Garment companies fear they may lose clients cause of higher production costs

VietNamNet Bridge The decision to increase the minimum wage two months earlier than initially planned has raised big worries to businesses, especially the labor-intensive industries such as garment and footwear.
Garment and footwear producers have been put on tenterhooks, because they fear they may lose a lot of orders at the end of 2011 and early 2012. The problem is that businesses have been told to apply the new minimum wage two months earlier than initially planned. This spells that the businesses will have to pay more money to pay social insurance premiums for workers, which will make the production cost increase. With more than 2000 workers, the Saigon 2 Garment Company now fears that the profits would be smaller when it has to pay more for workers social insurance premiums. Nguyen Huu Toan, Deputy General Director of the company, said that though the production costs increase, the company cannot adjust the sale prices of finished products. If they do, clients may leave the company for other producers. Especially, foreign importers may shift to place orders with Bangladeshi or Indonesian producers instead of Vietnamese. The minimum wage increases will certainly affect the garment and footwear industries, which need high numbers of workers. This will make Vietnam less attractive than other countries in the eyes of investors, said Chris Kim, Deputy General Director of South Korean Mirae Fiber. In the last few years, a lot of foreign investors have moved to Vietnam and set up their production bases in order to take full advantage of the cheap labor force. However, an officer of the Vietnam Textile and Apparel Association (Vitas) has said that when the minimum wage increases, this will make the production costs increase, which will force foreign investors to reconsider their decisions to make investment in Vietnam. The officer emphasized that garment is a labor-intensive industry; therefore, it is understandable why the minimum wage adjustment seriously affects garment enterprises. Dao Xuan Long, Assistant to Dinh Vang Companys General Director in Hai Phong City, said that though there are many orders in 2011, because foreign investors placed orders with Vietnamese producers instead of Chinese, the company has to struggle to develop, because it has to arrange enough money to pay its 1200 workers. In my opinion, it is unfair that they have to reduce the workers wages but at the same time it is logical that they have to pay more for they insurance, I think that it is an obvious outcoming. However, I think their production will increase in the future, because I believe it is more expensive for the investors to move they already financial stability to other country. And also even though their profits will decrease it is a good thing they in a certain way they are putting their workers in first place.

Mapping of the week Challenges of International Human Resources Management Recruiting managing, and retaining human resources at a firm with extensive global operations are especially challenging.

FOR EXAMPLE: In 2005, German firm Siemens had 460,800 employees in some 190 countries: 290,500 throughout Europe, 100,600 in the Americas, 58, 000 in the Asia-Pacific region, and 11,900 in Africa, the Middle East and Russia.

INTERNATIONAL HUMAN RESOURCES MANAGEMENT The planning, selection, training, employment, and evaluation of employees for international operations.

How a firms recruits, trains, and places skilled personnel in its worldwide values chains sets it apart from competition.

THREE EMPLOYEE CATEGORIES AT THE MNE

HOST-COUNTRY NATIONALS: citizens of the country where the subsidiary affiliate is located.

PARENT-COUNTRY NATIONALS: also known as home-country nationals.

THIRD-COUNTRY NATIONALS.

DIFFERENCES BETWEEN DOMESTIC AND INTERNATIONAL HUMAN RESOURCES: 1. New HR responsibilities. E.G. International Taxation, International relocation and orientation, services for expatriates, host government relations, and language translation services. 2. Need for a broader perspective. E.G. Establishing affair and comparable compensation scale when there is a mix of PCNs, HCNs and TCNs. 3. Managing the mix of expatriates versus locals.