International Migration: Social and Economic Impact for Thailand

Dr. Porametee Vimolsiri

Deputy Secretary-General

National Economic and Social Development Board (NESDB

At the seminar on International Migration in Thailand and Southeast Asia: Policies and Practices

12 January 2011

Development and Changes of

Thailand’s Economic and Social Structure 1

14 กนยายน 2553 3Copyright NESDB

GDP Growth and Production Structure (Supply Side)

6th Plan(1987-1991)

7th Plan(1992- 1996)

8th Plan (1997 – 2001)

9th Plan (2002 – 2006)

First 3 years of 10th Plan

(2007 – 2009)

Economic Growth(%yoy)

Agricultural Sector 4.1 2.8 2.1 2.9 1.3

Non-agricultural Sector 12.1 8.7 -0.3 6.0 1.8

Manufacturing Sector 15.1 10.0 2.0 7.4 1.7

Services and other 10.8 8.1 -1.7 5.1 1.8

GDP 10.9 8.1 -0.1 5.7 1.7

Thailand’s economic structure

Agricultural Sector 13.6 10.1 10.1 9.6 8.8

Non-agricultural Sector 86.4 89.9 89.9 90.4 91.2

Manufacturing Sector 28.2 31.9 35.2 38.3 39.6

Services and other 58.2 58.0 54.7 52.1 51.6

GDP 100.0 100.0 100.0 100.0 100.0Source : National Accounts Office, NESDB

Economic growth was driven mainly by manufacturing sector, especially during the year 1987-1991 and 1992-1996. Accordingly, manufacturing sector expanded at the annual rate of 15.1 percent and 10.0 percent, respectively. The expansion was due to the offshoring production relocation of the companies from Japan and NIEs.

Manufacturing sector as a share of GDP had an upward trend, increasing from 28.2 percent and 31.9 percent during the 6th

and 7th plan, respectively, to 39.6 percent during the 10th plan.

The main engine driving the Thai Economy concentrated in 4 industries and they were accounted for 41.8 percent of all manufacturing production. These industries included petroleum industry, electronic industry, motor vehicle industry and electrical appliance industry, they were accounted for 12.5, 13.6, 9.0 and 6.7 percent of all manufacturing production, respectively.

Employment Structure

6th Plan(1987-1991)

7th Plan(1992- 1996)

8th Plan (1997 – 2001)

9th Plan (2002 – 2006)

First 2 years of 10th Plan

(2007 – 2008)

Labour structure

Agriculture 61.3 50.3 44.2 40.2 39.6

Manufacturing 10.8 14.2 14.6 15.6 15.1

Services 27.9 35.5 41.1 44.2 45.3

Total 100.0 100.0 100.0 100.0 100.0

Compensation of Employees structure

Agriculture 4.4 3.5 4.3 3.8 3.4

Manufacturing 30.5 36.0 38.0 37.2 36.1

Services 65.1 60.5 57.6 59.0 60.5

Total 100.0 100.0 100.0 100.0 100.0

Source: NESDB and NSO

Labour in agricultural sector decreased from 61.3 percent during the 6th Plan to 39.6 percent during the 10th Plan.

Employment in manufacturing sector increased from 10.8 percent to 15.1 percent during the 6th and 10thPlan, respectively, while employment in service sector increased from 27.9 percent to 45.3 percent during the 6th and 10th Plan, respectively.

Agricultural sector received a lowest share of 3.4 percent of Compensation of Employees (CE), while manufacturing and service sectors accounted for 36.1 and 60.5 percent, respectively.

Income and Employment

Economic Growth and Total Factor Productivity

GDP Gr.

Contribution of

Labor Land Capital TFP

5th Plan(1982-1986) 5.37 0.74 0.02 4.72 -0.10

6th Plan(1987-1991) 10.94 0.86 0.01 7.69 2.38

7th Plan(1992- 1996) 8.09 0.37 0.01 7.74 -0.03

8th Plan (1997 – 2001) -0.10 0.26 0.01 1.37 -1.74

9th Plan (2002 – 2006) 5.71 0.71 0.02 1.65 3.32

First 3 years of 10th

Plan(2007 – 2009)1.72 0.58 0.05 1.96 -0.88

Average (1982-2009) 5.54 0.59 0.02 4.35 0.59

Source: NESDB Total Factor Productivity of production sector

TFP Agriculture Manufacturing Services and other

5th Plan(1982-1986) -0.10 1.18 -0.15 -0.86

6th Plan(1987-1991) 2.38 1.36 1.35 1.61

7th Plan(1992- 1996) -0.03 -3.37 0.44 -1.68

8th Plan (1997 – 2001) -1.74 -1.29 0.55 -3.77

9th Plan (2002 – 2006) 3.32 -0.51 4.42 2.44

First 3 years of 10th Plan(2007 –2009)

-0.88 -2.78 -1.11 -0.94

Average (1982-2009) 0.59 -0.77 1.05 -0.50

Source: NESDB

From the past development, economic expansion depended more on growth of investment and labour, than on the total factor productivity (TFP)

