Hat giant is heading abroad over costs
Sky-rocketing wages in Shenzhen will force Mainland Headwear Holdings, one of the world's largest cap makers, to relocate as much as 50 per cent of its output to Bangladesh over the next two years.
The relocation was being fast-tracked after the special economic zone lifted the monthly minimum wage by 13.6 per cent to 1,500 yuan (HK$1,845) today, the nation's highest and the third increase in two years, managing director Pauline Ngan Po-ling said yesterday.
On top of that fewer migrant workers had returned to work at the group's factory in Shenzhen on Monday, the first working day after the Lunar New Year break, indicating dwindling labour supply, she said.
'A production line can't operate properly if it is missing one worker,' she said. 'My core mission in the next two years is migrating half of the production to Bangladesh.'
Labour issues are aggravating manufacturers' growing woes, which range from deteriorating demand in the United States and European Union to yuan appreciation and industrial reform in Guangdong.
Some factory owners have opted to move production to remoter parts of China, but Mainland Headwear chose Bangladesh, because average salaries are far lower there than in its Shenzhen plant.
Ngan said workers at the Shenzhen factory took home about 3,000 yuan a month on average, but those in Bangladesh only earned US$60. On top of the pay, the Shenzhen factory offers three meals a day and accommodation, but no such provision is made in Bangladesh factories.
Mainland Headwear planned to form a joint-venture with a local Bangladesh factory, with the business ultimately to be 51 per cent-owned by the Hong Kong company, Ngan said after she visited the country last week. Meanwhile, factory buildings were under construction in Bangladesh near the capital of Dhaka and completion would be scheduled in May.
'Bangladesh is like China 50 years ago,' she said. 'I want to move as soon as possible. It is an effort to keep workers at the Shenzhen plant.'
On Monday, 1,600 migrant workers, or 65 per cent of the total workforce of 2,500, returned to work at the Shenzhen plant after the Lunar New Year holidays, compared with 80 per cent the same time last year.
This was despite offers of perks such as cash bonuses and a dinner banquet with wine and lucky draw prizes of iPhones, television sets, washing machines and smart-phones made two weeks before the Lunar New Year.
'The lower show-up rate means the offerings are not attractive enough,' Ngan said. 'Those who have returned to work after the holidays are older, it is so hard to keep the younger ones.'
Danny Lau Tat-pong, the head of Kam Pin Industrial and chairman of the Hong Kong Small and Medium Enterprises Association, said the industrial and architectural coating firm only had 10 per cent of its migrant workers fail to show up at its Dongguan plant yesterday, about the same as last year. But he said this year's economic outlook was just as bad as it was last year.
Lau estimated that less than one-third of Hong Kong manufacturers across the border made profits last year, with the remainder suffering losses or just breaking even.
One garment-manufacturing member of the association produced a smaller number of samples for customers during November and December last year. 'This is a clear signal of poor demand for the first half of this year,' Lau said.
Mainland Headwear produces more than this number of hats a year in more than 5,000 designs and its hats have even been in movies