By 2015 Cambodia, Thailand, Myanmar, Laos and Vietnam will be integrated into a EU-like regional economic bloc under the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS).
Under the ACMECS framework, the five countries are committed to five priority areas of cooperation, including the food sector, planning a total of 46 common projects and 224 bilateral projects over the next decade.
Petch Chinabutr, president of the National Food Institute (NFI), said that while Thailand’s food industry would be impacted by the lower wages in Cambodia, Laos, Myanmar and Vietnam, it would retain its potential for growth.
Chinabutr said that while Thailand’s new high daily wages standard means food manufacturers may prefer the four other countries for setting up their units, the country still enjoyed a very visible edge over the others.
“We have a competitive edge over those countries in terms of bountiful and diverse raw materials, sophisticated production technology, and capital and infrastructure, even with higher wages,” he said.
Wage trouble
Thailand only recently raised its average daily wage standard and according to the NFI, Thailand’s new 300 baht or US$10 daily wage is more than double the average minimum in the other four countries. Wages are however half of that found in Singapore or Malaysia.
Chinabutr warned that although Thailand currently has many more food related industries than its neighbours, it was still weak in grouping of production networks and supply chains.
He added however that most other nations in the region also faced the same problems of strategy, structure and competition, particularly concerning prohibitive state controls and regulations.
“Thai food also earns higher marks from regional consumers than the products of Indochina and Myanmar, as several food manufacturers are export-oriented and have already upgraded their production to international standards,” he said.
Hike causing domestic pressure
According to the NFI, food costs are estimated to increase by as much as 20% following the minimum wages hike. The hike has already caused food production costs to increase by 5-20%, depending on the intensity of the labour.
Chinabutr said that the increased minimum wage would increase costs for small and medium enterprises, which make up for 97% of the country’s food sector, by around 6.4%.
The seafood sector will be the hardest hit, said the NFI, with a cost increase of 20%, followed by 5-10% for meat, 5-10% for medium-sized fruit and vegetables, and 6-10% for bread.
The institute also said that using machinery to replace workers is not a viable alternative as sectors like seafood and processed fruit and vegetables require human labour for separation and trimming processes.
NFI data shows that Thailand’s labour-intensive sectors include 320 chicken-processing factories, 579 fishery factories and 640 fruit and vegetable factories. They employ a total of 120,000 workers.