The NICs and ASEAN

Shortages of local labour supply during the development process were common in the labour- short NICs, ASEAN countries (including Brunei and the Gulf States) and were attributable to a combination of demographic, socio-economic and labour market situations. All the countries examined here experienced a general lack of local manpower supply both in numbers and skills to man their respective economic diversification programmes. Their manpower shortages occurred in different periods during their development processes and accordingly different development strategies were adopted to overcome the labour supply problem. In the early development stage of these countries, one of the overriding problems which engendered segmentation was an abundant supply of unskilled local manpower.

i) Abundant supply of unskilled local labour

The abundant supply of unskilled local manpower in the 1960s stemmed fi'om the rapid population growth of ASEAN countries (such as Singapore, Malaysia and Thailand) before the Second World War. In the early years of the development process (1960s), import-substitution strategies were implemented to deal with the oversupply of local labour and rising unemployment. The increasing local workforce was utilised by the booming construction sector and the newly established manufacturing sector, mainly as production workers in industries such as electronics, electrical machinery, footwear, clothing and textiles. The establishment of these factories, boosted by foreign investors (Abella, 1994), required personnel fi'om overseas for performing managerial, administrative tasks, while low level tasks were carried out by the locals who were only capable of doing unskilled jobs. Therefore, it was the prevailing problem of oversupply of locals with limited qualifications and skills which formed part of the segmentation process during the 1960s because they could only occupy low level jobs in newly operating industries.

The abundant supply of unskilled local labour include females, whose labour participation increased dramatically under the export-oriented industrialisation (Chen, 1979). Their increased participation was not only due to increased employment opportunities, such as in the

manufacturing sector, but also the preference of export-oriented firms to hire young female workers over others. The reason was their willingness to work for lower wages, to do repetitive assembly tasks, and their subordinate place in society, making them docile and easily manipulated (Hein, 1984; Fuentes and Ehrenreich, 1987, cited in Pandit, 1995). In Malaysia, for example, the export-oriented industrialisation led to the employment of large numbers of women in the manufacturing sector (Kaur, 1999). MNCs employed young female workers to work for long hours at low wages, effectively making them the cheapest segment in the labour force (Lim, 1992). This is one example of segmented employment structure, which is actually common in developing countries. In Singapore, female labour also increased in proportion particularly as production and assembly workers (Pang and Seow, 1983). Generally, local labour was abundant in supply, a situation arising fi'om the rapid population growth up to and during the 1960s (Pang, 1988a; Tan, 1997), which is now examined.

ii) The dynamism of demographic factors

Demographic factors contribute to segmentation principally through the mechanism of the successful implementation of population policies which leads to slow labour force growth.

Initially, in the 1950s and 1960s, the NICs and ASEAN countries did not have enough jobs for the increasing local labour supply. This situation was due to the high population growth and the increasing local workforce during the post-war years. In Singapore, Malaysia and Thailand, for example, the initial labour-intensive import-substitution development strategies they adopted were then seen to be the best means to cope with the post-World War Two high rates of population growth, rising unemployment, under-employment, poverty, as well as loss of traditional markets, growing trade deficit and stagnating economic growth (Pang, 1988a and b;

Pandit, 1995). In addition, they simultaneously used long-term socio-economic measures (such as improvement in education) to reduce fertility and population growth (Pang, 1988a and b; Tan, 1997). These measures ultimately reduced the supply of local labour as labour force growth slowed down and rapid economic growth since the 1970s, forced them to depend on foreign labour supply. These policies, such as control of population growth therefore initiated

segmentation processes because their ultimate efifects (i.e. slow growth of workforce) manifested at a time of rapid economic growth (1970s onwards), necessitated increasing utilisation of foreign labour. It can be argued, therefore, that one process which was creating the segmented labour market and employment structure in Malaysia, Singapore and Thailand was the successful implementation of family planning policies in the 1960s and 1970s to reduce population growth. The continued success of the industrialisation process of the labour-short ASEAN countries since the 1970s and the consequent dependence on foreign labour supply further contributed to the segmentation process as it increased the recruitment and utilisation of relatively cheap skilled and unskilled foreign labour sourced by the neighbouring countries within the Southeast Asian region. In 1968 in Singapore, for example, foreign workers numbered only 2,300 (4 per cent of Singapore labour force but surged up to 14,000 (2 per cent) in 1970. By 1980, about 120,000 or 11 per cent of the total labour force were non­ citizens (Pang, 1994a), and by the early 1990s, the proportion had risen to 16 per cent (Abella, 1994). This rise was necessitated by the shortage of local labour supply in Singapore, caused by its remarkable demographic transition (TFR fall from 4.9 in the 1960-65 period to 1.8 in

1992) (Rieger, 1991; Drakakis-Smith, 1998).

