REGIONALIZATION AND LABOUR MARKETINTERDEPENDENCE IN EAST AND SOUTHEASTASIA

Regionalization andLabour MarketInterdependence in Eastand Southeast Asia

Edited by

Duncan CampbellSenior Research OfficerTask Force on Industrial RelationsInternational Labour Office

Aurelio ParisottoResearch OfficerInternational Institute for Labour Studies

Anil VermaProfessorFaculty ofManagementUniversity ofToronto

and

AsmaLateefConsultantlntemational Institute for Labour Studies

Foreword by Padmanabha Gopinath

~ in association with~ Palgrave Macmillan

First published in Great Britain 1997 by

MACMILLAN PRESS LTDHoundmills, Basingstoke, Hampshire RG21 6XS and LondonCompanies and representatives throughout the world

A catalogue record for this book is available from the British Library.

ISBN 978-1-349-25933-5 ISBN 978-1-349-25931-1 (eBook)

First published in the United States of America 1997 by

ST. MARTIN'S PRESS, INC.,Scholarly and Reference Division,175 Fifth Avenue, New York, N.Y. 10010

ISBN 978-0-312-17703-4

Library of Congress Cataloging-in-Publication DataRegionalization and labour market interdependence in East andSoutheast Asia / edited by Duncan Campbell . . . let al.) .p. em.Includes bibliographical references and index .ISBN 978-0-312-17703-4 (cloth)I. Labor market-East Asia. 2. Labor market-Asia, Southeastern.3. Industrial location-East Asia. 4. Industrial location-Asia,Southeastern. 5. East Asia-Economic conditions-Regionaldisparilies. 6. Asia, Southeastern-Economic conditions-Regionaldisparities. 7. International division oflabor. I. Campbell,Duncan C.HD5826.A6R44 1997331.12'095-dc21 97-18984

CIP

© International Institute for Labour Studies 1997

Softcover reprint of the hardcover 1st edition 1997

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10 9 8 7 6 5 4 3 206 05 04 03 02 0 I 00 99 98

DOI 10.1007/978-1-349-25931-1

Contents

List of Figures and Tables

Foreword by Padmanabha Gopinath

List of Abbreviations

Notes on the Contributors

IntroductionAurelio Parisotto and Duncan Campbell

vii

xi

xiii

xv

Part I Overview of Integration

Is an Integrated Regional Labour Market Emerging inEast and Southeast Asia? 15David E. Bloom and Waseem Noor

Part II Organization of Production

2 The Reorganization of Production on a World Scale:States, Markets and Networks in the Apparel andElectronics Commodity Chains 43Gary Gereffi

3 The Changing International Division of Labour in theElectronics Industry 92Jeffrey Henderson

Part III Regional and Subregional Integration

4 Regional Integration of East and SoutheastAsian Economies: The Role of JapanSusumu Watanabe

5 Hong Kong and Coastal China Growth LinkagesRonald Skeldon

6 Recent Development of Growth Triangles and theImplications for Labour Mobility in AsiaMin Tang and Myo Thant

v

129

151

174

VI Contents

199

219

214

Part IV Labour Policy

7 Thailand in the Regional Division of LabourVoravidh Charoenloet

An Employer ResponseNiphant Simakrai

A Worker ResponseSakool Zuesongdham

8 The Philippines in the Regional Division of Labour 224Aniceto C. Orbeta, Jr and Maria Teresa C. Sanchez

An Employer ResponseFrancisco R. Floro

249

A Worker Response 254Andres J. Dinglasan

9 Labour. Labour Markets and the Economic Integrationof Nations 260Anil Verma

Index 279

List of Figures and Tables

Figures

5.1 Employment and unemployment in Hong Kong, 1976-93 1525.2 Hypothetical districts in the Pearl River delta by

functional activity after 1997 1575.3 Administrative divisions of Guangdong, c. 1990 1639.1 Economic growth and human resources 275

Tables

1.1 Level and growth of outmigration from ESEA's majorlabour-sending countries, 1980-91 19

1.2 Outmigrants from Indonesia, Philippines and Thailand,1991 21

1.3 Distribution and growth of FDI among ESEA's majorcapital-sending countries, c . 1980-90 24

1.4 Total foreign investment by Japan and Taiwan in ESEA ,selected years 25

1.5 Growth rates of exports, 1979-92 261.6 Distribution of ESEA exports and world exports, 1979-92 271.7 Levels, 1992, and average annual growth rates, 1979-92,

of trade within ESEA 281.8 Ratio of total labour force to total capital stock in ESEA,

selected years 301.9 ESEA labour, capital and trade movements, selected

years 321.10 Measures of tariff restrictions 332.1 Growth of exports in major world regions, 1980-93 482.2 Structure of merchandise exports, 1970-93 502.3 Main characteristics of producer-driven and buyer-driven

