Fortune ran an interesting story in its April 17, 2006 issue:
http://money.cnn.com/magazines/fortune/fortune_archive/2006/04/17/8374287/index.htm
Basically, it talks about a US Furniture maker and its woes with offshoring. This is something that would obviously become a problem when companies started to take advantage of lower wage rates in Asia.
Basically, you save a LOT of money by paying the local wages which are much lower than in western economies. If you want to push even further, there are also less legislation on labour, benefits and environmental protection.
But what has been a problem there over the years? These countries do not respect intellectual property. Ask any software company... Some like Vietnam have over 90% of their software pirated. A majority of government agencies even use pirated software.
These countries are also all trying to set up their own manufacturing bases to try to develop out of misery.
Obviously, when you spend your capital to set up a factory there, train the people for the job and send them your designs, there is a chance they will turn around and bite you at one point. Why work so hard for so little when you can do the same and reap all the rewards (even though of course, knock-offs sell for cheaper).
Of course, it is a risk everywhere. Every year we hear of some cases of industrial espionage here, but at least there is recourse in front of the law if you have been slighted by a competitor or a partner. There, there is no recourse. And with the appetite for setting up shop and gaining access to Asian markets still so high, there will be low pressure on this matter for quite some time.
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