Monthly Archives: January 2012

Participate online to support: People’s Tribunal on Minimum Living Wages for Cambodian Garment Workers- 5-8 Feb 2012

Dear all

Warm greetings from Asia Floor Wage Cambodia and Asia Floor Wage Alliance.

We wish to inform you that the upcoming People”s Tribunal of Asia Floor Wage Alliance will be held in Cambodia. The national PT of Cambodia is organised by the Asia Floor Wage Cambodia., in partnership with Asia Floor Wage Alliance.

This is the second national People’s Tribunal that was organised by AFWA’s members in Sri Lanka.

Renown International Judges from Permanence Peoples Tribunal together with the known figures in Cambodia will lead the PT.

We will be uploading all the proceeding into you tube online on the day of proceeding.
Therefore, you may follow the trial via the online documentation from 5-6 and 8 Feb 2012

The Trial will start from 5-6 Feb and 8 Feb will be the verdict announcement by the judges.

Please stay with us via:


‘We will upload all the latest information via this FB page and AFWC blog

Here is the detail of the PT:
People’s Tribunal on Minimum Living Wages and Decent Working Conditions for Garment Workers as a Fundamental Right, 5-8 February, 2012, Cambodia
Asia Floor Wage Cambodia is a member of the Asia Floor Wage Alliance’s Steering Committee, on behalf of Cambodian garment workers employed in the global garment industry as a fundamental human right of workers.

The Tribunal is being undertaken to pursue a global campaign for an Asia Floor Wage targeting garment manufacturers (garment TNC), suppliers, consumer-importers, garment workers and government officials. The Cambodian tribunal is second among other national hearings scheduled in upcoming months, and will culminate in an international session being requested at the People’s Permanent Tribunal. The goals of the Tribunal area:

Establish the State of Decent Labour Standards, specifically focusing on Women Workers, in the global garment industry including the issue of fair pricing for manufacturers
Present the impact of gender as a factor in determining the political economy of the global supply chain
Provide leverage for building worker collectivity with bargaining power within the global supply chain and contribute to strengthening grassroots mobilization
· Contribute to strengthening the conditions of workers, in particular women workers, in the garment global supply chain

The Tribunal will hear the testimonies of garment workers and experts on wage deficits and the Asia Floor Wage. The testimonies will provide cases and arguments towards the following objectives:

1. Establish whether the Supply Chain of garment industry is conducive for decent labour standards for workers, specifically women workers, using the ILO guidelines;
2. Determine the magnitude of workers, specifically women workers, in the Garment Global Supply Chain, working and living in conditions that fall far short of Decent Labour Standards;
3. Analyse the role of gender in determining the state of labour standards;
4. Investigate the causes of the deficit in terms of:
Adequacy of national regulatory framework
Effectiveness of ILO’s core conventions
Purchasing practices of multinationals
International trade regulatory mechanisms
Political economy of the garment Global Supply Chain
Adequacy of workers’ organizations, especially of women workers; and
5. Evaluate Proposals for establishing Decent Labour Standards and make Recommendations

Specifically, we petition the Tribunal to provide observations and recommendations on the following issues:
1. Is there a deficit in Decent Labour Standards in Cambodia’s garment industry?
2. Is there a wage deficit for basic living standards?
3. What are the causes of the wage deficit? Who are responsible?
4. Can AFW address this wage deficit?
5. What are the criteria for a wage that is defined as a human right?

Vote for Samsung to be the winner of Public Eye Awards

Samsung has been nominated for the Public Eye Awards by Supporters for the Health and Right of People in the Semiconductor Industry, stopsamsung.wordpress.com
At least 140 work-related cases of cancer, including at least 50 deaths. Outrageously, Samsung denies the illness of the workers are work-related and refuse to compensate the victims.
High-tech gadgets built on the backs of workers: South Korea’s richest conglomerate uses banned and highly-toxic substances in its factories, without informing and/or protecting its workers. As a result at least 140 workers were diagnosed with cancer, of which at least 50 young workers have died. Despite clear evidence, Samsung denies its responsibility and publicly discredits the sick and deceased, as well as their relatives. Samsung has a history of over 50 years of environmental pollution, trade union repression, corruption and tax flight. Samsung’s power in South Korea is so great that many citizens speak of the “Samsung Republic.”
End of January 2012 the winners will be presented their shameful awards in an international media conference in Davos. The organizations who nominated the winners will present their cases at that media conference in Davos.