GCCs 552.4 Exports roles in the global economy occupied by major

Third World regions, 1965-95 562.5 Shifts in Asian clothing exports, 1980-95 722.6 Relative importance of textiles and clothing in the total

exports of East Asia's main economies, 1980-95 74

....

viii List of Figures and Tables

2.7 Regional trade patterns in world exports of textiles andclothing, 1980-95 80

3.1 Paid employment in electronics industries, selected years 943.2 Electronics production and exports, principal producer

economies, 1990 963.3 International division of labour in US semiconductor

production, selected companies and locations, c. 1985-8 1004.1 Japanese overseas direct investment as approved by or

reported to the Ministry of Finance, FY 1951-93 1324.2 Changes in the geographical distribution of Japanese

FOI, FY1951-93 1344.3 Japanese direct investment in Asia, FY1951-93 1344.4 Motivation of Japanese manufacturing FDI in Asia 1354.5 Changes in the geographical structure of Japanese

trade , 1960-93 1364.6 Structural changes in Japan's trade within Asia,

1985 and 1993 1374.7 Japan's shares in external trade of Asian economies,

1965-93 1394.8 Employment at Japanese manufacturing affiliates in

Asia, 1992 1404.9 Training methods used by Japanese firms, selected

countries, 1992 1424.10 Japanese car manufacturers' BBC Programme applications 1455.1 Nominal payroll per person engaged, selected years 1555.2 Index of industrial production, 1988-93 1585.3 Establishments and persons engaged in manufacturing

industry, 1983-92 1606.1 Growth triangles in Asia, 1980s-1994 1776.2 Basic indicators in the Southern China and SIJORI

growth triangles 1786.3 Basic indicators in the I-M-T growth triangle 1818.1 Basic economic indicators, 1973-90 2258.2 The Philippines, chronology of significant economic

and political events, 1970-94 2278.3 Distribution of central bank-registered FDI, 1973-93 2308.4 Shares in real GDP, 1970-94 2328.5 Proportion of employed persons, 1970-94 2338.6 Shares of Philippine export, by major commodity

group, 1970-93 2348.7 Net FOI flow in the Philippines, 1970-93 235

List of Figures and Tables ix

8.8 Distribution of central bank-registered foreign equityinvestment, 1973-90 237

8.9 Distribution of unemployed persons, selected years 2389.1 Critical and differentiation views of trade and

labour markets 264

Foreword

In recent years, the International Institute for Labour Studies has ad­dressed the social and labour market implications of globalization. Ithas taken, as its point of departure, the growing disparity between theinternational level , at which economic activity is increasingly organ­ized, and the national level, at which social and labour market institu­tions are traditionally structured. The trend towards greater integrationand wider geographical networks of production and distribution hashad a direct impact on labour. The deregulation of trade and invest­ment regimes and the expansion of market horizon have accelerated ashift in investment patterns, which has impacted on the quantity, qual ­ity and location of jobs in industrialized and developing countries alike.

The process of global integration is particularly apparent of the re­gional level through the emergence of regional trading blocs, and theclustering of foreign direct investments (FDIs) around the core econ­omies of the European Union (EU), Japan and the United States . Adistinct process of regional economic integration has taken place inthe rapidly growing economies of East and Southeast Asia (ESEA).Intra-ESEA trade and FDI is one of the most dynamic vehicles in theworld economy today, resulting in the establishment of regionally in­tegrated production and distribution networks, driven by an increas­ingly important regional market.

Much of the current literature has emphasized the macroeconomicaspect of these changes. The Institute has attempted to fill a gap byfocusing explicitly on the micro-organizational dimensions of globalizationand regionalization. The contributions in this volume reflect that em­phasis. The focus is on the production and investment strategies ofenterprises, and their correlation to labour market variables. The pro­cess of regional integration is not viewed simply as an automatic re­sponse to macroeconomic 'fundamentals ', but as responding to a rangeof factors - such as business ties and geographical and cultural prox­imity - which play an important role in shaping production and tradelinkages across locations. Such a perspective facilitates identificationof the microeconomic channels through which labour market interde­pendence is established.

