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  Asia-Pacific
Looking for Social, Labor Dimension in Korea-ASEAN Summit
Special Contribution
Maragtas S. V. Amante
Flags of ASEAN countries

Maragtas S.V. Amante is a professor at the College of Economics and Business Administration, Hanyang University Ansan. He is from the Philippines, and was a consultant with the ASEAN Secretariat on labor. Email: amante2008@hanyang.ac.kr, amantech@ymail.com

Once again, leaders of ASEAN will gather for a summit with Korea in Jeju Island on June 1-2. The event is a bit historic since it is the first time for the leaders to hold a summit in Korea. The leaders are from Brunei, Cambodia, Indonesia, Laos, Malaysia, Burma, the Philippines, Singapore,Thailand, and Vietnam. With very few recent elections producing changes in national political leadership, the gathering is a reunion for many – plus repeat performances and statements.

In between, there will be subdued, somber recollections of caramaderie with a recently departed leader from Korea. East Asians share a strong, common culture of empathy, and the meaning of Roh Moo Hyeon's death will loom large but silently among his friends among the current group of ASEAN leaders, as they recall his advocacies.

There will be joint statements on improving Korea-ASEAN relations in four areas — security, economic development, society and culture, and global issues. During summits, leaders are usually pre- occupied with niceties, photo opportunities, food, drink and leisure, alongside geopolitics, diplomacy and recovery from the global financial crisis. ASEAN has now 570 million people, and together closer social and economic relations with 48 million Koreans will create a demand for higher expectations. There will be more demands on better exchanges and extensive assistance to promote social harmony, alongside business and economic development. The labor dimension will always be there as long as there are social and economic exchanges involved. In the future, there will be vociferous calls to put the labor dimension into prominence, as a regular item in the agenda for Korea – ASEAN relations. Future summits may yet address the movement of people, alongside trade in goods and services, and the creation of decent, quality jobs with social security.

Mutual benefits in the exchange of products, capital and labor between nations are based on classical ideas and assumptions about comparative advantage. Economic relations between Korea and ASEAN provide a good case of the potentials as well as limits of what could regional economic integration bring about. National economies face constraints through domestic pressures as well as from demands of the global economy, which determine capacity to promote economic growth & social development. There are significant similarities and contrasts between the economies of Korea, the original six ASEAN countries (Brunei, Indonesia, Malaysia, Philippines, Thailand and Singapore), and the four latecomers in the group (Cambodia, Laos, Vietnam, and Burma/Myanmar). Better technology through communications and transport will leap frog through social and cultural diversity, and enable more goods, capital, services and people to move across national boundaries, at a greater intensity and with greater benefit for both sides. Movements of natural persons, goods and services across national boundaries are inevitable, but a functional economic partnership agreement will provide greater advantages between trading partners. These are usual expectations documented in summit statements. Accountability and efficiency in words to match action and capacity are scarce commodities in these discussions.

Both Korea and ASEAN are now enmeshed in an "udon soba" ("mixed noodle bowl"), or complex web of bilateral and multilateral free trade agreements with Europe, the US, Australia, and other countries. Economic partnership agreements (EPAs) became major foreign policy instruments of many countries, since the WTO talks collapsed in Hong Kong in 2005. Leaders of Korea and ASEAN need to navigate themselves from the sticky, and tricky complexities of trade agreements which no one among them may actually understand 100 percent, to the detriment of sound decisions.

The labor dimension

The ‘labor dimension' is a composite framework of the primacy of the human element in economic transactions, including a commitment to promote decent work in trade – strange words to some, uncomfortable but familiar phrases to many of the leaders in the summit. In the production of goods and services for trade, workers are employed. As people move across national boundaries, they become foreign workers with human rights. The composite framework includes guarantees to freedom of association for unions and collective bargaining to improve work conditions, health & safety; and no discrimination in employment and pay. Behind the discussions among Korea and ASEAN leaders are assumptions about comparative advantages and benefits in the international division of labor, and exchange of capital and resources. The dominant thinking in free trade is to reduce transaction costs through social and labor standards. Yet, enterprise managers accept that to motivate workers to be productive and efficient requires good working conditions and adequate compensation. These ideas about labor cost and motivation contradict each other.

Both Korea and ASEAN countries are signatory to various international conventions, which provide the basis for national laws and policies, including labor and social standards. International norms such as human rights include the freedom of association, workers rights to collective bargaining, health and safety, and decent working conditions. International agreements such as the UN Global Compact, the UN Declaration of Human Rights, and the ILO Declaration on Fundamental Principles and Rights at Work. These norms provide a standard of behavior or a code of conduct among countries which acceded as signatories. Compliance with internationally recognized labor and social standards, laws and policies provide a playing field for global competition and free trade.

