A way to get us back in the manufacturing loop

PUBLISHED : Wednesday, 16 June, 2010, 12:00am
UPDATED : Wednesday, 16 June, 2010, 12:00am

Following a rash of worker suicides, Foxconn moved into full damage-control mode and gave staff two big pay rises in one week, doubling the minimum monthly wage to 2,000 yuan (HK$2,280) from October 1. At the same time, its Shenzhen factory has stopped recruitment for certain jobs and announced a series of relocation plans, such as moving some of its production lines to Sichuan and Jiangsu .

According to mainland reports, Foxconn may relocate its 400,000-strong Shenzhen production plants inland. Among them, two of the most profitable production lines at the factory in Longhua district - which employs 300,000 workers - would be merged with another factory, while the majority would be relocated.

The availability of cheap labour has, for decades, helped the mainland prop up its manufacturing and processing industry. But the negative impact of this labour exploitation has sounded alarm bells across the nation.

Moving production inland, where wages are relatively lower, to continue business as usual may be effective in the short term. However, it will not tackle the root causes.

The central government has already ordered local authorities to raise minimum wages, in a bid to offset the US demand for yuan appreciation, bridge the wealth gap and boost working-class consumption. In Guangzhou and Shenzhen, the minimum wage has been set at 1,100 yuan, and in Beijing, it will go up to 960 yuan. Further inland, the levels will hover around 600 to 700 yuan, but this is expected to go up before too long as living standards improve.

For its long-term development, Foxconn could consider moving some of its production closer to Hong Kong instead of Taiwan. And the Lok Ma Chau Loop between Hong Kong and Shenzhen would be an ideal location.

Foxconn has raised its basic wage to 2,000 yuan. If food and accommodation allowances are included, remuneration adds up to HK$4,000 or HK$5,000 a month. If Foxconn could double that, to about HK$9,000, it would certainly attract a lot of Hong Kong workers. The wages may double but the quality and efficiency that Hong Kong workers offer will most probably be twice as much, too; there will be little difference in production costs.

Moreover, with Hong Kong conveniently integrated with the production powerhouse in the Pearl River Delta, collaboration in the supply chain and logistics shouldn't pose any problem at all.

If Foxconn boss Terry Gou wants to invest in Hong Kong, our government would no doubt offer incentives to facilitate the move.

Since the handover, the government has focused on promoting Hong Kong as a logistics hub for the delta region, and has joined hands with the private sector to strengthen the city's economic integration in the area.

Hong Kong must take the lead to promote economic development and facilitate trade within the region by providing financial, banking, legal, logistics, packaging and marketing services. With the rise of wages in the region, companies like Foxconn that produce high-value processing services can now consider Hong Kong as a viable base to set up their operations.

The manufacturing industry is intrinsically less volatile than the financial and property sectors and can provide a substantial number of jobs, which can help alleviate our structural unemployment problems.

Since the handover, we have experienced two financial crises that exposed the obvious weaknesses in our economic structure. The government must grasp this opportunity and develop the Lok Ma Chau Loop into a special industrial zone to provide favourable conditions for Hong Kong's reindustrialisation to get under way.

Albert Cheng King-hon is a political commentator. taipan@albertcheng.hk