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WHY NZ FACTORIES CLOSING IN 2009

MANUFACTURING IS MOVING TO THAILAND & ASIA

Once able to hold its own NZ factories are moving out of NZ to settle in more stable factory environments like Thailand. "The high dollar and highest interest rates in the Western world and most unhelpful Government policy in terms of free trade agreements with low-cost countries are really just forcing even what politicians are calling the inevitable," Bongard of Fisher & Pykel said. Fisher & Pykel have moved to Rayong in Thailand as has many others including the animation of Lord of the rings for IT workers.

The relocation of the Fisher & Pykel saves about $6 million a year, with a one-off cost of about $5 million - both at a pre-tax level. The savings would mainly come from wage costs, BOI incentives but also cheaper sources and closer proximity to materials and better export shipping costs unlike NZ shipping and transport costs. So it makes sense to move to a better employment climate as NZ cannot compete with Asia fullstop. Bruce Goldsworthy, of the Employers & Manufacturers Association Northern, said the relocation was not really a surprise. He said the move reflected "the international nature of the company and the international nature of the product and the fact that we are part of an international market". He said it was not all bad news. A recent survey showed that a shortage of skills was the biggest issue facing local manufacturers but in reality NZ can not longer compete and many skilled workers cannot now get jobs in NZ. The influx of skilled workers from the Uk retruning home in 2009 indicates this as NZ Companies are now downgrading, stretching their work roles wider for those employed mainly because of the costs, union intervention and Government tax issues which make life harder. The company had looked hard at dividing the electronics operation between New Zealand and Thailand "but the economics ruled it out unfortunately". It makes total sense and the savings are phenomenal moving to Thailand due to the incentives of BOI (Board of Investment) , tax relief etc and manufacturing costs. Free trade was good for New Zealand, although Bongard would prefer agreements with countries like Canada, US, Japan and Europe but the costs of transport etc make even exporting, shipping being one of the highest in the world . NZ has 30% containers in and out empty and the wharfage costs, transportation movement costs are over the moon. Yes we have bascially cost ourselves off the planet. ACC levies for employers, OSH restrictions, utility costs which change and high salaries before even thinking about transportation and usage costs make life in manufacturing a disaster and this cannot be now revere unless salaries and costs drop & the regualtions are deregulated which will never happen. In a nut shell NZ like many other western countries have gone beyond the bounds of cheap goods and services & unfortunately only a deduction to Asian standards will make NZ a viable manufacturing sector again?? but alas it will never happen.

Reflecting the entrenched nationalism and pro-employer sympathies of the entire union bureaucracy, New Zealand's local manufacturers are simply victims of political decisions to reduce tariffs on imported goods. The reality is that shifting manufacturing to a lower-cost country not only lowers the wage rates, but also the other non-wage expenses of the "fully burdened cost". NZ is totally over-regulated and the manufacturing businesses are taxed beyond a joke so it does not help matters when one wants to employ and setup a manufacturing business with all the crazy rules that have been imposed. NZ is now a country for the blue collar jobs and theres no hope for unskilled workers apart from the benefit or returning back to retrain.

FACTORY CLOSURES WILL CONTINUE IN NZ:

 

Telecom Corp Ltd axed around 250 jobs at its call centres and relocated to the Philippines to lower expenses. Nearly 90 clothing workers also were axed as two more factories are shut down.Australian based underwear and sock maker Pacific Brands closed its Palmerston North and Christchurch factories by September 2009. PacBrands told its NZ workers that it could not afford decent wage increases and from time to time forced them onto four day weeks. Of course the NZ Unions do not help matters but when profits are less and costs increase its natural for companies to seek to make offshore. PacBrands shares are only worth 17 cents Australian, the banks are breathing down Pacific Brand's neck and the Australian public are rallying behind calls to boycott the iconic brands marketed by the firm. Totally crazy--its not the Companies fault they have to move to lower wage countries like Thailand. The capitalist system we live in created this over an inflated bubble of high salaries, homes, services, costs etc.Carter Holt Harvey's Kopu sawmill on the Coromandel (145 jobs going) and Whangarei's Tenix Shipbuilding (60 jobs). Dunedin lost of 500 jobs after Fisher & Paykel closed its Mosgiel plant (450 jobs) and family company Tamahine Knitwear called it quits after 40 years (50 jobs). In the last six weeks of May 2009, at least 830 people in manufacturing around New Zealand have now lost their jobs and theres more to come.

WHAT THE GOVERNMENT AND OTHERS THINK:

The NZ Treasury has forecast the unemployment rate will rise to 7.2 percent by March 2010. We think it will be more? The central bank sees it at 6 percent next year. ANZ said manufacturing companies are working their staff less, rationalizing and creating 2 jobs into 1 but as the expenses and costs bite in more manufacturing will keep on closing. This is better than the unemployment as it keeps workers but it will have an impact as there is no stopping the shift offshore to the likes of Thailand now so really apart from the dairy, wine and fruit industry most other manufacturing will die.

WHY FACTORIES ARE SHIFTING TO THAILAND & ASIA:

1/. NZ Government taxes, ACC levies, health & safety and regulations are an issue as is a high kiwi $. In Thailand they offer tax incentives as well as importation fo raw materials free if a company seeks BOI (Board of Investment) status? The costs to builkd a factory to obtaining skilled workers is not an issue either as more Thai graduate yearly in most related skills.

2/. Unions work structures are harsh in NZ & salaries are far too high as are related accountant fees? In Thailand better labour laws & workers will work 6 days per week with inhouse accountancy at a much lower level.

