When the Association of Southeast Asian Nations’ (ASEAN) Economic Community (AEC) was set up at the end of 2015, the region achieved a significant milestone in terms of its growing political, economic, and cultural integration.
As set out in 2007’s ASEAN Economic Blueprint, the AEC seeks to “transform ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of capital.” While considerable progress has been made in liberalising and normalising the region’s activities in most of these areas, establishing free movement of skilled labour lags appreciably behind.
Although the area has a clearly stated goal of promoting the increased mobility of skilled workers, current policies not only trail behind those of the European Union, where freedom of movement is essentially unencumbered, but also those of less ambitious arrangements such as the North America Free Trade Agreement (NAFTA) and the Caribbean Community (CARICOM).
The lack of a cohesive regional framework, the existence of nationalist and protectionist policies as well as middling political strategies will undoubtedly impede ASEAN’s skilled labour mobility ambitions still further.
But in order to address the frequent skilled worker shortages found in ASEAN countries, employers can still take advantage of policies that make it easier to hire people in certain sectors.
Labour mobility provisions
Provisions for the movement of skilled labour within the ASEAN region principally revolve around Mutual Recognition Agreements (MRAs). These Agreements mean that a worker’s skills, experience and accreditations are recognised by all participating countries in the trade bloc, which permits them to work outside of their home country.
MRAs currently exist for six sectors and there are framework agreements in place for two more. MRAs exist in relation to the following occupations:
• Engineering
• Nursing
• Architecture
• Medicine
• Dentistry
• Tourism
• Surveying (framework)
• Accountancy (framework)
The standards imposed by each MRA vary by profession. For example, an engineer must first hold a license issued by the regulatory body of his or her home country. They must also have at least seven years of work experience following graduation, two of which entail significant work.
An application can then be submitted to the ASEAN Chartered Professional Engineers Coordinating Committee for review. If successful, the applicant would be permitted to work in other ASEAN countries as a “Registered Foreign Professional Engineer.”
In contrast, however, case-by-case assessments have been eliminated entirely for the tourism sector, enabling the automatic recognition of 32 tourism-related occupations.
Modest start
In addition to MRAs, the ASEAN Agreement on the Movement of Natural Persons (MNP) and the ASEAN Comprehensive Investment Agreement (ACIA) streamline the procedures for citizens within the region wanting to apply for business visas. People engaged in trading goods and services, investors, business visitors, contractual service providers and intra-corporate transferees now enjoy easier access to other ASEAN countries for temporary cross-border visits.
But although the eight occupations currently governed by MRAs increase mobility, they represent only a modest beginning to ASEAN’s envisioned free movement of skilled labour. By way of contrast, NAFTA – which is a regional trade agreement rather than an association – enables professionals in 63 fields to move between Canada, the US and Mexico with just a work contract.
Moreover, occupations covered by existing MRAs represent only 1.5% of the region’s workforce. But some 87% of intra-ASEAN migrant workers are unskilled and many of them are irregular and not governed by formal agreements.
Furthermore, while the MNP and ACIA arrangements facilitate cross-border business, visa standards are still not uniform across the area and make it no easier for employers’ to hire skilled talent from other ASEAN member states.
Lack of will
In addition to the limited number of professions covered by MRAs, meanwhile, exercising them often proves difficult in practice too. In the case of Cambodia, Thailand, Myanmar and Laos, for instance, companies need to demonstrate that they will transfer skills and knowledge to local employees, who must eventually replace foreign workers.
In Indonesia, organisations need to prove that a vacant position cannot be filled by a local employee, while the Philippines has a constitutional ban on foreigners taking on certain occupations. Multinational companies, on the other hand, are able to bypass many of these restrictions by hiring employees from one country and relocating them to another market.
But the restrictive labour policies of a number of South East Asian countries ultimately demonstrates the lack of political and public will to pursue increased workforce mobility. Politicians, professional associations and the public alike fear that migrant workers will swarm into richer countries and introduce increased competition and instability, while poorer countries fear losing their most highly educated people to a brain drain.
