18 May 2016

The creation of the ASEAN Economic Community (AEC) earlier this year created a community that represents some 625 million people and became the world’s seventh largest economy.

A core tenet of this new economic community is a free flow of skilled labour within the 10 ASEAN member states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam). But what does this really mean?

On first hearing of a single economic community with a free flow of labour, the mind jumps to perhaps the most prominent economic community of all, the European Union (EU). Visions of workers freely moving between member states, reduced border control and increased access to state social security benefits spring to mind. In reality, however, there is a gulf of difference between the EU’s free movement of people and the AEC’s free flow of skilled workers.

Whereas in the EU a citizen can freely move, reside and seek employment in any member state, regardless of skill level, the AEC has a far more limited approach. A key limitation is that the AEC is only making concessions to skilled workers, more particularly eight professions at this point in time: engineering, nursing, architecture, medicine, dentistry, tourism, surveying and accounting. To put this in context, far from introducing freedom of movement to all workers, the AEC is focused on less than 1.5% of the ASEAN labour force.

There are, however, further limitations on the free movement of that small slice of skilled workers. There are minimum years of experience requirements, labour market tests, pre-employment requirements such as health clearances and numerous other domestic immigration and professional boxes to tick. Far from guaranteeing labour mobility even for skilled workers, it seems the AEC simply shifts the mobility scale for a few workers from ‘very difficult’ to ‘easier but still complicated’.

For all the limitations, the advances in facilitating a free flow of skilled labour in ASEAN should not be dismissed out of hand. In particular, for businesses that employ engineers, nurses, architects, medical practitioners, dentists, tourism operators, surveyors or accountants, consideration should now be given to the new, wider talent pool that the AEC is establishing. Consider whether your business can leverage the increased mobility of professionals keen to seize new opportunities, or if there is money to be made (or saved) if / when supply and demand is inexorably altered by the advent of the AEC.

Wider migrant management

What about the wider impact on workforces in APAC? The AEC does not, at least at this stage of its development, seek to address or manage the movement of low(er)-skilled workers, though the vast majority of labour movement in the region falls into this category. It is estimated that around 87% of intra-ASEAN migrants are low-skilled workers. Spend any significant time in Singapore, for example, and it becomes apparent that the city-state relies on its access to low-skilled workers from the region to build its offices and condos, look after its residents’ households and keep its streets clean. Such workers are, however, strictly controlled on a national level, and without doubt, the AEC will have a hard time persuading increasingly nationalistic ASEAN member states to cede regulation of such workers to the AEC.

This should come as no surprise. The ASEAN member states are far more disparate in terms of development and wealth than the founding member states of the EU. It is no wonder that the ASEAN member states tread cautiously when approaching issues of immigration. A ‘brain drain’ of highly educated workers to richer countries, small wealthy nations being overrun by poor migrants, and the destabilisation of fledgling industries, are very real fears for ASEAN members.

On a different scale to the Syrian migrant crisis playing out across Europe, but similarly contentious and distressing, there is also the on-going migrant crisis in the Andaman Sea where thousands of Rohingyas and Bangladeshis are smuggled across borders. The idea of opening borders, or even encouraging the movement of skilled workers, in the AEC will no doubt be more difficult to sell to an already wary public in the context of EU member states hastily erecting border fences.

Mandates and money

What is more, the AEC does not have a strong central authority or even an established mandate for implementing labour policies in individual member states. Even if there were a groundswell of support for the AEC to better manage labour migration in ASEAN, it would seem that the organisation lacks the professional staff and funding to tackle such a major concern. When compared to the EU, the ASEAN Secretariat (which will be the central authority for the AEC) appears seriously underfunded and understaffed: the ASEAN Secretariat’s annual budget is USD $17 million, whereas the EU’s administrative budget is in the billions; the ASEAN Secretariat has around 300 staff whilst the EU has over 20,000.

Another problem is the idea of equal funding for each member state given the wide disparity in economic development of member states. Whilst this design is appealing in repudiating a financial hierarchy and allowing poorer member states to contribute, ultimately it does no favours if it limits the effectiveness of the AEC.

Platform of opportunity

The list of reasons why the AEC is unlikely to move quickly, if at all, to further facilitate the movement of all workers – not just skilled workers – in ASEAN is a long one. However, whilst it is important to see the barriers for what they are, focus should be on the opportunities that the AEC will now provide. The AEC will, hopefully, provide a strong platform for the future movement of workers, and the management and protection of migrants. There is opportunity now for the member states to recognise the worth of local labour and skill sets, and to address the issue of unemployment of educated youth. In time, perhaps the AEC will follow the lead of the EU and abolish discrimination on the grounds of nationality between workers of member states as regards their employment, remuneration and other conditions of work and employment.

For now, however, there is a wider talent pool to consider, and increased mobility for certain professionals. In the wider scheme of things, these are small developments in enabling free movement of workers. But things change quickly in Asia, and the advent of the AEC will almost certainly benefit, rather than hinder, further change.

Roger James is Global Head of Employment for international law firm Taylor Vinters. Taylor Vinters provide centrally co-ordinated legal support for a range of international clients. Our employment and HR team work with partner firms across the globe to ensure a consistent, commercial and cost-effective approach that is aligned with local laws and practices. If you would like to discuss how we can help your business internationally, please do not hesitate to contact us.