Exodus of jobs from China to SE Asia
December 03, 2008

As labor costs in China rise on tightened labor laws and the strengthening yuan, Korean clothes makers that outsource production to China are turning their eyes to Southeast Asian countries such as Vietnam.

Three officials of Tomboy and Co., a local women’s casual wear maker, recently went on business trip to Vietnam’s Hanoi and Ho Chi Minh City in order to find new factories to outsource production of the company’s blouses and jackets, according to a spokesman. These clothing items used to be produced in Dalian, China.

“Our production cost in China has surged 50 percent in this year,” said the spokesman, Lee Jong-hwan. The company’s average monthly pay per worker in Dalian has risen to the current 1,400 yuan ($203) from 1,000 yuan late last year, due to China’s new labor laws, he said. In addition, the yuan has risen sharply against the Korean won this year. China accounted for 58 percent of Tomboy’s production early this year and the company plans to lower the percentage to 45 percent early next year.

Other local midrange clothes makers such as Shinwon Corp., The Basic House Co. and E.Land are also moving their production bases from China on soaring costs.

“We have no other choice, because we cannot reflect the cost hikes to product prices for fear of losing customers in the already-freezing market amid the global financial turmoil,” said an official at a clothes maker who refused to be identified.

“Vietnam is emerging as the most competitive alternative now,” said Kim Young-sik, head of the outsourcing division at FnC Kolon, a Korean sportswear maker. He visited the country twice this year.

“We are collecting data about Indonesian factories, as the country is said to have low wages and low tariffs,” said Choi Won-gyu, an official at Yeshin PJ, a casual-wear maker.

By Lim Mi-jin JoongAng Ilbo [symoon@joongang.co.kr]