International Labour Migration in East Asia- Trends, Patterns and Policy Issues

8/3/2019 International Labour Migration in East Asia- Trends, Patterns and Policy Issues

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2006 The AuthorJournal compilation 2006 Asia Pacific School of Economics and Government, The Australian National University

and Blackwell Publishing Asia Pty Ltd.

doi: 10.1111/j.1467-8411.2006.00176.x

BlackwellPublishingLtdOxford,UKAPELAsian-PacificEconomicLiterature0818-99352006 AsiaPacificSchool ofEconomicsand Government,TheAustralianNationalUniversity andBlackwellPublishingAsia PtyLtdMay2006201ORIGINAL ARTICLEATHUKORALANTERNATIONALLABOURMIGRATIONINEAST ASIA:TRENDS,PATTERNSandPOLICYISSUESASIANPACIFICECONOMICLITERATURE

International Labour Migration in East Asia:trends, patterns and policy issues

Prema-chandra Athukorala*

This paper examines emerging patterns of labour migration in East Asiaand related policy issues from the perspective of labour-importing coun-tries. Following a survey of the characteristics of labour flows stemming

from, but more importantly occurring within, the region, it probes inter-country differences, both in the timing of the entry of migrant workersand the degree of dependency on migrant labour in the context of rapideconomic growth and labour market change. There is clear evidence thatlabour migration is now a structural feature of the economic landscape inthese countries. The policy challenge is to design market-based systemsfor making the new reliance on labour inflows consistent with changingdomestic labour market conditions and the priorities of national develop-ment policy, while minimising social resentment and adverse implica-tions for political relations with neighbouring labour-sending countries.

International labour mobility has been anincreasingly important feature of the economiclandscape in East Asia over the past threedecades. From the late 1980s, high-performingeconomies in the region have been absorbingan increasing volume of foreign workers fromneighbouring countries that are at earlierstages of demographic and economic transi-tion. In the wake of the East Asian financialcrisis (199798) there was some reduction inthe number of foreign workers in the crisis-affected countries. These cuts proved, how-ever, to be much more muted than anticipatedand labour inflows soon returned to pre-crisislevels. Thus, the indications are that labour migra-tion is now firmly rooted as an important

feature of economic growth and structuraladjustment.

Managing labour immigration is at the cen-tre of policy debate in labour-importing Asiancountries1a position this issue has long occu-pied in Western Europe and North America.Employers in labour-importing Asian countrieshave begun demanding a more liberal andtransparent approach to the entry of foreignworkers. Employers argue that the availabilityof foreign labour contributes to economicdynamism and enables the economy to be flexiblewhen structural adjustment is required. Govern-ments, however, face greater political obstaclesin freeing up restrictions on international labourflows than they do in liberalising international

* Professor of Economics, Research School of Pacific and Asian Studies, The Australian National University. The author isgrateful to Chia Siow Yue, Chris Manning, and two anonymous referees for valuable comments and suggestions.

1 The related literature is too large to be listed in full. Some recent works, which provide extensive listing of previous

works, include Ananta and Arifin (2004), Chen, Ko and Lawler (2003), Hugo (2004), Iguchi (2002), Kim (2004), Bhatnagarand Manning (2005), Park (2002) and Wickramasekera (2003).


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ATHUKORALA INTERNATIONAL LABOUR MIGRATION IN EAST ASIA: TRENDS, PATTERNS AND POLICY ISSUES

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2006 The AuthorJournal compilation 2006 Asia Pacific School of Economics and Government, The Australian National Universityand Blackwell Publishing Asia Pty Ltd.

trade and investment. Trade unionists voiceconcerns that local unskilled workers are likelyto suffer in the face of immigration, as jobs are

lost to migrant workers or domestic wages aresuppressed. The perceived adverse social con-sequences resulting from the presence of foreignworkers is a recurrent theme in the massmedia. Such social resentment, coupled withthe widely held view in policy circles that thedependence on cheap foreign labour tends toslow economic restructuring and productivitygrowth, has underpinned the generally restric-tive policy stance towards migrant workers.

The governments of labour-exporting coun-

tries in the region generally believe that thenational gains from emigration outweigh thepotential costs.2 In particular, they considerlabour migration as a safety valve for unem-ployment and underemployment and as animportant source of foreign exchange. Reflect-ing this favourable perception, the facilitationand promotion of labour export has become animportant aspect of their labour and employ-ment policies. The restrictive policies pursued

by the labour-importing countries relating tothe entry of immigrant workers have therefore

begun to strain relations between countries.3 Itis becoming increasingly difficult to formulateviable strategies for regional cooperation inthe spheres of trade and investment withoutpaying attention to labour migration issues.

The purpose of this paper is to reviewemerging trends in international labour migra-tion in East Asia and related policy issues fromthe perspective of the major labour-importingcountries in the region. The paper is primarilymotivated by the growing importance of man-

aging labour migration as a public policy issuein these countries. A study of labour migrationin East Asia is also of wider global relevance,

however, given the emphasis placed on labourmigration in the recent debate on internationaleconomic reforms. Analysts such as Bhagwati

(2004), Rodrik (2002), and Winters et al. (2003)have made a strong case for the liberalisationof temporary international migration flows,going beyond the so-called Mode 4 reformsunder the General Agreement on Trade inServices (GATS),4 as a means of redressingglobal income disparities. Surprisingly, thisnew debate has so far focused on liberalisingrestrictions on temporary flows by developedcountries, implicitly treating international labourmigration as a NorthSouth phenomenon. It

has ignored the fact that much contemporaryinternational migration is intra-regional innature, and that intra-regional labour flowsare rapidly gaining prominence over NorthSouth flows (Hatton and Williamson 2002 andMassey et al. 1998). Potential gains from inter-national policy initiatives in this area are likely

be limited unless the intra-regional dimensionis taken into account.

The countries covered in this study areJapan, Singapore, Hong Kong, Taiwan, Korea,Malaysia and Thailand. Following the stand-

ard practice in this field of study, the terminternational labour migration (ILM) is usedto refer to those who migrate for work reasons.The term includes both persons who migratefor work and long-term settlement and con-tract labour migrants recruited for specificperiods. The latter category, however, domi-nates labour flows stemming from and occur-ring within East Asia, accounting for over90 per cent of the total. In addition to labourmigration, refugee movements (particularly

from Vietnam and China) have become anincreasingly important aspect of internationalmigration within the region. This form of

2 For an extensive review of the issues and evidence linking labour out-migration and economic development in low-income countries, see Lucas (2005).

3 Examples include the dispute between the Philippine and Singaporean governments in 1998 over the civil rights of Phil-ippine female workers employed in Singapore, the serious concern expressed by Indonesia and the Philippines aboutmass repatriation of illegal workers by Malaysia during the 199798 East Asian financial crisis, and the ongoing policydialogue between Indonesia and Malaysia on controlling illegal labour flows.

4 International migration of temporary workers is a part of reform commitments in services trade agreed upon in the Uru-guay Round of multilateral trade negotiations. These commitments, which come under Mode 4 in the GATS, apply

only to workers in the services sector and negotiations have so far been restricted to business, skilled, and professionalmigration.


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migration deserves separate treatment becausethe underlying motives, socioeconomic impli-cations, and the related public debate concern-

ing this type of migration differ greatly fromthose concerning labour migration.

The paper begins with an overview oflabour flow trends and characteristics, both interms of labour flows originating in East Asiaand in terms of intra-regional flows, but withan emphasis on the growing importance of thelatter. The next section aims to explain labourflows through an examination of the interac-tion of supply (push) and demand (pull) factorsas well as of government policy. A key theme

of this discussion is the inter-country differencesin the timing of migrant worker entry and thedegree of dependency on migrant labour in thecontext of structural transformation and labourmarket change. The subsequent section examinesthe evolution and current state of national policiestowards labour migration, using the typologyof labour market transition developed in thepreceding section as the organising frame-work. The paper concludes with some remarkson the importance of international labourmigration as a structural feature of the ongo-

ing process of economic transition and itsimplications for public policy in labour-importing countries and the policy dialogueon regional economic cooperation.