Please vote for Samsung before 26th January. ,to make its name printed in the Hall of Shame

 

 

 

Greece:Interview with Union President Nikos Photopoulos

Interview with NIKOS PHOTOPOULOS, President of the GENOP-DEH union of workers of the Greek national electricity company, who is to be sentenced on the 10th of January, 2012, along with 14 of his comrades

Interview conducted in Athens, December 1st, by the ILC International Newsletter

Q: Facing the heavy prison sentence that you are faced with, shouldn’t we plan to undertake a broad campaign in the international labour movement to demand the lifting of any legal proceedings, especially between now and January 10th, 2010?

A: I thank you for the proposal, because we need such a campaign in order to pressure the government. We need to show the workers that they are not alone. The government and the Troika [IMF, European Union, European Central Bank — tr. note] have committed to a war to the bitter end. Nothing will stop them. With the government and the Troika, the accounts have been opened. These accounts are going to be settled in the streets. It is either us or them. We can no longer bear this policy that makes the workers pay while the rich get richer. It was not us, the workers, who were governing when the debts were contracted, so it is not up to us to pay those debts.

Today, a class war is taking place in Greece and for us the workers, it is our survival that is at stake, because they have blocked all the roads to the future. But we will bring those obstacles down. We are going to win back our dreams, which have been stolen. Greece already counts a million and a half workers under the poverty level, and a million of unemployed.

For over a year and a half now, they have been trying to brainwash us, to make us believe that we are responsible for what has happened to our country. But the brainwashing isn’t working. The people have awakened and their combat is at the heart of the situation.

That is why we did not hesitate to stand up to them, to show that we are not afraid — and we are doing so in all awareness and in order to open the way forward.

Yesterday, if the judgement sentencing us to prison had been pronounced, we had decided collectively not to appeal, in order to make them face up to their responsibilities. We did so in all awareness, not acting as heroes or as martyrs, but not lowering our heads. Our conscience is clear.

Q: How was the decision to occupy the centre in the Kholargos district taken, and what role did the union play?
A: We came to occupy to block the electricity cuts that have hit the unemployed and the poorest who can not afford to pay. This occupation was unbearable to the government, who sent the police to oust us. We knew that things would end up like this. We are demanding that the law be cancelled, because access to electricity should not be used as a means of pressure on society. The MPs who voted for this tax could never survive for even an hour without electricity Š but, as for others, they don’t give a damn.

Q: Yesterday, on the eve of the general strike called by the GSEE and ADEDY confederations, the court that was judging you and the 14 other activists of the GENOP-DEH, postponed its sentencing to the 10th of January, 2012. What are you accused of and what might your sentences be?
A: We are accused of “blocking the action of the forces of law and order” and blocking the proper functioning of public services”. Prison sentences of 6 months to 5 years are being sought against us. But the government fears having to declare us guilty because of the consequences that they would have to face. That is why they have put off this decision.

* * * * *

Greece:Stop the prosecution of Nikos Photopoulos and his comrades from the GENOP-DEH union immediately!

Fifteen union leaders and rank-and-file member of the GENOP-DEH will appear in court on January 10, 2012. They face up to five years in prison without parole for expressing their opposition to the policies of the Troika (IMF, European Union, and European Central Bank) and for actively demonstrating their solidarity with the Greek people, who refuse by any and all means necessary to pay for a crisis created by the banksters and speculators.

The International Liaison Committee of Workers and Peoples, in close collaboration with the Greek unionists [see statement and interview below], has launched an international campaign to demand that all charges be dropped against the 15 GENOP-DEH trade unionists.

Given the seriousness of the charges and the very short time before the court ruling, the ILC and GENOP-DEH are especially asking to receive solidarity statements from national and international trade union bodies, national unions, and local unions and central labor councils — though individual endorsements are also welcome.

* * * * * * * * * *

Appeal by the International Liaison Committee of Workers and Peoples (ILC)

Stop the prosecution of Nikos Photopoulos and his comrades from the GENOP-DEH union immediately!

We have just been informed by representatives of the Greek public power union, GENOP-DEH, of the repression affecting 15 Greek members of the GENOP-DEH union:

On 24 November 2011, squads of riot police (MAT) stormed the power company’s facilities in Mesogeion Avenue in Athens and violently cleared it of workers and trade unionists who had been staging a sit-in/occupation for a few days. The offices are responsible for cutting off the electricity supply to the thousands of working-class families who have refused to pay the new property tax imposed by the Greek government by order of the Troika (IMF-European Commission-European Central Bank), which is being levied through the electricity bills. The same offices are in charge of cutting off the supply to the thousands of families who, due to the crisis, can no longer pay their bills.

