Nov 7, 2012

Thailand - Chinese companies wrestle with labour shortage in Thailand

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While Thailand remains an attractive investment destination, Chinese companies are increasingly facing challenges in attracting skilled labour, says Gao Wenkuan, the Chinese economic and commercial counsellor to Thailand.

Chinese firms also have difficulty in finding management talent who are fluent in Chinese and Thai, he said.

"The reason why Thailand is particularly attractive for Chinese investors largely lies in its social stability and people, who are well-known for their friendliness, inclusiveness and devotion to work," said Mr Gao.

"Thailand has an established market system with a favourable tax policy, which is always crucial to investment decisions."

According to data from the Board of Investment, China's foreign direct investment in Thailand last year totalled 28.49 billion baht, a rise of 166% from 2010.

The launch of the Asean-China Free Trade Area (ACFTA) in 2010 has also driven Chinese investment in the country.

Mr Gao said the Thai-Chinese Rayong Industrial Zone, located along the Eastern Seaboard, now includes over 40 Chinese companies over the four-square-kilometre park. Further development is underway in a collaboration between industrial park developer Amata Group and China's Holley Group.

Companies at the industrial zone include ZC Rubber and Linglong Tire, both of which produce over 10 million tyres annually.

"By taking advantage of the convenience provided by the free trade zone and local sourcing of raw materials, manufacturers are gaining more comparative advantages," said Mr Gao.

But labour constraints are becoming an increasing problem for Chinese firms. Some Chinese companies look to bypass the issue through acquisitions and partnerships, such as consumer goods manufacturer Haier, which first collaborated with Sanyo in operating a local factory and later took over the venture and its 2,500 local employees.

"There is a widespread feeling that human resources are lacking. And from a long-term perspective, hiring educated locals who can also speak Chinese in middle management is also necessary, but difficult," said Mr Gao.

"I think the Thai government recognises the problem. We hope that when the Asean Economic Community is formally set up in 2015, and we see free movement of skilled labour and capital, things will get better."

Besides manufacturing, Chinese investors in Thailand are also increasingly interested in cooperation in infrastructure and energy projects.

Chinese firms are already participating in several local ventures in solar power and renewable energy.

Increased investment has helped push Thailand to pass Singapore in terms of trade volume with China among Asean nations. Trade is increasingly shifting away from agricultural goods to manufactured goods and electrical products.

"The trade relationship between Thailand and China now is interdependent," Mr Gao said.

"For example, almost 70% of the rubber exported from Thailand is sold to China. If China stopped buying rubber from Thailand, the impact on Thai farmers would be disastrous, and many Chinese factories would go bankrupt."

He said the creation of the AEC would be of benefit both to China and Asean.

"There is no direct competition between China and Asean, and each has its own advantages," he said.

"Asean is in a good position to become the southern gateway of China to European and American markets."

Zhang Qi

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