Trends and patterns of labour inflow

There is a long history of international migra-tion and ethnic diversity in East Asia. Duringthe nineteenth century and in the twentieth

century until the outbreak of World War II,international labour migration played a piv-otal role in economic transformation in manycountries in the region.5 Between World War IIand the late 1980s, intra-regional AsiaPacificlabour migration was largely limited to the

inflow of workers to Hong Kong and Singaporefrom surplus-labour countries in the vicinity.Since then, Japan, South Korea, Taiwan,

Malaysia and, more recently, Thailand haveabsorbed a growing number of workers fromthe surplus-labour countries in the region. Bythe early 1990s, intra-regional labour flowshad reached significant levels and someauthors named East Asia as the newest inter-national migration system or the newestmigratory pole (Findlay and Jones 1998; Find-lay et al. 1998 and Salt 1992).

The available estimates of migrant workerstocks in the seven countries under considera-

tion are pieced together in Table 1.6

By the mid1990s, migrant workers accounted for over 20per cent of the labour force in Singapore, 12per cent in Malaysia, around 10 per cent inHong Kong and 6 per cent in Thailand. InKorea and Taiwan the degree of dependenceon migrant workers was still small (12 percent of the workforce) but subsequently grewrapidly (Figure 1). Although the stock ofmigrant workers accounted for a relativelysmall proportion of total labour supply inmost countries at this time, such workers

made up an increasing proportion of thegrowth in labour supply during the 1990s. Inthe decade to the mid 1990s, migrant workersaccounted for more than half of the growth inthe less-skilled labour force in Malaysia, andperhaps one-third of the growth in the less-skilled labour force in Thailand in the first halfof the 1990s (Athukorala and Manning 1999).

The impact of the East Asian financialcrisis on the employment of migrant workersproved to be much more muted than antici-

pated. Malaysia, Thailand and Korea tried tocut back on migrant worker intakes and dealwith the problem of illegal migrants. Thesemeasures had only limited success, althoughgovernment policies were more successful instemming the inflow of migrants than in

5 For a brief history of labour migration in the region and additional references see Athukorala (1993).

6 These estimates should be treated only as rough indicators because of the difficulties involved in the estimation of clan-destine workers. Estimates are presumably more accurate, however, for Japan, South Korea and Taiwan than for the

other nations under consideration, because these three countries have well demarcated borders and administrative con-trols that assure reasonably accurate enumeration of entrants and visa overstayers.


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Table 1Immigrant workers in East Asian countries

Source Year Stocka(000)

Illegal migrants(per cent)b

Migrant labourdependency

ratio (MLDR)c

Japan Mori (1997) d 1986 119 53 2Iguchi (2002)d 1990 260 39 4" 1993 611 48 9" 1996 631 54 9" 1998 668 55 10" 2000 677 34 11International Migration

Program, ILO, Genevaj2003 706 .. 13

Korea Park (2002)e 1987 6 66 .." 1990 7 87 ..Hahn and Choi (2004)f 1993 66 81 3" 1996 210 61 9" 1998 184 57 8" 2000 312 61 13" 2002 507 73 22

Taiwan Tsai (1991: Table 1)g 1990 125 100 14Tsay (2003: Table 2)h 1995 189 .. 21" 1998 271 .. 28Council of Labour Affairs, Executive 2000 324 .. 33

Yuan, Taiwanj

" 2002 303 .. 30" 2004 314 .. 31

Hong Kong Athukorala and Manning (1999)i 1981 140 .. 81" 1993 320 .. 95" 1996 245 .. 85Manning (2002)i 1998 251 .. 73" 2000 255 6 72

Singapore Athukorala and Manning (1999)i 1970 14 .. 2" 1980 125 .. 9" 1990 369 .. 13" 1996 370 .. 21Manning (2002)i 2000 530 1 26

Malaysia Athukorala and Manning (1999)i 1984 500 .. 100" 1994 1,063 .. 133Kanapathy (2004) 1996 1,471 40 113" 1998 1,127 .. 164" 2000 800 35 105" 2003 1,780 23 220

Thailand Athukorala and Manning (1999)i 1988 165 .. 6" 1990 170 .. 5

Chalamwong (2004) 1997 1,126 85 31" 1999 767 87 21" 2003 1,101 91 30

a Including illegal (clandestine) workers.b The percentage of illegal workers in the total stock. For Japan and Korea, illegal workers are foreigners overstaying their visas. Data on illegalworkers are not available for Taiwan, but it is believed that, following the introduction of the migrant worker policy in 1993, the share of illegalworkers has declined dramatically (perhaps to 510 per cent of the total migrant worker stock).c Number of immigrant workers per 1,000 in the labour force.d The original source for all studies in Japan is the Ministry of Labour (unpublished estimates). The estimates include illegal (undocumented)foreign workers (visa overstayers) but do not cover permanent residents.e Based onAnnual Survey of Immigration, Ministry of Justice, South Korea.f Based on Yearbook of Migration Statistics, Ministry of Justice, South Korea.g Estimate based on official records of foreigners overstaying their visas.h Based onMonthly Bulletin of Statistics 116 (September 2002), Table 11.4, Council of Labour Affairs, Taipei.i Based on various published papers and official documents and internet sources

j Data obtained from websites of the given organisation.


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repatriating them.7 In Malaysia, permits wereextended for an additional year in August1999 in response to continued pressure from

low-wage industries. Following a notabledecline in the three years following the onsetof the crisis, the estimated stock of migrantworkers reached an all time high (nearly 1.8million or 22 per cent of the labour force) in2003 (Figure 1).8 Even in Korea, where unem-ployment rates rose much more sharply thanin the other crisis-hit countries, migrant work-ers were not repatriated in large numbers. Insum, the notion that the reliance on contractworkers was a temporary phenomenon associ-

ated with the pre-crisis economic boom wasdispelled by the experience of the post-crisisyears. This inference about the structuralnature of the phenomenon of internationallabour migration is also consistent with the

Japanese experience in the 1990s. Despite lack-lustre growth performance throughout thedecade, the stock of foreign workers in Japanrecorded an almost three-fold increase

between 1990 and the year 2003, when therewere over 700,000 workers, accounting for 1.3per cent of the Japanese labour force.

While the share of foreign workers in theworkforce varies across countries, there is astriking similarity across countries in terms ofthe skill composition of workers and the dura-tion of their work contracts.9 The workerspredominantly belong to unskilled and semi-skilled categories. Most of them are engagedin tasks on the lower rungs of the employmentladder (dirty, dangerous and demanding (3-D)

jobs) that are shunned by local workers. Move-ment of skilled and professional manpower

(brain circulation) has gained importance over

the years as an integral aspect of greaterregional integration through trade and invest-ment (Manning 2002), but skilled and profes-

sional workers still account for a small share oftotal labour flows.10

The past two decades have seen two inter-esting developments in regional flows ofprofessional migrants that may become increas-ingly significant as the countries in the region

become more integrated through investment andtrade linkages. First, the newly industrialisedeconomies (NIEs) in the regions have begunto experience the return of professionalworkers (skilled labour) from developed coun-

tries (mostly the United States). For instance,in the early 1990s a significant number ofprofessionals of Korean and Taiwanese origin

began to return from the US to their countriesof origin, both because of the glass ceiling inthe United States that prevents movementfrom research and development into manage-ment positions and because of the opportuni-ties opening up in their countries of origin tomeet these unmet career ambitions (Ong,Cheng and Evans 1992 and Saxenian and Shu2001). These flows seem to have increased

rapidly in recent years because of growingemployment opportunities in quickly growinghigh-tech industries.

