Foreign workers: Job predators or catalysts?

By Djisman Simandjuntak

JAKARTA (JP): The cross-border movement of workers, blue collar and white collar alike, is becoming a heated issue in international economic relations. When the iron curtain disappeared in Europe, governments were afraid of a massive movement of workers into western Europe at a time when that part of the world was faced with rising structural unemployment.

Now, it is being predicted that 70 percent of the 2.7 billion people expected born into the world population between now and 2025 will come from low-income countries. This causes worries about a gigantic cross-border movement of labor in the years to come. And changes in the global economy are working in favor of, rather than against, higher labor mobility in general and that of managerial personnel in particular.

Movement of goods, services and capital is being enhanced through three-tier liberalization: unilateral, regional and multilateral. At the same time, new technologies are exerting tremendous pressure on multinationals to globalize. Eroded comparative advantage will also force low-skill intensive industries to relocate to developing economies, which in turn will seek to upgrade competence through all possible paths, including cross-border outsourcing.

Countries, such as India and the Philippines, with a relatively abundant supply of well-trained manpower will be increasingly attracted to exporting labor services, while countries with an excess demand will rely more heavily on imported managerial services.

Throughout the history of its independence, Indonesia has never been a major destination of foreign workers. Nor has it ever had an open immigration policy. On this score Indonesia shares a common feature with other Asian countries.

Unfortunately, Indonesia's Central Bureau of Statistics publishes only figures on foreign residents. In 1992, foreign residents numbered close to 300,000, of which two-thirds were permanent. The number of foreign workers is not explicitly reported.

In a press interview recently, Minister of Manpower Abdul Latief mentioned the figure of 57,000 for foreign workers, which he said cost Indonesia foreign exchange of US$2.4 billion a year, compared to earnings of $600 million, which is repatriated by 290,000 Indonesians working overseas.

There are some signs of an accelerated increase in recent years. The number of applications for foreign working permits rose from 14,778 in the 1992/1993 period to 21,407 in 1993/1994. Part of this increase is related to a similarly strong increase in investment approval, both foreign and domestic. Another factor may have been restructuring among existing companies attempting to comply to international practices.

Judged from the absolute number and the policy direction adhered to since the middle of the 1980s, Indonesia is far from being flooded or invaded by foreign workers.

Interestingly, the misgivings about foreign workers are more widespread than the number might suggest. This concern afflicts societies around the globe at varying degree.

Even though the stock of foreign workers in Indonesia appears trivially small compared to the total labor force of around 79 million, foreign workers are oftentimes associated with the crowding out of local workers. In such thinking, a local worker is assumed to be a perfect substitute for an expatriate. This argument is static in nature and fallacious at the same time.

In an economy which is open to foreign investment, certain positions are predetermined to be occupied by foreigners. From a dynamic perspective, a foreign worker can serve as a catalyst in employment generation. While there are cases where locals might have been hired in the absence of foreign workers, the crowding out argument is not very likely to pass any empirical test.

The high concentration of expatriates in managerial positions may have further worsened the misgivings about foreign workers, but this is hard to avoid given the current features of Indonesia's labor market.

Excessive privileges, such as higher salaries and better fringe benefits, are said to have been extended to foreign workers. The existence of such excesses are difficult to prove. Being expatriate implies a number of opportunity costs. It means living far away from home, having to get used to a different culture, and difficulties during "reintegration" when someone goes back to the home country office, after spending years in foreign subsidiaries.

Attempts to assign a worker overseas are likely to be futile unless the assignment is sweetened with a package of incentives. By way of example, even an Indonesian living in Jakarta is hard to persuade to accept a position in a provincial capital, not to speak of a subdistrict town.

In contradiction to the argument of perfect substitutability, refusal to transfer knowledge and knowhow to fellow local workers is among the standard criticism against foreign workers. The extent to which this complaint is well founded is again difficult to ascertain. On the one hand, delaying replacement into the remotest future possible is part of the human instinct.

Rather than waiting for voluntary transfer, locals are challenged to actively learn from fellow expatriates in every way possible. Successful cases of such learning among Indonesians are certainly not too few to mention. One can now find Indonesians, who were learning on the job under the supervision of an expatriate, at the apex of top Indonesian companies.

Cultural segregation, or lack of interest in adapting to local culture, constitutes another unpleasant story about foreign workers. In spite of globalization, people of the same origin do still find some merit in flocking together and in sticking to certain home-country values. In fact, Indonesians living overseas are constantly reminded of the need to observe Indonesian values.

No doubt, failure to adapt to the local culture is a liability rather than an asset to a foreign worker. In many ways, however, the main purpose of allowing foreigners to work in Indonesia is not cultural mutation. What Indonesia needs from expatriates is the sharing of competence rather than a superficial friendliness.

If weighed in balance, there are more benefits to be reaped from the well-planned presence of foreign workers than costs to be incurred. However, free entry to foreign workers is beyond the comprehension of today's human view, which revolves around the organization of groups in people nation states. Indeed, in coming years most countries are more likely to tighten rather than to loosen existing restrictions against foreign workers. But where are the limits?

The answer is simple. Indonesia should import foreign workers as dictated by the excess of demand over domestic supply of workers which meet the same requirements. Setting an ex-ante quota is appealing, but would not be a wise step. Indonesia should stick to its present pragmatic policy in spite of its imperfections. What matters more is an active policy to narrow the gap between demand and supply within the shortest possible period.

Given the exponential growth of knowledge worldwide, the accelerating speed of technological change across a widening spectrum of industries, and the increased complexity of world business, catching up in human capital accumulation is bound to be a formidable challenge. Nevertheless, some suggestions can be made on how a society can close ground rapidly.

The buzzword is turning government, educational and training institutions, non-governmental organizations and the business sector into human resource development champions. Such a change of direction requires the promotion of a pro-science and technology attitude among the elite of Indonesia in all spheres of life. It also necessitates the dedication of a greater fraction of limited resources to education and training programs, and the rationalization of existing programs.

In this process of catching up local institutions are bound to play a crucial role. Hence, a pro-growth policy on education and training is essential. In plain language, this means a more liberal policy than the one currently adhered to by Indonesia. Even with a better policy as has existed in the field of graduate management study in recent years, enlarging capacity with improved quality is abound to take time, however responsive Indonesians are to changing market signals.

Considering its present rate of economic growth and the structural change associated therewith, Indonesia does not seem to have any realistic choice but to continue to tap foreign resources in various ways.

The presence of foreign workers in Indonesia is one of them. Other approaches will have to be taken more seriously. They include the greater importation of educational and training programs and materials, such as books and journals in printed or electronic form. Promoting overseas education and training among Indonesians should also be attached greater importance. This combination of initiatives will result in a new equilibrium in due course of time.

However, even this does not have to mean a smaller population of foreign workers. As an economy continues to internationalize, it will have to live with a more heterogeneous workforce, although giving priority to its own citizens is a legitimate right of any government.