Asean, the AEC, and Changes in the Labour Market

March 19th, 2013
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With the impending Asean Economic Community (AEC) set to open in 2015, many of our small and medium sized clients have questions about what to expect in terms of changes to labour, HR, and HRM, given the new era of regional cooperation. One interesting fact is that Small and Medium Sized Enterprises account for 96% of enterprises across Asean. Though accustomed to thinking locally, SMEs will face unique challenges and opportunities.

Asean, the AEC, and Changes in the Labour Market

Asean, the AEC, and Changes in the Labour Market

The most competitive among them are prepared and poised to welcome the economic opening and are beginning to think globally.

According to Declaration on the ASEAN Economic Community Blueprint, signed on 20 November 2007, the AEC will, “transform ASEAN into a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.”

Large or small, the ability of Asean businesses to open offices in Thailand will get easier because barriers to entry are being removed. This is one door through which labour will flow. Companies are asking themselves if they are sufficiently staffed, if their employees are highly skilled and trained and if they have adequate compensation packages in place to succeed side-by-side with the influx of domestically-based foreign competition.

There are five main pillars to the AEC, namely free trade in goods, free trade in services, free flow of skilled labor, free flow of investment, and a freer flow of capital – Dr. Prasarn Trairatvorakul, Governor of the Bank of Thailand

Which industries will be hit the hardest how can you prepare?

Dr. Prasarn, the Governor of the Bank of Thailand warned Thai companies about the risk of complacency in address at Sasin, saying, “Doubts about the AEC are not about the dangers of integration, but are based upon cynicism that little will change come 2015. But this in itself can lead to a more dangerous threat – that of complacency and the danger that we will wake up and find that we are already too late to catch the rising wave of ASEAN.

Services in most ASEAN member countries typically include final services for consumption, such as hotels and restaurants, wholesale and retail trade, intermediate services such as business and professional services, transport and communications, finance, insurance, information technology and computer services.

Dr. Prasarn Trairatvorakul is optimistic about the future of the domestic service industry, adding that, “While services liberalization can involve short term adjustment costs, the increased competition and economies of scale can also lead to enlarged services export markets, and improved service competitiveness and efficiency.”

Change, done right, takes time

The AEC process has been criticized for being slow, but at PeopleServe, we are of the opinion that these changes are good for the region and for Thailand’s business climate and that there is a risk in rushing — labour laws and accompanying legislation need to be carefully considered, explained and a certain amount of buy-in by enforcement agencies is required to ensure the changes are thorough and as non-disruptive as possible. There is a genuine excitement among our partners and clients as we navigate this new and exciting terrain.

We will continue to take an in-depth look at this topic and how it is expected to impact businesses in the coming weeks.

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