Second, there has been an increase in themovement of professional and technicallabour, mostly from Japan and the NIEs tofast-growing countries in Southeast Asia, butalso among the NIEs and Japan (InternationalLabour Organization 1992; Manning 2002, andBhatnagar and Manning 2005). While no num-

bers are reported, many countries in the region

seem to have large and growing Japanese,

7 Malaysia sent back about 200,000 Indonesian workers employed in the services and construction sectors in 1998, whileThailand reported repatriation of about 200,000 Myanmarese workers by the end of 1998. For a detailed discussion seeManning (2002).

8 This is higher than the share of foreign workers in any European labour-importing country in the post-war era, with theexception, briefly, of Luxembourg and Switzerland (Kindleberger 1967 and Zimmermann 1994).

9 There is a sizeable literature on this subject. For useful surveys see Stalker (2000) and Wickramasekera (2003).

10 According to available estimates, the share of these workers in the total estimated stock of migrant workers is as follows:2 per cent in Malaysia, 6 per cent in Thailand, 9 per cent in South Korea and 6 per cent in Hong Kong (calculated fromTable 7 and 9 in Manning (2002)). They probably accounted for close to a one-quarter of all high-level workers in Singa-pore and around 510 per cent of all high-level workers in Malaysia and Thailand in the same year (Bhatnagar and Man-

ning 2005). Unskilled labour tends to move from the less developed to the more developed countries within the region,while skilled labour moves in the opposite direction, mostly in a complementary fashion to trade and FDI flows.


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Figure 1Migrant worker stock (MWS) and migrant labour dependence ratio (MLDR) in Korea,

Taiwan and Malaysia

Sources: Immigrant worker stock: Malaysia: Kanapathy, Vijayakumari, 2004. International labour migration in Malaysia:trends, policies and impact on the economy, paper presented at the conference on Cross-Border Labour and East AsianIntegration, East Asia Development Network, Institute of Strategic and International Studies, Jakarta, 910 July; Korea andTaiwan: see Table 1. Labour force: World Bank, World Development Indicators, database, World Bank, Washington, DC.


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Taiwanese and Korean communities associatedwith direct foreign investment. While a signif-icant number of these foreign workers seem towork for domestic firms, the majority areemployed in affiliate companies of multina-tional enterprises (MNEs). Developed-countryMNEs have also begun to hire high-level man-power from some countries in the region to fillpositions in both their regional and global net-works of affiliated companies. A peculiarity ofthis type of migration is that its evolutiondepends not on the aspiration of the individ-ual to move (as with other forms of migration)

but on the development of the organisationalinfrastructure within which the moves takeplace (Salt 1992).

One general feature of the labour migrationsystem in Asia (and in the Middle East) is thatthere is rigid control of foreign workers andthe prohibition of settlement and family reun-ion. The flows of both unskilled and skilledworkers consist predominantly of contractworkers (who migrate for a duration of 23years) rather than permanent settlers. The

strict control system has apparently been suc-cessful in preventing a replay of the Europeanexperience in which temporary guest workersturned into settlers and new ethnic minorities.11

Thus, the outflows are essentially associatedwith return flows and repatriated earnings.The ability of foreign workers to shift employ-ment away from the initial recruitment posi-tion to other industries and other regions isregulated by the employment contracts. Amongthe labour-importing countries, only Singaporehas a policy of encouraging skilled and profes-sional workers to obtain permanent residence

and subsequently citizenship. As alreadynoted, Korea and Taiwan have also begun toexperience some return migration for perma-nent settlement. In both cases however, thenumbers involved are rather small (probably afew thousand).

Table 2 provides data on the source-countrycomposition of the migrant worker popula-tion. For Malaysia, Thailand and Hong Kong(and Singapore in the early years), the mainsources of international migration are cross-

Table 2Source country composition of the estimated stock of migrant workers in East Asian host countries,

199798 (per cent)Source Country Japan

(1997/98)Korea(1998)

Taiwan(1998)

Hong Kong(1997)

Singapore(1997)

Malaysia(1998)

Thailand(1997)

Indonesia 0.5 1.3 8.1 6.6 3.6 54.5 ..Malaysia 10.2 0.6 0.4 2.7 38.3 . ..Philippines 10.2 6.3 41.7 24.0 15.2 11.1 ..Thailand 7.7 3.1 48.8 4.5 13.4 1.0 ..China 11.2 56.0 .. 30.4 .. .. 20.5Korea 11.9 .. .. .. .. .. ..South Asia 1.7 10.7 .. 6.3 13.4 27.9b 5.1Western countries 30.2a .. .. 21.6 10.8 2.5 3.3Other/unclassified 16.4 22.0 1.1 3.9 5.3 3.0 71.1c

Total 100 100 100 100 100 100 100

a Mostly from Brazil, Peru and Mexico.b Mostly from Bangladesh.c Principally from Myanmar, Lao PDR and Cambodia.Source: Compiled from Stahl, Charles, 1999. International labour migration in East Asia: trends and policy issues, paperpresented at the symposium: New Trends in Asia Pacific Migration and the Consequences for Japan, Waseda University,2327 September: Table 3.

11 Perhaps with the exception of early Indonesian migrants to some parts of Malaysia (Guinness 1990).


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border flows. Taiwan and Korea, however,admit workers from far-flung, yet selected,countries in East and South Asia, includingThailand, Malaysia and Bangladesh. Taiwanand Malaysia are examples of countries thattry to control the source of inflows on socio-cultural grounds. Taiwan aims to discourage

the entry of workers from mainland China andencourages manufacturing workers from Thai-land. The Malaysian recruitment policy favoursthe importation of workers from Muslim coun-tries, in particular Indonesia and Bangladesh.

There are both differences and similaritiesin the sectoral distribution of migrant workersamong the countries being considered (Table3). In Malaysia and Thailand, migrant workersare typically more involved in agriculture(including fisheries). However, in bothcountries, migrant workers are increasinglyemployed in manufacturing, mainly in small

segments of lagging industries and in smalland medium-scale enterprises. Interestingly,the share of migrant workers employed inmanufacturing in Singapore, Taiwan, Malay-sia and Korea is now much higher than thecomparable figure for native workers. A largeproportion of workers classified as employed

in the services sector in Hong Kong and Singa-pore are female workers involved in domesticwork.

Data on the industry composition of themigrant worker population in Taiwan andKorea (Tables 4 and 5) suggest that thedependence on foreign labour is much morewidespread than is usually thought. There is aremarkable similarity between the two coun-tries in terms of the distribution of migrantworkers across industries. While migrantworkers are heavily concentrated in the tradi-tional labour-intensive industries, particularly

Table 3Distribution of foreign workers by sector, Japan, Singapore, Taiwan and Malaysia (various years)

Sector Japan Korea Singapore Taiwan Malaysiab

1990 2000 1995 2002 1980 1995 2002 1992/93 2000

Primary sectora 0.4 0.9 2.3 3.2 . . . 37.7 16.5Industry 38.7 44.5 81.1 89.6 46.3 90.0 60.8 43.2 54.9Construction 10.1 8.3 7.3 1.3 20.2 21.5 8.4 34.4 23.6Manufacturing 28.5 36.2 73.3 88.3 46.1 68.4 58.4 8.8 31.3Utilities - - .. .. . .. .. .. ..Services 58.8 50.9 8.9 6.7 33.7 9.3 38.4a 18.6 28.4Unclassified 2.1 3.7 7.5 0.5 .. 0.8 0.8 0.5 0.2

