Foreign workers: Job predators or catalysts?

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.