Three days after New Year's Day, Xiao Renping, manager of China Cutting Die Co (Vietnam), sat in his office in an industrial development zone in Binh Duong Province, Vietnam, brewing a plan to set up a branch factory in Myanmar. Xiao is hoping to diversify his investment as the company is facing rising costs and lower productivity while operating in Vietnam.
For Xiao, the advantage of lower operating costs in Vietnam is long gone. When the company first came to the country to set up a factory in Di An Town, Binh Duong Province in 2009, it offered 1,200 yuan ($190.79) a month to local workers, compared with the average monthly salary in Vietnam of only around 600 yuan.
Over the past three years, Xiao's company has raised workers' salaries by 40 percent to the current average level of 2,000 yuan a month. And Xiao said the Vietnamese government has just ordered companies to raise workers' salaries by 20 percent this month.
Given the low work efficiency of Vietnamese workers, the advantage of cheaper labor in the country has lost its attraction, Xiao said.
The difficulty of finding skilled workers in Vietnam is also something that Xiao had never anticipated. Even when offering a higher salary than the country's average, Xiao could not get enough experienced workers and had to hire seven skilled workers from China to fill the labor shortage.
The dispute between China and Vietnam over sovereignty in the South China Sea has also added uncertainty to Xiao's business, and he sometimes has to "tip" Vietnamese officials in order to get a visa.
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