With regional integration and globalization, it is expected that decent work and the labor dimension will have greater prominence in various bilateral and multilateral free trade negotiations, especially in the agreements regarding movement of natural persons among countries. A common fundamental framework for labor standards will be most relevant to ensure harmony and productivity in the workplace, narrow down worsening inequalities in wages and income, improve living standards and contribute to social and political stability in the region.

Both Korea and the ASEAN countries have a rich variety of labor laws and procedures on the fundamental framework of industrial relations, to promote decent work. Efforts to develop capacity need to intensify. Capacity building is important, to fill the gaps, harmonize and improve national policies and laws concerning labor, employment, social security, health and safety, and industrial relations.

Eight ILO Conventions have been identified by the ILO's Governing Body as being fundamental to the rights of human beings at work, irrespective of levels of development of individual member States. These rights are a precondition for all the others in that they provide for the necessary means to strive freely for the improvement of individual and collective conditions of work. Numerous studies in the ILO indicate that a failure to respect labor standards carries specific and measurable costs to national economies, harms economic development, and violates the rights of working people throughout the region.

Most ASEAN countries have ratified the core labor dimensions concerning freedom of association and collective bargaining (ILO Convention 87 and 98), abolition of forced labor (C29 & C105), prohibition of child labor (C138 & C182), and prohibition of discrimination in employment (C100 and C111). Capacity to implement the conventions needs to be developed among the countries which ratified them. Korea ratified the core conventions on elimination of child labor and employment discrimination. However, Korea had not ratified the core conventions on freedom of association and forced labor, key standards for workers rights. (see box). Korean unions, and their concerted activities in the exercise of freedom of concerted action however are among the most vibrant in the world. Brunei, a new member of ILO, so far ratified only one core labor convention against child labor. Effective ratification depends upon the capacity to devote resources to implement the observance of core labor standards. Ratification also depends upon the circumstances of the relevant government instrumentality mandated to ratify international commitments.

Labor laws on wages and disputes

Labor laws of most countries in ASEAN, and Korea provide for the fundamental framework of "freedom of association" generally understood to include the right of workers and employers to establish and join organizations of their own choosing without previous authorization; to draw up their own constitutions and rules, elect their representatives, and formulate their programs; to join in confederations and affiliate with international organizations; and to be protected against dissolution or suspension by administrative authority.

Most of labor laws in ASEAN, as well as Korea, also provide for concerted action, which include the right of workers to strike, and for employers to lock out their workers. It is generally accepted for strikes to be restricted in essential services, the interruption of which would endanger the life, personal safety, or health of a significant portion of the population, and in state administration. These restrictions must be offset by adequate safeguards for the interests of the workers concerned. Labor laws provide mechanisms for mediation and arbitration, due process, and the right to judicial review of legal actions. Reporting on restrictions on the ability of workers to strike generally includes information on any procedures that may exist for safeguarding workers' interests.

Workplace conflict, a situation which all parties seek to avoid, presents itself in two forms: disputes of rights and disputes of interests. Disputes of rights are categorised by their direct relation to a particular labor agreement, arising from different interpretation or fulfilment of rights conscribed by an existing contract. The contractual nature of rights disputes enables them to be largely handled by the court system or legally binding arbitration committees. In contrast, disputes of interests arise over opinionated differences with respect to the conclusion or revision of a collective agreement. There are 3 generally recognized means of conflict resolution: conciliation, mediation, and arbitration.

In the ASEAN countries, there is a rich diversity in the experience of wage determination, through a variety of policies including minimum wages, various bargaining and legislative procedures for setting the minimum wage, methods for changing it, economic and social criteria taken into consideration, and its impact on employment and poverty.

Wage bargaining requires a fundamental framework, to provide for the freedom of association, and the exercise of workers rights. Market wages imply recognition of economic efficiency, wherein competitive forces reward increases in performance and productivity with wage increases. This idea is common sense: low wages are associated with low motivation, low performance, resulting in low productivity and vice versa.

There are various approaches in both Korea, and in ASEAN countries in addressing issues concerning wages, in relation to productivity. Challenges from globalization bring to the attention of employers and workers the need to consider employment generation, income security and skills development. The IT revolution has contributed to changes to the work environment resulting in changes at the workplace. Other challenges include the ageing population and changes in the labor market structure. The tripartite relationship among government officials, organized workers and the employers needs a restatement, and focus. There is a need to develop trust and the openness to share information with each other to determine sustainable wage that is linked with productivity.