On 30 November 2011, 15 trade unionists, including GENOP-DEH General Secretary Nikos Photopoulos, appeared in court, charged with “obstructing the forces of order” and “obstructing the correct functioning of the public services”. They face prison sentences of 6 months to 5 years without parole. On the eve of the 1 December general strike called by the trade union confederations GSEE and ADEDY, the government decided it would be wiser to hold its fire; accordingly the court postponed its ruling until 10 January 2012.

Throughout the world, the workers and peoples are standing shoulder-to-shoulder with the Greek workers and their trade union organisations as they engage in the battle against the Troika’s barbaric plans implemented by the Greek government. The workers’ actions are legitimate, just as the actions of the Greek power workers and their trade union to prevent the power disconnections and to demand the withdrawal of the new tax imposed by the government are legitimate.

No worker, no labour activist, no democratic labour organisation can accept this threat of repression, which would be a blow against all labour and democratic rights.

This is why the International Liaison Committee of Workers and Peoples (ILC) has decided to inform all labour organisations around the world of these extremely serious facts, and to invite them to join in the effort, in whichever form they see fit, to demand that the Greek authorities immediately drop the legal proceedings against the GEOP-DEH union members, and to express their solidarity with them.

signed/
Louisa Hanoune, General Secretary of the Workers Party (Algeria)
Daniel Gluckstein, National Secretary of the Independent Workers Party (France )
Co-ordinators of the International Liaison Committee of Workers and Peoples

Messages should be sent to

GENOP-DEH Union :
main@genop.gr et press@genop.gr
(copy to be sent to the ILC : eit.ilc@fr.oleane.com)

Greek Prime Minister Papademos
internationalmediaoffice@primeminister.gr

Greek Minister of Labour
Ministry of Labour
40 Pireos Str. 10182 ATHENS – GREECE
Fax: +30 210 5295 186
info@ypakp.gr

Greek Minister of justice
Ministry of Justice
96, Messoghion Avenue 11527 Ambelopiki Athens –
GREECE
Fax: +30 210 7755835

 

Joint Statement on the Law on Associations and NGOs of Cambodia

Kingdom of Cambodia

Nation Religion King

Joint Statement

We, members of the associations, networks and communities in the Kingdom of Cambodia, have closely examined and widely discussed the recently released fourth draft of the Law on Associations and NGOs. We understand that this law was created with an intention to control rather than to promote and strengthen civil society, and as such it undermines the rights of the people and shrinks democratic space in Cambodia.

We note that the fourth draft law places severe burdensome onall civil society organizations, from grassroots associations to international NGOs. If it is enacted, the draft law will be as a toolhalt the activities of organizations working to promote and protect human rights and democracy in Cambodia.

Read more

Capital Mobility in Automotive Sector in Thailand

Capital Mobility Research Paper Series No 4

By Woradul Tularak

 

Introduction

The automotive sector in Thailandhad been built under the government’s industry protection policy. In early 1960s the industry was protected by an import substitution and industrialization strategy which included a local content requirement programme. In response to this policy, Japanese auto companies expanded into Thailand, led by Toyota Motor Co. which established its assembly plant in the country in 1962, followed by Nissan Motors Co. in the same year.

In the mid-1980s, the overvalued Japanese yen pressured Japanese companies to find investment locations aboard in order to competitively export their products, especially to Southeast Asian markets. Japanese companies chose Thailandas their export base. This period saw of the peak in capital inflows to the sector since 1960ss, a trend which was dominated by Japanese companies.

1. Production Mapping

In early 2000, in compliance with the World Trade Organization’s Trade-related Investment Measures, Thailandeliminated its local content requirement programme. The impact was felt especially in motorcycle and automobile engine production. Additional moves toward further liberalization followed; in particular the import tariffs reduction schedule was introduced.

This was in line with the Board of Investment’s extension of investment incentives, which included tax exemptions to attract foreign investment, especially from multi-national companies (MNCs). As a result, since the late 1990s, the major automakers from the West, especially European and US firms, have expanded their production activities in the country. The arrival of Western automotive manufacturers in Thailandcan be seen as direct competition for the Japanese MNCs.

By 2008,  the major automakers in the world, including Ford, General Motors, BMW, Daimler Chrysler, Mitsubishi, Mazda, Isuzu, Honda, Nissan and Toyota, had all established production facilities in a number of sites. The position of the local industry in the global network has shifted from a parts and component producer and assembler to the major automotive production centre in Southeast Asia.

