VietNamNet Bridge – Though the minimum wage spike has three and a half months to go, enterprises in the labor-intensive textile and garment sector are scrambling to find ways to cope with this financial burden.

Employees are at work at a garment factory in Binh Duong Province. Though the minimum wage spike has three and a half months to go, enterprises in the labor-intensive textile and garment sector are feeling its impact – Photo: SGT

The National Wage Council early this month agreed on a 12.4% increase in minimum wages for 2016. The new minimum wage is subject to Government approval in October.

Therefore, enterprises in the sector plan to change products structures at their factories in cities, expand production in rural areas and cut down on some allowances and bonuses for workers to survive the difficult situation.

Speaking at a media conference held in HCMC last Saturday to introduce the Vietnam International Fashion Fair (VIFF) 2015, Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association, said the 12.4% salary hike will pose a huge challenge for companies in the sector.

Enterprises in Region 1 (Hanoi and HCMC) and Region 2 (Can Tho, Danang, Haiphong and the outskirts of Hanoi and HCMC) will be hard hit. Viet Tien Garment Corp., for instance, will see the paycheck for its workers jumping by VND86 billion (US$3.8 million) compared to this year.

“As a member of the National Wage Council, I support a wage spike but its timing should be reconsidered in a way that helps enterprises survive the current tough economic conditions,” Giang said.

The sector has already felt the impact of the upcoming wage hike. Businesses are struggling to cope while foreign importers have shifted their orders to other countries such as Myanmar and Bangladesh due to a possible rise in production costs here in Vietnam.

In the long term, foreign investment capital flows into the local textile and garment industry may slow down as the Government will continue to raise wages in 2018 to ensure that workers can live on their salaries, Giang said.

In addition, enterprises have pointed out a paradox revolving the way region-based salaries are fixed. In Haiphong City’s Vinh Bao District, there is a garment company bordering with Thai Binh Province and located around 80 kilometers from Hai Phong City. However, Thai Binh belongs to Region 4 but Haiphong City is in Region 1, he added.

If Government approval is forthcoming, the monthly minimum wages would be VND3.5 million for region one (up VND400,000), VND3.1 million for region two (up VND350,000), VND2.7 million for region three (up VND300,000) and VND2.4 million for region four (up VND250,000).

According to Giang, the nation obtained US$17.8 billion in textile and garment export revenue in January-August, up 10% year-on-year. The sector targets US$27.5-28 billion in export revenue this year.