Industry is worried that higher salaries combined with fewer skilled workers will push up costs and erode competitiveness, according to one consulting company.

Neil Russell, local operations director of international personnel consultants Manpower, said wages for general employees were up between 15 and 50 per cent on last year.

For senior personnel, salaries have increased between 25 and 50 per cent.

"This is ostensibly for the same jobs.

"The requirement has been huge and the labour pool does not match demand. This leads to spiralling costs and that will affect competitiveness," Russell said.

In spite of a large workforce, companies in Thailand are struggling to find skilled staff.

He estimated the immediate shortfall was between 20,000 to 25,000 workers.

The Eastern Seaboard is home to myriad manufacturers in the petrochemical, electronics, automotive, plastics and food industries.

While commending the Board of Investment's efforts to attract foreign direct investment, Russell said it would be a pity if labour shortages, a lack of skills and higher staff costs drove potential investors to other countries.

"Costs are a concern. Now that Malaysia, India, Vietnam and China are far more competitive in attracting companies, things could get tough," said Russell, adding thatit was time Thailand asked itself what should do to maintain its attractiveness to investors.

These concerns were brought into sharp relief recently when US chip maker Intel announced plans to build a huge plant in Vietnam and unconfirmed reports that hard disk drive maker Seagate was expanding advanced electronics production in Malaysia because Thailand lacked skilled labour and a strong infrastructure.

Russell argued Thailand was now competing with Indonesia, China and Hong Kong. The game was no longer Bangkok versus Chiang Mai or other provinces.

Companies are choosing to locate where skilled labour was available because without it they cannot meet production deadlines, and timely production is paramount nowadays given the shortening product life cycles, he said.

While developed countries suffered from an ageing workforce and contraction of their manpower base, developing countries with an abundant workforce needed to develop their skills to attract investment.

Russell acknowledged it was difficult to move workers from the farm to the factory, partly because Thailand's education system did not emphasise development of workplace skills.

In general, workers need to be more flexible, more accountable and more proactive, he said.

"That's not going to happen overnight - maybe in a generation. But it needs to be done," he said.

Labour shortages and poor skills have been cited as problems that could drag Thailand's foreign-investment attractiveness under.

An Education Ministry study released last week showed seven key industries could suffer severe labour shortages in three to five years if the education system did not produce graduates trained in skills that were in demand.

The shortfall in the petrochemical, food, automotive, tourism, textile, software and logistics industries could reach almost 585,000 workers.

Russell said companies were just about managing to meet personnel demands in the short term but, with demand outstripping supply, there had to be a long-term plan to attract more people into the industrial sector and stop them flocking to other occupations. He cited the mid-1990s exodus to the finance and service sectors.

Additionally, the government needed to bring in more labourers from Laos, Burma and Cambodia to handle menial jobs Thais did not want to do.

Russell said companies had to realise it was cheaper to hold on to a workforce than to hire new people.

Employers have to encourage staff to be "engaged" in a company. They also have to make it worthwhile for workers to remain with a company.

Research proved the recruitment costs were higher than those of maintaining an experienced staff. The investment in training new workers was high, Russell said.

"Not all companies are looking to reduce their head count, but they need employees to be more engaged and more productive," he said.

Achara Deboonme

The Nation