The sector’s share of manufacturing output in value terms is quite significant. In 2009, it contributed 210,000 million baht to the manufacturing sector, accounting for 12 percent of total manufacturing value and contributing around 8.1 percent to GDP.

Regarding the capacity of auto production in the country, currently more than one million completely built-up units (CBUs) are produced annually. In 2009, Thailandproduced around 330,000 passenger cars, 690,000 trucks and buses, and 1.7 million motorcycles.

 

a. International Trade

In 2009, exports of automotive parts and vehicles accounted for 9.3 percent of the total value of the exports of the country. The major export product was completely built-up units (CBUs). The total value of vehicle and parts exports was 379,486.62 million baht. The value of CBUexports accounted for 63 percent of the total value which was 251,342.94 million baht. CBUexports have also been on an upward trend. This is to say that industry had become more export oriented in completely built-up units than in the past.

For destinations of automotive exports, passenger cars were exported to the   following: 9.5 percent to ASEAN countries, mainly Indonesiaand the Philippines; 15.2 percent to Australia; and 14.3 percent to the Middle East. (Ministry of Commerce website, www.moc.go.th)

For trucks and pick-up trucks, the major export destinations were Australia, Chileand Indonesia. And for motorcycles, 36 percent of the total production was exported mainly to Indonesia, Vietnam, the United Kingdom (UK) and the Philippines. (Ministry of Finance report, 2010)

For automotive components and parts, the major export destinations were Japan, Malaysia, Indonesiaand US which accounted for 15.9 percent, 11.6 percent, 10.4 percent and 6.3 percent, respectively. For automobile engines, the major export destinations were Indonesia, Japan, Indiaand Malaysiawhich accounted for 15.4 percent, 12.0 percent, 9.6 percent and 9.3 percent, respectively. For the motorcycle parts, the major export destinations were Indonesia, Vietnam, Philippinesand Cambodiawhich accounted for 26.5 percent, 17.0 percent, 9.9 percent and 8.8 percent, respectively. (Export-Import Bank of Thailand (EXIM) 2010 report and author’s calculations)

Thailand’s major export competitors in thecomponents and parts sectors in 2009 were China, Mexicoand South Koreaand in CBUexports, Chinaand Indiawere the major competitors. In this regard, Chinaand Indiahave lower costs of production, while Thailanddepends heavily on raw material imports, in particular steel for automotive production which is around 50-60 percent of the production cost in the industry. In addition, Thailandcan be seen as the less attractive export base for MNCs.

 

b. Domestic Market

In 2009, the total number of domestic vehicle sales was 548,871 units, of which 238,773 units were passenger cars and 310, 098 units were commercial vehicles including trucks, vans, buses and pick-up trucks. Sales declined by about 10.6 percent from the previous year, mostly due to the decrease in sales of commercial vehicles.

From 2006 to 2009, the domestic market was quite stable. Total sales were around 5000-650,000 units per year, except in 2005 and 2006 when sales exceeded 650,000 units.

The major player in the domestic market with the greatest market share was Toyota with 42 percent of total sales in 2009, followed by Isuzu (20 percent), Honda (17 percent), Nissan and Mitzubushi (together 9 percent), GM and Ford (together 4 percent) and others (9 percent).(Thailand Automotive Institute, 2010 and author’s calculations).

 

c. Production Network

In the global supply chain, there are three tiers of suppliers in Thailandwith 1,815 plants. The automotive suppliers can be classified into two groups. The first group, Tier 1 suppliers (direct OEM suppliers) produce automotive parts and supply their products directly to car makers. Currently, there are 709 companies in this group; around 50 percent of the companies are foreign-owned company or joint venture companies and the remaining 354 companies are Thai-owned company. Among the foreign companies, 40.5 percent of them are units of Japanese MNCs.

The second group, Tier 2 and 3 suppliers, includes raw material suppliers and replacement equipment manufacturer (REM). This group supplies raw material, parts and equipment to Tier 1 suppliers. Most companies in this group are small and medium-sized Thai companies. Currently, there are around 1,110 companies in the second group.

The auto parts companies supply their products to the car makers, sometimes under a global supply agreement. For example, LEAR Company produces auto seats and supplies to Ford motor company under a global supply agreement.

Some of global suppliers are joint ventures with the local suppliers. For example, the Thai Summit Group, the largest supplier company in Thailand, is a joint venture between a Thai company and a Japanese partner. This company supplies its products to various car makers in the country.

