Companies flee Bangkok in search of cheap labor

[webfact]

Companies flee Bangkok in search of cheap labor
MASASHI UEHARA, Principal economist, Japan Center for Economic Research

BANGKOK: -- Thailand, the biggest economy on the Indochina Peninsula, is also the primary driver of economic development in the Southern Economic Corridor.

While Thailand is stable under the military regime, its economy lacks strong resilience. Given labor shortage in and around Bangkok, Thai and foreign companies operating in the country are relocating operations to neighboring nations or areas in Thailand near national borders with surrounding countries. The move away from Bangkok prompts industrial accumulation in places along the southern corridor as well as the East-West and North-South corridors.

Recovery under the junta

I entered Aranyaprathet, Thailand from Poipet, Cambodia. Aranyaprathet was home to camps for Cambodian refugees during that country's civil war. What I first saw in the town was a poster of Thailand's interim Prime Minister Prayuth Chan-ocha, who was also the army chief. Below the photo were flowery words such as "intelligent, knowledgeable, modern and visionary." Next to the prime minister's poster were those of military officials in uniform, perhaps the heads of the three military branches.

Full story: http://asia.nikkei.com/Politics-Economy/Economy/Companies-flee-Bangkok-in-search-of-cheap-labor

-- NIKKEI ASIAN REVIEW 2016-01-21

[never me]

A lot of Company's are moving out of Thailand not only because of the high salary demanded by the work force but also because they

are fed up with the B/S..

[trogers]

A lot of Company's are moving out of Thailand not only because of the high salary demanded by the work force but also because they

are fed up with the B/S..

So, cut the B/S and double those wages...or is this the B/S?

[ezzra]

We have tried doing that moving our labor based company of over 100 skilled works to Vientiane Laos first

and than to Khon Kean, we did saved on salaries, but the skill level, attendance and loyalty for the job

was abysmal to say the least, we ended up with revolving door or workers coming and going according

to their family whims and farming seasons....

[jaltsc]

"Thai and foreign companies operating in the country are relocating operations..."

It's not a matter of cheap labor. It's all about cost effectiveness. If laborers produced quality work, showed up when they are supposed to, worked full shifts, and the government offered economic incentives, there would be no reason to move operations to another country. The surrounding countries get it....They pay their workers less for more time spent on the job (Another issue which needs to be discussed, but this article is not about that), and workmanship is consistent. Those governments offer more economic incentives and guarantee that business contracts will be fulfilled. This is a policy and work model Thailand has not embraced yet, and they will pay for it when their major industry of the future is the production of nam pla. Which, by the way, Vietnam produces a much superior product.

[jalansanitwong]

'Economic incentives'...usually means poor countries offering massive tax breaks or maybe even no taxes at all. Corporate boards here in LOS will be loaded up with retired or semi retired army generals who get paid to sign documents and make everything legal. They have no hands on side of the business. Thailand has a good semi skilled work force as such many car companies will remain here even though theyre paying higher wages than whats on offer in Vietnam or central Africa.

.

The problem with Thailand is thousands of young men dont want to work or get a real job. They like to zoom around on bikes and drink,smoke and spit.

Their mothers give them money or they wash cars for a few baht. The really lucky ones, of course ,have a sister or girlfriend who lives with a foreign husband in LOS or Europe.

Welcome to the global economy.

Edited January 21, 2016 by jalansanitwong

[Eric Loh]

Deputy Finance Minister was on CNBC yesterday and made that quite clear that Thailand will not be a place for cheap labor and will not mind seeing companies that came here due to low wages moving to neighbouring cheaper countries. I have to agree with that policy that Thailand need to concentrate on higher value production to move away from the middle income trap. But we also need better education and vocational reforms to match this new policy.

[Paul Henry]

Companies work on 5-10 business plan they are not moving because of wages they are moving because they know the JUNTA will not hold democratic elections next year or in the forseeable future. The country will finish up in a civil war.

[scorecard]

A lot of Company's are moving out of Thailand not only because of the high salary demanded by the work force but also because they

are fed up with the B/S..

