people do not actually want to work in the factories due to rising inflation. He said that the Lao garment firms would not be able to increase pay for workers as this would in turn push up product prices and put the Lao garment industry at a disadvantage on the international stage.

He said that wages for Lao workers were already high compared with those in Vietnam, Cambodia and Bangladesh, and for this reason industry employers would not be able to offer a pay increase. He has urged the government to address rising inflation, one of the main issues preventing Lao people from working in the garment industry, which would offer them a wage of around 560,000 kip (US$70) per month.

“Despite the growing value of the kip against the US dollar and Thai baht, the price of rice and other foods has risen steeply,” he said According to a report from the association, Laos’ export value of clothes over the past six months was US$78 million – a 1 percent drop on the same period of last year.

There are around 100 garment factories currently operating in Laos, employing more than 20,000 workers nationwide. The sector is a principal generator of employment for the people of Laos.

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