January 30, 2014 12:00 am JST

Learning on the job

GWEN ROBINSON, Senior Asia editor, Nikkei Asian Review

BANGKOK -- The recent surge of labor activism throughout Asia, intensified by harsh suppression in some countries, highlights the problems facing both investors and governments in a region seeing uneven income growth and rising worker expectations. In the past two years, wages and labor conditions have become a flashpoint for protests and industrial unrest in countries from China, Sri Lanka and Cambodia to the Philippines, Pakistan and Myanmar.

     In some developing countries, the apparel industry -- notorious for unscrupulous operators and sweatshop practices -- is at the front line of wage disputes. In China, a garment factory worker can expect to earn $300 to $500 per month. In Thailand, the figure is about $200, while in Cambodia, the pay is barely $80 per month and in Myanmar, a paltry $35.

     The challenges emerging from such discrepancies are on stark display in three countries in the heart of Southeast Asia: Thailand, Cambodia and Myanmar.

Trailblazing in Thailand

For Thailand, wage policies have drawn rare consensus. While the country is now mired in political crisis, the beleaguered government of Prime Minister Yingluck Shinawatra earned praise for its bold, two-step move from Jan. 1, 2013, to raise the minimum wage to 300 baht ($9.12) per day from a previous range of 160 to 220 baht per day.

     Critics scoffed that the minimum wage would be impossible to enforce, while some Thai employers' groups complained bitterly about the impact of the wage hike -- modest in higher-cost areas near Bangkok but marking an increase of nearly 40% in poorer provinces -- on their bottom lines.

     Citing factors including the strong baht, these groups warned that many smaller companies would be forced to shut down. Government planners said in late 2013 that relatively few companies had closed as a direct result of wage increases, though state planning agency the National Economic and Social Development Board calculated that the higher wages resulted in an average 6.4% annual rise in employer costs.

     Even so, most economists agree that the better pay has helped protect Thai economic growth and buoy consumer spending in 2013, as external factors slowed exports.

     Other policies of Yingluck's government, including its controversial rice-price subsidy scheme, have been widely criticized. But in its wage move, Thailand was in step with a vital trend. More than 20 countries in the Asia-Pacific region have set or raised minimum wages in the past two years, according to U.N. body the Economic and Social Commission for Asia and the Pacific, which has welcomed these developments as an overdue push by governments to boost domestic demand while reducing overreliance on exports and "exploitation of cheap human capital."

Cambodia's dilemma

Undoubtedly, Thailand's move helped fuel worker discontent in Cambodia over the minimum monthly wage of $80. Labor unrest in the capital Phnom Penh culminated in a bloody crackdown earlier this month on striking garment workers in which four were killed and scores injured. With 700 to 800 factories employing more than 600,000 workers, the apparel industry is worth $5 billion and accounts for 80% of Cambodia's exports.

     In the lead-up to the crackdown, Cambodian apparel workers had demanded a doubling of the minimum wage and were incensed when the government offered an increase of just $15 to a total $95 per month. When desperate unions joined opposition protests against the government of Prime Minister Hun Sen over claims of fraud in the July 2013 election, the security forces moved in. Now, say local analysts, the stage is set for further industrial unrest unless both government and unions start compromising.

     In an export-reliant economy, the most effective solution could lie with the country's big investors and buyers. Signaling a new level of "investor activism," an unprecedented coalition of 30 multinational companies including Walt Disney, Wal-Mart Stores and Nike, and three global unions wrote to Hun Sen in mid-January demanding an investigation into the shootings and a fresh approach to raising minimum wages.

     Cambodian officials and industry groups have warned that wage demands threaten the country's competitiveness. But the strongly worded call by Western companies signals their anxiety to avoid association with the brutal crackdown and their determination to push for change in government policies. That, local labor organizers say, suggests Western companies will tolerate higher production costs in Cambodia.

     In an earlier compromise attempt, the government proposed a 100% hike in the minimum wage gradually over five years. But workers rejected the offer and escalated their protests.

Lessons for Myanmar

None of these developments have been lost on Myanmar, which is still in the "least-developed country" category. Myanmar's labor policies and standards have already undergone radical change since the quasi-civilian government of President Thein Sein came to power in 2011. The legislative overhaul has enabled the creation of unions, paved the way for a minimum wage and seen Myanmar admitted to the International Labor Organization.

     Once outlawed, unions are now common in the country's factories and even in its white-collar offices. More than 900 unions have been registered since mid-2011, with unionized workers now numbering more than 60,000, according to local estimates, and literally hundreds of strike actions -- once illegal -- have often led to improved pay or conditions.

     Wages are still pitiful in Myanmar, ranging from as low as $28 per month to an average of $40 in the garment industry, and conditions for workers are uneven, at best.

     But the government has committed to raising labor standards and implementing a minimum wage rule within this year. It has created national and regional committees of public and private sector representatives to consider appropriate pay levels. The move is seen as essential for Myanmar, as investors stream in following the introduction last year of a new foreign investment law. Details are not yet decided, but Cambodia's $80 per month level is seen as a "good standard," a labor policy adviser said.

     In a country of 60 million, more than 60% of the working population relies on agriculture for jobs. But new and better-paying jobs lie in the nascent industrial economy, particularly in the rapidly reviving apparel industry. U.S. sanctions led to mass factory closures and sharp falls in the country's garment exports in the early 2000s. Now, while worker numbers in the apparel industry are still far below their peak of more than 350,000 in 2000, they have climbed to 150,000 from a low of 60,000 in 2010.

     Khine Khine Nwe, a garment factory owner and leading executive of the Myanmar Garment Manufacturers Association, believes the industry is a key draw for foreign investment.

     "Of course there is a long way to go, but we are getting there. ... On issues concerning labor standards and industrial policies, we have learned from the experience of other countries, and we know the direction we want to head," she told the Nikkei Asian Review.

     International aid officials agree. "There is no question that the government has moved and continues to move positively in establishing a legislative framework of minimum national standards across the board in the labor market," said Steve Marshall, ILO representative in Myanmar.

     However, he cautioned, "having laws and achieving change for the better in the workplace are two different things. There has definitely been some improvement in practice, but eventual success depends on a number of issues, particularly on the capacity of government to implement new laws and the capacity of employers and workers to understand, accept and apply the new concepts contained in those laws."