By Jung Seung-hyun
Korea Joong Ang Daily
When one of the largest shoemakers in Korea invested $19 million in a manufacturing plant in Qingdao, China in 1995 with a hefty contract from Nike in hand, its future, and that of the new plant, looked bright.
However, China’s fast rising wages soon forced the firm to re-evaluate its China strategy.
Just last year, the company closed the Chinese plant and opened one in Indonesia. The new $25 million facility started production in January this year.
A T-shirt manufacturer found itself in a similar boat so it too closed down its operations in China and set up shop in Cambodia.
With strengthening labor laws and increasing wages, Korean companies are running for the exit in China, according to the Korea Trade-Investment Promotion Agency (Kotra).
Other Asian nations are increasing their minimum wages but they are still much more competitive than in China’s, according to the trade-Investment body. China boosted the minimum wage by 20 percent last year for Chinese companies and another 150 percent for firms invested with foreign capital. As a result, a rising number of foreign companies are shifting their production from China to other parts of Asia.
In Indonesia, 87 textile, sewing and shoemaking companies invested $356 million in 2008. That jumped to 143 companies and $299 million in 2010, according to figures compiled by Kotra.
A significant number of those companies have left China. In Cambodia, the number of textile, sewing and shoemaking companies that moved from China between 2008 and 2010 was 53, worth $189 million in investments.
Kotra, however, advises caution. It highlights risks in non-Chinese markets, saying they are also susceptible to rising wages and labor-management disputes. It suggests procuring legal advice and utilizing its Korea Business Centers.
Kotra added that companies should employ human resources departments, improve employee benefits and reach out to local communities.
“Although Southeast and Southwest Asian countries are also capable of raising labor costs and having labor-management disputes, it is important to find ways to do business in these areas in the long run,” said Kwak dong-woon of Kotra.
1 comment:
no matter how much wage they increases, i still think the company still make profit. Y r they being so stingy and greedy? come on...these pple make less than $100 a month and sew so many apparels in a month which sell in the USA or oversea for $20 or more. that is more than 100% profit!
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