Free movement of labour is coming. Are you ready?

24 October 2016

Authors: Mark Godfrey and Keith Nuttall

The 10 members of the ASEAN community are moving towards a new form of mobility for staff - but they won't be copying the EU model

Political and economic unions haven't had the best press recently - Britain's decision to quit the European Union is just the latest in a series of challenges to rock the organisation's self-confidence, while the Transatlantic Trade and Investment Partnership (TTIP) is still in flux. But one group of countries is decidedly undeterred. The launch on 1 January of the ASEAN Economic Community (AEC) among the 10 members of the Association of Southeast Asian Nations (ASEAN) bloc may not have received major fanfare, but it capped 12 years of negotiations to forge a labour movement zone in southeast Asia.
Among the legalese lies a series of agreements designed to make it easier for employers in one ASEAN country to hire the citizens of another. These include mutual 'recognition of qualification' deals - covering professions such as accountants, doctors, engineers, nurses and architects - which ensure credentials are valid across the bloc, and an agreement on 'movement of natural persons', which makes it easier to issue temporary visas or move individuals within countries.
The aim is clear: in its ASEAN Community Vision 2025, the bloc agreed to strive for "a more seamless movement of investment, skilled labour, business persons and capital", which will further erode barriers to the movement of labour. But while ASEAN has sought in many ways to mirror the free market of the EU in forging the AEC, there are some crucial differences. The economic diversity of ASEAN's 10 member states, which contain 622 million people, means it requires free movement of skilled labour rather than the free movement of all citizens allowed by Brussels, according to ASEAN secretary-general Surin Pitsuwan.
With Singapore's per person gross national income of $52,090 more than 40 times greater than that of Myanmar (the group's poorest member), the potential for surging migration flows is clear. So the AEC has tried to be more surgical. Even where mutual recognition agreements are in place, work permits are still required and individuals often have to take professional examinations in their new host country, says Singapore-based Bob Aubrey, an academic and HR practitioner who runs his own consultancy
There has been no 'big bang' of free movement of labour comparable to the EU, but that was never intended, says Aubrey. The real significance of the ASEAN initiative may not be in movement but in corporate culture.
Aubrey sees the creation of an 'ASEAN mindset' among HR professionals. Every one of 24 CEOs across the region who Aubrey spoke to for a white paper to be published by Singapore Management University agreed their HR professionals are "too focused on their own national labour force" rather than looking at the ASEAN region as a talent pool in itself. The 'mismatch' between HR's priorities and the increasingly cross-border goals of businesses will have a "growing impact as the region integrates", says Aubrey. Even state-owned enterprises will be forced to open up with the push to an ASEAN single market.
Governments also favour better mobility of talent to attract investment from multinationals and Chinese firms seeking to relocate to ASEAN members, where costs are lower. "ASEAN needs better flow over borders to get the kind of benefits of scale from being a market of 600 million people," says a seasoned Vietnamese diplomat and trade official who has moved back to Hanoi after a stint in Guangzhou, the mainland Chinese city near Hong Kong. "Multinationals won't leave China just for cost reasons because they have a huge market there... unless we can also say 'you can move your staff easily around ASEAN and you can avail of lower costs and a big marketplace'," he adds.
Data might also help shift employers' perspectives. The current level of cross-border movement is widely underappreciated: there are 18.8 million people working across ASEAN borders, according to the Asian Development Bank, although only 6.5 million of those are formal labour migrants.
While AEC regulations will not affect these workers, national capitals are shifting policy: "It is much more a question of how individual countries regulate migration," says Aubrey. He sees bilateral trends having an impact - pointing, for example, to large numbers of Vietnamese workers learning Thai in order to emigrate to the larger economy for opportunities.
But whatever happens, the transfer of talent appears necessary and irreversible: the latest ASEAN Business Outlook Survey from the American Chamber of Commerce in Singapore shows that 75 per cent of executives across all ASEAN countries believe integration is important in helping their companies do business in the region.
Hong Kong will be watching closely. It has long relied on low-cost domestic labour from ASEAN members the Philippines and Indonesia, but the country's function as a financial services and legal hub for the region faces erosion if an equivalent base emerges. Its role as a bridge to mainland China has so far given it an edge in its rivalry with ASEAN member Singapore, another leader in finance and logistics. But a slowdown in the Chinese economy, helping push Hong Kong into recession this year for the first time in nearly a decade, has turned the heads of government officials in the territory towards ASEAN with renewed urgency: a Hong Kong-ASEAN free trade deal, scheduled for completion by the end of this year, will include trade in services.
Indeed, the Hong Kong ASEAN Economic Cooperation Foundation Council set up in the city has a mission to make Hong Kong a "high value-adding hub, bridge, connector, investor" for the region. But it will need the staff: a survey compiled by the Hong Kong Institute of Human Resource Management between July and October 2015 showed 90 per cent of Hong Kong companies are finding it 'very difficult' to recruit. The answer, it seems, may lie just across the water.