A worker wears her mask as she waits for public transportation in Tangerang, Banten province, Indonesia last week. Unskilled workers in Central Java earn around $120 monthly, compared to around $330 in China.

By Arno Maierbrugger/Gulf Times Correspondent /Bangkok

Significant changes in production costs for low-cost manufacturing and assembling in Asia have increasingly triggered international companies to migrate their factories to Southeast Asia, a development whose main victim is China.

With rising wages and manufacturing in China moving up the value chain, more and more multinationals that previously had the majority of their assembly outlets in China are moving away, many towards Southeast Asia. Countries such as Indonesia, Vietnam, the Philippines and Cambodia – and now also Myanmar - are undercutting China with wages up to more than a third lower than in China’s manufacturing hubs.

Some examples: Taiwan’s technology giant Foxconn, Apples contract manufacturer and also assembler for Sony, Nokia and other big brands, has signed a letter of intent to invest $1bn in new manufacturing plants in Indonesia to diversify its production away from China, where it presently employs some 1mn people. South Korea’s Samsung Electronics has also said it will expand its operations to Indonesia and soon start building a factory there to the detriment of its Chinese assemblers. The South Korean electronics giant was recently granted a licence to invest $1bn into a new smartphone and tablet manufacturing base in Vietnam, a country which has also seen substantial investment in manufacturing from Japan’s Mitsubishi in the recent past.

Toyota has been stepping up production in its plant in the Philippines and has said it will boost its presence in Indonesia with investments totalling $1.3bn until 2017. A new Toyota engine plant was opened in West Java earlier this year. India’s car maker Tata Motors has also decided to make Indonesia its manufacturing and distribution base for the region and move away from China.

Camera maker Nikon opened a factory in Laos last year.

Cambodia has emerged into the region’s textile manufacturing centre, with more than 85% of its exports made up of garments. The times when T-shirts were labelled “Made in China” are seemingly over.

Japan, South Korea, Taiwan and Singapore have been the heaviest investors in Southeast Asia and shifting factory work from China. The Middle East, having mainly a presence in Southeast Asia’s oil and gas industry, could follow suit with possible manufacturing investments.

Indonesia is currently the country pushing itself strongest as a low-cost manufacturing destination as an alternative to China. In the latest move, the government in Jakarta has been heavily promoting Central Java for investors, a province not far too from the capital but with clearly lower wages.

For example, unskilled workers in Central Java earn around $120 monthly, compared to around $330 in China. As for other countries, minimum wages in Vietnam are between $90 and $130 depending on the region, the Philippines starts with $140, Laos with $110, Cambodia’s dominant garment sector currently pays $80 per month for a worker, and wages for unskilled labourers in Myanmar can be as low as $60.

Another big draw for international investors in manufacturing in Southeast Asia is the upcoming common regional market, the Asean Economic Community (AEC), slated to come into effect by the end of 2015. The AEC will abolish intra-regional trade barriers and tariffs within the Association of Southeast Asian Nations, or Asean, and open a 600mn people market with a burgeoning middle class to unobstructed trade flows and where low-cost manufacturing is accompanied by continuous improvements in infrastructure.

With the huge untapped pool of labour in many parts of Southeast Asia, the region will remain one of the cheapest locations on the planet for manufacturing in the foreseeable future.