World Economy

Asean Labor Flows Hit a Wall

Asean Labor Flows Hit a Wall Asean Labor Flows Hit a Wall

Tighter restrictions on foreign labor in Malaysia and Thailand have pushed out millions of Southeast Asian migrant workers, driving up wages and potentially threatening a growth model reliant on freedom of movement and cheap labor.

Malaysia’s Top Glove, the world’s largest manufacturer of rubber gloves, faces a very challenging increase in labor costs, according to executive chairman Lim Wee Chai. Foreign workers account for more than half the company’s workforce of 13,000, Nikkei reported.

The rise in costs owes largely to a shortage of foreign manpower in the country. Companies like Top Glove in labor-intensive industries are paying higher wages to foreign workers to keep them from leaving, or employing more locals to fill the gap. Top Glove intends to build two more plants this year, but a lack of workers could cause these plans to fall through.

Malaysian palm plantation operator Felda Global Ventures Holdings had to scramble to fill a shortfall of 8,000 workers. Indonesians used to account for 70% of the company’s 35,000 or so foreign employees. But fewer Indonesian migrants sought work in Malaysia last year, forcing Felda to shrink its harvesting operation and weighing on sales in the plantation segment.

Thailand’s Samut Sakhon Province, a major fishing hub, is 5,000 workers short following tighter government regulations that prompted many migrants to leave. Fewer than 500 people responded to a call for more workers.

The Association of Southeast Asian Nations had 6.9 million migrant population coming from within the region in 2015, according to the United Nations. Nearly 80%—5.3 million—were in Thailand and Malaysia, two of the region’s most developed economies. Both countries have also long turned a blind eye to foreign workers without proper documentation, who are often tasked with difficult or dangerous jobs.

UN data and estimates from local industry bodies suggest that a total of roughly 4 million, or 2 million people each, used to work illegally in Thailand and Malaysia, putting the total number of migrant workers at roughly 10 million—equivalent to more than 10% of the countries’ working-age population.

Many come from fellow Association of Southeast Asian Nations members Myanmar, Laos, Cambodia and Indonesia, as well as such other emerging economies as Bangladesh and Nepal. Remittances from those workers are vital to economic growth in these poorer countries, yet many are returning home.

Regulations implemented last June in Thailand impose fines on employers with unregistered foreign workers. Malaysia has arrested many migrants as well as people employing them illegally, and the government introduced a tax this year on companies with any foreign workers.

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