Actually the main reason for many companies to move to other countries is:

- Forever late to arrive at work.

- Poor to very poor (low) production numbers

- Poor quality of products coming off the production line, way too expensive to rework the products, cannot fulfill orders, salary paid for nothing costly raw materials thrown away.

- Lazy.

- Poor work attitudes.

In every factory? No, of course not, but more than acceptable.

I recently attended a seminar on this subject at Samut Prakan conducted by a number of Japanese manufacturers in that area, most of them have the bullet points above.

[scorecard]

Companies work on 5-10 business plan they are not moving because of wages they are moving because they know the JUNTA will not hold democratic elections next year or in the forseeable future. The country will finish up in a civil war.

Bullshix.

[dcsw53]

Having read this and other articles by Mr. Euhara, it sounds to me that he is just trying to put people off from investing here. His choice of examples and his travel program are spectacularly naïve.

Inward investment in most countries is a big challenge, one of the biggest losers is Japan, so Mr. E seems to be trying to scare people. Before TV members start Thai bashing consider :-

Vietnam , Laos and Cambodia do not have the electricity we do. Show stopper for big employers to go there.

Ditto roads, transport damage on the way to market from products made in these countries is severe.

Attendance rates are worse, the work ethic here is better. Thailand has done a pretty good job of balancing salaries and staying competitive. You pay peanuts you suffer.

Infrastructure around BKK is struggling. The current investment in roads around Amata with roads to Laem Chabang port will keep us ahead of the game.

I could go on, but I got work to do, figuring out how to improve this year on the 22% increase in business we achieved last year from 2014.

[FloridaExport]

Reading the entire article was quite informative. It's nice to read something written by what appears to be a native English speaker with no agenda.

[onni4me]

While Thailand is stable under the military regime...

The credibility of the article stopped here for me. Thailand is crippled with corruption, freedom is suppressed and foreign investment went down 78% from year-to-year (Nov 2014 - Nov 2015).

The so called leadership has told USA that if they talk about democracy, they won't do business with the yanks. Good luck with that. They were dictating the Chinese to build a railroad for them and loan the money to do it and wanted the Chinese to take old rubber storages as an exchange...just to see Chinese buy their rubber elsewhere...

Stupid is what stupid does and what comes to stability...er...it's at its most stable when all is dead and still.

[TheCruncher]

Having read this and other articles by Mr. Euhara, it sounds to me that he is just trying to put people off from investing here. His choice of examples and his travel program are spectacularly naïve.

Inward investment in most countries is a big challenge, one of the biggest losers is Japan, so Mr. E seems to be trying to scare people. Before TV members start Thai bashing consider :-

Vietnam , Laos and Cambodia do not have the electricity we do. Show stopper for big employers to go there.

Ditto roads, transport damage on the way to market from products made in these countries is severe.

Attendance rates are worse, the work ethic here is better. Thailand has done a pretty good job of balancing salaries and staying competitive. You pay peanuts you suffer.

Infrastructure around BKK is struggling. The current investment in roads around Amata with roads to Laem Chabang port will keep us ahead of the game.

I could go on, but I got work to do, figuring out how to improve this year on the 22% increase in business we achieved last year from 2014.

Just 1 question.

Ever been to Thailand?

[SanukDii]

I will preface this with the statement that I believe there are good, honest hard working Thai people in this country. Unfortunately none of them seem to be in positions where they can make a real difference to the way the country is run and educated.

Civil war? It's possible I suppose but far in the future.

We are also moving our operations back to the west for many of the reasons already mentioned here.

Lack of accountability is another one not mentioned and the relentless corruption and dishonesty.

Productivity, we've decided that it is better to pay western salaries and get things done at a higher quality in half the time, and base ourself in a country that has laws that are enforced and apply to the majority.

As others mentioned here the timeline of the political cycle makes basing serious money projects here a complete waste of time and resources.

So, we will take our highly paid jobs and projects that employ 100's of Thai's at above average salaries and give them to another country - which is disappointing but not entirely unforseen.

