Chinese pay disputes mirrored across region

Chinese labour unrest is being replicated in south-east Asia where factories that compete with China to supply low-cost goods face walkouts as employees demand better pay and benefits.

In Cambodia, workers are poised to stage a three-day strike this month in a dispute over the minimum wage while in Vietnam, thousands of workers at a Taiwanese-owned shoe factory staged a strike demanding higher salaries.

The disputes match similar action in China, where growing worker dissatisfaction has led to industrial unrest and higher wages. As a result, foreign factory owners are increasingly moving production from southern and eastern China – long seen as the “workshop of the world” – to the interior and other Asian developing nations. Chengdu in western China has already attracted IT giants such as Intel, Microsoft and IBM while Vietnam has become a manufacturing base for companies such as Foxconn, the world’s largest contract electronic manufacturer, Intel and Canon.

Labour costs in countries such as Cambodia, Vietnam and Laos remain a fraction of those in China. But, while their governments have been jostling to attract foreign manufacturers, unions are keen to protect their members and industrial action is on the rise, together with minimum wages across the region.

The average garment worker in Cambodia, where the minimum wage is one of the lowest in the world, earns $50 (€40, £33) per month plus a $6 living allowance bonus. The government has proposed a $5 increase but the Free Trade Union, which represents more than 80,000 labourers, intends to go ahead with the strike unless minimum pay is increased to $70.

The union represents more than 80,000 workers in factories across the country. Hundreds of international companies, including PCCS Garments, a Malaysian company which supplies goods to Adidas, Puma and Nike, and Korean manufacturer Yakjin, whose clients include Walmart and Gap, may have operations disrupted if the argument is not resolved.

The Vietnamese government increased the minimum wage for workers at foreign-owned companies to 1m dong ($52.50) this year. In Laos, the minimum wage was rose last year from 290,000 kip ($35) to 348,000 kip ($42) per month.

Cambodia has a relatively high number of active unions and most garment factories are represented, says John Ritchotte, of the International Labour Organisation. However, he points out that industrial unrest is not uncommon across the region.

“Even in those countries without independent unions, such as Vietnam and Laos, disputes occur, particularly during periods of high inflation,” he says. “The number of disputes has grown substantially over the past five years.”

At the same time, Cambodia’s open business environment, in which companies can be 100 per cent foreign owned, is expected to attract increasing foreign investment. According to figures from the Cambodian Ministry of Commerce, 290 new foreign companies registered in the country in the first quarter of 2010, an increase of 56 per cent on the same period last year. The World Bank estimates foreign direct investment in Cambodia will grow to $725m in 2010, up from $515m in 2009, partly as a result of an increase in Chinese investment.

While Vietnam is relatively well established as a manufacturing base, the number of multinational companies operating in Cambodia and Laos remains small. Poor infrastructure, high energy costs and corruption all act as obstacles to investment for global groups. However, predictions of economic growth in both countries and government plans for stock exchanges have attracted increased attention. This month representatives of a number of large US firms, including General Electric, Johnson and Johnson and JPMorgan visited Cambodia to discuss the potential for future investment.

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