AEC 2015: Can HR Directors Expect a Free Flow of Labor?

November 8th, 2012
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If you live in Thailand, or any one of the ten countries that compose the Association of Southeast Asian Nations (ASEAN), you no doubt have heard a chorus of voices singing the virtues of the upcoming ASEAN Economic Community (AEC). Many observers had penned January 1, 2015, ASEAN as the launch date for the AEC, but ASEAN Secretary General Surin Pitsuwan surprised many when he declared December 31, 2015 as the implementation date – giving the organization’s member nations an additional year to prepare for the changes “AEC 2015” will usher in.

HR Directors Expect a Free Flow of Labor

The main objectives of the AEC will be the elimination of tariffs, as well as the free movement of labor, capital, and a streamlined customs clearance procedure. Forging free trade agreements will be the main priority, allowing for greater global market access for the region’s products and attracting foreign direct investment. A single ASEAN visa is also under discussion – which will make travel within the region more convenient and benefit the region’s travel and tourism industry. The emphasis then is to create a single market and production base which will allow ASEAN a competitive advantage in the world economy.

If everything goes as planned, the AEC will have a combined GDP of nearly 2 trillion dollars – making it the ninth largest economy in the world. This figure will trend upward in the immediate years as the purchasing power of ASEAN’s 600 million inhabitants increases with the region’s growing middle class.

It’s this emphasis on economic integration that has led many to compare the AEC with the European Union’s (EU) single economic market. Unfortunately, this is a common misconception. Unlike the EU, where capital and labor are allowed to flow relatively unrestricted across borders, individual ASEAN nations will not be required to do away with local labor restrictions and requirements.

“Freer” flow of labor, but only for a lucky few

The AEC charter states that the free flow of labor only pertains to “skilled labor” through the “managed mobility or facilitated entry for the movement of natural persons engaged in trade in goods, services, and investments, in accordance with prevailing regulations of the receiving country.” Plainly speaking, country specific regulations will still prevent the unencumbered mobility of labor after the AEC comes into existence. For example, here in Thailand the Alien Employment Act will continue to prohibit foreigners from being employed in thirty-nine professions, ranging from civil engineering to legal services.

Also, the term “skilled labor” has been defined very restrictively to include only the following eight professions: doctors, dentists, nurses, engineers, architects, accountants, surveyors and tourism industry professionals. The ability of any one of these professionals to work in a particular ASEAN host country will continue to be subject to the host country’s domestic labor laws and regulations.

Despite limiting labor mobility to these eight professions, labor experts fear that “brain drain” will be inevitable as professionals from the less developed ASEAN economies such as Myanmar, Laos, Cambodia and Vietnam migrate to its more prosperous neighbors such as Singapore or Thailand.

What should corporate HR departments expect?

From the looks of it not much will change after December 31, 2015 unless ASEAN begins a concerted effort to harmonize and standardize industry and professional benchmarks.

Unfortunately, the sentiment in ASEAN seems like it is going in the other direction. The measures undertaken by Thailand and other member nations to date make it very clear that any labor treaty or agreement will not supersede local laws.

Essentially, the AEC will continue to be preoccupied with creating mechanisms to facilitate the free flow of capital, and pay little attention to creating agreements that will allow for an accompanying free flow of labor.