Minimum wages policies were observed in seven ASEAN countries (Cambodia, Lao PDR, Indonesia, Myanmar, Philippines, Thailand, and Viet Nam). Minimum wages were fixed in terms of local, regional, provincial, industrial or national rates. As a basis for determining minimum wages, these countries emphasize cost of living, measured through inflation and the consumer's price index (CPI).

Cambodia, Indonesia, Myanmar and Philippines introduced minimum wages to protect vulnerable workers. Cambodia, Lao PDR and Myanmar introduced minimum wage fixing in certain industries like the garment industries after consultations and negotiations between employers, workers and government. In Indonesia, Thailand and the Philippines, there are regional and local wage boards to determine minimum wages applicable to the local areas. In Cambodia, however, the minimum wage tends to become the maximum wage or ceiling.

In many countries, minimum wages are used as entry pay for certain jobs. Enterprises must pay for an entry wage rate, for new workers which are equivalent to a minimum wage. Job evaluation methods are used by employer's especially multinational enterprises, in fixing their pay systems. This method considers such factors as workers' qualifications, knowledge and skills. The cost of living must consider not only food, but other basic needs such as shelter, clothing, transport, health and other utilities.

There are gaps in linking wages and productivity in many ASEAN countries. In some cases minimum wages serve as the ceiling, or approximate average market wages. Minimum wages also approximate subsistence wages,. as a form of social protection. Minimum wages provide social protection for vulnerable workers not covered by collective bargaining, where there are no unions, or organized workers.

Korea's investment and ASEAN labor

Economists note that Korean foreign direct investment reached full scale in the 1980s, and since the mid-1980s, Korean firms have looked to Southeast Asian countries as a source of inexpensive labor as well as abundant natural resources. In particular, Korean firms also exported manufactured goods produced in Southeast Asia to developed countries. Such a strategy allowed these firms to bypass the trade barriers to Korean products in third country markets.

As a result, Korean investment to ASEAN began to increase in the late 1980s, concentrated in labor-intensive industries such as footwear, textiles and electronics. Even though Korea's investment in

Southeast Asia declined in 1993 and 1994 because many Korean companies were investing heavily in China, it increased again when large Korean conglomerates began directing investments towards

ASEAN countries including Indonesia and Vietnam. As the purchasing power of ASEAN member countries became diversified, Korean firms also began to shift their investment patterns to market oriented investment after the mid-1990s. Korean investment toward ASEAN declined due to the financial crisis after 1997, but went up again. The emergence of China is a major factor which also affect the flow of Korean investment in ASEAN.

Variations in development and wealth between Korea and ASEAN present a unique challenge to discussions about trade, investment and regional integration. Such differentials are a major driving force for intra-regional labor migration, which represents both a source of comparative advantage and a challenge. Another challenge comes with finding a balance between economic growth and social development and establishing appropriate measurements of success. For example unemployment statistics are seen as a reference for whether progress is sustainable and prosperity is being shared, while other crucial aspects of labor market performance are glossed over; the issue of labor productivity, gender gaps, the growth of the informal economy, the persistence of underemployment and working poverty. The continued existence of such inequities raises questions about the stability and sustainability of development.

Exports continue to play a large role in the overall economic growth and development in both Korea and ASEAN. The recent global financial crisis however provided a stimulus to "re-think" this development model, and focus more on the development of domestic markets, national industries, and local financial capacity. However, there were also warnings against the dangers of protection.

Economists argue that "countries can compete in global export markets in different ways, however – e.g. through either capital or labor-intensive production – taking into account their unique labor market characteristics. Export growth can occur by increasing employment, increasing worker productivity, or both." The data shows that in some countries, expansion is driven by high employment growth alone. According to the ILO, in Cambodia, for example, where the garment industry dominates the export market, from 1995 to 2000 employment increased by more than 100 %annually, while labor productivity declined. Other studies show that the office machinery industry in the Philippines had a similar contradiction between increase in employment, and a decline in productivity. From 1996 to 2003, employment grew 17.3 %annually, on average, but worker productivity actually fell by 6.0 %. Conversely, productivity-driven growth can be seen in Malaysia's leading manufacturing export industry, where average annual productivity expanded by 17.0 % while employment in the industry decreased annually by 7.4 %. Finally, in other cases, export growth has been balanced between employment growth and increased productivity, as seen in the leading manufacturing export markets of Indonesia and Viet Nam.

The ILO pointed out that "productivity growth does not guarantee comparable wage growth. In Malaysia's office machinery industry, productivity rose by 17 % annually, while wages grew by only 4.2 %. Holding other factors (including exchange rates) constant, if worker productivity

grows faster than wages, unit labor costs decline and overall cost competitiveness increases.

In other ASEAN export industries, workers have faced an even more disturbing scenario."

