The global foundry industry chain has passed from Europe and the United States to Asia’s Japan, South Korea, Hong Kong, Taiwan, and finally through mainland China, and now it is gradually turning Southeast Asian countries such as Vietnam and Cambodia have also extended to Africa. Among them, the textile and apparel industry is the most obvious.
However, recently, more and more information and policies have shown that Southeast Asia is no longer popular.
According to Malaysia’s “Nanyang Siang Pau” report, The Malaysian government has shut down 140 factories involved in importing and processing illegally imported waste in the first two months of this year.
On November 24, two Taiwanese-owned factories in Vinh Phuc Province in northern Vietnam were shut down. At least 110 employees suddenly suffered from dizziness, vomiting and even fainting. The local government has asked these two factories to suspend operations. The Vietnam Army’s chemical branch was dispatched to investigate the accident.
The costs of building factories in Southeast Asia are soaring
According to statistics, 34 new factories were opened in Vietnam in 2016 , but more than 70 factories closed down. In 2017, 15 new ones opened and 54 closed.
Vietnam’s basic salary has increased more than 17 times in the past 20 years! Moreover, once the government increases the basic salary, corporate employees will demand a salary increase. In addition, companies will also need to pay high Social Security Expenses.
Wages in Vietnam are rising rapidly. The basic salary plus pension insurance, the salary issued by the company is about RMB 2,300 per person per month. However, the work efficiency of Vietnamese employees is equivalent to 60% to 70% of domestic employees; the equivalent actual salary is 3,285 yuan per month. The government also raises basic wages every year.
Vietnam has introduced a new labor law, labor is not cheap
Vietnam is currently in a labor dividend period, and its population in 2017 The total number reached 93.7 million, ranking third in Southeast Asia. However, Vietnam’s labor force level does not have a clear advantage. Nearly 77% of the country’s workers (more than 43 million people) lack professional skills, and the ratio of workers with diplomas is 23.5 %. According to the Global Competitiveness Report 2016-2017, Vietnam ranks 63rd in labor market efficiency among 138 countries around the world, while China ranks 39th.
As for the retirement age, the new version of the “Labor Law” stipulates that under normal working conditions, the retirement age of male and female workers will be increased to 62 and 60 years old respectively.
The specific road map is that for male workers, the retirement age under normal working conditions is 60 years and 3 months in 2021, and will increase by 3 months each year from 2021 to 2028. . For female workers, the retirement age under normal working conditions is 55 years and 4 months in 2021, and will increase by 4 months each year from 2021 to 2035.
Protests and rights protection activities are frequent, affecting the normal production activities of factories
In Southeast Asian countries, workers have frequently gone on strike. Take a major supplier of Adidas and Nike as an example. The company has seven factories in Vietnam with a total of 160,000 employees. However, after the company’s Vietnam factory experienced five large-scale strikes in seven years, the company decided that it would no longer expand the scale of its Vietnam factory and would invest more in Indonesia and Myanmar in the future.
Vietnam relies heavily on imported raw materials
In the past 10 years, although Vietnam’s waste recycling has grown by 15-20% annually, 80% of the plastics industry has Raw materials still rely on imports. In this regard, Mr. Ho Duc Lam, Chairman of the Vietnam Plastics Association, said: “Vietnam can currently only manufacture end products and has not paid much attention to the development of plastic recycling. This will lead to serious imports of raw materials.”
Vietnam’s port throughput capacity is limited
In the past two years, more people have gone to Vietnam to make waste plastics. Many containers have been queued up for customs declaration and cannot be declared at all, so Vietnam Customs will wait for a period of time. Close customs and prevent imports. Therefore, if you want to set up a plastics factory in Vietnam, you need to store enough supplies, or have local supplies in Vietnam. However, there is basically no profit from buying local supplies in Vietnam, but it can ensure that you can maintain production when the customs are closed.
Vietnam’s real advantage lies in its better business environment
Tax rate is competitiveness! If you run a large enterprise in Vietnam, paying taxes for the first fifteen years is slightly better than nothing! Even for enterprises with small investments, two exemptions and four half reductions are standard treatment. In fact, even if tax is paid normally, the tax rate in Vietnam is not high. The value-added tax that Chinese companies are most afraid of is divided into several levels here, and the highest is only 10%.
Vietnam is close to the market, and the entire Southeast Asian market has unimpeded access. There are almost no import and export restrictions, and import tariffs on raw materials are very low. As for electricity prices, in Vietnam, power supply in industrial zones is basically guaranteed. The industrial electricity price is equivalent to RMB 0.44-0.45 per kilowatt hour, which is only 60% of the domestic price.
Big-name processing factories are targeting Africa again
In addition to Southeast Asia, Africa is also favored by many large companies , Africa is close to European and American markets, and has important cotton-producing areas. The merchants are also “very cooperative”. Compared with East and Southeast Asian countries, East AsiaIn addition to cheap labor, it is cheaper to transport clothing to Europe or the United States. In addition, African countries signed a special trade agreement with the United States in 2000, and American clothing enters the African market duty-free. As the local cotton industry in Africa develops, local resources can be purchased to further reduce costs.
International giants H&M and Primark have begun purchasing from Ethiopia
International giants H&M, Tesco, Primark and other companies have also begun purchasing from Ethiopia Purchase from Ethiopia because there is no minimum monthly salary limit in the country. For unskilled workers, the monthly salary is only 35 to 40 US dollars, which is obviously much lower than that in Myanmar. These foreign clothing manufacturers are very popular in African countries, and they also benefit from the abundant local cheap labor and energy. Kenya’s garment industry is also developing. Although the monthly salary in the country is about US$120, the government attracts these foreign businessmen with generous incentives.
Whether it is moving to Southeast Asia or Africa, all this stems from the increasing saturation of other global clothing markets and the swelling of various business costs, and the financial crisis sweeping the world has played a contributing role.
No matter where you open a factory, it can be said that there are pros and cons, but you must be cautious, because the management of textile companies in foreign countries is becoming increasingly strict. Companies that invest in and build factories must remember Understand local policies and never do illegal business!
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