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NEWS UPDATES Asean Affairs           21   July  2011

Pheu Thai wage policy could kill FDI

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Thailand may lose as much as 100 billion baht per year in foreign direct investment (FDI) if the Pheu Thai Party moves ahead with its promise to increase the minimum wage to 300 baht per day nationwide, says the Thai Chamber of Commerce.

"Investors take into account many factors, including political and economic stability as well as labour efficiency," said Dusit Nontanakorn, the chairman of the Thai Chamber of Commerce.

"In the past we might have been less worried about this, but in four years the Asean Economic Community will provide more options for investors."

He spoke yesterday at a meeting of the Joint Standing Committee on Commerce, Industry and Banking.

Mr. Dusit said that increasing the minimum wage would make Thailand less attractive than countries with lower wages and affect Thailand's FDI, worth about 400 billion baht per year.

The chamber estimates a minimum wage of 300 baht per day works out to US$260 per month, compared with the current rates of $50-60 in Burma, $60-70 in Cambodia and $70 in Laos.

Increased production costs, said Mr. Dusit, will also affect the country's competitiveness as product prices rise.

"Foreign investors will probably switch investment to Vietnam, Indonesia and other neighbours if Thailand's competitiveness declines," he said.

Thanavath Phonvichai, an economist at the University of the Thai Chamber of Commerce, said higher wages would deal a heavy blow over the next two to three years, as 30-40 percent of Thai businesses are labor-intensive.

Thaveekij Jaturajarernkul, chairman of the Federation of Thai Industries labour committee, said workers themselves would not have jobs if businesses are not able to survive.

"We [the business sector] are asking for justice, since we are bearing the burden while the government is standing there laughing at us [businesses and workers] arguing," he said.

Martin Schneider, chairman of the Thailand committee of the Swiss-Asian Chamber of Commerce, said important factors considered by foreign businesses regarding labor include not only cost of labor but also regulations about labor conditions.

He said that for small and medium-sized enterprises in Asia, Thailand was still a very appropriate base as opposed to China, for instance, which is geared toward big companies.

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