Asean labour needs to play catch-up

Asean countries are being challenged by the need to catch up with labour productivity in China and India, says the International Labour Organisation.

Average annual labour output in Asean contracted slightly during the global financial crisis from 2007 to 2009, while that of China rose by 8.7% and India 4%.

The trends represent a challenge in Asean economies - Malaysia, Indonesia, Thailand and Singapore - where labour productivity has been stagnant or has declined over the past few years, the ILO said in its report Labour and Social Trend in Asean in 2010.

Before that, overall output per worker in Asean was higher than in China and India by almost 100%. Output growth in Asia was higher than in North America and Europe during the period.

The key contributing factor to productivity of Asean labour in the past was buoyant investment and migration from the industrial to the service sector.

Asean will face tough competition for labour from China and India as earnings gaps between the countries will narrow, the ILO said.

Asean's overall labour output lags more developed countries in the EU and North America.

Attempts to increase productivity would cause wages to increase, strengthening domestic economies in each Asean country, the ILO said.

Thailand's labour productivity increased by 3.5% from 2001-07, compared with 4% in Indonesia and Singapore, 5% in India and 10% in China.

In a separate development, IMD, a Switzerland-based business school, ranked Thailand 26th out of 58 countries in competitiveness last year, unchanged from 2008.

Singapore, Hong Kong and the US were the top three respectively according to IMD's World Competitiveness Yearbook 2010, which judges economic resilience a key strength.

Thailand improved on the scale for international trade, inflation, foreign direct investment and increased foreign reserves. But it declined in budget deficit, stock market capitalisation, political stability, the Map Ta Put legal impasse and private investment in research.

IMD said Thailand's challenges this year were continuing the government's infrastructure plan, environmental law infrastructure, innovation, corruption and unrest in the Southern provinces.

For government efficiency, IMD sees Thailand's strengths as low personal income taxes, unemployment legislation that provides incentives to look for work, flexible labour regulations, low consumption taxes and social security contribution rates for employers.

Weaknesses include political stability, foreign shareholding restrictions, time to start-up new businesses, tariff barriers and real short-term interest rates.

In terms of business sector efficiency, it said financial sector transparency, the size of the labour force and Thais' openness are strengths.