Total Factor Productivity

Employment Situation,

Trend and Outlook for Thailand 2

0

1

2

3

4

5

6

30.0

35.0

40.0

2544 2545 2546 2547 2548 2549 2550 2551 2552 2553

การจางงาน (แกนซาย) อตราการวางงาน (แกนขวา) %ลานคน

Source :: NSO7

2009 2010Year H1 H2 Q1 Q2 Q3 Q4 H1 Q1 Q2 Q3 Jul Aug Sep

Total employment 1.9 2.4 1.5 1.9 2.3 1.4 1.8 0.5 2.6 -0.5 0.8 -1.0 1.1 3.4 - Agriculture -0.1 1.7 -1.5 0.8 2.4 -0.8 -2.3 -4.2 2.8 -6.6 -1.2 -8.4 2.4 12.5 - Non-farm 3.1 2.3 4.0 2.5 2.2 3.1 4.9 4.0 2.5 3.1 2.3 4.5 0.2 -2.3 Industry -1.5 -3.5 0.7 -3.7 -4.6 1.3 0.2 2.4 -1.1 0.8 -2.3 0.5 -5.3 -3.5 Construction 4.0 4.5 3.5 3.4 5.2 1.6 5.3 5.3 -1.2 9.3 1.9 2.3 5.8 0.6 Hotel and Restaurant 8.8 7.5 10.1 7.7 7.3 8.7 11.4 7.3 10.3 1.7 0.1 4.1 -4.6 -5.1Wholesale and retail 5.1 5.4 4.8 5.5 5.3 4.2 5.4 3.9 2.9 4.9 4.1 6.1 3.6 4.0

No. of unemployment (hundred thousand)

5.7 7.3 4.2 7.8 6.7 4.6 3.84.7 4.3 5.0 3.4

3.5 3.53.4

Unemployment rate 1.5 1.9 1.1 2.0 1.8 1.2 1.0 1.2 1.1 1.3 0.9 0.9 0.9 0.9

In Q3/2010, employment in non-agricultural sector grew by 2.3 percent particularly in public administration sector, wholesale and retail sector and construction sector which expanded by 18.4, 4.8 and 4.0 percent respectively.Similarly, employment in agricultural sector contracted by

3.2 percent, improved from 6.6 percent contraction in the previous quarter.The unemployment rate remained low at 0.9 percent.

In the third quarter of 2010, the employment increased by 0.1 while the unemployment rate remained low, declined from 1.3% in the second quarter to 0.9 in the third quarter

8

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

47 48 49 50 51 52 53

ต าแหนงงานวางและผสมครงานใหม

ต าแหนงงานวางทงประเทศ (อตรา)

ผสมครงานใหมทงประเทศ (คน)

ทมา: ธนาคารแหงประเทศไทย

-100

-50

0

50

100

150

200

250

300

350

0

20,000

40,000

60,000

80,000

100,000

120,000

50 51 52 53

ผประกนตนกรณวางงานผประกนตนกรณวางงาน (แกนซาย)

%YoY (แกนขวา)

ทมา: ส านกงานประกนสงคม

(คน) (%)

• In the third quarter of 2010, the number of job vacancies reached 40,068 people, while the number of new job seekers was 125,680 people.

• The ratio of the job vacancies to the new job seekers was 1.0, reflecting a tension in the labour market which has persisted since the beginning of the year 2010.

• Labour in assembled and packaging line is in shortage.

Beneficiary of unemployment benefit

• In the 3rd quarter of 2010, the number of registered beneficiary of unemployment benefit decreased to 16.8 percent, in other words, the number reduced from 149,108 (Q3-2009) to 124,036.

• The number of registered beneficiary ofunemployment benefit began to decrease sinceDecember 2009, and the situation started to get backto normal.

Tension in labour market situation persisted since the beginning of the year 2010

Forecasted demand for additional Labour 2007-2012

Occupational groups 2006 2007 2008 2009 2010 2011 2012

Additional demands for business expansion (Growth)

Administrators & skilled workers

-79.3 836.6 415.8 417.6 414.4 445.1 384.9

Basic/low-skilled workers

43.2 2.8 123.2 105.6 120.6 137.2 149.5

Total -36.1 839.4 539.0 523.2 535.0 582.3 534.4

Additional demand for replacement of workers (turnover)

Administrators & skilled workers

410.2 445.6 463.3 481.0 498.5 517.4 533.7

Basic/low-skilled workers

124.9 125.0 130.2 134.7 139.8 145.7 152.0

Total 535.1 570.6 593.5 615.7 638.4 663.1 685.7

Total additional demands for workers

Administrators & skilled workers

330.85 1,282.23 879.01 898.52 912.94 962.53 918.57

Basic/low-skilled workers

168.11 127.77 253.49 240.36 260.43 282.82 301.50

Grand total 498.96 1,410.01 1,132.50 1,138.89 1,173.37 1,245.35 1,220.07

Note: The additional demand for replacement of workers is calculated based on the job turnover rate of 4.24%Source: Thailand Development Research Institute, 2006.

