SMEs urge migrant quota rethink

SMEs urge migrant quota rethink

Small players without the benefit of automation say they will bear the brunt of the foreign worker cap.

On the face of it, if there must be four Thai workers for every migrant window-washer - 15 window-washers are far too many, even if Thais would take the job for minimum wages. (Photo by Apichit Jinakul)
On the face of it, if there must be four Thai workers for every migrant window-washer - 15 window-washers are far too many, even if Thais would take the job for minimum wages. (Photo by Apichit Jinakul)

Thailand's small and medium-sized enterprises (SMEs) are continuing to suffer as policymakers place a quota on the number of migrant workers who can be employed at a company.

The Act on Management of Migrant Labour, passed by the National Legislative Assembly in April, puts a cap on the number of migrant workers at 20% per company, aiming to protect employment opportunities for Thais.

The new law will take effect in early July, with Section 11 stating that it's for the benefit and protection of opportunities for Thais' career development. The Employment Department is compiling job-seeking registrations from all Thai nationals who wish to work, as well as their qualifications.

But the new law is expected to take a toll on local SMEs, and there have been several negative reactions from the private sector.

Yongyuth Chalamwong, research director for labour development at the Thailand Development Research Institute, said the government should assess the quota based on the size of the business.

"I disagree with this being imposed on a one-size-fits-all basis across the entire business spectrum," Mr Yongyuth said.

Sounding the alarm

If such a law is enforced, SMEs will bear the brunt rather than large corporations because the latter do not use a significant number of migrant workers and can also afford automation in manufacturing.

"If the 20% cap is imposed, we will need time for businesses to adapt, be it five years or longer," Mr Yongyuth said.

He said the government could look into drafting an organic law specifying the application of this law on specific industries and exempting labour-intensive industries, such as fisheries and food processing, from adopting the law.

The fishing industry hires a large number of migrant workers. THITI WANNAMONTHA

Tanit Sorat, vice-chairman of the Employers' Confederation of Thai Trade and Industry, said many business operators are seriously concerned about the issue because they have been relying on unskilled labourers, who mainly come from three neighbouring countries: Myanmar, Laos and Cambodia.

"The new law can hurt Thai firms, such as the fruit and food processing sectors, in which robotics and automation systems cannot be applied," Mr Tanit said. "The fruit and food processing companies such as pineapple and tuna canneries -- the flagship products of the country generating export value -- still use unskilled labourers to slice pineapples by hand. Local workers will not accept working in these kinds of jobs."

Mr Tanit said many business operators should urge the government to reconsider the quota on migrant workers.

Many industrial firms are still at the 2.5 or 3.0 development stages, but the government is now promoting the Thailand 4.0 initiative, which has been adopted from Germany's policy -- a country a the highest stage of innovation and value-based industry.

"Clearly we are not ready yet," Mr Tanit said. "The 4.0 era has just been jump-started in the country's industrial sector, and many Thai industries cannot afford to invest and transfer such high technology for their manufacturing processes."

Mr Tanit's main concern is that once the new law goes into effect, it will push many migrant workers to return home, while many companies could possibly move their manufacturing bases to states like Vietnam to avoid risks in Thailand's labour industry.

Unskilled labour represents roughly 50% of the 37.4-million-strong workforce in the industrial sector.

As of December, the country had 1.85 million registered unskilled labourers from three countries, accounting for 89.7% of the more than 2 million migrant workers nationwide, according to the Foreign Workers Administration Office.

Apart from labourers coming from the three neighbouring countries, most migrant workers from other regional countries are classified as skilled and semi-skilled.

'Vital contributors'

Suchart Chantaranakaracha, vice-chairman for labour affairs at the Federation of Thai Industries (FTI), said the organisation will soon meet with the Labour Ministry to consult on Section 11 of the new law because there are many confusing issues regarding the 20% cap imposed on migrant workers.

"Section 11 states that special fees will be put in place if firms wish to exceed the 20% quota, but the FTI thinks it is unclear," Mr Suchart said. "We are unsure whether the 20% limit will include existing foreign workers or apply to all foreign workers. We [might] have to fire an excessive number of workers to avoid the fee."

He said the ministry should have a clear-cut policy for business operators to plan and make future decisions.

The government should issue policies and regulations that do not increase the burden on companies, mainly local SMEs, Mr Suchart said, because they do not have a lot of capital to spend on fees or invest further in new machinery when compared with large companies that can afford additional costs from policy changes.

"The FTI completely disagrees with enforcing the act on the management of migrant labourers, while the government has to make this clear to the private sector because this new law will seriously exacerbate the country's labour shortage problem," he said, adding that local workers will not accept the unskilled jobs that their migrant counterparts do.

