Labor Woes Grip Garment Exports

Laos is struggling to hire factory workers to meet growing demand for its garment industry.
2012-11-15
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Laos’ Industry and Commerce Minister Nam Viyaketh (L) receives his country’s name plate from WTO Director General Pascal Lamy in Geneva, Oct. 26, 2012.
Photo courtesy of the WTO

Updated at 12:46 p.m. EST on 11-26-2012

A labor shortage in Laos’ garment sector may prevent the country from meeting its goal of nearly tripling clothing exports by 2015, an industry source said, and the problem is unlikely to be resolved soon.

Garments are the single biggest manufactured export in Laos, but according to an official from the country’s Garment Industry Association, the sector will need to double its workforce to at least 60,000 to meet the target of U.S. $500 million in exports in three years.

The export market for garments in Laos currently draws an estimated U.S. $100-200 million annually, said the official, who spoke to RFA’s Lao service on condition of anonymity.

As of 2011, the official said, Laos was home to around 110 garment factories which employ around 30,000 workers. Fifty of the factories were export-oriented and, in the first six months of 2012, shipped products worth more than U.S. $85 million.

The Garment Industry Association plans to secure more investment from the Lao government for additional factories to meet growing demand, but export volume will be restricted by labor constraints.

He called the labor shortage a “chronic issue that is hard to solve and will continue.”

Seasonal labor is one of the reasons factories are unable to maintain a steady supply of workers, he said, with rural workers returning to their fields for planting and harvesting crops.

He also cited a lack of skilled workers in Laos, which has forced companies in the garment industry to increase job training and to import labor from neighboring countries. But despite these efforts, the number of workers is still not meeting demand.

A government official, who also spoke to RFA’s Lao service on condition of anonymity, said that the number of garment factories in the country is increasing too rapidly to hire sufficient workers.

He said that the industry needs to hire at least 12,500 workers a year but has only been able to recruit 4,000-5,000 this year, largely because Laotians are attracted to more lucrative jobs across the border in Thailand.

“Laos does not have efficient measures to prevent them from going to Thailand,” he said.

“It’s so convenient to go to Thailand—whoever has a passport or a border pass can go.”

The Lao garment industry has trained around 100,000 workers over the past 20 years, the official said, but has only maintained a workforce of around 30,000.

Growing sector

The World Trade Organization’s recent approval of Laos’ membership is expected to help the landlocked communist nation of 6.5 million people grow its garment sector, officials say. Following approval by the Laotian parliament, the country should officially join the WTO in early 2013.

According to the ASEAN Federation of Textile Industries (AFTEX), a grouping of textile and garment associations of the 10-member Association of Southeast Asian Nations (ASEAN), garment exports in Laos peaked at U.S. $189 million in 2008, with the bulk going to the European Union and the U.S.

Exports dropped significantly as the global economic crisis dampened demand, but have now begun to rebound, according to the Garment Industry Association.

The country’s main garment buyers are Germany and France, but the association said that Lao factories are now looking to branch out to Asian markets as well, where demand is now on the rise.

Many producers have turned to Laos from China to secure their garments because of lower labor costs, which has exacerbated the labor shortage problem, it said.

But association officials have also said that many Lao workers prefer not to work in the garment industry because the pay cannot keep pace with inflation in the country.

The average garment worker earns around 630,000 kip (U.S. $79) per month—the national minimum wage in Laos—working six days a week.

The Garment Industry Association says factories have been unable to increase wages for workers lest product prices rise, lessening the advantage of Lao garments in the global arena.

Reported by RFA’s Lao service. Translated by Bounchanh Mouangkham. Written in English by Joshua Lipes.

CORRECTION: An earlier version of this story indicated that the Lao garment industry has trained around 300,000 workers over the past 20 years and that the average garment worker earns slightly more than the national minimum wage in Laos.