[FredNL]

I have several companies in Bangkok. From cosmetics till ISP and software development. I already started to look outside Thailand for employees, production facilities, and better service. Skilled IT engineers are hard to find. Especially in the e-commerce business. Thai only know 3 buttons <Ctrl><C> & <Ctrl><V>. There is not even 1 Thai that was able to write payment applications. They only could copy and paste and do poor translations. All programs used by banks are mostly illegal copies of software that we developped or illegal software from outside Thailand. They buy only for 1 pc and install it on every pc (mostly done with some cracking by very cheap Indians).

Thai employees don't want to work, they only want to have money. Motivation is zero point zero, using their brains is absolutely not done, attitude of zero point zero and they're World Champion in lazyness, loyalty not to the company but only to themselves and direct friends.

In the past I had to hire for 1 product line of a cosmetic product, 8 Thai, 2 supervisors included. Now a days same thing is done by 3 Cambodians. Thai asking 15k/month each for doing shit. 2 Cambodians working harder and having produtivity more than 8 Thai for only 10k/month each (with less failures). For the cosmetic part we only do stocking and distributing in Bangkok. Production is nowadays done outside Thailand. They must be able to read English because it is an export product. 3 out of 10 shippings still go wrong due to the lack of thinking or motivation. Working, they rather play all day long on their phones.

ISP, we already started changing server locations to Singapore and USA. Higher speeds, better connections and in the future no problem with a single gateway in/out Thailand. The whole ISP company has only 1 skilled Thai that has been trained by us. (After graduation of Assumption University with a Masters). The other hired Thai are sweeping the floor, answering the phone (playing with it all day long), cleaning the tables, bringing coffee (after 1 year, she still asks me 3x per day how I want my coffee).

To be short, Thai don't care about their jobs. They only do it for the money that comes in. I predict that Thailand will sink in the next 5 years. My predictions always came out before. The only thing that keeps up the Thai economy are the "rich" and the "rich" tourists. For export they are already losing it from upcoming economies. (except for some rotten rice). The economy is more and more consuming inside Thailand. For e-commerce we already see a decrease of Thai customers since September 2014 and it is going down fast. (only 10% of our customers is based in Thailand, we're growing outside).

So just blame everything to foreign companies, don't take a look at yourselves. It's the only thing were Thai are champions in, besides lazyness.

BTW: Translations of our software into Thai is taking 5 - 6 times as long than into any other language. Why ??? Big question mark, WHY ???

Edited January 21, 2016 by FredNL

[PaullyW]

Deputy Finance Minister was on CNBC yesterday and made that quite clear that Thailand will not be a place for cheap labor and will not mind seeing companies that came here due to low wages moving to neighbouring cheaper countries. I have to agree with that policy that Thailand need to concentrate on higher value production to move away from the middle income trap. But we also need better education and vocational reforms to match this new policy.

Hi Eric,

It's difficult to a agree with the Deputy Finance Minister as a matter of practicality.

One could argue that Thailand has some deep structural problems that it has not yet addressed. Some of the country's foundational culture (of which most are deafeningly proud) is based on distinct social and class hierarchy that has nothing necessarily to do with achievement. A society like Thailand which is deeply feudal but nicely wrapped in a thin veneer of modernity CANNOT avoid the middle income trap. Indeed, the traditional power structure RELIES on the middle income trap.

To move up the value chain, Thailand can only be competitive if the traditional elite share power and wealth and educate and empower the rest. The country needs a strong, reasonably educated middle class.

So, while the Deputy Finance Minister, as many in Thailand, knows all the right words to say, the country is at any moment in time at least 1 generation away from any meaningful change.

There simply are not enough Sino-Thai, educated abroad rich kids to leave the country competitive. Where are the initiatives from the elite (many of whom are exceptionally wealthy) to build world class education facilities and modernize the country?

There was just a report yesterday that Thailand has among the LOWEST worker productivity of the 60+ countries surveyed. Among the LOWEST English (as a non-native) language ability in the world.

Tough to imagine them overcoming these structural challenges with any efficiency. They need to change the meaning of what it means to be Thai and Thainess. That will be a VERY PAINFUL awakening for the entire country.

