Shoe exports unaffected by wages

Despite adverse effects from the nationwide hike in the daily minimum wage, exports of shoes and leather products are expected to grow by 7% this year, higher than in many recent years, says the Thai Footwear Association (TFA).

President Chanin Jitkomut said the healthy growth is thanks to government stimulus measures, particularly the revival of the Bangkok Fashion City project originally initiated by the Thaksin Shinawatra administration.

Last year, the value of exports totalled 20 billion baht.

In 2008, shipments dropped by almost 30% from the previous year, while growth since then has averaged no more than 5% per year. The Fashion City project covers textiles, garments, shoes, leather and jewellery.

Mr Chanin said the project has geared industries to focus on design instead of labour-intensive processes.

"For instance, we have focused on sandals and their design, resulting in an influx of orders," he said.

Mr Chanin said the hike in the daily minimum wage will affect the shoe industry, particularly small players.

Some medium-sized and large firms planned ahead and relocated their factories abroad.

But some small and medium-sized enterprises (SMEs) did not prepare for the wage increase in terms of worker training, while some foreign workers were demanding the same minimum wage as unskilled Thai workers, said Mr Chanin.

He advises businesses to change their mindset and come up with new primary technology to cut production processes.

Labour accounts for about 40% of total costs of high-quality shoemakers, but the ratio falls to 18-19% for mass market companies.

The TFA estimates 20-30% of shoe businesses will have problems related to the new daily minimum wage, with some even forced to close down.

"However, businesses will probably wait for about a year before deciding what should be done," said Mr Chanin, adding the effects of the wage increase remain unclear for the long run.

The Office of Small and Medium Enterprises Promotion said the wage increase will benefit half the employees working for SMEs or 5.25 million people.

Labour accounts for 11.8% of SMEs' costs on average, resulting in an average cost increase of 4.72%, it said.

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Writer: Nanchanok Wongsamuth
Position: News Reporter