No wage-hike fund for employers: Kittiratt

FTI keeps up compensation push; minister denies recent plant closures caused by Bt300 wage

Finance Minister Kittiratt Na-Ranong yesterday ruled out the idea of setting up a fund to compensate employers in 70 provinces for the added cost of raising the daily minimum wage to Bt300.

Federation of Thai Industries (FTI) chairman Payungsak Chartsutipol, however, said the Joint Standing Committee on Trade, Industries and Banking would continue pushing for the fund.

"This is a measure that will really help small and medium-sized enterprises [SMEs]," he said.

Payungsak said the private sector did not expect the government to pay the difference forever - just for three years.

"The Finance Ministry should find some money to finance this fund," Payungsak said. "The joint committee will definitely seek more discussions with the ministry."

FTI vice chairman Vallop Vitanakorn said it was "really terrible" that the government had ignored pleas to set up the fund. He pointed out that the government's Bt300-a-day wage policy would significantly raise production costs and cause many SMEs to suffer liquidity problems.

Since the government has cancelled its plan to set up the fund, the FTI will call for an urgent meeting this coming Monday to draw up a plan to help enterprises.

Labour Minister Phadermchai Sasomsap explained that Kittiratt had decided against such a fund because it would require a massive budget.

"Financially speaking, the idea is not feasible," Phadermchai said.

He was speaking after a meeting with Kittiratt to discuss possible measures to reduce the adverse impacts of the government's policy to raise the minimum daily wage to Bt300 across the country.

In April last year, the minimum wage was boosted significantly to Bt300 in seven big provinces, including Bangkok. On January 1, the minimum wage was raised to that level in the 70 remaining provinces. For less industrialised provinces like Phayao, this represents a drastic hike and employers are struggling.

Many workers are feeling the pinch, too. Hundreds have been laid off and many more have found their employment conditions changed.

Many employers want the government to pay the difference between the Bt300 and the old wage rate, which stood at just Bt222 a week ago.

Phadermchai yesterday said Kittiratt had already turned down this request. However, the labour minister said a meeting would be held next week to determine what additional measures could be introduced to help employers cope with the wage hike.

According to Phadermchai, at least five measures will be tabled before the Cabinet at its meeting next Tuesday. These include a lowering of the government fee at accommodation services offered by SMEs from Bt80 to Bt40 per room per night.

"The impacts of the wage hike in 70 provinces should become clear in mid-March," Phadermchai said.

He dismissed any suggestion that recent business closures and layoffs were the result of the January 1 pay increase.

"These companies have long operated in the red. They have received fewer orders from foreign customers for a long time. Many of them decided to shut down their business at the end of 2012 in order to reduce the severance pay. After the wage hike takes effect, the [severance] amount is definitely higher," he said.

FTI vice chairman Vallop, who is also secretary-general of the Thai Garment Manufacturers Association, argued that, "The problems don't arise from the enterprises' shrinking sales. The problems arise from the fact that the rising labour cost has reduced the entrepreneurs' competitiveness."

Vallop said business owners have raised their prices in response to soaring costs incurred due to the wage policy, prompting customers to turn to suppliers in other countries.

He said the impact of hiking the wage nationwide would seriously hit SMEs in the garment industry and hurt mass-production centres in urban areas, as they relied heavily on labour.

Garment manufacturers may try to adjust by moving their plants to neighbouring countries such as Cambodia, Laos, Myanmar and Vietnam, or by downsizing, Vallop said.

"If they raise prices, they may lose customers to rivals operating from countries where labour costs are much lower," he said.

Kuang Pei San Food Products, the manufacturer of products under the Smiling Fish brand, said it was doing its best to freeze prices until the second quarter of this year.

"But in the third quarter we may have to increase the price of our canned fish for the first time in four years. The price may go up by about 5 per cent," the company's deputy marketing director Kraiserm Tohtubtiang said.

Somchai Pornrattanacharoen, chairman of the Thai Retailers Association, said: "Now that this policy has taken effect in 70 other provinces, too, it's clear many more industries will increase their prices and many small enterprises will have to go out of business."

Somchai warned that the government's wage policy could push prices in Thailand up to the point that things here become 200 per cent more expensive than in neighbouring countries.

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Article source: http://www.thethailandlinks.com/2013/01/05/no-wage-hike-fund-for-employers-kittiratt/