-

Sanuk Out, Hard Efficient Work in

Edited January 21, 2016 by PaullyW

[ALLSEEINGEYE]

the labor laws here are unrealistic as well.

How can you expect to have a reliable work force when the Gov tells them it's OK to have 30 sick days per year.

Who the hell is sick 30 days a year?

[PaullyW]

Thais will need redefine themselves which will be both long and painful. All our modern societies went through the same. This is not unique to Thailand. But they have not even begun the process.

Edited January 21, 2016 by PaullyW

[colinneil]

Most Thais do not want to work.

Rice planting, rice harvest, buffalo sick, mother sick, i sick.

Excuse after excuse.

We employ a carer to help me when my wife is at work.

Monday she comes in the morning tells my wife , i have a migrane buls..t, then she rides away on a motorbike, with a migrane !! WHAT !!

later my wifes hears she won 2000 baht on the lottery, tuesday comes to work, today she tells my wife last night i not sleep cannot work today, then gets on a motorbike goes off to town.

Trying to find a reliable person to come to work everyday is immpossible.

[teko]

the labor laws here are unrealistic as well.

How can you expect to have a reliable work force when the Gov tells them it's OK to have 30 sick days per year.

Who the hell is sick 30 days a year?

Strange but true and we have had employees who plan their whole year to make sure they take everyone of those sick days.

You could read it like a Mills and Boon as to what Monday they would not be in the office.

[GarryP]

The staff in my department work exceedingly hard. They come in on weekends when need be. They are getting paid quite well but are very conscientious in their duties. I don't understand why so many people say Thais are lazy or lack a work ethic.

[colinneil]

The staff in my department work exceedingly hard. They come in on weekends when need be. They are getting paid quite well but are very conscientious in their duties. I don't understand why so many people say Thais are lazy or lack a work ethic.

Send 1 of your staff members here to help me. As it is immpossible to find a reliable person here.

[Eric Loh]

Deputy Finance Minister was on CNBC yesterday and made that quite clear that Thailand will not be a place for cheap labor and will not mind seeing companies that came here due to low wages moving to neighbouring cheaper countries. I have to agree with that policy that Thailand need to concentrate on higher value production to move away from the middle income trap. But we also need better education and vocational reforms to match this new policy.

Hi Eric,

It's difficult to a agree with the Deputy Finance Minister as a matter of practicality.

One could argue that Thailand has some deep structural problems that it has not yet addressed. Some of the country's foundational culture (of which most are deafeningly proud) is based on distinct social and class hierarchy that has nothing necessarily to do with achievement. A society like Thailand which is deeply feudal but nicely wrapped in a thin veneer of modernity CANNOT avoid the middle income trap. Indeed, the traditional power structure RELIES on the middle income trap.

To move up the value chain, Thailand can only be competitive if the traditional elite share power and wealth and educate and empower the rest. The country needs a strong, reasonably educated middle class.

So, while the Deputy Finance Minister, as many in Thailand, knows all the right words to say, the country is at any moment in time at least 1 generation away from any meaningful change.

There simply are not enough Sino-Thai, educated abroad rich kids to leave the country competitive. Where are the initiatives from the elite (many of whom are exceptionally wealthy) to build world class education facilities and modernize the country?

There was just a report yesterday that Thailand has among the LOWEST worker productivity of the 60+ countries surveyed. Among the LOWEST English (as a non-native) language ability in the world.

Tough to imagine them overcoming these structural challenges with any efficiency. They need to change the meaning of what it means to be Thai and Thainess. That will be a VERY PAINFUL awakening for the entire country.

-

Sanuk Out, Hard Efficient Work in

Your points very valid. 0.1% of these traditional elites and the super rich owns 46.5% of the country total assets. The problem is that there is very little tricky down of their money to the society. Most keep their wealth outside the country and they have strong lobby to ensure laws keep protecting their wealth. It's this wealth disparity that allowed to continue for years that creates the conditions for the collapse of democracy or worse if social cohesion further weakens.