FTI chairman Supant Mongkolsuthree said the private sector does not understand why the government has to regulate the quota of migrant workers in each company, as there have been labour shortage problems for several years.

Low-skilled immigrant workers are "vital contributors" to the country's economy, Mr Supant said.

"The labour shortage has become widespread across the country, pressuring business operators to hire migrant workers from neighbouring countries as a result," he said.

Mr Supant said local SMEs will be most affected by the resultant labour shortages.

There are roughly 3 million SMEs in the country, accounting for 99.7% of all businesses, and they employ 11 million people.

SMEs are estimated to employ about 10 million migrant workers, both legally and illegally.

Mr Supant said large companies will suffer less from the law because they hire 3-4 million migrant workers.

Dirty, dangerous and difficult

SMEs earlier had to endure a further hike in the daily minimum wage, which came into effect in April. This caused jitters among SME operators because they must shoulder a higher cost in addition to existing production costs amid Thailand's slow economic recovery.

The cabinet in late January endorsed nationwide daily minimum wage hikes of 5-22 baht, rising 1.64-7.14% from the base of 300 baht.

There are seven daily minimum wage rates -- 308, 310, 315, 318, 320, 325 and 330 -- varying by region.

The average minimum wage is 315.97 baht. While Phuket, Chon Buri and Rayong got the highest rate, the three southernmost provinces -- Yala, Pattani and Narathiwat -- received the lowest at 308 baht.

The new hike was based on an overall inflation rate of 0.4% and the country's projected economic growth rate of 4%.

Issara Boonyoung, honorary president of the Housing Business Association, said the new quota could cause panic in many business sectors and do harm to the country's economy.

"The law is too strict. It will be impossible to enact it and will ultimately be unsuccessful," Mr Issara said.

"Many businesses depending heavily on manual labour like fisheries have used migrant workers for a long time, since Thai people don't want to do this kind of work. At present, even those from Myanmar have turned away from fisheries because they have more job choices. The sector now needs to use Bangladeshis."

Mr Issara said Thai people are usually selective in choosing jobs. They tend to turn away from "3D" jobs -- dirty, dangerous and difficult. This designation is associated with fisheries, construction, agriculture and mining.

"Local people prefer jobs other than working in the labour industry or service sector, a usual occurrence in developed countries, as they don't want to do labour-intensive work," Mr Issara said. "As an employer, we actually don't want to hire foreign workers due to the high costs, such as immigrant fees, but we have no choice because Thais don't want to do this type of work."

If the government is worried about unemployment among Thai people, it should improve the education system to increase Thai people's competence, he said.

"Unemployment is a problem among white-collar workers more than blue-collar ones," Mr Issara said.

He said Thai employers may register the number of employees they need with local authorities at employment offices, and the offices can seek out Thai people to fill those roles.

But if the number of workers that those employers need is higher than the number of Thai people registering for such job opportunities, the employers could be allowed to employ foreign workers.

Crippling construction

Men work on a condominium construction site on Phetkasem Road. PANUMAS SANGUANWONG

A survey by Siam Commercial Bank's Economic Intelligence Center (EIC) a few years ago found that more than half of companies were unable to find labourers they wanted in three months.

This problem was more pronounced in sectors that depend heavily on a manual labour workforce, like construction.

The EIC said one of the key factors was the demographic shift to an ageing society. The proportion of the working population aged 15 to 64 years old will peak this year.

Atip Bijanonda, chairman of the committee on business for real estate development at the Thai Chamber of Commerce, said the law should be only be applied to skilled labourers and exclude unskilled labourers.

"For skilled workers, a quota can protect skilled Thai workers," he said. "But for unskilled labourers, foreign workers should be allowed."

In the property sector, the strongest impact will be in construction, as it depends heavily on foreign labourers, of which more than half are usually migrant workers.

"Thai labourers prefer other kinds of jobs than construction," Mr Atip said. "Today, nearly 100% of the labour force at some construction sites are migrant workers."

Pun Paniengvate, president of Thai President Foods Plc, the producer of Mama instant noodles, said the company employs 600-700 foreign labourers from Myanmar, Laos and Cambodia at its factory in Ban Pong district, Ratchaburi province, for producing instant rice vermicelli and porridge.

Foreign labourers represent just 15% of the company's total workforce at present.

"We have not been affected by the new government [cap] on foreign labourers so far," Mr Pun said.

But he urged the government to refrain from implementing a policy that could become an obstacle for business operators, as some government policies fail to reflect the real situation on the ground.

Mr Pun said the company is relying more heavily on high technology to boost its competitiveness.

The company itself prefers hiring Thai labourers, he said, but domestic workers are rather difficult to find.

"There are many rules to hiring foreign labourers, and they have no loyalty to the company," Mr Pun said. "We need to hire them because we cannot find Thais working in these areas."

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