Asean's got talent, but where's it going to go?

The AEC'S got talent. Indeed. And the talent pool is quite limited.

The first time we heard of the Asean Economic Community or AEC, free movement of labour within Asean was perhaps one of the key changes that concerned us, along with other nations that are suffering labour shortages.

Now that the rules have been fine-tuned, allowing eight pilot professions to test the waters once the AEC is launched in 2015, expect stiffer competition within these professions.

With the stage now set for qualified workers to showcase their talents, get certified, and be free to work anywhere in Asean, is this the time for us to push the panic button?

To be fair, this is good news if you are a skilled professional with high aspirations. Free movement of labour provides opportunities to for people to seek employment regionally, potentially gaining valuable international experience required for career advancement, not to mention higher pay.

The "open audition" is also good news for companies or countries in need of fresh talent. It appears that a solution to the local skill shortage is to recruit regionally.

Take Germany as an example. The country that was once faced with a shortage of doctors addressed the problem by allowing physicians who had completed basic medical training in the European Union to practise in Germany. Surely, this trend will become the key theme in Asean in the years to come.

But whether this is good news for Thailand remains unclear. What is clear is that we are in serious need of talent. Labour shortages are a well-known problem that affect all but especially smaller businesses. Last year, the SCB Economic Intelligence Centre conducted a survey with Thai SMEs across all regions and industry sectors.

It found that around two-thirds of respondents said they were short of skilled labour and needed an average 8% annual increase in their workforce over the next three years.

Thailand will need to be proactive, or the situation could worsen drastically. Our labour force could begin to shrink as early as 2018, after which the working age population will decline by roughly 60,000 a year.

Unfortunately, one of the factors is our low population growth of only 0.7%, the lowest amongst the Asean-5 grouping (Indonesia, Malaysia, the Philippines, Singapore and Thailand).

So what can Thailand do to attract international talent?

First and foremost, it is imperative to understand who moves, and why they do. By looking at experiences in the European Union where workers have been moving freely for some time, it shows, not surprisingly, that wage differentials explain most of the labour movements.

But it is also notable that the migrants were mostly young professionals moving from countries in Eastern Europe (such as Romania and Poland) to those in Western Europe (such as Germany, Spain, Italy and the United Kingdom), where pay rates were up to five times higher. The outflows of young workers were significant enough to cause depopulation in some Eastern European countries.

Therefore, if the same logic applies to Asean, it is the young professionals who are most likely to embrace the "open audition", and wage differentials will prove to be the deciding factor.

Thailand is certainly not the destination with the highest wages for young workers. After adjusting for cost of living and taxes, junior professionals working in Singapore still earn twice as much as those in Thailand and Malaysia.

Obviously, a small labour market like Singapore cannot accommodate all of the available young talent even if it wants to, thus allowing Thailand and Malaysia to fight for the remaining top-tier candidates. But doesn't this mean we have to bypass the cream of the crop? In reality, if we are willing to compete, paying top money for young talent is unavoidable. The key challenge lies in designing attractive remuneration schemes for non-Thais without upsetting the current pay scale for Thai staff.

Workaround solutions include offering higher contract-based earnings, but without employer pension contributions.

While compensation is a powerful force, conducive work environments and a corporate culture that values diversity are increasingly important to attract and retain international talent. This could be particularly challenging for companies with a well-established corporate culture; therefore, commitment from senior management to reshape the norms will be required.

A simple cultural enhancement such as the use of English in routine written communications could be encouraged. Government also has a role in creating an attractive and integral environment for foreigners. The Singapore government, for example, works with the private sector to promote the benefits of an integrated workplace and to encourage the private sector to place importance on diverse capabilities.

But the bigger problem for Asean governments is doing away with unnecessary roadblocks that hinder the influx of international professionals. For Thailand, rules still prohibit foreigners from working in 39 occupations reserved for Thais, and require companies to maintain a maximum ratio of one foreigner for every four Thai workers. Anecdotally, some certification exams for foreigners are still being administered in Thai, even though Thai-language proficiency is not required for some segments of those positions.

As equally vital and challenging for Thai firms is how to retain young Thai professionals. Thai companies with overseas posts can offer international rotations for bright young employees looking for a fast track up the corporate ladder. Many Thai firms also grant overseas education scholarships to top-performing staff with guaranteed promotion upon graduation. Some other firms give away perks based on length of employment. Given the fierce competition for talent in the region, do not be surprised if the best that firms can do is to delay young Thai workers going abroad. All in all, it may be the most cost-effective way for businesses to stay agile and swift in replacing employees.

In any case, this increased connectivity under the AEC provides an opportunity for Thailand to showcase as well as to attract talent. Individuals and businesses alike should not hesitate to take full advantage of this shift in the regulatory landscape. Indeed, it will take several crucial steps to be ready for this "open audition" and most of them cannot happen overnight.

There is no time to waste; after all, 2015 is right around the corner.


Sutapa Amornvivat, PhD, is chief economist and executive vice-president of the Economic Intelligence Centre, Siam Commercial Bank. She has international work experience at IMF, ING Group and Booz, Allen, Hamilton. She received a BA from Harvard and a PhD from MIT. eic@scb.co.th EIC Online: www.scbeic.com

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Writer: Sutapa Amornvivat