100 100 100 100 100 100 100 100 100

a Agriculture forestry and fishing, and mining.b Data relate to registered workers in Peninsula Malaysia.Sources: Japan: Japan Statistical Bureau, 1995. The 1990 Population Census Report, Vol. 3, Statistical Bureau, Tokyo andJapan Statistical Bureau, 2003. The 2000 Population Census Report, Vol. 3, Statistical Bureau, Tokyo. Singapore: Athukorala,Prema-chandra and Manning, Chris, 1999. Structural Change and International Migration in East Asia: adjusting to labourscarcity, Oxford University Press, Melbourne and Oxford: Tables 3.9 and 5.4. Korea 1995: Park, Won-Woo, 2002. Theunwilling hosts: state, society and the control of guest workers in South Korea, in Y.A. Debrah (ed.),Migrant Workers inPacific Asia, Frank Cass, London: 66 94; Korea 2002: Hahn, Chin Hee and Choi, Yong-Seok, 2004. Foreign labour inflow andits consequences in Korea, paper presented at the conference on Cross-Border Labour and East Asian Integration, East AsiaDevelopment Network, Institute of Strategic and International Studies, Jakarta, 910 July. Taiwan: Lee, Joseph, 2002. Therole of low-skilled foreign workers in Taiwans economic development, in Y.A. Debrah (ed.),Migrant Workers in Pacific Asia,Frank Cass, London: 4166 and Tsay, Ching-Lung, 2003. International labour migration and foreign direct investment inEast Asian development: Taiwan as compared with Japan, in Y. Hayase (ed.), International Migration in APEC MemberEconomies: its relation with trade, investment and economic development, APEC Study Centre, Institute of Developing Economies,Tokyo: 13167; Malaysia: Kanapathy, Vijayakumari, 2004. International labour migration in Malaysia: trends, policies and

impact on the economy, paper presented at the conference on Cross-Border Labour and East Asian Integration, East AsiaDevelopment Network, Institute of Strategic and International Studies, Jakarta, 910 July.


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Table 4Foreign workers in Korean manufacturing (share in production workers)

Industry composition (per cent)a Share in total employment (per cent)

KSIC Industry 1997 1998 1999 2000 2001 19972001 1997 1998 1999 2000 2001 19972001

15 Food and beverages 4.9 4.1 3.7 4.9 6.2 7.4 2.1 1.9 2.9 5.5 7.1 3.917 Textiles, except sewn wearing apparel 22.6 33.1 22.6 23.8 23.9 39.0 7.2 6.7 10.4 11.9 10.5 9.318 Sewn wearing apparel and fur articles 4.6 2.4 5.6 3.2 3.8 6.7 1.5 0.8 3.4 3.7 8.2 3.519 Leather products, luggage and footwear 4.0 3.1 2.9 2.3 3.0 4.9 3.2 2.3 5.2 3.4 5.9 4.020 Wood and wood products except furniture 1.1 0.7 1.3 1.1 1.3 1.8 2.6 2.3 3.5 11.8 5.1 5.121 Pulp, paper and paper products 1.9 1.7 2.1 2.1 2.2 3.2 4.4 3.3 3.6 8.8 4.8 5.022 Publishing and printing 0.6 0.5 0.7 0.8 0.6 1.0 1.8 0.5 1.0 3.5 2.7 1.924 Chemicals and chemical products 3.3 2.5 2.8 2.4 2.7 4.4 4.7 3.2 4.1 5.9 5.4 4.725 Rubber and plastic products 7.4 7.3 9.2 9.8 9.7 13.9 6.3 5.7 8.2 15.1 10.4 9.126 Non-metallic mineral products 1.2 0.8 1.2 1.2 1.2 1.8 4.6 3.1 5.7 8.5 6.4 5.727 Basic metals 2.4 1.7 2.4 2.3 2.3 3.6 5.9 4.8 4.8 8.8 6.0 6.128 Fabricated metal products 6.0 5.9 7.3 8.0 7.3 11.1 3.5 2.9 7.8 10.4 9.3 6.829 Machinery and equipment 4.6 4.1 5.9 6.7 5.3 8.7 2.5 2.2 2.5 6.1 5.4 3.730 Computers and office machinery 0.4 0.2 0.3 0.7 0.4 0.7 4.2 1.5 5.7 6.5 4.0 4.431 Electrical machinery and apparatuses 7.7 6.1 4.0 4.9 6.8 9.1 3.0 2.2 2.5 6.2 5.0 3.832 Electronic components, radio, TV etc. 8.0 5.8 7.8 11.4 10.3 13.9 4.0 3.1 4.6 7.2 5.5 4.933 Professional equipment, watches, clocks 1.1 1.2 1.1 1.2 1.6 1.9 3.6 3.3 3.5 11.0 5.5 5.434 Motor vehicles 15.2 13.6 10.9 10.4 9.1 19.1 4.0 5.4 4.8 8.9 6.9 6.035 Other transport equipment 0.4 0.5 0.3 0.6 0.8 0.8 3.3 1.8 3.5 5.3 3.1 3.436 Furniture and miscellaneous manufacturing 2.5 4.6 8.1 2.2 1.7 6.7 3.0 2.1 5.4 4.9 10.7 5.2

Total Manufacturing 100 100 100 100 100 100 3.9 3.2 5.2 8.1 7.3 5.5

a Based on visas issued for industrial trainees.Note: KSIC is the Korean Standard Industry Classification.Source: Compiled from data reported in Hahn and Choi (2004), based on Yearbook of Migration Statistics, Ministry of Justice (various issues), and Report on Small and

Medium Business Survey, Korean Federation of Small and Medium Business (various issues).


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textiles, rubber and plastic products, andmiscellaneous manufacturing, they are also

significant in industries such as electronics,electrical machinery and motor vehicle indus-tries, which are conventionally classified ascapital/technology-intensive. It seems that 3-D

jobs are not necessarily industry-specific.

Explaining trends

While the overall flow of labour has increased,the timing of the entry of migrant workers insignificant numbers and the degree of depend-ence on imported labour vary across the coun-

tries being studied. Why have labour inflowsgrown? Why do the rates of growth of inflows

differ among receiving countries? Answers tothese questions are important for both under-standing the likely future course of the migra-tion process and for informing the currentpolicy debate on appropriate national labourmigration policies.

Some theory

Three sets of factors jointly determine the sizeand direction of labour flows across countries.These are supply (push) factors (factors affect-ing the decision of emigrants to leave the

Table 5Foreign workers in Taiwanese manufacturing

Industry composition (per cent) Share in total employment (per cent)

199294 199597 19982000 200102 199294 199597 19982000 200102

Food manufacturing 3.0 2.7 2.6 2.7 1.4 3.3 4.0 4.1Textiles 23.2 19.3 19.3 18.1 8.7 18.5 21.9 21.3Wearing apparel 2.8 2.4 1.8 1.6 1.4 3.3 3.3 3.0Leather products 1.7 1.9 1.3 1.0 2.3 7.7 6.3 5.1Wood and bamboo

products2.6 1.4 1.0 0.8 3.9 6.9 6.0 5.0

Furniture and fixtures - 0.1 0.2 0.1 - 0.4 0.6 0.5Pulp, paper and paper

products2.0 2.5 2.1 2.1 2.0 6.0 5.6 5.3

Printing - - 0.1 0.2 - - 0.3 0.5Chemical products 0.4 0.9 0.9 1.8 0.2 1.0 1.1 1.9Rubber products 2.1 3.2 2.8 2.7 0.7 11.1 11.5 11.0Plastic products 6.8 7.8 6.4 6.3 2.2 6.5 6.2 5.8Non-metallic mineral

products6.1 5.8 4.2 3.8 3.7 8.9 8.5 7.9

Metal products 15.1 11.8 9.9 7.1 2.8 5.0 4.6 3.2Machinery and equipment 3.9 2.9 3.9 9.0 0.4 2.6 4.0 8.7Electrical machinery 12.3 20.8 27.9 29.4 1.6 6.1 8.6 8.4Transport equipment 4.2 4.1 4.2 4.4 1.8 4.4 5.2 5.8Precision equipment 0.3 0.4 0.5 0.5 0.5 2.5 2.7 2.8Miscellaneous products 0.2 0.3 3.2 3.5 0.1 0.5 7.3 8.2Manufacturing 100 100 100 100 2.6 6.3 7.2 7.0

Source: Compiled using data on migrant worker stock from Tsay, Ching-Lung and Lin, Ji-ping, 2001. Labour migration andunemployment of local workers in Taiwan,Asian Pacific Migration Journal, 10(34):50534 and Tsay, Ching-Lung, 2003.International labour migration and foreign direct investment in East Asian development: Taiwan as compared with Japan,in Y. Hayase (ed.),International Migration in APEC Member Economies: its relation with trade, investment and economicdevelopment, APEC Study Centre, Institute of Developing Economies, Tokyo: 13167, and manufacturing employment from

Industry of Free China, Republic of China, Council for Economic Planning and development (various issues) (economy-wideemployment).


