Hong Kong-Invested Companies in Thailand: Labour Relations and Practices

Abstract

This article examines the labour relations and practices of Hong Kong-invested factories in Thailand. Although Hong Kong investments in manufacturing in Thailand can be traced back to the 1970s, there has been little research on Hong Kong firms in Thailand. This article reports on a survey and interviews conducted in 25 Hong Kong-invested plants, seeking the views of factory managers. It was found that most surveyed firms do not comply with Thailand's national labour law. Unionisation is weak and, even in the few unionised factories, there is little regular consultation between unions and management. Only one collective bargaining agreement exists amongst the surveyed firms. We conclude that a principal determinant for Hong Kong investors in maintaining their investments in Thailand is the ability to keep control over labour. This article sheds light on the role played by the industrial relations systems in host countries on the foreign investors' actions.

Key Words:

• Foreign investment
• Hong Kong
• industrial relations and practices
• Thailand

Acknowledgement

This article draws on data from a multi-country project supported by the Research Grants Council of Hong Kong (Project No. CityU1268/03H). Earlier versions of this article were presented at the “Symposium on Hong Kong Investors in the Southeast Asian Supply Chain: Workplace Standards, Fair Trade and Globalisation,” 10 July 2006 and the Spring 2008 Colloquia series in the Department of Geography, University of North Carolina at Chapel Hill, 1 February 2008. We thank participants in these events for their comments. The authors also thank Stephen Frost, Mary Ho, Chantanut Theerachun, Praphob Anantakoon, Parat Nanakorn and Naomi Lo for their research assistance, and Bill Taylor for his research collaboration. We are also most grateful for the insightful comments of two anonymous reviewers.

Notes

This article is closely related to a paper on Cambodia (Chiu, 2007), where the research methods and questions were similar. The larger project involved extensive fieldwork in Cambodia, Thailand and Vietnam.

As indicated by Low et al. (1996), Hong Kong-based investment is often by affiliates of foreign investors in Hong Kong. In this study of industrial relations, we have not sought to distinguish between the two kinds of company and investment. This is because investment decisions and control tend to be concentrated in the Hong Kong affiliates(Low et al., 1996: 26, 43).

On some of the controversy in Hong Kong, related to charges regarding contraventions of the share trading rules and other legal cases related to the finance industry, see ICAC (2007) and SFC (1999). For Thailand, see the example of conflict with the Thaksin Shinawatra government and the Kanajanapas-controlled Skytrain operation, where the government threatened to take over the company (reported in the Nation newspaper, 25 May 2005, http://www.nationmultimedia.com/2005/05/25/business/index.php?news=business_17473731.html; downloaded 28 September 2007). Pasuk and Baker (2004: 46-51) noted an earlier business dispute between Thaksin and the Kanjanapas family.

The MFA began in 1974. It meant that importing countries could, through a framework of rules, impose quotas in areas where increase in imports had the potential to cause “market disruption.” USA and Western European countries applied quotas almost exclusively to developing country exports. This basic arrangement remained in place until the end of 2004. Developing country quotas encouraged manufacturers to relocate to gain access to those quotas (for background, see Brambilla et al., 2007: 3-5).

Current incentives include exemption or reduction of import duties on machinery and raw materials, limited corporate income tax exemptions, permission to bring in foreign workers, own land and remit foreign currency abroad. See the Board of Investment's website at: http://www.boi.go.th/english/about/basic_incentive.asp (downloaded 21 January 2008). For information regarding WTO assessments of Thailand's investment environment, see the WTO and Thai government documents for its trade policy reviews, available at: http://www.wto.org/english/tratop_e/tpr_e/tp223_e.htm (downloaded 21 January 2008).

It is remarkably difficult to access readily comparable wages for factory workers in Southeast Asia. In this context, we refer to “relatively cheap wages” based on a comparison of wages available for Thailand (US$62-100 per month), Cambodia (about US$60 per month) and Vietnam for 1998 (about US$35-55 per month) cited at the Database of Labour Law in Malaysia, Cambodia, Thailand, Hong Kong, Singapore and Vietnam by the Southeast Asia Research Centre, City University of Hong Kong (http://www.cityu.edu.hk/searc/labourlaw/index.html, downloaded 25 January 2008) and various news and business reports available to the researchers. We are aware that the remote services industry has different features from factory work, the information regarding competitiveness in outsourcing in the services industry for 2005 and 2007 is instructive. In terms of “financial attractiveness” (which included wage costs), among 50 countries, Thailand, Vietnam, the Philippines, Indonesia and Malaysia ranked at the very top, matching or bettering China and India. In the total ranking of competitiveness in this industry, Thailand ranked fourth (after India, China and Malaysia) in 2007, up from sixth in 2005 (A.T. Kearney, 2007).

The interviewers did not specifically ask about brands/companies. Those mentioned were WalMart and Kmart and, in both cases, managers explained that the inspectors were concerned mainly about excessive overtime and protective equipment. It was noted that client/buyer occupational and safety standards were different from those in the Thai law. Managers also complained that the overtime restrictions of both clients/buyers and the Thai labour law were unrealistic, especially for rush orders and in peak production times.

In his earlier works, Yeung was accused of being too “culturalist” in explaining investment decisions. In a recent book, Yeung (2004: xv) has explained that he is no longer interested in engaging in “culturalist” analysis that “explains Chinese capitalism primarily in relations to cultural norms and practices.” In this article, we have attempted to indicate that cultural factors have a role, but that these are embedded in a wider context of decision making.

We are most grateful to an anonymous reviewer and other commentators for insight and suggestions on this point.