Bra manufacturer Top Form set an example for the growing number of garment factories heading to Cambodia from China. As the company slowed its production in wage-costly China, it began leasing Cambodian land in December 2011. The Post’s Sarah Thust talked to Chief Executive Willie Fung about finding a balance between low wages and high skill sets.
Top Form set up its new factory in Cambodia and not in China.
We’re about 40 years old, and we’re a listed company in Hong Kong. Two years ago, China was accounting for almost two-thirds of our global capacity. We had manufacturing facilities in China, Thailand and the Philippines. In the future, we target to produce about 50 per cent in Thailand, 45 per cent in China and five per cent in Cambodia.
Why is that so?
The reason is that the structure of the labour source in China has changed so much in the most recent years that there are more job opportunities . . . Historically, [manufacturing companies] have been operating in the south of China quite close to the coast for almost 30 years. Over the years, the labour source changed in that more people opted to [earn] more [to match rising] costs of living.
Secondly, the wage structure in China has also changed quite drastically over the last four, five years. The minimum wage today is 100 per cent higher than it was four, five years ago. Also, nobody can hire workers simply by paying the minimum wage; you have to compete with the other enterprises or industries, fighting for workers. You also have to pay benefits, some contributions, and on top of that you have also the local currencies. The currency in China has been gaining value over the last years and is still appreciating today.
All this added together was the reason why we wanted to expand outside of China and come to
Why did you decide on Cambodia?
The reason for that was that we already have a very established manufacturing and management base in Thailand. If you look at the map, Cambodia is so close and shares a lot of cultural background. We can support Cambodia from Thailand with a better cost structure.
Do you plan to leave China in the long term?
Today, our capacity in China is shrinking, but we have no intention to fully leave the country, because China still provides a lot of opportunities and elements for us. We still have about 5,000 to 6,000 hectares in China.
However, our target is to increase our presence in other countries like Thailand.
As far as Thailand is concerned – we’ve been operating in Thailand for over 20 years – today we have probably about 500 hectares, and this is growing. Our target is to increase the hectares in Thailand to 3,000. So China today is still our number one by percentage, but technically Thailand will play a major role in the future.
What do you think about the latest minimum wage hikes in Cambodia?
Cambodia is relatively new in manufacturing, so you can hardly compare it to China or any other country. Therefore, the workforce is cheaper in terms of what you pay workers . . .
but relatively not as skilled, and the efficiency is not as high. But we saw that in China 40 years ago as well.
In the meantime, the costs in Phnom Penh are lower, and this is satisfying to produce basics. So there is a place for Cambodia as well, as long as the wage structure in Phnom Penh is keeping pace with what the market can afford.
Do you also plan to improve workers’ qualifications?
In fact, there is no real qualification. But what we will do is to open the door for as many workers that are willing to work in a factory. We can give them more money, and they can produce more. It’s a give and take.
How do you plan to develop your manufacturing in Cambodia?
Our factory compound in Phnom Penh is 22,000 square metres. It is a new factory operation, currently accounting for no more than five per cent of our global capacity. The factory is provisioned for a 1,500 headcount at the last stage of the buildup. Currently, we have approximately 350 employees, but we have targeted to hire a total of 700 employees by the end of this year. Late 2014, it will be up to 1,200. So we still have a long way to go.