The recent announcement from Nikon, the Japanese optics and electronics company, that it intends to open a new assembly plant in Laos illustrates the continuing evolution of global trading patterns.
The new plant will be in Savannakhet Province which is located on the border between Thailand and Laos. The Province has benefitted from the development of its road infrastructure and a substantial bridge over the Mekong river that connects it to Thailand. These investments have also triggered the creation of a ‘special economic zone’ in the city where the new Nikon plant will be based. It will employ 800 people when it opens in October of this year.
For more than ten years, Nikon has been developing assembly operations in the Thai city of Ayutthaya, outside Bangkok. This was part of a significant investment in the country by the electronics sector from the 1990s onwards with Sony and Canon also having substantial manufacturing operations in Thailand. These facilities are generally used to assemble finished products using components produced in Japan.
Fundamental to this growth has been Thailand’s competent logistics infrastructure including a significant airport in Bangkok as well as good sea and road links to Singapore. These resources have enabled major OEMs to access what was previously a low-cost labour force.
The move by Nikon into Laos is indicative that the strong growth in Thailand has pushed wages upwards, with the labour market now quite tight and the country increasingly tapping into migrant labour from Laos, Cambodia and Burma. Thailand has also recently introduced a minimum wage of approximately 300 baht (US$10) a day.
Therefore, the opportunity to access the lower cost labour force in a country such as Laos, and benefit from the development of its infrastructure, must surely be an attractive next step for many of the businesses that have already established a presence in Thailand. There had been rumours that Nikon was looking to expand its presence in China, however Laotian wages rates are markedly below those of the cities of the Chinese eastern seaboard.
The move is obviously an indicator that the countries of Indo-China offer substantial potential for global logistics service providers. Vietnam has been the destination for investment in logistics for sometime, however the ability to use Thailand as a springboard into Cambodia, Laos and even Burma is a potentially powerful new concept for supply chains both in the South East Asia region as well as globally.