Can the Asean Economic Community deliver the jobs for the people?

A ferry transports Cambodian people across the Mekong river as it travels in front of a construction site in Phnom Penh on Aug 27, 2014. -- PHOTO: AFP
A ferry transports Cambodian people across the Mekong river as it travels in front of a construction site in Phnom Penh on Aug 27, 2014. -- PHOTO: AFP

Policymakers talk a lot about the impact of the ASEAN Economic Community in 2015. But the real question is, how will this AEC affect the 600 million people who live in the region? Together the International Labour Organization and the Asian Development Bank set out to find some answers, and we recently delivered our findings in a report presented to the ASEAN Secretary-General Le Luong Minh.

Ordinary men and women first and foremost experience economic change though the labour market. What matters to them is whether they can find a good job that offers security, pays decent wages in decent conditions, and whether, in time, their children will be able to do the same.

Our findings are encouraging. If managed well over the next decade, the AEC could boost the region's economies by 7.1 per cent by 2025, increase investment, and generate 14 million additional jobs. However, there are some big "ifs" and "buts".

While some sectors will flourish others are likely to see job losses, and some workers will not necessarily have the right skills to seize the new opportunities created by the AEC. Women could have a relatively smaller share of new jobs. In addition, while improved productivity may bring income increases for some, particularly high-skilled workers, this could bypass the large majority unless more effective wage-setting mechanisms for low-wage workers are in place.

The AEC's provisions for free movement of skilled labour is likely to have little impact as it will affect less than 1 per cent of workers in ASEAN member states, while medium- and low-skilled migration will continue to increase.

To realize the full potential of closer economic integration, countries across the region need to take decisive action, right now. This is the core, take-away message from our study, "ASEAN Community 2015: Managing integration for better jobs and shared prosperity".

Here are three priorities for ASEAN's leaders to focus on.

The first is to proactively manage and facilitate structural change. The specifics will vary according to country, development level, and a range of other factors, but across the region we expect that share of employment in agriculture will decline, while construction, transportation and trade will be key regional growth sectors.

At national level our modelling predicts a range of sectorial beneficiaries; for example, an expansion of employment in garments and textiles in Cambodia and Vietnam, chemicals and metals in Indonesia, wood products in Laos, food processing in the Philippines and vehicle production in Thailand.

It is also important that countries create conditions that allow other, emerging, manufacturing sub-sectors to grow. This means not only investing in physical infrastructure and implementing sound industrial and sectoral policies, but also improving their "soft" infrastructure - investing in better education and vocational training systems so that workers have the skills enterprises need, backed by robust, cross-border, skill recognition systems.

Small and medium-sized enterprises form the backbone of ASEAN's economy, but many lack the capacity to adjust to the coming changes. If they are to thrive and maximize their potential by moving into higher value-added activities, they will need support to improve management, labour practices and production chains.

At the same time it will be critical to build stronger social protection systems, including for workers in informal employment and other vulnerable groups who may be left behind by the changes brought on by regional integration. Countries such as Cambodia, Thailand and Vietnam are making notable progress in this.

This leads to our second recommendation - that economic gains must lead to shared prosperity. Linking wages to productivity gains will allow workers to benefit from economic progress while enterprises remain competitive. This requires sound wage-setting systems that can deliver minimum wages appropriate to each national situation, and stronger collective bargaining procedures that allow employers and unions to negotiate to improve working conditions and improve productivity.

But, shared prosperity is not just about creating better systems for spreading wealth, it's also about equitable development and reaching more people. So ASEAN needs to act to realize true gender equality, and more respect for the rights of migrant workers.

Finally, ASEAN countries need to strengthen regional cooperation. Some of the architecture for this is already in place. For example, ASEAN's leaders agreed to "promote decent, humane, productive, dignified and remunerative employment for migrant workers" in the Cebu Declaration. And in the ASEAN Declaration on Social Protection, they set out the principle of "equitable access to social protection". Concrete action is now needed to turn these declarations into practical change. Cooperation also needs to reach into other areas; such as skills recognition and labour market information and analysis.

The ASEAN Economic Community 2015 will place ASEAN at a crossroads. If these priorities are effectively addressed, the region can make great strides towards equitable economic development and shared prosperity. But if ASEAN's leaders fail to act, the AEC will increase inequalities, and will bypass the majority of the region's population.

The writer is Assistant Director-General and Regional Director for Asia and the Pacific of the International Labour Organization.