Indicators show that despite substantial productivity growth in Thailand's and Viet Nam's key export industries, real wages fell. This reflects worsening worker incomes and livelihoods despite increased worker efficiency.

Korea's foreign ‘guest workers'

"Korea welcomes laborers from your country." This is the headline banner in the website of Korea's Employment Permit System (EPS). Korea's EPS is a significant tool of labor market management, "to establish efficient employment of foreign workers." Korea initiated bilateral labor agreements with labor surplus countries such as the Philippines, Indonesia, Vietnam. The EPS allows employers who have failed to hire native workers, to legally employ a certain number of foreign workers. These are mostly small enterprises, which Korean workers themselves avoid due to low pay and difficult working conditions, mostly in the factories. Yet, a key objective of the EPS is to provide protection for human rights, and prevent abuse and discrimination. Employers hire foreign workers for a fixed term, usually up to three years, but many stay on to be undocumented, and invisible to the social and health infrastructure due to the high demand for cheap labor.

Many countries which experience labor shortages due to economic development and population ageing, put in place a system to manage the employment of foreign workers. Korea began to attract foreign workers in order to overcome labor shortages from the mid-1980s. Foreign workers were employed for "3-D" jobs - difficult, dirty and dangerous work which most Koreans avoid.

Taiwan, Singapore, and Hong Kong also introduced similar Employment Permit System. Most European countries such as France, Germany, and Switzerland introduced "Labor Permit Systems" which allow foreign workers to move freely from one workplace to another in Europe.

Korean experts explain that over the last 20 years, globalization and increased openness have accelerated the inflow not just of goods and services but also of labor. According to one Korean analyst, "it was quite an unusual thing to see foreigners in Korea about 20 years ago. Now , foreigners walking on the street scarcely get a second glance because there so many of them now live in Korea."

The number of foreign residents in Korea increased constantly from 49,500 in 1990 and surpassed the one million mark in August 2007. This means that foreign residents now make up more than 2 percent of the total population, numbering around 1,007,000.

There has been extensive discussion on the entry of foreign workers in Korea. A critic of Korea's EPS policy points out that the policy to attract high-quality foreign human resources "has not yet borne fruit." In 2007, foreign workers receiving employment visas, non-professional employment (E-9) and training employment (E-8) account for 69.6 percent and 11.7 percent, respectively, under the work permit system. Apart from non-professional employment and training employment, the other major category is for professionals, of which foreign language instructors make up the largest share at 9.6 percent. One analyst concludes that "there are problems in the policy to attract highly-skilled foreign workers to respond to the needs of a knowledge- and information-based society."

Another important consideration is the negative opinion among Koreans of the increase in foreign manual workers. News about arrests of illegal workers are a regular feature in the media. There are perceptions that Korea's national competitiveness has weakened due to the rise in social integration costs, a crowding-out effect for domestic workers, and a delay in industrial restructuring.

The labor dimension in trade

There is a consensus among the leaders that both Korea and ASEAN should continue to integrate and liberalise their respective economies. According to the Prime Minister of Singapore, "the purpose of ASEAN is not to create a trade bloc … we are committed to open regionalism and adopt an inclusive approach. But our actions would demonstrate the practical benefits of economic openness and contribute in a modest way to maintaining the global momentum for trade liberalization." This type of thinking however is increasingly challenged by the events related to the global financial crisis, and recent calls to strengthen domestic economies, replacing the prominence of export oriented economies.

Both Korea and ASEAN have good long-term economic potentials, and growth opportunities. Leaders have called for faster integration,to gain a greater share of investments and job creation. Given the diversity in the region's economies, the challenge is for leaders to 'walk the talk', for the statements and declarations to trickle down the bureaucracies, institutions and structures for implementation, and engagement with 'civil society groups' – an idea which many leaders may not be comfortable with.

At the same time, more prominence on the social and labor dimension would require a higher level of awareness among both Korean and ASEAN people, to be more open, tolerant and understanding of the diversity of cultures, languages, ways of thinking and creative methods of action.

A suitable framework for cooperation requires improvements in existing mechanisms, such as bureaucracies and institutions dealing with social and labor issues, alongside economic and business relations. The arrangements so far were ‘ad hoc' or temporary, and fluid depending on the capacity of resources and priorities of revolving leaders. Mutual respect for the diversity of social, political and economic systems require an institutional framework, with common values, legal principles and mechanisms for joint action and cooperation. The expectation in the Korea – ASEAN summit is to strengthen the shared determination to maintain regional peace, safeguard human rights, and sustain the commitment to democracy as norms to support the functioning of the competitive enterprise system which is the basis of trade. At some point, Korea and ASEAN leaders need to put prominence to the social and labor dimensions in the summit discussions, to define the emerging architecture, and foundations of regional integration.



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