 

d. Workers in the automotive sector

In 2008, the automotive sector employed around 350,000 workers. The 189 MNCs and their affiliates employed 136,339 workers. Around 50,000 of the 350,000 workers in the sector were sub-contracted, other outsourcing contract or were employed on a fixed-term contract. Both the MNCs and the local companies usually reduced the number of regular workers on the staff payroll and recruit other workers via agencies to replace them.

In a surveyed done by the unionists in 2009, the average wage of agency workers in the industry was lower compared to those with permanent staff positions. Most of them received the minimum wage of 178 baht with few other benefits, except for housing and some medical support in the case of a work- related accident. But most importantly, they had no job security.

Furthermore, sub-contracted workers were vulnerable to being laid off when the sector experienced a contraction or other financial difficulties. In the period following the global recession in 2008, General Motors laid off 780 workers that year, according to an interview with unionists in the Eastern Industrial Estate. More than half of them were sub-contracted workers. On the other hand, in the same year, Toyotalaid off hundreds of permanent workers and then re-employed most of the same workers but under new employment contracts with a fixed-term of employment of 11 months.

The large company uses subcontracted workers not only to cut long-term labour costs but also to weaken the power of the unions to negotiate a collective agreement. Workers hired through sub-contractors are non-unionized and the least protected by the labour laws. To bring these contract workers into the unions is sometimes difficult and depends on the union’s policies and effort.

 

e. Labour Union in the Sector

In general, labour unions in Thailandhave formed a very small number of workplace-based labour unions. In 2008, there were 1,258 labour unions in the country with 331,853 members which accounted for 3.73 percent of the total of 8,886,681 insured workers eligible to be members of labour unions according to the Labour law 1975. The unionization rate in the automotive sector is low but moderate if compared to other sectors. There were 114 unions in the sector with 17,946 registered union members in the sector.

To deal with the core issue, sub-contracted employment, with the small number of labour unions and their low membership, labour unions in Thailandfound it difficult to delay or abolish the practice of sub-contracted employment.

However, we have found some unions that have discovered ways to cope with this problem. For example, the group of unions in the automotive industry in the Eastern Industrial Estate negotiated in their collective agreement to limit  the number of subcontracted and agency workers to not more than 50 percent of the total number of workers. Some of the unions negotiated further requiring that those recruited as sub-contracted workers be made permanent worker in the certain period of time, i.e. after three years of work.

However, these union policies are still not fully effective because firstly, the number of subcontracted workers has increased substantially and become more wide-spread in terms of the number of workers as well as factories. And with the various forms thus the unions are overwhelmed by too many issues. Secondly, these issues and union policies are still not the first priority for most of unions, even though they are aware of the problems. Thirdly, regular workers are not considering contract workers as their fellow workers. This makes it problematic for unions to target their organizing on these workers and seek to enrol them in the union. Lastly, the company-based union structure in Thailandis not only an obstacle to organizing the contract workers, but it also weakens the power of the union itself. Thus, to cope with the sub-contracting issue industrial action is also required.

 

2. Mapping of capital flows

In the non-bank sector, private capital inflows into Thailandconsist of foreign direct investment (FDI), loans, portfolio investments (PI) and non-resident bank account (NRB). In general, capital inflows in form of FDI are longer term than PI and the others.

During the Asian financial crisis in 1997-1998, Thailand’s FDI was not affected and even grew remarkably after the currency was allowed to float. In this regard, the fixed exchange rate system, which overvalued the baht, seemed to discourage FDI the most, because it raised the potential costs of a Thai export base for the MNCs. This was similar to the 1980s when the overvalued yen and the cheaper Thai baht attracted Japanese FDI to Thailand.

 

a. FDI in the Automotive Sector

Since 2000, FDI in automotive sector has increased over time. In 2009, the value of FDI in the sector was US$1,443.97 million, the first of all industries. It increased from US$1,407.78 million in 2008 and US$1,248.81 million in 2007. During the period, others sectors, such as petroleum products, financial institutions and mining sectors, experienced a decline. Within the manufacturing industries, FDI in automotive sector had a share of 38.6 percent of the total invested in manufacturing and 26.1 percent of the total FDI invested in all sectors including services, construction, real estate, agriculture sectors and others.

The majority of FDI into Thailandhas come from Japan, the USand the European Union (EU), in that order. More than half the FDI in the automotive sector has been the direct investment of Japanese MNCs.