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country of origin), demand (pull) factors (factorsinfluencing the entry of immigrants to a givenhost country), and government policy, which

directly or indirectly conditions/regulatesdemand and supply factors. In the case ofinternal labour migration, the third factor isnot important (except in some former socialistcountries) because governments generally donot control the movement of people withinnational boundaries. This was also the casefor mass international migration in the halfcentury before World War I, when potentialmigrants were relatively unconstrained bypolicy intervention (Hatton and Williamson

1998). However, the role of government pol-icy, particularly that of receiving countries, isimportant in explaining contemporary interna-tional migration. Migratory flows are condi-tioned by immigration policies that serve as afilter between the desire to migrate and themovements that take place. It is not possible,therefore, to analyse international migrationwithout understanding the immigration con-trol system in receiving countries (Bhagwati1979 and Piore 1979).

On the supply side, the migrants decision

to move depends primarily on the expectedimprovement in income from migration. Thus,wage differentials between sending and receiv-ing countries, adjusted for costs of movementand differences in costs of living as well asfor the probability of being unemployed oncethe destination country has been reached, istreated as the critical factor in explaining inter-national labour migration. Once the outflow

begins, it may perpetuate itself via the infor-mation and assistance offered by previous

waves of migrants to newcomers. Migratorynetworks develop, linking areas of origin anddestination, and helping to bring about changesin both. The network aspect of migration alsomeans that trade and foreign direct investmentmay serve to provide conduits for increasedmigration.

Migratory decisions also depend on the costof migration. For this reason, migrants from

very poor families are unlikely to migrate,unless there is an institutional mechanism forrelaxing the credit constraint. For the same

reason, at the individual country level emigra-tion from poor countries may increase as eco-nomic development takes place. However, thepoverty constraint on migration is not inde-pendent of the migration process; it can bemitigated through remittances from previousmigration (Hatton and Williamson 2002). Dis-tance is probably an important determinantof the direct cost of migration, althoughadvances in modern transportation havegreatly weakened the link between distance

and migration cost. Nevertheless, people havemore (and better) information about, as well asmore extensive social and cultural links with,countries that are closer to home. This perhapsexplains why migration flows are typicallylarger among countries that are geographically(and culturally) closer (Borjas 1998).

Analysing demand (pull) factors influenc-ing the migratory process, while allowing forthe role of host country policy, is a majorchallenge. The celebrated Lewis model ofeconomic growth with surplus labour, which

was introduced to the international migrationliterature by Kindleberger (1967) and recentlyextended by Athukorala and Manning (1999) toaccommodate open-economy (trade-investmentmigration) interrelations in the process of eco-nomic transformation in late-industrialisingcountries, provides a useful framework forthis purpose.

The starting point of the model is a dualeconomy with a modern (capitalist) sectorand a subsistence (traditional) sector.12 To

recapitulate briefly the main features of themodel, profit maximisation rules apply in themodern sector, whereas the marginal productof workers is equal to or below their averageproduct in the subsistence sector. As outputexpands in the modern sector, profits increasewhile wages remain low, leading to a continu-ous outward shift in the demand for labour.In an open economy, this shift takes place

12 For a description of the basic model, see Lewis (1954, 1957). The production process in each sector makes use of two fac-

torscapital and labour in industry and land and labour in agriculture. The subsistence sector is not conterminous withagriculture. It includes handicraft workers, petty traders and domestic servants, as well as farmers.


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through the export of goods that are intensivein unskilled labour. Under the small countryassumption, the economy does not face an

external demand constraint, and labour costsplay a critical role in determining productionstructure.

The process of growth continues up to thepoint where the surplus labour pool isdepleted. This is the famous Lewis turningpoint. From then on, the economy begins tolook very much like a developed economy.The timing of the emergence of labour scarcitydepends on factors such as the initial pool ofunemployed and underemployed workers

(the surplus labour pool), the size of the labourforce involved in the rural economy (agricul-tural sector), the size of the urban informalsector (which provides a potential source oflabour for modern sector expansion as thegrowth process gets going), demographicdynamics, and the emerging patterns of labourmarket segmentation associated with grow-ing prosperity. As domestic labour supply

becomes less elastic (as a result of a slowdownin population growth, the aging of popula-tions and the depletion of labour reserves in

the rural economy and the urban informaleconomy) and increases in income and associ-ated changes in living patterns induce nationalsto shun jobs at the bottom end of the skill andwage distribution, industrial expansion natu-rally results in higher wages, which bite intoprofits.

Labour-market tightening does not, how-ever, necessarily induce the opening of aneconomy to migrant workers. At this stageof economic transformation, firms have two

alternatives to employing foreign workers:capital deepening and the relocation of pro-duction to low-wage countries (capital chasinglabour). Under the first strategy, the countryadjusts structurally through the adoption ofnew technology in order to establish competi-tive industries at a higher wagerental ratio.Labour scarcity (and rising wages) is, how-ever, only the trigger factor in this process ofindustrial upgrading. The outcome dependson the fulfillment of other preconditions; inparticular that human capital and infrastruc-ture are sufficiently developed. The second

alternative, exporting capital (the relocation ofproduction to cheap-labour countries), is notan option available to all firms. It is obviously

not open to firms in most non-traded goodssectorsin services, domestic transport andconstruction. Even in tradable goods sectorsthis option is mainly restricted to large-scalefirms, mostly in oligopolistic industries. Forsuccessful overseas operation, the investingfirm has to have some ownership advantageover its rivals (or potential rivals) in the newinvestment location. For small-scale firms inalmost all industries, and for many firmsinvolved in diffused-technology product lines,

exporting capital in search of labour is not afeasible response to domestic labour-markettightening.

These contrasting options in the face oflabour-market tightening, which impact oncapital deepening and capital exporting res-pectively, provide the backdrop for significantdifferences among countries in terms oftheir reliance on the third alternative whenfacing a labour shortage: employment of for-eign labour. Socio-cultural imperatives dictatethat governments generally give priority to

encouraging capital deepening and capitalchasing labour before opening the door toforeign workers. The pressure exerted byinternal lobby groups for and againstopening the door to migrant workers alsodepends on the viability of these alternativeroutes in sustaining growth in an economyfacing domestic labour shortages. Firmsdecision to rely on foreign workers is usuallyconditioned by public policy. Governmentsusually attempt to restrict and direct the

inflow of migrants to minimise its (perceivedor real) adverse effects on the domesticemployment situation and income distribu-tion (and of course on non-economic factors);contract-labour immigration systems areessentially controlled systems. Thus, underthe labour-importing alternative, one couldvisualise a job ladder economy (Bhagwati1979) in which the growing demand forlabour leads to higher-wage jobs being filled

by existing domestic labour supply, and bot-tom-of-the-ladder, unskilled low-wage jobs

being filled by the recruitment of migrants.


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The East Asian experience

Significant cross-country differences in living

standards and wages emerged in East Asia inthe 1980s. These gaps expanded further in the1990s and resulted in vast economic disparities

between labour-sending and labour-receivingcountries. The desire to acquire a betterstandard of living has obviously been thefundamental pull factor driving migration.However, patterns of migration cannot beexplained in terms of differences in the levelof economic development among countries (orwithin a country over time) alone. For

instance, the dependence on foreign workers(as measured by the number of immigrantworkers per 1,000 in the labour force) inMalaysia is five times higher than in Koreaand Taiwan, while the latter two countriesdepend more heavily on migrant workers than

Japan (Table 1). The upshot is that, while thevast disparities in economic conditions haveset the stage for labour migration, actualmigrant flows are fundamentally determinedon the demand side, with the policies ofimporting countries playing a pivotal regula-tory role. The Lewis framework helps explaineconomic forces influencing the nature andthe degree of restrictiveness in governmentpolicy.

