June 16, 2011

Cambodia as alternative manufacturing labour


Japanese motor maker Minebea Co. chose Cambodia over Vietnam to build a plant for 5,000 workers in a sign growing labor disputes are hurting Vietnam’s appeal as a low-cost alternative to China.

“A strike would be trouble,” Yasunari Kuwano, a spokesman at Tokyo-based Minebea, said of the $62 million plant, which will make electric motors for appliances and digital equipment. “Labor is the key focus for us in choosing Cambodia. We need reliable labor.”

As Minebea broke ground last month in Phnom Penh, London- based cable maker Volex Group Plc (VLX) and Japanese lingerie company Wacoal Holdings Corp. (3591) were among investors in Vietnam that faced illegal wildcat strikes. Workers are demanding better pay after the highest inflation rate in Asia hurt their purchasing power.

The strikes have dented Vietnam’s 25-year-old goal of attracting foreign investors to set up manufacturing hubs by offering a reliable workforce with minimum wages now half those of China. Planned foreign direct investment into Vietnam fell 48 percent in the first five months of 2011, to $4.7 billion.

“The nation is at a critical crossroads,” said Victoria Kwakwa in Hanoi, the World Bank’s country director in the Southeast Asian nation. “Vietnam can’t assume that FDI will continue. Money can go elsewhere.”


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