The problem lies in the poor taxation system that allows the supper rich to evade and dodge taxation. Land & property tax, inheritance tax have been talked about but no government has the fortitude to implement because of strong lobby against. Unless we have a strong progressive taxation system and close loopholes to prevent the super rich from shifting funds, nothing will be tricky down to the economy.

Thailand has been fortunate that we attracted huge amount of foreign investment in the past that brings in revenue for re-investments in much needed areas. Now even FDI has dried up and we will suffer the consequences for years to come. One thing we don't need is political instability especially a coup.

​

[never me]

I have several companies in Bangkok. From cosmetics till ISP and software development. I already started to look outside Thailand for employees, production facilities, and better service. Skilled IT engineers are hard to find. Especially in the e-commerce business. Thai only know 3 buttons <Ctrl><C> & <Ctrl><V>. There is not even 1 Thai that was able to write payment applications. They only could copy and paste and do poor translations. All programs used by banks are mostly illegal copies of software that we developped or illegal software from outside Thailand. They buy only for 1 pc and install it on every pc (mostly done with some cracking by very cheap Indians).

Thai employees don't want to work, they only want to have money. Motivation is zero point zero, using their brains is absolutely not done, attitude of zero point zero and they're World Champion in lazyness, loyalty not to the company but only to themselves and direct friends.

In the past I had to hire for 1 product line of a cosmetic product, 8 Thai, 2 supervisors included. Now a days same thing is done by 3 Cambodians. Thai asking 15k/month each for doing shit. 2 Cambodians working harder and having produtivity more than 8 Thai for only 10k/month each (with less failures). For the cosmetic part we only do stocking and distributing in Bangkok. Production is nowadays done outside Thailand. They must be able to read English because it is an export product. 3 out of 10 shippings still go wrong due to the lack of thinking or motivation. Working, they rather play all day long on their phones.

ISP, we already started changing server locations to Singapore and USA. Higher speeds, better connections and in the future no problem with a single gateway in/out Thailand. The whole ISP company has only 1 skilled Thai that has been trained by us. (After graduation of Assumption University with a Masters). The other hired Thai are sweeping the floor, answering the phone (playing with it all day long), cleaning the tables, bringing coffee (after 1 year, she still asks me 3x per day how I want my coffee).

To be short, Thai don't care about their jobs. They only do it for the money that comes in. I predict that Thailand will sink in the next 5 years. My predictions always came out before. The only thing that keeps up the Thai economy are the "rich" and the "rich" tourists. For export they are already losing it from upcoming economies. (except for some rotten rice). The economy is more and more consuming inside Thailand. For e-commerce we already see a decrease of Thai customers since September 2014 and it is going down fast. (only 10% of our customers is based in Thailand, we're growing outside).

So just blame everything to foreign companies, don't take a look at yourselves. It's the only thing were Thai are champions in, besides lazyness.

BTW: Translations of our software into Thai is taking 5 - 6 times as long than into any other language. Why ??? Big question mark, WHY ???

Well said Sir.

I take my hat off to you for trying to do business in this country.

[PaullyW]

The staff in my department work exceedingly hard. They come in on weekends when need be. They are getting paid quite well but are very conscientious in their duties. I don't understand why so many people say Thais are lazy or lack a work ethic.

I think people are talking about their own anecdotes and sense of things based on their narrow experience. That's normal and natural. However, individually, each of our experiences is statically insignificant.

For example, I work with a bunch of elite folks and they work hard and are quite smart and educated and definitely more so than the average western retiree in TH. These people, on average, attend top global business schools and have PhDs and such. Just an example.

However, my experience is NOT the norm or average.

The stats give better indications. And, they typically suggest, whether or not people think average Thais are lazy or unreliable, their productivity DEFINITELY is far below world average. This will undoubtedly be a problem with large scale production investment as wages go up as well as being a problem higher up the value chain as/if they attempt to mature and change the economy.

It cannot be done easily. Thais have not figured out some magic that allows them to skip all the tough decisions made and requirements that modern economies have undergone since the industrial revolution.