For much of the post-war era, Japan wasunique among the advanced industrial nationsin that it managed to develop without relyingupon foreign workers to supplement thedomestic labour force (Chiswick 1998 andReubans 1982). The demand-side frameworkoutlined in the previous paragraphs enables

us to explain this historical experience (as wellas the recent emergence of Japan as a labour-importing country) reasonably well in termsof ordinary economic forces impinging on thelabour market. There is clear evidence thatthe great Japanese economic expansion that

occurred between the end of World War II andthe 1970s was fuelled by a relatively abundantsupply of labour compared to the European

industrial nations, which began to experiencea massive influx of guest workers as early asthe late 1950s (Athukorala and Manning1999).13 Japan started post-war growth with alarge population base. Demographic changesfollowing the end of the warthe baby boomfrom 1947 to 1949 and the subsequent dra-matic decline in the death ratefurther aug-mented the labour force. Another importantfactor was the persistent increases in thefemale labour force participation rate during

the first three decades of the post-war period.The annual percentage growth rates of theworking age population and total labour forcein the 1960s and 1970s exceeded that of themajor member nations of the Organisation forEconomic Co-operation and Development(OECD), except for the United States, by awide margin (Athukorala and Manning 1999).

Japan also started its post-war growth processwith a comparatively large reserve of labourin agriculture. Among the major industrialcountries, only Italys labour force reserve in

agriculture was as large as Japans in the early1960s. The aggregate reallocation of labourfrom agriculture and the rural economy to themodern sector in Japan was phenomenal bythe historical standards of the industrialisedcountries in Europe. Hand in hand with thetransition of labour from agriculture, was aclear shift in manpower from self-employmentand other informal work arrangements to sal-aried employment in the formal economy.Another supply-side factor that contributed to

a prolonging of labour-market flexibility in Japan was a sharp reduction in emigration.14

Reflecting the cumulative impact of thesefactors, the elasticity of labour supply continuedto remain high during the rapid growth phasein the post-war period.

13 On the European experience with guest workers, see Borjas (1998) and Zimmermann (1994).

14 Japan has a significant history of labour out-migration dating back to the Meiji Restoration. In the immediate post-warperiod, a significant number of Japanese left the country for overseas settlement in response to the dearth of domesticemployment opportunities. The Japanese government encouraged emigration at the time as a safety valve for domestic

labour-market pressure. By the mid 1960s, however, labour outflows had virtually stopped, partly as a result of therapid expansion of domestic employment opportunities (Mori 1997).


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From about the early 1970s, signs of a grad-ual tightening in Japans labour market beganto emerge. A rapid decline in fertility

brought about by economic affluence coupledwith the aging of populationhad resulted ina decline in domestic labour force growth. Therate of increase in female labour force partici-pation also began to decline from about thelate 1960s. As a result of a steady rise in lifeexpectancy since World War II, the share ofthe aged population in the total populationrose sharply, from about 6 per cent in 1960 toover 10 per cent in the mid 1980s. Reflectingthe cumulative impact of these factors, the

annual rate of labour force growth fell fromover 2 per cent in the 1960s to just over 1 percent in the 1980s (Sato 1998). The labour poolin the agricultural sector and the informalurban sector declined from the early 1960s,although it remained sizable by developed-country standards until the mid 1980s. Therising job aspirations of new labour-marketentrants in an increasingly affluent society

began to be reflected in dramatic changes in job preferences, which led to a significantdegree of labour market segmentation (Mori

1997). In particular, new entrants began toshow a reluctance to engage in 3-D jobs and

jobs that did not provide a setting for futurecareer advancement through on-the-job train-ing and/or through employment by a reputableemployer (that is, they avoided dead-end jobs).

The structure of the Japanese economy alsounderwent inexorable changes, with implica-tions for both the level and the composition oflabour demand. The share of manufacturing intotal domestic output tended to decline and

that of services to increase from about the mid1980s. By the early 1990s, the service sectoraccounted for over 60 per cent of total output,up from less than 50 per cent a decade earlier.This shift in production structure implied anincrease in the labour intensity of aggregateproduction (many services are more labour-intensive than manufacturing activities).Employment expansion in the services sectoralso tended to exacerbate the bias towards 3-Dand dead-end jobs (Mori 1997). Thus, labourmarket segmentation driven by changes in jobpreferences was compounded by demand-side

development rooted in changes in the produc-tion structure.

Japanese firms first responded to growing

labour scarcity though capital deepening(greater reliance on labour-saving investment)and relocating labour-intensive productionoverseas. These alternative strategies soonreached their limits as viable policy responsesto domestic labour shortages. Thus, by the late1980s, the objective conditions for a semi-permanent foreign worker presence werealready in place in the Japanese economy.

Korea and Taiwan followed closely in Japans footsteps. Starting from conditions of

highly elastic labour supply, both countriesindustrialised rapidly through export-ledindustrialisation. Japan and Korea (unlikeMalaysia, Thailand and Singapore) did notrely heavily on foreign investment in the proc-ess, although foreign capital played a morecritical role in Taiwan. Thus, the industrialisa-tion process was accompanied by the rapidaccumulation of local skills and entrepreneur-ship needed for technological upgrading andthe relocation of labour-intensive productionprocesses overseas in response to growing

labour-market pressure. In the 1980s, Koreaand Taiwan followed Japan in seeking tomaintain market access in labour-intensiveindustries through promoting the relocationof labour-intensive production processes tolower wage countries, primarily in SoutheastAsia. Growing labour shortages faced by non-traded goods sectors and small and medium-scale manufacturing firms, and growingdualism in labour markets resulting from thereluctance of domestic workers to perform 3-D

jobs, eventually forced these countries to turnto migrant workers.

Export-led industrialisation in the city-states of Hong Kong and Singapore, giventhese nations small population bases and thesheer rapidity of output expansion, exhibitedsignificant reliance on foreign workers from anearly stage. The production patterns in HongKong remained relatively more labour-inten-sive owing to the more flexible labour-supplysituation arising from the porous border withmainland China. However, when the liberali-sation reforms on the mainland opened up


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new investment opportunities, Hong Kongmanufacturing rapidly migrated to Chinaan interesting case of capital chasing labour.

There has also been a significant structuralshift in the services sector, away from tradi-tional activities and towards modern, more skill-intensive operations. With the hollowing-outof the manufacturing sector and compositionalchange within the services sector, Hong Kongsdependence on migrant workers has begun todiminish, and the composition of the migrantworkforce has begun to shift away fromunskilled workers towards skilled and profes-sional personnel. The demand for workers

involved in household services (in particularmaids) has begun to increase, as the new serviceorientation of the economy generates lucrativeemployment opportunities for local females.

While Hong Kongs non-interventionisteconomic policy regime ensured that labour-intensive production would continue to bene-fit from the availability of migrant labour, theproactive policy in Singapore favoured amultifaceted response to domestic labourshortages. This involved encouraging capitaldeepening in manufacturing and a shift to

human capital-intensive financial services,combined with a relaxation of restrictions onworker inflows in line with national develop-mental priorities. The option of relocatingmanufacturing offshore has been less potent inSingapore because the local-entrepreneurialcomponent of domestic industrialisation has

been small. In contrast to Hong Kong, Singa-pore will, for the foreseeable future, continueto be a significant importer of migrant work-ers, given the continued importance of manu-

facturing in the economya situation that setsa limit on the structural shift in servicestowards more skill-intensive product lines.

