Thai industry chief warns politicians’ pledges to hike wages threaten investment
Foreign investors may shift their production bases from Thailand to other nations if the pledges made by some Thai political parties to raise daily wages are implemented, Wiwat Hemmondharop, the vice-chairman of the Federation of Thai Industries, told Bloomberg news.
The two most popular Thai political parties are campaigning to raise the minimum wage. The Pheu Thai Party and the Move Forward Party are promising to increase the daily rate to 600 and 450 baht, respectively.
Wiwat told Bloomberg that Thailand has raised the minimum wage by an average of 5% over the past year, and that even this increase lowers the competitiveness of the country to attract manufacturers, particularly against Vietnam.
Vietnam is gaining international attention as a manufacturing hub for the automotive, petrochemical, and semiconductor industries, Wiwat added.
He said political parties use populist policies – including daily wage increases, salary guarantees for new graduates, and debt moratoriums for farmers – to win votes.
Populist policies are not healthy for the Thai economy in the long run because it has not yet fully recovered from the pandemic, Wiwat said, adding that populist policies could lead to inflation, rising interest rates, and higher production costs.
Foreign investors could move their production bases out of Thailand due to populist policies and their impact, Wiwat said.
He pointed to China as an example, saying companies have been shifting their factories from the country – once dubbed “the factory of the world” – due to higher wages there.
Thailand had been a major manufacturing hub, but it is now being overtaken by neighbours like Indonesia and Vietnam, Wiwat said.
Vietnam raised its minimum wage by 6% on July 1, 2022, but it still remains lower than Thailand’s, according to official data from both countries. Both countries apply minimum wages regionally, with the highest daily minimum in Thailand equivalent to about US$10.50 in Chonburi province. The highest minimum daily wage in Vietnam is equivalent to about 97 US cents. The rate applies in Region 1: Hanoi and Ho Chi Minh City.
Wiwat said exports could be undermined by higher production costs if minimum wages rise. He also said a global economic slowdown is expected, and that this will make the issue more acute.
