A new decree that increases the minimum wage of workers in Vietnam will not necessarily lead to companies relocating to Cambodia, according to officials.

“The Vietnam government has issued [a] decree, which takes effect from January 1, to adjust the minimum wages paid to workers by enterprises... farms, households, and individuals,” Tran Tu, trade attache for the Vietnam Trade Office in Cambodia, said.

According to the decree, the respective new monthly wages in Vietnam’s four regions that are separated by their economic situation, increased to 2.4 million dong ($113), 2.1 million, 1.8 million and 1.7 million dong.

Tran Tu said the previous levels of minimum wage workers in the four areas used to get monthly were two million ($96), 1.8 million, 1.6 million and one million dong respectively.

According to Cheat Khemara, senior officer at the Garment Manufacturers Association in Cambodia, this increase will not immediately force Vietnamese companies like garment firms to enter Cambodia.

He said, generally, companies planning to relocate need at least five years to study the business environment and procedures in the new country, so they will not enter Cambodia in the short term.

In November last year the Thai government approved a proposal to implement a minimum wage of 300 baht ($9.81) a day from January 1 the Bangkok Post reported.

It reported last December that TK Garment Co, a leading Thai original equipment manufacturer for fashion lines in Thailand, is relocating its largest production site to Cambodia to escape high wage costs.

Tran Tu said the investor’s decision depended on many factors, “not only the level of minimum wage but also the quality of skilled workers [and] the working attitude.”

“Also, [the] Vietnam Government offers foreign investors many other preferential conditions, including [a] high-quality system of infrastructure [and] tax exemption. As a result, [the] Vietnamese investment climate is competitively better and better; good enough to attract more and more investors from all over the world,” he said.

Hiroshi Suzuki, chief executive and chief economist at the Business Research Institute for Cambodia, said many companies, especially in labour-intensive industries, are looking for good investment candidates.

“The increase in wages in Vietnam provides some effect on this decision. Cambodia’s lower labour costs would be more attractive for these companies,” he said.

But he said the current level of wages in Vietnam is not too high, so a drastic replacement from Vietnam to Cambodia would not occur now. “Now is the stage that labour-intensive industry in China would like to relocate to good candidate countries because of drastic increase of wages in China compared with that of other countries, including Cambodia.”

According to Suzuki, Cambodia is well located between Bangkok and Ho Chi Minh City, where many Japanese companies are based.

He said sectors most affected by the minimum wage in Vietnam are labour-intensive industries like garments, shoes and parts manufacturing.

Chhun Hut, president of the Vietnamese Businessmen’s Association in Cambodia, said some Vietnamese companies had already relocated to Cambodia, but he said he did not know whether it was a result of the increase.

To contact the reporters on this story: Anne Renzenbrink at [email protected]

Rann Reuy at [email protected]