In Thailand and Malaysia, labour-markettransformation occurred over a much longerperiod than in Korea or Taiwan. In both coun-tries, low-wage workers remained locked inagriculture for a longer period because the ini-tial phase of industrialisation was less labour-intensive. From the outset, foreign investmentplayed a much more central role in capital for-mation. Given their weaker human resource

base, the governments in these countries

viewed foreign capital as the principal meansto achieve rapid industrial growth. Thailand,in particular, which had a much larger labour

pool in agriculture, lagged in the basic educa-tion needed to produce a highly skilled work-force. In both countries, greater agriculturalpotential meant that there was less urgency inupgrading industrial capacity than in Koreaor Taiwan. The paucity of domestic labour

became a major development challenge aslabour markets tightened in the 1980s and1990s. In contrast to Taiwan and Korea, Thai-land and Malaysia faced major problems inthe 1990s in shifting away from agriculture

and labour-intensive industries. Given theheavy reliance on foreign direct investmentand the weak domestic entrepreneurial base,there was little room for coherent strategies tosupport technological upgrading at home oncemarkets for unskilled labour tightened.

In the case of Thailandby far the leastindustrialised of the seven countries studiedmigrant workers only came to represent a sig-nificant segment of the workforce in the 1990s.Unlike in Malaysia, workers from outlyingprovinces fuelled growth in agriculture, indus-

try and service sectors during an extendedperiod of rapid economic expansion over twodecades to the late 1980s. However, conditionschanged as this source of labour supply driedup and the labour market tightened quite dra-matically in the 1990s. Shortages of labour,mainly in self-employed and contract jobs inagriculture and fishing, provided the impetusfor international labour migration. Migrantworkers subsequently entered the construc-tion, domestic service and manufacturing

industries in major urban centres, principallyBangkok.

Managing labour inflow

There are vast differences among the sevencountries being considered in terms of thenature of the governments policy stancetowards migrant workers. Singapore is uniquefor its well-conceived and explicit policytowards foreign workers. Taiwan has beenattempting to follow Singapores example, but


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remains in the early stages of policy formula-tion. The other countries handle immigrationpolicies in a narrow, particularistic manner,

rather than as part of the countrys central eco-nomic objectives. Japan and Korea have so faravoided an explicit migrant worker policy,while permitting back-door entry throughtrainee programs. Thailand still has a virtualnon-system: a regime that tolerates largelyuncontrolled clandestine immigration combinedwith periodic crackdowns on clandestineworkers. These differences notwithstanding,over the years all the countries have becomemore tolerant of migrant workers, de facto or

de jure.Since the late 1970s, Singapores foreignlabour policy has evolved into a highly selec-tive instrument to achieve changing social andeconomic goals (Pang 1995). At independencein 1965, the government implemented tightimmigration restrictions. These controls wererelaxed by 1968 in response to increasinglabour shortages. In 1981, the governmentannounced its intention to phase out allunskilled foreign workers, except domesticmaids and those employed in construction

and ship building, by the end of 1991. Thispolicy shift was underpinned by the concernthat a heavy reliance on unskilled foreignlabour hinders productivity growth and thetechnological upgrading of domestic manufac-turing. This policy was abandoned within afew years, however, as it was becoming increas-ingly evident that Singapores continued eco-nomic growth could be sustained only bysupplementing the slowly growing domesticlabour force from external sources. In

response, the government devised an innova-tive immigration policy to regulate workerinflows, using a combination of the pricemechanism and employment quotas.

The new policy, introduced in 1987, aimedto regulate immigrant worker flows in linewith domestic labour market conditionsthrough two key tools: a monthly levy payable

by the employer for each foreign workeremployed, and a dependency ceiling thatlimited the proportion of foreign workers inthe workforce of any employer in a givenindustry. The levy was a means of giving

employers access to foreign labour, but at aprice similar to that of local labour. It was aform of protection for local workers, as it

reduced the downward pressure on localwages by the growing supply of foreignlabour. In the ensuing years, the levy hasevolved into a selective instrument that varieswith the type of work and the nature of theindustry, and is adjusted to take account ofchanging labour market conditions and policyobjectives. Like the levy, the dependency ceil-ing varies by sector. While the levy has beenraised several times since 1987, to preventdownward pressure on local wages, the

dependency ceiling has been relaxed in someindustries to let employers import more for-eign workers. The implementation of labourimport policy in Singapore involves severepenalties for illegal workers and for the em-ployers who hire them. Employers are permit-ted to recruit foreign workers only if vacanciescannot be filled with local workers. Thesemigrant workers are also encouraged to applyfor permanent residence and citizenship.

Until the early 1970s, Hong Kong liberallyadmitted all visitors from China, both legal

and illegal, while allowing the immigration ofunskilled workers from anywhere else. In1974, in response to the economic recessioncaused by the first oil shock, the governmentintroduced the so-called reach base policy forillegal immigrants from China. Under this pol-icy, illegal migrants who managed to escapecapture and reach the resident registrationcentres were allowed to register as residents.In October 1980, the government ended thereach base policy and began to implement

tough measures to punish employers of illegalimmigrants. But the governments policytowards illegal immigrants turned out to bemore liberal in the second half of the 1980s asthe domestic labour market began to tightenas a result of rapid economic growth and adecline in the population growth rate (as aresult of Hong Kong residents emigrating toWestern countries and a decline in the birthrate). At the same time, new measures wereimplemented to facilitate the importation ofskilled and professional workers belonging todesignated employment categories. In 1989,


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the government introduced a new labour-importation scheme. Under this scheme, quotaswere allocated to employers for the importa-

tion of labour to take up unfilled vacancies,provided there were no local workers to fillsuch vacancies. Since 1974, the governmenthas been allowing the importation of domesticworkers (from any country other than China)under two-year renewable contracts.

From the mid 1980s, growing labour short-ages in Korea began to attract clandestineforeign workers (mostly ethnic Koreans fromChina who came in the guise of tourists). Thenumbers grew rapidly as the government vir-

tually turned a blind eye to the violation ofimmigration rules. In response to requests byemployers and manufacturers associations, inNovember 1991 the government introducedan Industrial Trainee System (similar to thetrainee scheme in Japan). This scheme enabledKorean firms with foreign operations to bringin a limited number of foreign workers (for aperiod of 6 months, extendable up to a maxi-mum of one year) in the guise of upgradingthe skills of their overseas workforce. In Sep-tember 1992, firms without foreign affiliates

were also permitted to import workers underthe scheme. In November 1993, the trainingperiod was extended from 6 months to oneyear with the possibility of extending it for anadditional year. Moreover, preference wasgiven to small and medium-sized enterprises(SMEs) in manufacturing. The number of manu-facturing industries (at the two-digit level ofthe Korean Standard Industry Classification,KSIC) covered by the scheme was increasedin subsequent years: from 10 in 1993 to 22 in

1996. Finally, SMEs in construction, fishingand agriculture were made eligible to hireforeign trainees. A training-cum-employmentsystem was introduced in April 2000. Thisscheme enabled trainees who had finished twoyears of training and had specific qualifica-tions to work for an additional year with legalemployee status. In December 2001, the two-year training and one-year employment sys-tem was changed to a one-year training andtwo-year employment structure. The annualquota for industrial trainees, which was ini-tially set (in 1993) at 20,000, was increased

annually and stood at 85,500 in 2002. InAugust 2003, the government announced anew Employment Permit Scheme (imple-

mented in August 2004) with the aim of meet-ing SME labour demand more effectively,while protecting foreign workers by makingthem legal workers. The new law allows for-eign workers to stay in Korea for up to threeyears and to change jobs up to three timeswithin that period. Foreign workers are to beimported only to supplement native workers.Moreover, it is obligatory under the new lawfor the employers to provide evidence that for-eign workers are imported only as an act of

last resort after trying to fill the vacancies fromdomestic workers. The Korean governmenthas explicitly recognised this new policy as anintegral part of its SME development strategy(Hahn and Choi 2004).

In Taiwan, as in Korea, from the mid 1980sonwards a significant foreign worker presenceemerged in the form of illegal migrants.During 198991, the government permittedthe employment of foreign workers in severallarge-scale construction projects. A workpermit system for the importation of contract

workers on two-year contracts was introducedunder the Employment Services Law promul-gated in 1992. In recent years, foreign workerpolicy has become more liberal as the govern-ment has placed emphasis on foreign workersas a means of promoting targeted industriesand upgrading economic infrastructure, going

beyond the initial objective of using theseworkers to alleviate temporary labour short-ages. In 2000, the two-year employment termwas extended to three years. Workers who

return home after completing a three-yearterm are eligible to come for a further three-year term (Lee 2002).

