Myanmar factory owners in a bind?
Much is currently being made of recently approved implementing regulations for minimum wage in Myanmar. Workers at labor-intensive factories argue inflation and rising costs have made their wage rates unlivable. Domestic – and some foreign businesses – argue Myanmar’s labor-intensive assembly factories can’t compete against costs in other regional low-cost, low-value added manufacturing destinations with new minimum wage rates set at Ks. 3,600 /day (about US$2.80 at recent exchange rates).
Indeed, factory owners are in a bind. Low wages and abundant unskilled operator labor have been two of the only pull factors for Myanmar’s manufacturing base for a long time. Ports, roads and other shipping and logistics infrastructure are badly underdeveloped leading to high costs. The availability and reliability of public power, water and communications utilities – particularly in the country’s dilapidated industrial zones – is another drag on the quality of operating conditions and a contributor to manufacturers’ high costs. The list goes on.
However, factory owners must eventually face up to the fact that prevailing wage rates for unskilled operators are increasingly becoming untenable. Rising prices of everything from food to public transport are making it difficult for factory workers to get by and the last thing this government wants is social instability and worker protests.
And wages tend to trend in only one direction – up. Instead of trying to depress or resist rising wages, Myanmar factory owners – and foreign businesses seeking direct investment opportunities in manufacturing – should seek out alternatives to reducing operating costs. Tractus Asia has a long history of helping manufacturing clients anticipate and respond to evolving operating costs and conditions, including turning around ailing production facilities. Operations audits and optimization exercises can help boost productivity. Thoughtful industrial site selection analysis can also help generate longer-term, more sustainable operating cost and condition advantages – something Tractus has done across Asia since 1995.