Despite these concerns, labour and skill shortages exist in the Philippines, Indonesia, and Vietnam – countries that could benefit from skilled labor from other ASEAN states boasting better educational attainment levels. Similarly, other countries such as Thailand, Malaysia and Singapore require affordable labour, which Indonesia could supply easily with its surplus of young unemployed workers.
Regional standards
But the dearth of effective labour mobility programmes is also a symptom of the need for regional standards regulating various industries. ASEAN’s aviation sector, for instance, does not have common regulations for licensing personnel, training, safety and maintenance, flight operations and air traffic management.
Establishing common guidelines for industries across the ASEAN region, however, could support the growth of regional businesses and sectors, build a larger and more qualified workforce, and promote interconnectivity.
The region is starting to address some of these issues by establishing ASEAN Qualification Frameworks. The aim here is to create universal measures for qualifications, harmonise regulations and encourage universities to cooperate and develop common standards.
Into the longer term, more skilled labour mobility in the ASEAN region is highly likely, but the free movement of skilled workers remains a distant goal. Indeed, it is the only AEC goal that does not have specific targets to encourage and achieve progress.
Limited mobility
Given the region’s stated aim of creating freedom of movement for skilled labour, investors running businesses in the region may be surprised to see such limited mobility between countries. In fact, companies hiring skilled foreign workers generally have no incentive to hire people from an ASEAN country rather a non-ASEAN one.
This is because, in most cases, hiring a foreign worker from another ASEAN member state means following the same visa and work permit procedures as for other countries. For those sectors covered by MRAs, however, employers benefit from access to a much larger potential talent pool.
What this all means is that, when setting up a business within the ASEAN region, it is essential for investors to develop a clear understanding of the relevant labour market and where its potential skill shortages are, particularly given its uneven levels of development and complex regulations.
- This article was first published in ASEAN Briefing.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about the firm can be found at: www.dezshira.com.
When the Association of Southeast Asian Nations’ (ASEAN) Economic Community (AEC) was set up at the end of 2015, the region achieved a significant milestone in terms of its growing political, economic, and cultural integration.
As set out in 2007’s ASEAN Economic Blueprint, the AEC seeks to “transform ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of capital.” While considerable progress has been made in liberalising and normalising the region’s activities in most of these areas, establishing free movement of skilled labour lags appreciably behind.
Although the area has a clearly stated goal of promoting the increased mobility of skilled workers, current policies not only trail behind those of the European Union, where freedom of movement is essentially unencumbered, but also those of less ambitious arrangements such as the North America Free Trade Agreement (NAFTA) and the Caribbean Community (CARICOM).
The lack of a cohesive regional framework, the existence of nationalist and protectionist policies as well as middling political strategies will undoubtedly impede ASEAN’s skilled labour mobility ambitions still further.
But in order to address the frequent skilled worker shortages found in ASEAN countries, employers can still take advantage of policies that make it easier to hire people in certain sectors.
Labour mobility provisions
Provisions for the movement of skilled labour within the ASEAN region principally revolve around Mutual Recognition Agreements (MRAs). These Agreements mean that a worker’s skills, experience and accreditations are recognised by all participating countries in the trade bloc, which permits them to work outside of their home country.
MRAs currently exist for six sectors and there are framework agreements in place for two more. MRAs exist in relation to the following occupations:
• Engineering
• Nursing
• Architecture
• Medicine
• Dentistry
• Tourism
• Surveying (framework)
• Accountancy (framework)
The standards imposed by each MRA vary by profession. For example, an engineer must first hold a license issued by the regulatory body of his or her home country. They must also have at least seven years of work experience following graduation, two of which entail significant work.
An application can then be submitted to the ASEAN Chartered Professional Engineers Coordinating Committee for review. If successful, the applicant would be permitted to work in other ASEAN countries as a “Registered Foreign Professional Engineer.”
