High cost of RP labor a myth

A survey debunking claims that Philippine wages are more expensive than those in China is the anchor of a Board of Investments’ investment promotion campaign aimed at attracting manufacturing industries that are not power-intensive.

Quoting the 20th Asia survey by JETRO released in October 2009, BOI managing head Cristino Panlilio said businessmen should disabuse their minds about Philippine labor being more expensive than China’s.

“That is my call to business, employers: Start checking, re-computing this cost competitiveness as far as labor is concerned,” Panlilio said.

Panlilio said the survey showed that salaries in the manufacturing and services sectors, both for employees and managers, are more expensive in China.

“I heard that there are serious efforts (by some manufacturing companies) to relocate here from China,” Panlilio said.

Consider the numbers in the survey, Panlilio said.

In manufacturing, China’s salary is $4,000 per annum compared to the Philippines’ $3,800.

For engineers, the salary in China is $8,000 per annum but in the Philippines it is $6,000.

Managers in the manufacturing sector in China get $14,900 per annum. In the Philippines, they get $14,800

In the service industry, China’s salary is $10,000 per annum but here it is only $6,000 per annum.

Managers’ salary in the service industry in China is $25,000 per annum while that of the Philippines is $18,000 per annum.

Based on the survey, Panlilio said the Philippines is at par with Indonesia and Vietnam but is cheaper than Thailand and Malaysia.

In manufacturing, the average annual salary of a worker in Indonesia is $3,523 per year while in Vietnam it is way down at $1,903. The Philippines’ $3,704 is a lot cheaper than Malaysia’s $4,312 and Thailand’s $4,497.

In services, the average wage of a staff in Indonesia is $5,320 and in Vietnam $5,584, cheaper than the $5,940 in the Philippines. The figures for Thailand are $10,317 and for Malaysia, $15,044.

“Wages usually increase as a nation develops and that’s part of economic growth. The cost of labor becomes a giant cost so, business gravitate towards countries with reasonable labor cost. The Philippines is very competitive when it comes to labor and employment cost,” Panlilio said.

Another advantage of the Philippines, according to Panlilio, is the high number of college students.

In 2009, 2.9 million or 57 percent of high school graduates proceeded to university.

There were 298,000 new students in engineering, 648,000 students in nursing and medical-related courses and 260,000 in information technology in 2009.

With this stock of prospective graduates, Panlilio said local business should switch gears.

“I would like to think we are geared for higher level of manufacturing opportunity but local businessmen are not aware of this,” Panlilio said.

He said while the Department of Energy is mapping out a game plan to make energy affordable in the medium term, the Philippines must focus on non-power-intensive light industries such as appliance or computer assembly. He cited Hitachi and Acer.

Panlilio said industries with electric cost component of over 20 percent would be difficult to attract, and would have a hard time surviving here.

Panlilio said the previous administration had been fair to labor.

“But increasing (wages) further has to be sensitized based on labor situations. We have to look at wages per industry basis because each has different factors/inputs of production,” he said.

Panlilio said he favors having a minimum wage because it is easier to administer and tends to average out salary rates across industries.

“We hope the regional wage boards do not increase labor (wages) because we have managed our inflation, which is very benign,” he said. –IRMA ISIP, http://www.malaya.com.ph/08232010/busi1.html