The ASEAN Economic Community’s labour policy needs work

Author: Sanchita Basu Das, ISEAS

Driven by the looming 2015 deadline, discussion is heating up about the impact ASEAN’s Economic Community (AEC) will have on employment. Set to begin on 31 December 2015, the AEC envisions ASEAN as a single market and production base characterised by the free flow of goods, services, investments and the freer flow of capital and skills. Two key factors will affect the region’s employment prospects.

Indonesian workers at a construction site in Jakarta, 03 September 2014. A recent publication by the International Labour Organization and the Asian Development Bank on six ASEAN countries found that, with the AEC in place, jobs in agriculture; trade; transportation; and construction would increase in all six countries by 2025.(Photo: AAP).

First, structural change in the domestic economies of ASEAN’s member countries will impact the labour market, as trade integration leads member countries to reallocate resources from less productive to more productive economic activities. And some occupations are likely to grow as the ASEAN integration process progresses.

This kind of structural change, and changing employment dynamics, has occurred in the past. During the last two decades, ASEAN saw a decline in employment in agriculture, which has mainly been compensated by gains in the services sector. Currently, while agriculture accounts for 40 per cent of total employment, industry accounts for 19 per cent and services 41 per cent.

But this regional generalisation masks cross-country variations. Today, agriculture remains the largest employer for Cambodia, Laos, Myanmar, Thailand and Vietnam, while services sector employment plays an important role in Singapore, Brunei, Malaysia, the Philippines and Indonesia.

A recent publication by the International Labour Organization and the Asian Development Bank on six ASEAN countries — Cambodia, Indonesia, Laos, the Philippines, Thailand and Vietnam — found that with the AEC in place, jobs in agriculture; trade; transportation; and construction would increase in all six countries by 2025. Vietnam would gain six million additional jobs, Indonesia 1.9 million and Cambodia 1.1 million. But, for these economies, job losses would be felt in food processing, private services and mining industries.

Another impact of the AEC on the labour market could also be a shift in demand for particular occupations. The largest absolute demand is likely to be for low- and medium-skill jobs, though there will also be demand for high-skill jobs.

The establishment of Mutual Recognition Arrangements (MRAs) for professional services will also affect employment in the region. MRAs will promote the flow of skilled labour. Member states have adopted a framework for MRAs for seven professions — engineering, architecture, nursing, accountancy, surveying services, medicine and dentistry. MRAs will allow each member country to recognise education, experience, licences and certificates granted in other countries.

But so far, only the skills of architects and engineers — who are registered with the professional regulatory body both in their home countries and at the regional level — will receive cross-border recognition.

But with the MRAs, effective movement and the subsequent benefits will be limited as domestic rules and regulations governing these professions still apply.

For example, in Malaysia, foreign engineers have to be licensed by the Board of Engineers for specific projects and must be sponsored by the Malaysian company carrying out the project. The Malaysian company must further demonstrate to the Board of Engineers that they are not able to find a domestic engineer for the job. A foreign engineer in Malaysia must also be a registered engineer in his or her home country, have a minimum of 10 years experience and must have a physical presence in Malaysia for at least 180 days in one calendar year.

Similarly, for architects to become fully licensed, most countries impose restrictions on residency or nationality. Foreign architects are often allowed to work on a project-based basis and, in most cases, employers have to submit proof that an equivalent national professional is not available for the job.

Domestic regulations will also limit the cross-border movement of nurses. For example, in order for a Filipino nurse to practise in Thailand, the candidate must pass the national licensure exam in Thai. As for the surveying profession, the MRA only provides the enabling framework of broad principles for further bilateral and multilateral negotiations among ASEAN member states. MRAs will be unable to provide greater mobility unless they address the domestic rules and regulations of ASEAN economies.

The advent of the AEC will not immediately change the ASEAN labour market. Over time, economic integration may cause structural changes and with that changes in employment scenarios. But policymakers will have enough transition time to address issues in their domestic economies.

The AEC may result in higher welfare, wages and employment. But it is expected that these benefits will be distributed unevenly among countries, sectors and genders. To address this, coordinated and coherent policies will be needed at both regional and national levels to ensure inclusive and fair outcomes. Policymakers should also continue with their efforts to ensure quality education and training in their economies as ASEAN strives to remain competitive and to develop itself as a regional production base in the future.

Sanchita Basu Das is a Fellow and Lead Researcher in Economic Affairs at the ASEAN Studies Centre, Institute of Southeast Asian Studies (ISEAS), Singapore.

A version of this article was first published here in The Straits Times on 4 August 2014.

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