2016 Jan 19
January 19, 2016

AEC and congested labor mobility

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With the official launch of the ASEAN Economic Community (AEC) on Dec. 31, 2015, the integration of Southeast Asia’s economies into a single market and production base is supposed to have been completed.
The reality, however, is far from what was envisioned by the ASEAN Charter that was signed by 10 ASEAN leaders in November 2007. The economic liberalization process in ASEAN has been progressing at a snail’s pace.

Despite the successful removal of tariff barriers by 2010, non-tariff barriers continue to proliferate. While a lot of work still needs to be done in the liberalization of trade in goods, the effort to liberalize the trade in services is even more difficult and complex.

Labor mobility, in particular, should be given further attention. Contrary to the widespread fear on an influx of foreign workers, the target of creating a free flow of skilled labor has actually not been achieved.

Efforts to enhance skilled labor mobility in ASEAN have mainly relied on the Mutual Recognition Arrangements (MRAs) on qualifications in professional services.

Within the last ten years, MRAs were signed for eight professions, starting with engineers in 2005 and followed by nurses, architects, geospatial surveyors, accountants, medical and dental practitioners and tourism professionals.

However, these eight professions represent only 1.5 percent of a total ASEAN workforce of over 300 million, dominated by unskilled and low-skilled workers. Ironically, the ASEAN MRAs thus far have not included the vast majority of the ASEAN workforce, despite the high demand for the mobility of these workers in a number of industries.

The implementation progress of the eight MRAs also varies greatly from one to the other. Engineering and architecture have achieved well-established competency standards and registration systems both at the national and regional levels.

On the other hand, nursing, medical and dental services have not established a regional registration system and the implementation of these MRAs has been dependent on national regulatory adjustments. Since national regulations relating to the health sector in most ASEAN countries restrict foreign professionals, the free flow of health professionals in the region is unlikely to materialize in the near future.

Even for engineering and architectural services, with their advanced competency standards and registration systems in ASEAN, the number of engineers and architects who are interested in registering with ASEAN is way below expectations.

Ten years after the MRA on engineering services was signed, the number of ASEAN chartered professional engineers that come from different countries in the region has only reached some 1,400. For ASEAN registered architects, the number is much less than that.

Furthermore, the MRA framework for surveying qualifications that was signed in 2007 has not yet been translated into a more detailed and operational MRA due to different perspectives among member countries in this field.

The only ASEAN MRA that has made speedy progress is the one on tourism professionals. This particular MRA is going to launch its regional secretariat in Jakarta very soon this year.

Other than the ASEAN MRA, another arrangement to facilitate the mobility of labor across ASEAN, called the ASEAN Movement of Natural Persons (MNP), was made in 2012. This initiative is intended to facilitate the movement of persons in the region, including business visitors, intra-corporate transferees and contractual services suppliers.

Nonetheless, the impact that this agreement will have on labor movements in ASEAN may not be seen for several years. Despite the significant expansion of service sectors committed to by ASEAN member countries, especially for business visitors and intra-corporate transferees, improvements in the depth of the commitment remains unclear.

Considering this development, whether the ASEAN MRA and MNP can facilitate the movement of workers in the region remains dubious. Nevertheless, these initiatives have brought immediate benefits to ASEAN. For example, the MRA has encouraged ASEAN countries to speed up the improvement of their human resources and workforce competency, including in standardization and certification.

The sluggish progress of the facilitation of labor mobility in ASEAN and the hesitancy of member countries to freely open their domestic job markets is, to some extent, understandable, considering the quality of the workforce in most ASEAN countries.

Not to mention unemployment issues that remain prominent in the consciousness of the general public, especially in more populated countries like Indonesia, which has over seven million people openly unemployed.

While low and unskilled labor dominates the ASEAN labor force, much of the skilled labor does not meet international competency standards and are often uncertified. In Indonesia, for example, less than five percent of the total workforce attended certified job training workshops every year in the last decade.

Even for those with certificates and sufficient technical skills, many are lacking in soft skills such as managerial, interpersonal and English language skills, which are essential if they have to compete with workers from other countries.

Therefore, opening domestic job markets for foreign professionals, despite potentially bringing some benefits to some domestic industries, may well increase unemployment among skilled and educated workers. This may also lead to social and political instability in the country.

In this context, the slow progress of ASEAN integration and the hindered mobility of labor could be a blessing in disguise, in the sense that it will provide more time for ASEAN countries to breath and improve the quality of their workforce before the free flow of labor mobility materializes in the region.

As slow as it may, it is certain that regional economic integration will keep moving. ASEAN countries should make the most of this lengthy process by quickly preparing their workforce to become more competitive and more responsive to this increasingly dynamic region. Mohammad Faisal, Jakarta | Opinion | Mon, January 18 2016.
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The writer is research director at the Center of Reform on Economics (CORE) Indonesia.

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