Until about the mid 1990s, the Malaysianpolicy on the entry of semi-skilled and unskilledforeign workers reflected a reaction to short-term needs and labour shortages rather thanan active and well thought out approach tomeeting long-term labour needs. Since the early1980s the government has made some attemptsto prevent illegal immigration and to regulatelabour inflows (Kanapathy 2004). A key ele-ment of the regulatory mechanism is bilateral


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agreements signed with labour-exporting coun-tries, under which skill requirements and thesectors in which the workers are to be employed

are delineated. In this way, Malaysia determinesthe nationality of migrant workers. The firstagreement (the Medan Agreement) was signedwith Indonesia in 1984. Under this agreement,Indonesia was to supply workers in sixemployment categories whenever requested

by Malaysia. A second agreement was signedin May 2004. Malaysia has also signed bilateralagreements with the Philippines, Thailand,Bangladesh, Vietnam and Sri Lanka.

In 1991, the Malaysian government intro-

duced an annual foreign-worker levy, whichvaries by sector and skill category. Currently,the annual levy is 300 Malaysian Ringgit (RM)for the plantation sector, RM 900 for semi-skilled workers in the service sector, andRM2,400 for skilled workers. There are basi-cally two types of work permit: the unskilledand semi-skilled workers (those earning lessthan RM2,000 per month) are issued visitpasses for temporary employment that arevalid for a year and can be renewed annuallyfor a maximum of three years (seven years

in some sectors). These workers are calledmigrant workers. Those earning RM2,000and above are classified as technical and pro-fessional workers (expatriates). Visit passesfor professional workers are issued relativelyliberally in all sectors and all occupations,except those that have direct implications fornational security.

Migrant workers began to enter Thailand inincreasing numbers from the mid 1990s, butthe government turned a blind eye to the phe-

nomenon until the onset of the financial crisisin 1997. In response to the economic collapse,the Thai government quickly repatriated for-eign workers and devised policies to regulatethe future entry of migrant workers in linewith national policy priorities. The number ofsectors open to foreign workers was reducedfrom 27 in 1997 to just six in 2002. Visas wereissued on an annual basis and a small levywas introduced in 1996 (Bhatnagar and Man-ning 2005). However, given the long porous

borders with Myanmar/Burma and the LaoPDR, and Thailands uneasy political relations

with the former country, the implementationof a national labour migration policy and thecontrol of illegal immigration remains a formi-

dable challenge for the Thai government.Recently, Thailand entered into agreementswith Laos and Cambodia for recruitment ofworkers by Thai employers, but problemswith Burma remain.

Conclusions and policy implications

International labour migration is becoming animportant factor in economic growth and

structural transformation in the high performingcountries of East Asia. Migrant flows are basi-cally demand driven (although state controlshave held rates of immigration well belowthose that might otherwise have prevailed)and the underlying determinants are struc-tural, rather than short-term in nature. Thiswas vividly demonstrated by the behaviour ofmigrant flows during the East Asian financialcrisis and by the experience of Japan since itentered a prolonged economic slump in theearly 1990s. In Japan, migrant workers either

fill skill niches in the service economy or workin occupations regarded as socially inappro-priate or undesirable by Japanese workers.

The shrinking of domestic labour forces because of low population growth and thegrowing reluctance of new labour-marketentrants to engage in 3-D jobs will continueto increase in importance as determinants ofdemand for foreign workers. While relianceon labour-saving production technology andthe relocation of labour-intensive production

processes will continue to be important meansof alleviating labour shortages in large-scalemanufacturing, firms in non-tradable sectors(services and construction) will continue toturn to foreign labour as a cushion against ris-ing labour costs. Demand for foreign workersfrom small and medium-sized firms whoseproduction processes are naturally morelabour-intensive and which have only limitedopportunities for the substitution of capital forlabour will also continue to grow. Indeed,recent moves by Malaysia, Taiwan, and morerecently, Korea, attest to the fact that the


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receiving countries now accept that there is aneconomic case for immigration.

The East Asian experience strongly sup-

ports the view that a controlled immigrationsystem leads to evasion and to unanticipatedeffects on both economic and social conditions.In particular, a complex bureaucratic systemdesigned to keep willing workers away is

bound to breed corruption and distortion.Furthermore, the tougher the border controls

become, the less likely migrants are to gohome when their work contracts are com-pleted and to incur the expense and danger ofanother crossing. Put simply, tighter enforce-

ment can encourage a switch from temporaryto permanent illicit migration.15

The policy challenge for the labour-importingcountries in East Asia is to make the relianceon foreign workers consistent with changinglabour market conditions and the priorities ofnational development policy, while minimis-ing social friction arising from their presence.Restrictive policies might limit migrantinflows but they are unable to halt them.Porous borders mean that unilateral regula-tion of migration is increasingly ineffective.

Moreover, once migration footholds are estab-lished, immigrant groups (as well as employers)help the newly arrived workers find work andintegrate into the society, perpetuating theillegal immigrant problem. At the same time,unilateral action by the host countries canhave adverse implications for their politicaland economic relationships with labour-exporting countries.

Therefore, there is a strong case for includ-ing migration on the agendas of regional trad-

ing agreements and other regional cooperationinitiatives in order to devise regional andcountry-specific solutions to the politicalopposition to foreign workers. The case forregional initiatives has gained impetus fromthe recent emphasis on liberalising temporary

migration as part of the WTO reform agenda(Bergsten 1994; Rodrik 2002; Yusuf and Stiglitz2001; Ghosh 2000; Winters et al. 2003 and

Withers 1994). However, attempts to developglobal (or regional) policies and new institu-tions in this sphere are bound to face formid-able challenges for at least two reasons. First,political considerations may dictate that labourflows are treated in a very different way tocapital and trade flows, because migrationimpinges on national sovereignty and identitymuch more directly than international tradeand foreign investment. Second, and perhapsmore importantly, unlike in foreign trade and

investment there is no consensus on a set ofoperational principles to inform the policydebate in this area.16

Possible ingredients for a market-based sys-tem designed to regulate international labourmigration have been suggested recently. Onepossibility is to introduce a system of employ-ing migrant workers as part of work contractsfor a given service delivery (contract suppli-ers) (Winters et al. 2003). Another is to replacethe needs-based assessment of applications byemployers with a higher rate of payroll tax

(levy) for those employing foreign workers (asin Singapore). The levy could be used partly topay for immigrants health costs. A part mightalso go to a social security fund in immigrant-sending countries (Rodrik 2002). There is alsothe possibility of introducing a system underwhich a portion of the workers earnings isheld by the employer until the worker returnsto their country of origin. Such a savingsscheme would also ensure that workers wouldreturn home with a sizeable pool of resources

to invest (Rodrik 2002). Other possibilitiesinclude the introduction of a visa fee (which isset a little lower than the cost of illegal entry)and/or a bond (priced slightly above thepeople smugglers going rate) to enter thecountry, and allocating employment quotas to

15 On this point, see the interesting paper by Cornelius (2001) on the efficacy and unintended consequences of US immi-gration controls since 1993.

16 Recent years have seen some emphasis on liberalising the entry of professional and skilled workers (Mode 4 liberalisa-tion within the WTO framework) as part of the reform agenda of the Association of Southeast Asian Nations (ASEAN)

(Bhatnagar and Manning 2005). However, the ASEAN member countries have so far remained remarkably silent aboutthe important issue of regulating cross-border flows of unskilled workers because of its political sensitivity.


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sending countries on a bilateral basis (perhapssubject to the condition that the quota isreduced by the number that fail to return).

There is a clear need for a systematic assess-

ment of these policy options, against the back-drop of domestic labour market transitionsand socio-political considerations, in order to

inform the policy debate.

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