In Thailand, despite an increase in labour supply in earlier years, rapid economic growth by the 1980s led to a tight labour market. However, demographic factors also contributed to labour shortages, through implementation of its National Family Planning Project to promote family planning in 1957 and 1970 (Tan, 1997). Consequently, annual population growth declined from 3 per cent to 2.5 per cent for the 1947-60 and 1970-1980 periods respectively and to 1.5 per cent by the late 1980s (Tan, 1997). Accordingly, labour force growth also declined markedly, from 4 per cent in 1975-85 to 2 per cent during the 1988-91 period (Vasuprasat, 1994). By the early 1990s, Thailand faced acute shortages of labour, especially skilled labour, such as engineers (Tan, 1997). Much of the labour demand for the highly skilled was supplied by foreigners. Since the mid-1980s, highly skilled foreign personnel mainly work in foreign investment-related enterprises and technically-oriented industries. Lower level occupations are partly filled by illegal foreign workers, estimated at 300,000 by 1992 (Poapongsakom and

Suzuki, 1992). These illegal immigrant workers, who mainly came from poorer neighbouring countries (Myanmar, Laos and Cambodia), were mainly concentrated in traditional sectors, mainly agriculture, but also in services, together with less educated Thai workers (Sussangkam,

1995). Thus, as in Singapore and Malaysia the population policies in Thailand constituted part of the segmentation processes because the effective implementation consequently accounted for slower workforce growth and local labour shortages, necessitating the need to supplement local labour supply with foreign nationals in certain types of occupation and economic sectors. However, it is not only the slow population growth which has caused labour shortages in the countries examined. Movement of people from rural to urban areas also produced labour supply problems, leading to increased employment of foreign labour for certain occupation and economic sectors in rural areas. These are now examined.

iii) Urbanisation processes

Rapid industrialisation of the ASEAN countries, particularly after the implementation of export-led growth generated many jobs (mainly in the manufacturing sector) attracted local workers from mral to urban areas, leaving a vacuum to be eventually filled by foreign workers.

In Malaysia for example, the issue of how labour supply variables played a part in generating the process of segmentation is related to its urbanisation processes. This is especially so since the successfiil implementation of Malaysia’s New Economic Policy in 1971 which stimulated movement of rural people to urban areas to seek employment in the modem sectors. Indeed, because of relatively better pay and working conditions, industrial expansion in urban areas attracted a specific group of local workers, mainly the Bumiputras to take up employment there. The availability of jobs in urban areas engendered rapid urbanisation, which in turn created both sectoral and spatial labour shortages, and the coexistence of regions of labour surplus (urban areas) and labour shortages (rural areas) in the country. Thus urbanisation was a process which triggered segmentation because it resulted in increasing recmitment of foreign labour to do jobs in mral areas vacated by Bumiputras who left for urban areas to take up employment in the modem sector both in the country and in Singapore (Stahl, 1986).

The sectors mainly affected were agriculture, construction, mining, logging, domestic services, petty trading and a host of other industrial and commercial services. Among all economic sectors experiencing labour shortages, agriculture was the most badly affected, especially in Johore (the most southern states of Malaysia), mainly attributed to the preference of locals to work for higher wages in Singapore, such as in the construction sector (Stahl, 1986), and in Pahang (in the northern part of the country), associated with land development schemes which intensified competition for labour. The vacuum in the cities created by many skilled Malaysians working in Singapore was filled by workers from the agricultural sector. Foreign workers, in turn filled plantation jobs and service sector occupations, including hawkers and domestic maids. In the early 1990s, in plantation agriculture for example, 75 per cent of Malaysia’s farm workers are foreigners, mainly Filipinos and Indonesians (Gooneratne, Martin and Sazanami, 1994). In total the number of legal foreign workers in Malaysia by the early 1990s has approximately 100,000 and the estimates of illegals were between 200,000 and 1 million (Gooneratne, Martin and Sazanami, 1994; Abella, 1994). These workers dominated mainly lower level jobs in the sectors mentioned above, meaning that such jobs and sectors became non-competitive, hence a segmented employment structure.

Other sectors also suffered labour shortages in the late 1970 and early 1980s. In construction, for example, there were shortages not only of skilled workers but also of semi-skilled and unskilled, also attributable to the large number of Malaysians working for higher wages in Singapore where they comprised 70 per cent of all construction workers (Stahl, 1986). The shortage had to be filled by migrant workers. In the late 1980s, out of about a third of a million workers including illegals, about 25 per cent were migrants. Similarly, in manufacturing, acute shortages were mainly caused by the attraction of Malaysians to work in Singapore's manufacturing sector where wages were 20-25 per cent higher than in Malaysia (Nayagam, 1992). Other reasons for labour shortages, leading to segmentation, include preferences by locals for public sector employment, because of better pay and working condition. Labour supply shortages in the service sector were attributed to; improved education and job

opportunities, especially in manufacturing industries; more women entering the formal labour market, leaving their traditional household and child care duties to paid domestic helpers (also increasingly foreigners), as local women who previously worked as domestic helpers now preferred to work in factories. In short, one consequence of urbanisation was that employers in a number of sectors needed to supplement labour shortages in their respective industries by foreign labour. The fact that foreign labour was employed to fill the vacuum itself bred segmentation processes.

