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Economy

Worker transfers slow ASEAN's economic unification

SINGAPORE -- Deliberations on the economic unification of the Association of Southeast Asian Nations continue to drag on as many member states have begun to hit a growth wall and become skeptical about the effects of such a move.

The transfer of workers is one factor contributing to the skepticism.

Traveling is part of life for Aung Kyaw Moe. He founded a payment services company, called 2C2P, in Thailand in 2003 and relocated its head office to Singapore in 2008. He is now planning to expand into his home country of Myanmar, which is on a growth path in the wake of democratic reforms.

Diversity is considered an opportunity in Asia, where countries at different stages of affluence are located next to each other, enabling a dynamic transfer of people. Moves to unify markets, such as the establishment of the ASEAN Economic Community at the end of last year, buoy such transfers. Talented people find work beyond national boundaries, while an abundance of young workers enhances the competitiveness of companies.

But an imprudent reliance on foreign workers could hamper economic growth.

A 28-year-old Indonesian man gathers palm nuts, each weighing more than 30kg, every day to be used in the production of palm oil in Johor, a state in southern Malaysia. Leaving his wife and 6-year-old son on a remote island in Indonesia, he works at a monthly wage much lower than the minimal rate of 1,000 ringgit ($243). "I last returned home two years ago, but I must accept the situation because there are no jobs in my hometown," he said.

In Malaysia, one out of every three laborers is a foreign worker like him, and half of all foreign laborers are illegal workers without permits.

Malaysia's per capita gross domestic product has increased to around $10,000. But the country is faced with slowing economic growth as its industries still rely on migrant workers to maintain competitiveness and lack the momentum to foster new businesses. Per capita spending on research and development programs is $250, less than one-fifth the amount set aside by South Korea, with which Malaysia competed in terms of growth until the mid-1980s.

On the Philippine island of Mindanao, home of President Rodrigo Duterte, who won a landslide victory in the country's presidential election in May, the construction of manufacturing plants needed to give local people stable earnings is hardly advancing. Per capita GDP in the Autonomous Region in Muslim Mindanao, which consists of predominantly Muslim provinces, is only $689, compared with $8,235 in Metro Manila.

Industrialization began in Southeast Asia in the 1980s, and nations in the region took advantage of illegal foreign workers as convenient labor. They still rely on these workers even though domestic income levels have risen. The cycle in which businesses that cannot withstand wage increases are eliminated and plants are relocated to less developed countries, or to areas unable to attract enough businesses, has been halted. The situation is partly blamed for causing the region the grave problems of the so-called middle-income trap and huge economic disparities.

ASEAN member countries agreed on economic unification in the mid-2000s with the aim of shoring up their economies through the unrestricted transfer of people, goods and money. Ironically, however, excess freedom in the transfer of workers is acting as a drag on growth.

As long as this freedom exists, adverse winds against the economic unification of ASEAN are likely to prevail.

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