 

b. Portfolio investment in automotive sector

There are 471 listed companies in the total of eight industry groups classified by the Stock Exchange of Thailand (SET). These are resources, financials, property & construction, technology, services and agro & food industry. The industrials group comprises petrochemicals & chemicals, packaging, paper and printing materials, automotive, and industrial materials and machinery.

In 2009, the net profits of all companies in the resources group on the SET were 158,547 million baht, the most profitable sector. It is followed by financials (101,348 million baht), property & construction (68,240 million baht), technology (37,373 million baht), services (35,872 million baht), agro & food industry (29,622 million baht), consumer products (6,948 million baht) and lastly, the industrials, the lowest of the 8 groups (6,170 million baht).

This is to say that using the channel of the stock market in Thailandis not the major financing channel for the industrials groups, including automotive sector, since its profitability is low compared with other sectors.

In 2009, the industrials group, comprised of 69 listed companies. Within the group, the automotive sector earned a slim profit of 149 million baht while the some sector incurred losses, especially the industrial materials and machinery sector which had losses of 13,366 million baht in 2009.

Currently, there are 19 listed companies in the sector on the SET. In 2009, seven out of the 19 companies incurred losses.

All of the companies are parts suppliers, not car makers, and are majority Thai owned. Their core businesses are components and parts production. Two of them are assemblers, producing vans and buses and motorcycles namely, ThaiRung Plc. and Suzuki Thailand Plc. (Stock Exchange of Thailand, 2010 Report)

 

c. Loans from Financial Institutions

Japanese Bank for International Cooperation (JBIC)

One of the important roles of JBIC in the automotive sector in Thailandis to provide financial support to Japanese affiliates and subsidiaries through various financial instruments and methods.

Co-financing with Bangkok Bank

In 2010, JBIC signed the loan agreements with Bangkok Bank Plc. to provide loans in the amount of US$30 million to Japanese MNCs focusing on the automobile industry, the electric appliance sector, and the electronics industry in Thailand. The loan is provided through the Bangkok Bank Plc.

Co-financing with Japanese banks and Thai Bank

In 2007, JBIC signed a 26 billion yen unsecured loan to support industries for local Japanese subsidiaries and affiliates, especially in the automobile, home appliance and electronics industries. JBIC signed a syndicated loan with one of the top local Thai banks, Kasikorn Bank, for co-financing with eight private financial institutions (Sumitomo Mitsui Banking Corp (lead bank), Bank of Tokyo-Mitsubishi UFJ, Mizuho Corporate Bank,  Bank of Kyoto, Higashi-Nippon Bank, Sumitomo Trust & Banking Co and Nomura Trust and Banking Co, with JBIC providing a guarantee for their co-financing portion.

Local currency-denominated bond guarantee

In 2004, JBIC signed an agreement providing a guarantee for a baht-denominated debenture issued by Tripetch Isuzu Sales Co. ltd., a joint venture between Mitsubishi Corporation and Isuzu Motors and Tripetch of Thailand in the amount of 3.5 billion baht. (www.jbic.go.jp)

Financing by Thai banks

In 2009, the total amount of loans from Thai commercial banks in the automotive sector was around US$15,028 million and accounted for around 7.2 percent of the total amount of loan issued by banks to the manufacturing sector. (BOT statistics, 2010)

For a big project, in 2010, Bangkok Bank, Siam Commercial Bank and Tisco Bank joined in the syndication of a 13.5 billion baht (US$417.2 million) credit facility for General Motors (Thailand) to finance two vehicle programmes and the construction of a diesel-engine plant in Rayong.

In addition, recently, Ford Motor (Thailand) expected to secure a syndicated loan, with Bangkok Bank as the lead bank with the funds to be used to open a new factory. (The Nation, June, 24, 2010). The new factory will be run by Mazda Motor Corp and the Ford Motor Company’s joint venture, AutoAlliance (Thailand) Co. Ltd. (AAT). A total of US$350 million is to be invested in a pickup truck plant. The investment will enable production of the new compact pick-ups to commence in 2011. (www.mazda.com)

Looking at the sources of financing in the sector, the amount of financing from Thailand’s banks was much greater than that from FDI and other sources. In fact, there has been an upward trend in the financing by banks of  the major automotive MNCs. This is also reflected in the fact that Thailand’s banks are the major player in automotive sector and the finance sector has been the most profitable sector in Thailandsince it recovered from the crisis in 1997-1998.