A similar situation was also experienced by Thailand where, although agriculture still absorbed the majority of its working population between 1991 and 1994, its share of total employment had declined from 60.6 per cent in 1991 to 58 per cent in 1994. Indeed, some parts of Thailand have been experiencing shortages of native agricultural workers, because many have left for other types of employment in the modem sectors either in urban areas in Thailand or overseas. In the southern part of Thailand for example, the vacuum has been filled by thousands of illegal workers from Burma (Tingsabadh, 1994; Lewis, 1997).

B) The small Gulf States

Segmentation processes in the Gulf States (and Bmnei), are fundamentally caused by a similar situation to that described above, namely shortages of local labour supply which necessitate import of labour from abroad. The main difference is in terms of magnitude and timing of occurrence during their development processes. For example, both Brunei and the small Gulf Countries have experienced local labour supply shortages throughout their development process, while Singapore, Malaysia and Thailand mainly faced labour shortages when their development process took off (second development strategy - export-led growth). For the Gulf States, their inadequate local workforce was exacerbated from the early stage of their development processes, partly by the selective attitudes of the nationals in terms of types of occupations.

i) Small workforce and selective attitudes of the locals

The Gulf countries possess sufiScient capital to develop their economies, but growth has been undermined by small labour forces and a general lack of high level skills, and exacerbated by an increasing reluctance of nationals to take up employment in the private sector (El-Azhary, 1984). Indeed, in the mid-1980s, the characteristics of the labour force there were those of a young indigenous population, limited employment of females in the private sector, shortage of trained managerial and technical national employees (Roukis and Montana, 1986). These situations have engendered labour immigration over a long period, which in itself produced segmentation processes as foreign labour supplies were employed to fill job vacancies particularly shunned by the locals. Indeed, as in Brunei, the demand for labour migrants in the Gulf region began during the first oil boom (1930s and 1940s), mainly for basic infi-astructure development, improvement of administrative functions and social services, such as housing, health and education, the overall effect of which was a rise in the standard of living of locals (El-Azhary, 1984; Townsend, 1984). A dramatic increase in labour demand commenced in the second oil boom (1973/74) accelerating economic growth and stimulating the implementation of spectacular development programmes (Seccombe, 1988). For these programmes, labour supply, both internally and internationally has been crucial to their development progress because of the small local workforce in terms of numbers and skills.

In Kuwait, for example, the already small workforce was exacerbated by the unwillingness of locals to work in less prestigious jobs, which resulted in such jobs being entirely performed by foreign workers. Between 1965 and 1988, Kuwaiti males participation in production occupations dropped fi'om 30 per cent to 11 per cent. Participation in the public sector has been significantly high (nine-tenths of Kuwaiti males and 97 per cent of females). This is not surprising even in the 1990s, as occupations in this sector are awarded and guaranteed on the basis of their being Kuwaiti nationals and possessing the required qualifications. They continue to occupy their positions, regardless of their performance (Shah, 1994). Hence such occupations or positions are non-competing ones. Therefore, government hiring policies which give preference to their own nationals in the public sector are segmentation processes

themselves. However, in the UAE, the small size of the labour force, the majority of whom were untrained compelled the government to employ expatriates in significant numbers in the public sector". The segmentation processes involved here were simply demographic factor (small population) and education programmes which concentrated on training the indigenes for public administration occupations (Roukis and Montana, 1986).

This section has demonstrated that the nature of domestic labour supply in the NICs and ASEAN during the initial stage of their economic restructuring contributed to creating segmented labour market and employment structures in three ways. First, the abundance local and unskilled labour force confined them to working in low level jobs such as in the manufacturing sector, under the management of MNC transients. Second, their population policies which promoted family planning effectively eventually reduced their population growth, and hence growth of local workforce, leading to increased reliance on foreign workers. Third, rural-urban and urban-urban movements of locals, such as to urban centres in Malaysia and Singapore, created vacuums, for example in plantation agriculture, which accordingly were filled by foreign workers. The resultant segmented employment structure, mainly between local and foreign workers was further strengthened by the roles played by government and non­ government bodies, in relation to the quantitatively and qualitatively demand and supply of foreign and local workers.

2.4.3 Government’s and non-government’s roles

This section examines governments’ and non-governments’ roles, mainly MNCs (as foreign investors) in the development process and the resultant increase in labour immigration in the NICs and the labour-short ASEAN and Gulf countries. The purpose is to identify what and how segmentation processes are created by the governments of labour-short ASEAN countries and foreign investors, particularly the MNCs, during their development process which led to increased inflow of foreign labour. It is argued here that some government labour rules and

regulations, such as immigration laws, work permit and the industrial activities of foreign investors in the labour-short countries examined, have contributed to creating segmented labour markets and employment structure. The segmentation engendered by the government and non­ government bodies (foreign investors) examined here is based on the interactions of their roles (in the development process) with the demand for and supply of labour.

A) Government’s role in labour market segmentation of NICs and ASEAN Countries