In contrast, however, case-by-case assessments have been eliminated entirely for the tourism sector, enabling the automatic recognition of 32 tourism-related occupations.
Modest start
In addition to MRAs, the ASEAN Agreement on the Movement of Natural Persons (MNP) and the ASEAN Comprehensive Investment Agreement (ACIA) streamline the procedures for citizens within the region wanting to apply for business visas. People engaged in trading goods and services, investors, business visitors, contractual service providers and intra-corporate transferees now enjoy easier access to other ASEAN countries for temporary cross-border visits.
But although the eight occupations currently governed by MRAs increase mobility, they represent only a modest beginning to ASEAN’s envisioned free movement of skilled labour. By way of contrast, NAFTA – which is a regional trade agreement rather than an association – enables professionals in 63 fields to move between Canada, the US and Mexico with just a work contract.
Moreover, occupations covered by existing MRAs represent only 1.5% of the region’s workforce. But some 87% of intra-ASEAN migrant workers are unskilled and many of them are irregular and not governed by formal agreements.
Furthermore, while the MNP and ACIA arrangements facilitate cross-border business, visa standards are still not uniform across the area and make it no easier for employers’ to hire skilled talent from other ASEAN member states.
Lack of will
In addition to the limited number of professions covered by MRAs, meanwhile, exercising them often proves difficult in practice too. In the case of Cambodia, Thailand, Myanmar and Laos, for instance, companies need to demonstrate that they will transfer skills and knowledge to local employees, who must eventually replace foreign workers.
In Indonesia, organisations need to prove that a vacant position cannot be filled by a local employee, while the Philippines has a constitutional ban on foreigners taking on certain occupations. Multinational companies, on the other hand, are able to bypass many of these restrictions by hiring employees from one country and relocating them to another market.
But the restrictive labour policies of a number of South East Asian countries ultimately demonstrates the lack of political and public will to pursue increased workforce mobility. Politicians, professional associations and the public alike fear that migrant workers will swarm into richer countries and introduce increased competition and instability, while poorer countries fear losing their most highly educated people to a brain drain.
Despite these concerns, labour and skill shortages exist in the Philippines, Indonesia, and Vietnam – countries that could benefit from skilled labor from other ASEAN states boasting better educational attainment levels. Similarly, other countries such as Thailand, Malaysia and Singapore require affordable labour, which Indonesia could supply easily with its surplus of young unemployed workers.
Regional standards
But the dearth of effective labour mobility programmes is also a symptom of the need for regional standards regulating various industries. ASEAN’s aviation sector, for instance, does not have common regulations for licensing personnel, training, safety and maintenance, flight operations and air traffic management.
Establishing common guidelines for industries across the ASEAN region, however, could support the growth of regional businesses and sectors, build a larger and more qualified workforce, and promote interconnectivity.
The region is starting to address some of these issues by establishing ASEAN Qualification Frameworks. The aim here is to create universal measures for qualifications, harmonise regulations and encourage universities to cooperate and develop common standards.
Into the longer term, more skilled labour mobility in the ASEAN region is highly likely, but the free movement of skilled workers remains a distant goal. Indeed, it is the only AEC goal that does not have specific targets to encourage and achieve progress.
Limited mobility
Given the region’s stated aim of creating freedom of movement for skilled labour, investors running businesses in the region may be surprised to see such limited mobility between countries. In fact, companies hiring skilled foreign workers generally have no incentive to hire people from an ASEAN country rather a non-ASEAN one.
This is because, in most cases, hiring a foreign worker from another ASEAN member state means following the same visa and work permit procedures as for other countries. For those sectors covered by MRAs, however, employers benefit from access to a much larger potential talent pool.
What this all means is that, when setting up a business within the ASEAN region, it is essential for investors to develop a clear understanding of the relevant labour market and where its potential skill shortages are, particularly given its uneven levels of development and complex regulations.
- This article was first published in ASEAN Briefing.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about the firm can be found at: www.dezshira.com.