[thesetat2013]

Deputy Finance Minister was on CNBC yesterday and made that quite clear that Thailand will not be a place for cheap labor and will not mind seeing companies that came here due to low wages moving to neighbouring cheaper countries. I have to agree with that policy that Thailand need to concentrate on higher value production to move away from the middle income trap. But we also need better education and vocational reforms to match this new policy.

The problem here is not wages. It is dedication and workmanship and reliability. Why would any company want to pay more wages when a scheduled workday starts an hour after they are supposed to be there. Or when the products they make are crappy and break consistently over short periods of time. Or when workers take so many personal and sick days for lame reasons or pathetic and unacceptable to most companies but forcibly tolerated in Thailand. Their is no pride in a person's job here and most look for reasons not to work even while at their jobs. Thais have their big heads thinking they are so smart and most refuse to do menial jobs and since it is against Thai culture to have confrontation these add up to even more problems. Suggestions for improvement are rarely made nor, I can imagine, taken seriously.

[gandalf12]

It isnt only Thailand that has an allocated number of sick days. Most countries I have worked in have them. Notably I am thinking of the UAE. People where I worked there planned long weekends based on sick days. There should be no allocation of sick days at all. If you are sick and a doctor can verify it then it is what it is. Giving an allocation is really saying you have extra holidays to take when you want, no need to apply for them.

[OMGImInPattaya]

The staff in my department work exceedingly hard. They come in on weekends when need be. They are getting paid quite well but are very conscientious in their duties. I don't understand why so many people say Thais are lazy or lack a work ethic.

Send 1 of your staff members here to help me. As it is immpossible to find a reliable person here.

Maybe nobody wants to work for a "cranky old bugger."

[OMGImInPattaya]

I have several companies in Bangkok. From cosmetics till ISP and software development. I already started to look outside Thailand for employees, production facilities, and better service. Skilled IT engineers are hard to find. Especially in the e-commerce business. Thai only know 3 buttons <Ctrl><C> & <Ctrl><V>. There is not even 1 Thai that was able to write payment applications. They only could copy and paste and do poor translations. All programs used by banks are mostly illegal copies of software that we developped or illegal software from outside Thailand. They buy only for 1 pc and install it on every pc (mostly done with some cracking by very cheap Indians).

Thai employees don't want to work, they only want to have money. Motivation is zero point zero, using their brains is absolutely not done, attitude of zero point zero and they're World Champion in lazyness, loyalty not to the company but only to themselves and direct friends.

In the past I had to hire for 1 product line of a cosmetic product, 8 Thai, 2 supervisors included. Now a days same thing is done by 3 Cambodians. Thai asking 15k/month each for doing shit. 2 Cambodians working harder and having produtivity more than 8 Thai for only 10k/month each (with less failures). For the cosmetic part we only do stocking and distributing in Bangkok. Production is nowadays done outside Thailand. They must be able to read English because it is an export product. 3 out of 10 shippings still go wrong due to the lack of thinking or motivation. Working, they rather play all day long on their phones.

ISP, we already started changing server locations to Singapore and USA. Higher speeds, better connections and in the future no problem with a single gateway in/out Thailand. The whole ISP company has only 1 skilled Thai that has been trained by us. (After graduation of Assumption University with a Masters). The other hired Thai are sweeping the floor, answering the phone (playing with it all day long), cleaning the tables, bringing coffee (after 1 year, she still asks me 3x per day how I want my coffee).

To be short, Thai don't care about their jobs. They only do it for the money that comes in. I predict that Thailand will sink in the next 5 years. My predictions always came out before. The only thing that keeps up the Thai economy are the "rich" and the "rich" tourists. For export they are already losing it from upcoming economies. (except for some rotten rice). The economy is more and more consuming inside Thailand. For e-commerce we already see a decrease of Thai customers since September 2014 and it is going down fast. (only 10% of our customers is based in Thailand, we're growing outside).

So just blame everything to foreign companies, don't take a look at yourselves. It's the only thing were Thai are champions in, besides lazyness.

BTW: Translations of our software into Thai is taking 5 - 6 times as long than into any other language. Why ??? Big question mark, WHY ???

All the things you complain about have been issues for years...so why did you locate to thailand in the first place...was it for the cheap sex?