 

3. MNCs mapping

Reportedly in 2008, there were a total of 1,185 MNCs (parent companies with and affiliates) in the country which employed around 800,000 employees. In automotive sector, there were 186 parent companies with affiliates employing around 152,113 employees. More than half of them are Japanese MNCs with affiliates. (www.investmentmap.org)

The major players in the sector are multinational firms, including Honda, Toyota, Isuzu, General Motors and Auto Alliance company, the Ford- Mazda joint venture.

In 2008, the top parent companies, together with their affiliates, in terms of number of employees were as follows: Toyotaemployed 18,749 workers;, Honda 15,346 workers; Mizubishi 6,070 workers; Isuzu 4,500 workers; and General Motors 1,500 workers.

Toyotawas the first Japanese automaker to establish a plant in Thailand. Over the years it has expanded its business line and operates many sites within the country. Currently, it has 6 affiliates, namely Toyota Motor (Thailand) Co.Ltd., Thai Auto Wheel Co. Ltd, Siam Toyota Manufacturing Co. Ltd., Hino Motor (Thailand) Manufacturing Co. Ltd., Hino Motor (Thailand) Ltd. and Cateler (Thailand) Ltd..

The largest factory in this group is run by Toyota Motor (Thailand) Co. Ltd. employing around 12,000 workers. It produces car bodies, while the other affiliates produce trucks and buses, engines and parts, internal combustion engines, aluminium die-castings, parts and accessories, car bodies, industrial inorganic chemicals.

Honda, the second largest MNCs in terms of the number of employees in the sector has eight affiliates, namely Honda Manufacturing (Thailand) Co.Ltd, YS. Tech Co.Ltd, Siam Yashiro Co.Ltd, Siam Goshi Manufacturing Co. Ltd, Honda Lock Thai Company Ltd, Honda Automobile (Thailand) Co.Ltd, Asian Honda Motor Co. Ltd. and Honda Southeast Asia Co. Ltd.

This group of companies produces automotive stampings, motors and generators, motor vehicle parts and accessories, plastics products, blast furnaces and steel mills, products of purchased glass, car bodies.

 

4. Conclusion

The global crisis resulted in a sharp contraction of 54 percent in vehicle production in Thailandin the first half of 2009 when compared to the same period of 2008. On the other hand, the global crisis does not appear to have affected FDI.

The reason for the contraction is due to the fact that there is a high degree of connection of production in the automotive sector. The sector is also highly dependent upon exports and the financial situation of MNCs in the parent countries.

Importantly, the crisis also affected the workers and large numbers were laid off, particularly contract and agency workers in Thailand

At the same time, the automotive sector recovered quite rapidly, thus employment has picked up. Large companies have announced plans to increase production. Ford Thailandincreased investment in new plants with the prospect of 11,000 new jobs. Another 2,200 workers are to be employed directly by the parent company. Another 8,800 workers will be recruited through local parts suppliers. Employment in the automotive sector is estimated to be maintained at around 300,000 until 2012.

Based on a report by the Office of Industrial Economics in 2010, there is shortage of labour and companies, especially those in the automotive sector, are looking for up to one million subcontract workers.

There is a tendency in the sector to employ workers on short-term contracts, andduring the recovery period, contract workers were employed in large number. But it remains to be seen how long these workers are employed in the industry.

In the aftermath of the global crisis, MNCs turned to local banks for loans rather than seek financial sources in their home countries. This was true of Ford Motor Thailand and GM Thailand. Both companies needed loans for business expansion and the construction of new plants.

Major MNCs investing in Thailandin the automotive sector come with their own affiliates or subsidiaries. These subsidiaries are in the business of auto parts. This helps to ensure timely production for the MNCs. When there is disruption in the parts business, the assembly plants are also affected.

Given the facts, there are challenges for labour unions:

  1. Labour unions should develop a policy to bring contract workers into the same union
  2. Once workers are organized, the union shall initiate national collective bargaining covering both regular and contract workers
  3. As MNCs are utilizing local bank loans, the labour movement in the country should develop a strategy so as to set conditions for the MNCs receiving these loans. For instance, one condition should be to promote decent work and labour union rights. In the same manner, the labour movement shall engage in a dialogue with the principal companies and request that guidelines on labour practices be imposed on supplier companies.

 

References

Ammar Siamwara, Foreign Capital Flows to Thailand: Determinants and Impact. (November, 1999).

Mingsarn Santikarn Kaosa-ard, TNC Involvement In the Thai Auto Industry, Thailand (Development Research Institute Quarterly Review, 2001).

