JAKARTA, Indonesia—Southeast Asia is preparing for an economic community that could increase trade and investment flows but also widen inequality, with fewer jobs for women than men.
The 10 member states within the Association of Southeast Asian Nations will form a single market next year with the aim of easing cross border trade and labor in a region of 600 million people.
The integration could generate 14 million additional jobs by 2025 and boost economic growth to 7% by allowing for the freer movement of skilled labor, according to a new report by the Asian Development Bank and the International Labor Organization. But Indonesia could see the least benefit, with only 1.9 million additional jobs – or 1.3% of total employment – expected.
Nearly half of the gains in high-skilled employment are expected to take place there, according to the study. And yet much of that employment will go to people who lack sufficient qualifications due to insufficient training and a lack of education. That skills gap will reduce Indonesia’s productivity and competitiveness in a region where much of the demand for high-skilled labor will be unevenly distributed across countries, sectors and between men and women, the report says.
Much of the job growth created by the ASEAN economic community will be in trade, construction and transportation – sectors that often provide informal work and employ more men than women. It will also drive further increases in migration among medium and low skilled workers, increasing the need for protections and safeguards.
Indonesia’s Minister of Manpower, Muhaimin Iskandar, acknowledged the need to better regulate the placement of migrant workers during the report launch. He also said Indonesia would need to improve the quality of its goods and its workforce by offering better training and promoting job absorption.
The Wall Street Journal spoke with Sukti Dasgupta, a senior economist at the International Labor Organization and an author of the report, about what countries will need to do to take advantage of integration and where Indonesia stands in the process. Edited excerpts.
WSJ: How important is training and education?
Ms. Dasgupta: In terms of grabbing job opportunities, skills are very important. You have to have the right skills, because even though the bulk of jobs will continue to be medium-skilled and low-skilled, the rate of growth will be fastest in the high-skilled ones, and that’s also where there are chances for productivity improvement. Indonesia gains in the chemical sector, in construction, in trade and transportation. The question is, how do you [prepare] your workforce to take account of all these jobs that are created in the high-skilled [occupations]?
WSJ: What are Indonesia’s strengths?
Ms. Dasgupta: Indonesia has the [region’s] largest workforce. It has a huge youth population; whereas other countries like Thailand and Singapore are aging very fast. So Indonesia, in a way, is very well positioned. It has a huge domestic market, a lot of young people, innovation, new ideas.
Indonesia has been very dynamic on the policy front as well. There are lots of initiatives which are being taken in the medium term. There is will – from what you see from the new government coming in, the priorities that have been expressed are very much in line with what should happen for Indonesia to take advantage, of let’s say structural reallocation. Of course it can increase inequalities, and Indonesia has already seen a rise in inequality.
WSJ: How far along is Indonesia in its preparations?
Ms. Dasgupta: It has a minimum wage – there are many countries that don’t – so Indonesia I think is pretty well positioned. Also, it is a leader in ASEAN because of its sheer size. So a lot of what Indonesia says and does will become important for the region as a whole as well as what it does in sharing the benefits of this ASEAN integration with its people. –SARA SCHONHARDT, http://blogs.wsj.com/searealtime/2014/08/23/asean-economic-community-could-widen-inequalities/
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