3/. Costs for importing raw materials, transport costs & shipping costs does not warrant production in NZ as the end product will not be competitive due to the shipping and transport costs involved with re exporting finished products let alone bringing them into a factory. NZ shipping is expensive now and many shipping lines avoid NZ as 30% of all shipping containers in and out of NZ are empty. A 20ft FCL from Bangkok to NZ is approx $US1450 (Bkk to UK = $950 (as at July 30th 2009). The same container return Wellington - Bangkok = $US1850 which will not include transportation from the factory to port in NZ??.

4/. Utility costs too dear? Monopolies make telephone, power, water, internet broadband etc expensive in NZ compared to Asia. Again a factor to consider when moving to Thailand.

5/. Overall employment incentives & wage scales & BOI Board of Investment makes factory setups very viable for foreign companies in Thailand. Thailand has 65m people and as we write it is no wonder that all the big companies are shifting to Thailand. eg. Seagate & Western digital HDD makers just moved here employing some 29,000 people and 5,000 Thais respectively. Now doesn't this make sense.

6/. Many factory setups in Thailand build accommodation for staff onsite. This saves Companies monies and they have staff on hand with no call outs to pay. Thai staff also will work 7 days per week with time off per month. In NZ a 4-5 day is the norm now as more companies feel the bite of the crises.

7/. Staff accommodation is far cheaper in Thailand than NZ if a manufacture imports any management staff! Food is also cheaper and staff cafaterias far cheaper than NZ. Big factories where employment is from a town buses will commute staff to the factory very convenient and cheaper than anything NZ could supply. In NZ staff have to get their own way to the factory which bites into their weekly wage packet!

8/. Security services 24 hours are cheaper inhouse than NZ.

CAUSES FOR REDEPLOYMENY OF FACTORIES TO ASIA:

With large populations Thailand (65m ) as against (4.1m in NZ) Thailand is a relatively calm country with good employment labour laws that assist factory setups unlike the west. No wonder Toyota, Ford, Triumph and many large factories from the west move here. Thailand was also not affected by the sub prime and heres why:

Thailand does not allow foreigners to buy land or houses. They must lease or have under a Thai name. Foreigners can buy condos and apartments to 49% total ownership which does not allow speculation and profiteering as happened in the west. It also does not allow foreigners to jack up property prices which would inevitably happen and turn the country into a land grab. NZ was the opposite as it happened here. With increased property values which inflated beyond anyones dream the boom started in NZ and with this services and costs and salaries increased to meet this rush. Noone thought about the costs and services increasing but builders were asking over $NZ50 a hour and getting it to build more houses. The building suppliers were running out of stock so inevitably realized they could join the rush and up went their prices; they hired more staff; gave higher wages to cope and such was the move to the gold rush that followed. The west were oblivious to what was happening and what would happen next. They were only concerned in making their personal portfolios bigger and thus creating a bubble which would eventually burst. The NZ $ went thru the roof and everyone thought they were on a roll but they did not care about the repurcussions that were to follow. Those who got in late are feeling it as greed, saw people speculating on property they could never afford to pay back and read stories about friends and family making instant riches buying dn selling properties or upscaling to larger properties with additional ones under threir belt.

Thailand never saw any of this as it had a hold on property investment to stop speculation and holding prices down so their own people were and still able to buy property at resonable values. GREAT MOVE on Thailand's part. Once set in motion there is no return so now NZ has high property values, only those with lots of money will survive & the reason why factories are moving to Thailand being caught up in the sub prime due to the rising costs for everything across the board. The west created this bubble on greed now they suffer the fate of losing a hold on manufacturing and employment of their people FOREVER. This is purely the capitalist way and its not just in NZ as all western countries now feel this happeneing. Thailand is now reaping the rewards of allowing factories to setup in their country with good incentives provided and good labour laws which have made the West a big loser. There will be no recovery & forget about full employment politicians are promising--it will never happen in NZ now as it is too late to reverve back before the subprime era.

Thailand also imposed business restrictions; again a good move to allow Thais being a part in a foreign owned business and thus not being monopolised by foreign entry businesses. This now gives the Thais a chance in the business world and a good move which is still the norm today and which NZ could have followed if its politicians and people were not so greedy. The "green party" although they may mean well are in fact have only exemplified the situation NZ faces today with rediculous bylaws etc. NZ sold itself-- allowed foreigners with $1m to come and live here and build and property speculation beyond comprehension; open businesses with no Kiwi involvement & reap profits for themselves with nothing being given to NZders. Values went up overnight, people bought more properties with little equity and Banks were oblivious to what people could pay back--who cares its money they said and are the worst cuplprits for not having regulations on loans???.

NZders had no say and if they had of imposed laws like Thailand then the factory moves would not happen and more factories would be here. But what we have seen is the complete opposite with salaries sky rocketing along with goods and service costs, transport costs, more regulations & depts to carry them out and and everything else that one can plant on its people to the point only the white collar workers make any money & the workers become unemployable. The ratio of workers to benefits are 14:1. so how can the NZ government rectify a situation where evn top level government salaries and incentives keep climbing. NZ sold itself out to foreigners and greed of its own instigation. Thailand did not and will not?? thats the difference--- it looks after its own people; it kept its land and changed the business laws to suit its people. NZ forgot about doing this & now they are in an unmanageable situation that cannot reverse.

This is the difference

Even the Maoris who are reaping the Waitangi returns one will see all this disappear as the tribes squabble, CEOs pay themselves more; the uneducated take the reins to blow the inheritance payouts with no care to help their own people--but this is another story and it has never worked in Africa or any other place thats tribal?

If you need help we are Kiwi owned and can assist all kiwi factories and businesses to setup in Thailand. [ See WHY factory closures in NZ ] --same story

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