Addiction to cheap migrant labour hurting Asean
Deliberations on the economic unification of Asean continue to drag on as many member states have begun to hit a growth wall and become more sceptical about the effects of such a move. Issues related to the movement of workers represent one factor contributing to the scepticism.
Travelling is part of life for Aung Kyaw Moe. He founded a payment services company, called 2C2P, in Thailand in 2003 and relocated its head office to Singapore in 2008. He is now planning to expand to his home country of Myanmar, which is on a rapid growth path.
Diversity is considered an opportunity in Asia, where countries at different stages of development are located next to each other, enabling a dynamic movement of people. Moves to unify markets, such as the establishment of the Asean Economic Community at the end of last year, are intended to encourage such movement. Talented people find work beyond national boundaries, while an abundance of young workers enhances the competitiveness of companies in their home markets and beyond.
But an imprudent reliance on foreign workers could hamper economic growth in the longer term.
Take the case of the 28-year-old Indonesian man who gathers palm nuts, each weighing more than 30 kilogrammes, every day to be used for making palm oil in Johor, a state in southern Malaysia. Leaving his wife and six-year-old son on a remote island in Indonesia, he works for a monthly wage much lower than the legal minimum of 1,000 ringgit (about 8,400 baht or US$243) in Malaysia. “I last returned home two years ago, but I must accept this situation because there are no jobs in my hometown,” he says.
In Malaysia, one out of every three labourers is a foreign worker like him, and half of all foreign labourers are illegal workers without permits.
Malaysia’s per capita gross domestic product has increased to around $10,000. But the country is faced with slowing economic growth as its industries still rely heavily on migrant workers to maintain competitiveness and lack the momentum to foster new businesses.
Per capita spending on research and development programmes in Malaysia is $250, less than one-fifth the amount set aside by South Korea, with which Malaysia competed in terms of growth as recently as the mid-1980s.
On the Philippine island of Mindanao, home of President Rodrigo Duterte, the construction of manufacturing plants needed to give local people stable earnings is barely advancing. Per capita GDP in the autonomous region in Muslim Mindanao, which consists of predominantly Muslim provinces, is only $689, compared with $8,235 in Metro Manila.
Industrialisation began in Southeast Asia in the 1980s, and countries in the region took advantage of illegal foreign workers as convenient labour. They still rely on these workers today even though domestic income levels have risen.
The cycle in which businesses that cannot withstand wage increases are eliminated and plants are relocated to less developed countries, or to areas unable to attract enough businesses, has been halted. This situation is partly blamed for causing the region the twin problems of the middle-income trap and huge economic disparities.
Asean member countries agreed on economic unification in the mid-2000s with the aim of shoring up their economies through the unrestricted movement of people, goods and money. Ironically, however, excess freedom in the movement of workers is acting as a drag on growth.
As long as this freedom exists, adverse winds against the economic unification of Asean are likely to prevail.