With the world getting smaller by the minute because of the never ending advance of modern technology, companies have deemed it wise to outsource the manufacture of its products and the service that it provides to countries where the labor is dirt cheap. After all, in the world of capitalism, it is the duty of the company’s management team to maximize its profits and minimize the expenses.
Investing in other countries will entail a lot of costs, however. You have to make sure that there is sufficient workforce available that has enough education for the product or service that you will provide. Sure, that’s not much of a problem if it would only involve simple manufacturing production lines, but outsourcing today includes services in the fields of accounting, web technology and other areas that require a decent level of educational attainment. You also have to factor in the ability of the locals to converse in your own language, the safety and security of the environment and the consistency and reliability of local laws and regulations.
One also has to take into account the infrastructure facilities, from public transportation and traffic levels to Internet and communication facilities and cost of utilities. For companies that outsource manufacturing, shipping costs must also be factored in, as well as taxes that need to be paid. Even the level of corruption is something to think about.
Yet, despite all these tangible and intangible costs, the labor cost of these countries are so low that even if you add all these things together, everything will still come out lower than the astronomical labor costs in Western countries that amount from $19 and above. The high labor cost in advanced societies is the reason why businesses are willing to risk cultural differences and shoulder training expenses in other countries.
If labor cost is the only factor, these are the top 10 countries with the cheapest rates.
10. Egypt – $0.80 per hour
With a population of over 80 million, Egypt’s advantage is that it is not that far from Europe, which is why it is a favored destination for European garment manufacturers. It can also be utilized for call centers and other information technology services. Political stability and religious extremism may be an issue, however.
9. Sri Lanka – $0.62 per hour
Sri Lanka has a large workforce that has the ability to speak in English. This has allowed it to host call centers, as well as provide services for accounting and business processes. Most of it are from the United Kingdom because of its status as a former British colony. Its advantage is that it is the only country in South Asia to have a high human development index.
8. Senegal – $0.52 per hour
Senegal offers cheap labor and decent information technology infrastructure ideal for call centers. Of course, the problem is that its main language is French, so its investment appeal is limited to companies in French-speaking countries.
7. Kenya – $0.50 per hour
Kenya offers cheap labor that can be used for call centers and business processing activities. Take note, however, that Kenya’s bureaucracy is known to be corrupt and it has scored lowly in most corruption indexes the past few years. Its people speaks fluent English because the country used to be a colony of the United Kingdom.
6. India – $0.48 per hour
India is a popular destination for outsourcing activities because of its people’s ability to speak English and its large pool of computer engineering graduates. Call centers and software programming are done here. With more than a billion people and most living in poverty, it is also a good source of cheap labor for the manufacture of textile and parts. Traffic may be crazy in some areas, however. Law and order are also causes for concern.
5. Vietnam – $0.39 per hour
Though still officially a communist state, Vietnam has opened its doors for business through a series of economic and political reforms. The country is mainly used for information technology services, particularly in the fields of software design and digital game creation and development. Traffic and petty crimes may be a problem, but it’s not really that worse compared to other countries.
4. Ghana – $0.32 per hour
Ghana has a population that is quite conversant in the English language. It thus makes for a good destination for call centers. Investors should check the level of education of the workforce however, as well as the communication infrastructure critical for the success of call centers. Still, its education level has slowly been rising and technology services have also been improving.
3. Pakistan – $0.32 per hour
Just like India, Pakistan has a population that can speak in English. It can be a good source for call centers and IT services like software design and web development. Business processing can also be done here. But just like India, law and order may be a problem. Add to that the incessant threat of terrorists, as the country is in the frontline of the war against terrorism.
2. Bangladesh – $0.23 per hour
Bangladesh actually has a significant pool of college graduates just waiting to be tapped. It is also a good place for those with simple requirements in the field of information technology. Production facilities also abound in the country. Investors have to factor in, however, several areas of concern. Child laborers are used in the country’s factories. The country also has one of the most corrupt bureaucracies in the world. Flooding during the monsoon season will also interrupt operations.
1. Madagascar – $0.18 per hour
On a per hour basis, Madagascar has the cheapest labor rate in the world. Corruption in the country may be prevalent, but it is not that worse off compared to other similar countries. It ranks around just about the middle in corruption indexes. The country can provide accounting and IT services. Manufacture of clothes and other garments is also done here.