Kriengkai Techakanont, The Evolution of Automotive Cluster and Global Production Network inThailand(Faculty of EconomicsThammasatUniversity, March, 2009)

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Woradul Tularakis an independent researcher with a B.A. in Political Science from ThammasatUniversityand an M.S. in Economics from the Universityof Nebraskaat Omaha.  From 2005 to 2008 he was a Researcher at the Thailand Development Research Institute. His recent projects have been on Capital Mobility in Asia, Trade Union Role for Health and Safety Issues, Contract and Agency Labour in MNCs in Thailand, and an Industry Study on Building and Construction Workers in Thailand.

 

Capital Mobility Research Paper Series is a collaborative work carried out by AMRC and the researchers of Asian TNC Monitoring Network (ATNC). This collaborative research is one of ATNC’s programmes that develop the model of Asian ‘Triangle Solidarity’ which intends to deal with the changing shape of Asian capital and its impact on workers across Asia. This work is carried out by bringing together unions and labour organizations in the region, taking up a collaborative work that equips them with better strategies to cope with the trend of capital mobility. For further information about the work, please visit:

http://amrc.org.hk/taxonomy/term/issue_2/49

Preliminary Report on China’s going Global Strategy: A Labour, Environment, and Hong Kong Perspective

Capital Mobility Research Paper Series No 3

By Au Loong Yu and Kevin Li (Globalization Monitor)

Globalization Monitor, Hong KongSince the turn of the century Chinahas already become a significant player of out-flowing FDI (Foreign Direct Investment), FPI (Foreign Portfolio Investment) and an international world lender. This is against the background of China’s proclamation of seeking a ‘peaceful rise’. It is followed by more than 20 years of huge FDI inflow, which for many years was second only to the USA and then for three consecutive years, beginning from 2002, surpassed it.

For some years the think tanks of the Chinese government saw the relationship between Yinjinlai, literally meaning ‘inviting in’ (inflow FDI),and Zouchuqu, or ‘going global’ (outflow FDI), as supplementary to the course of modernization. According to this discourse, in the first phase of modernization, a country tends to accept more inflow FDI, without, the surplus capital for export. Then the inflow FDI, after interacting with the domestic market, necessarily modernizes the country to a point where it is both possible and necessary for the country to build its own TNCs (Transnational Corporations) and conduct overseas investment.

In 2004 the head of the Research Centre for the study of TNCs, Wang Zhile, edited a report on China’s TNCs with funding from the state. The Research Centre is a branch of the Research Institute of the Ministry of Commerce. Wang noted that

“Both the ‘inviting in’ and ‘going global’ strategies are ways to integrate into economic globalization. ‘Inviting in’ is the base for ‘going global’, and ‘going global’ is the necessary result of ‘inviting in’. The former strategy enables our country to get necessary economic resources like capital, technology and raw materials, but the initiative does not lie in the hands of our corporations. In fact, China’s accession to the WTO (World Trade Organisation) not only implies that she has domestic obligations to fulfil, but also that she is entitled to her legitimate rights beyond China. Only when we enhance our strategy of ‘going global’, of trans-national operation, can we balance our obligation with our rights’

Another professor from the think tank further elaborates the relations between ‘going global’ and the WTO:

“Now that China has become a WTO member state, we on the one hand need to fulfil our domestic obligations, while on the other we can also enjoy the privilege of national treatment (under WTO terms) afforded to Chinese enterprises, when they enter the markets of WTO member states.”

Chinabegan her overseas investment in 1980 following the course of market reforms that were kick started in 1979. Generally we can divide the last 28 years into three periods.

The preparatory phase: 1979-1991

Although the amount of over seas investment in this period is small, it helped Chinese firms to accumulate the necessary experiences and to cultivate partnerships and contacts for more overseas investment in the following years. In this period the place for overseas investment was first and foremost Hong Kong.

The second phase: 1992-1998

Deng Xiaoping’s tour to the South marked his attack on the ‘Conservative’ and the inauguration of full scale integration to global capitalism. It also began a period when China’s overseas investment increased dramatically. Again HK remained the most important destination, although it also started to diversify.

The third period: 1999- present

In early 1999 the State Department adopted a new document to promote overseas investment with special emphasis on processing industry. In 2001 Premier Zhu, in his policy address to the People’s Congress, officially used the term “going global” strategy for Chinese firms. In this period there is not only a dramatic increase of out flowing FDI, but also FPI(Foreign Portfolio Investment), including financial investment and international lending.

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