Minimum Wage – ‘The Impact Could Come Very Quickly’

On Monday the government announced an interim minimum wage proposal for a 3600 kyats (US$3.25) per eight-hour day, a middle-ground proposal after labor unions pushed for a 4000 kyats ($3.60) base rate and factory owners unwilling to proffer anything higher than 2500 kyats ($2.25). Both labor groups and employers have two weeks to lodge objections to the interim proposal before it is introduced across the country.

As president of the Hlaing Tharyar Industrial Zone Management Committee, Myat Thin Aung represents the interests of more than 600 factory owners—who collectively employ around 60,000 workers—in Rangoon’s biggest industrial area. In this interview, Myat Thin Aung, who is also on the executive committee of the Union of Myanmar Chambers of Commerce and Industry and a Yoma Bank board member, claims that the 3,600 kyats proposal is likely to have a significant impact on a number of Burma’s manufacturing concerns, particularly in the country’s rapidly growing garment sector.

What immediate impacts will result from the introduction of a new minimum wage in Burma?

It will impact factories here, but as is the nature of the factories, they can’t stop work at once because they already have raw materials and orders. They will have to keep running. For garment factories, there could be a quick impact on orders, which would affect the rest of the supply chain.

So you think the new minimum wage of 3,600 kyats is unaffordable for factory owners?

Some profitable factories can pay this amount, but if some garment factories have to pay this amount they will eventually shut their doors. However, the workforce will not be satisfied with anything lower than this amount. The government would need to provide assistance to businesses to keep them running.

It sounds like you believe the problem is exclusively one for garment factories.

Some garment factories and some other kinds of manufacturing enterprises may be impacted by the minimum wage laws.

Do you think new investors who plan to get in the industrial zone would less than before due to this minimum wages?

Foreign investors will go to markets wherever they see cheap labor. Burma has some of the cheapest labor in the Asean region—only Bangladesh is cheaper than us. So they might go to Bangladesh. The minimum wage amount is still cheaper than Cambodia. However, some businesses that have already set up here will have to keep running even if it means they face losses for two or three years.

When could we expect to see evidence of this impact?
It depends on individual factories. If they start struggling, the impact could come very quickly. In the recent past, some factories have already closed because of labor problems.

Where has recent investment in the Hlaing Tharyar Industrial Zone come from?

There are still relatively few foreign investors here. Some garment factories are still preparing to come here—at the moment there’s about 16. About 600 factories are locally owned. If they close their doors, [under the severance payment provisions of Burma’s Labor Law] they would have to compensate their workforce around 200-300 million kyats (US$180,000-270,000), which is why any impact from the minimum wage decision will not come at once.

Source: The Irrawaddy

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