This volume highlights the main labour market implications ofregionalization in ESEA. Jobs move with goods and capital across national

xi

xii Foreword

borders and create new patterns of interdependence between previouslyinsulated labour markets. Employment levels, wages, working condi­tions and labour management relations in a given location come underthe influence of decisions and events taking place elsewhere. As a re­sult, national autonomy in the formulation of labour market policiesmay be diminishing. Furthermore, the integration of ESEA economiesin the international division of labour has had variables effects on workers.Some have derived benefits while others have been left out in the processof transition and change. These emerging realities have several policyimplications. They require governments, business and labour to cometogether to influence labour market outcomes in terms which are rel­evant both to national and to regional needs. In addition, unless labourmarkets are managed so as to create sustainable competitive advantagewhile bringing benefits to the majority of workers, progress will beundermined by social unrest and economic discontinuities. It is theaim of this book to begin the exploration of policy options appropriateto these new developments.

PADMANABHA GOPINATH

Director. International Institutefor Labour Studies

Geneva

List of Abbreviations

AFfAANIEASEANBDDCDRPKECEOIEPZESEAEUFDIGATTGDIGDPGNPGOCCGSPICILOIMFlSIMFAMFNMITINAFTANIENTBOBMOCWOECD

OEMOJTOPECPDCCPRC

ASEAN Free Trade AreaAsian newly industrializing economyAssociation of Southeast Asian Nationsbuyer-driven commodity chainDemocratic People's Republic of KoreaEuropean Communityexport-oriented industrializationExport-Processing ZoneEast and Southeast AsiaEuropean Unionforeign direct investmentGeneral Agreement on Tariffs and Tradegross domestic investmentgross domestic productgross national productgovernment-owned and controlled corporationGeneralized System of Preferencesintegrated circuitInternational Labour OrganizationInternational Monetary Fundimport-substitution industrializationMultifibre Arrangementmost favoured nationMinistry of Trade and Industry (Japan)North American Free Trade Agreementnewly industrializing economynon-tariff barrieroriginal brandname manufacturingoverseas contract workerOrganization for Economic Cooperation andDevelopmentoriginal equipment manufacturingon-the-job trainingOrganization of Petroleum-Exporting Countriesproducer-driven commodity chainPeople's Republic of China

xiii

xiv

SECSEZSUORISMETNCTQCUNDPWTO

List of Abbreviations

Securities and Exchange CommissionSpecial Economic ZoneSingapore-Johor-Riau growth trianglesmall and medium-sized enterprisetransnational corporationtotal quality controlUnited Nations Development ProgrammeWorld Trade Organization

Notes on the Contributors

David E. Bloom Deputy Director, Harvard Institute for InternationalStudies (HIID), Cambridge, MA, USA.

Duncan Campbell Senior Research Officer. Task Force on IndustrialRelations, ILO (formerly Senior Research Officer, International Insti­tute for Labour Studies), Geneva, Switzerland.

Voravidh Charoenloet Associate Professor, Faculty of Economics,Chulalongkorn University, Bangkok, Thailand.

Andres J. Dinglasan Congressman, House of Representatives, Manila,Philippines.

Francisco R. Floro Vice-President, Philippine Chamber of Commerceand Industry, Manila, Philippines.

Gary Gereffi Professor, Department of Sociology , Duke University,Durham, NC , USA.

Jeffrey Henderson Professor of International Economic Sociology,Manchester Business School, University of Manchester, England.

Asma Lateef Consultant, International Institute for Labour Studies,Geneva, Switzerland.

Waseem Noor Department of Economics, Columbia University, NewYork, USA .

Aniceto C. Orbeta, Jr Research Fellow, Philippine Inst itute ofDevelopment Studies, Manila, Philippines.

Aurelio Parisotto Research Officer, International Institute for LabourStudies, Geneva, Switzerland.

Maria Teresa C. Sanchez Research Associate, Philippine Instituteof Development Studies, Manila, Philippines.

xvi Notes on the Contributors

Niphant Simakrai Regional Manager for West Asia, SingerNikko Co. Ltd, Bangkok, Thailand.

Ronald Skeldon Professor, Department of Geography and Geology,The University of Hong Kong, Hong Kong.

Min Tang Senior Economist, Programs Department (West), AsianDevelopment Bank, Manila, Philippines.

Myo Thant Senior Economist, Economics and Development ResourceCenter, Asian Development Bank, Manila, Philippines.

AnU Verma Professor, Faculty of Management, University of Toronto,Toronto, Canada .

Susumu Watanabe Professor, Tokyo International University,Kawagoe-shi, Japan .

Sakool Zuesongdham President, The Federation of Bank and Finan­cial Workers' Unions of Thailand, Bangkok, Thailand.