Vietnam and Thailand woes cause firms to seek new plant locations | South China Morning Post
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  • Mar 1, 2015
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Vietnam and Thailand woes cause firms to seek new plant locations

PUBLISHED : Monday, 26 May, 2014, 5:06am
UPDATED : Monday, 26 May, 2014, 7:55pm

Hong Kong Shippers' Council chairman Willy Lin Sun-mo says manufacturers based in the Pearl River Delta are running out of alternative, low-cost factory locations with ample labour following recent instability in their two preferred destinations, Vietnam and Thailand.

The managing director of fabric maker Milo's Knitwear is watching for after-effects of recent, violent anti-Chinese protests in Vietnam that have affected trade ties and hundreds of Hong Kong-, Taiwanese- and mainland-owned factories in the country.

Some Chinese workers died in violent protests in Binh Duong province, near Ho Chi Minh City, while hundreds were injured. The rioting left behind burnt factories and shattered windows.

Relocation is not about a factory, but is about the supply chain
Spokesman for electronic component supplier Fittec

Lin said investment confidence had taken a battering from the protests and riots that broke out on May 13, with production at some factories still paralysed.

"A couple of years ago, the question was whether to leave China or not," Lin said. "Now, the question is where to go."

Countries with lower costs, such as Bangladesh, Thailand, Vietnam and Indonesia, are popular with manufacturers in labour-intensive industries, even though they face occasional strikes for better pay and welfare.

Lin said manufacturers might be better off staying in Dongguan if the problems caused by a shortage of labour, such as soaring wages, could be resolved through vocational training and increased automation.

Many manufacturers have been squeezed out of the Pearl River Delta, which has seen its "factory of the world" reputation eroded by double-digit rises in minimum wages, protracted labour shortages, industrial reform and exchange-rate uncertainties. Dongguan, for example, has become the most expensive manufacturing base in southern China, with its monthly minimum wage soaring about 13 per cent to 1,810 yuan (HK$2,274) in April.

A spokesman for electronic component supplier Fittec, which fell victim to the recent frenzy of vandalism and arson in Vietnam, said that relocating manufacturing was closely intertwined with the supply chain.

He said the group had moved into Binh Duong's Vietnam-Singapore industrial park in 1998 to stay close to its clients, manufacturers of electronics gadgets and appliances. It also runs a factory in Suzhou and supplies chips to manufacturers nearby.

"Relocation is not about a factory, but is about the supply chain - from the upstream to the low-stream suppliers," he said. The spokesman said Fittec had planned to expand production at its plant in Binh Duong, which already accounted for about a quarter of the group's output, but "anti-Chinese emotions" meant a decision had to be made on whether to proceed.

The mainland has been Vietnam's largest trading partner in the past few years, with bilateral trade jumping 30 per cent to US$65.48 billion last year. According to Vietnam's Ministry of Finance, the mainland was the ninth-largest foreign investor in the country last year, with US$6.94 billion of investments, mostly in manufacturing and infrastructure.

Willie Fung Wai-yiu, chairman of lingerie maker Top Form International, ended production in Shenzhen last year after setting up production bases in Thailand and Cambodia a few years ago.

A plan to set up a factory in Myanmar is in the pipeline to test further expansion in Southeast Asia.

"It is very difficult to pick a location in the region," Fung said. "There are issues with every location, but the political instability makes it more complicated."

The group still has factories on the mainland, in Foshan and in Jiangxi province, which account for 39 per cent of its output, with 54 per cent from Thailand and the rest from Cambodia.

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