In light of pledges by some Thai political parties to raise the minimum wage, there have been fears that foreign investors could move their manufacturing bases from Thailand to other countries.
According to Bloomberg, Vivat Hemmondharop, vice chairman of the Federation of Thai Manufacturers, stressed that even a modest increase in the minimum wage is already reducing the country's competitiveness and attractiveness for manufacturers, especially compared to Vietnam.
One reason for the growing interest in Vietnam as a manufacturing hub for the automotive, petrochemical and semiconductor industries is its attractive business environment. However, it is necessary to carefully assess the prospects and take into account the characteristics of each country when making decisions on the transfer of production.
Vivat said political parties are using populist measures such as raising the minimum wage, salary guarantees for graduates and payment deferrals for farmers to win voter support. However, such populist policies may not be good for the Thai economy in the long run, especially in a country that has not yet fully recovered from the pandemic. Vivat warns that rash decisions can lead to inflation, higher interest rates and higher production costs.
An example of such economic impacts is China, where companies are relocating their factories due to rising wages. Vivat points out that Thailand, once a major manufacturing hub, is now losing prestige to its neighbors such as Indonesia and Vietnam. These countries are already overtaking Thailand in attractiveness to investors due to their competitive advantages.