Unit: 1000 persons

โครงสรางประชากรตามชวงอาย 2543-2570

0%

20%

40%

60%

80%

100%

2543

2546

2549

2552

2555

2558

2561

2564

2567

2570

60+

25-59

<25

ประมาณการประชากร 2543-2570

50

55

60

65

70

75

80

25

43

25

45

25

47

25

49

25

51

25

53

25

55

25

57

25

59

25

61

25

63

25

65

25

67

25

69

ลาน

คน

สมมตฐานภายใตภาวะเจรญพนธระดบสง

สมมตฐานภายใตภาวะเจรญพนธระดบปานกลาง

ทมา: การคาดประมาณประชากรของประเทศไทย 2543-2573, สศช. 2550

In the next 20 years, Thailand’s population will rise to approximately 71-75 million.

The proportion of elderly( aged 60 and above) will increase to 21 percent, while the

proportion of working-age population will not change much.

Source: NESDB (estimated before the crisis)

Thailand’s Population Structure in the Next 20 years.

14 กนยายน 2553 11Copyright NESDB

Sub-regional cooperation such as GMS, ACMECS, BIMTEC, IMT-GT

• Enhance economic integration / develop regional value chain/supply chain; Competitiveness enhancement; Increase economic bargaining power, and focus on market expansion

• Expand trade and investment in the region; Thailand as a strategic hub of transportation in GMS and ASEAN

• Focus more on people connectivity to empower people having resistance to all kinds of threats

Economic integration in Asia; Moving towards ASEAN Community

• Build physical infrastructure connectivity in sub-regions and neighboring countries that makes “Transport Corridors” in GMS

• Increase economic opportunity from market expansion induced from closer economic integration in this region

Development of Border towns along Economic Corridors

• Build land /rail transport , Improve customs facilities/procedures at border checkpoints; Set up One Stop Services at checkpoints in Chiang Rai, Tak, Nongkai, Mukdaharn, Sakiaw and Songkha , and other checkpoints in GMS.

• Thai Cabinet resolution (22 June, 2010) approved in principle of the legislation for the establishment of special administrative body in Mae Sod city

• Resolution of Thailand’s National Logistics Committee (21 June, 2010), mandated (1) MoFA to coordinate with Mynmar on providing support for the development of Dawei port/hinterland; (2) MoT to conduct detailed study for the development of roads from Karnjanaburi to Dawei portComplication of

threats prevailed in various dimension

• Key problems, e.g. human security, terrorism, cross-border crimes, that need strong and joint cooperation among countries in sub-regions, regions, and across the World

Enhancement of cooperation under economic integrations in sub-regions and regions

Emerging Economic Super Powers e.g. Brazil, Russia, India, & China (BRIC) Asia’s role in the world economy

Economic Integration in Sub-regions and Regions Build up economic bargaining power and enhance competitiveness

Changing Paradigms Facing Thailand

11

International Labour Migration Situation 3

Total Migrant Workers in Thailand

1,544,902 Persons

Registered Migrant Workers

210,745 Persons

Illegal Migrant Workers

1,334,157 Persons

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Numbers of Registered Migrant Workers in Thailand by type of industry 2008-2009

2008 2009

• The numbers of 1,334,157 illegal migrant workers in Thailand (as of Dec 2009) can bedivided into 2 groups:

– Ethnic minority groups = 19,775 persons

– Illegal migrant workers by cabinet resolution (Burmese, Lao, Cambodian) = 1,314,382 persons

– The number of illegal migrant workers expanded at 137.26 percent, or increased about 771, 846 personscompared to the numbers in 2008

• Most of illegal migrant workers are basic and unskilled labors e.g. housemaid, labour and workers inmanufacturing industries, orchard and gardening, restaurants and beverages, etc.

• Illegal migrant workers from ethnic minority groups are mostly permitted to work in construction.

• Illegal migrant workers by cabinet resolution are mostly permitted to work in agriculture andlivestock, construction, fisheries related industries, housemaid, and fishery sectors.

-2,000,000

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

GDP GNP Net factor income

Value of GDP and GNP at annual price (unit: billion baht)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

GDP 4,732.6 4,626.4 4,637.1 4,922.7 5,133.5 5,450.6 5,917.4 6,489.5 7,092.9 7,850.2 8,529.8 9,075.5

NFI -123.4 -160.0 -126.4 -76.9 -133.5 -188.4 -242.9 -291.0 -344.0 -316.8 -311.2 -357.0

GNP 4,609.2 4,466.4 4,510.6 4,845.9 5,000.0 5,262.2 5,674.4 6,198.4 6,748.9 7,533.4 8,218.6 8,718.5

Source: NESDBNote: NFI = Net Factor Income Payment from the Rest of the World

Past development result reflected in the expansion of export sector, production sector, manufacturing sector and investment.

Most revenue received from exports concentrated in 4 manufacturing industries, which were owned mainly by foreign investors.

The remittance of profit back to the parent company abroad, hence, reflected in the increasingly wider gap between GDP and GNP.

GDP and GNP

Annual direct remittances of Thai migrant Workers in foreign countries in 2001–2009

0

20000

40000

60000

80000

100000

120000

2001 2002 2003 2004 2005 2006 2007 2008 2009

No. of labors (Prs.) Remittance (mill. Baht)

• Numbers of Thai migrant workers in foreign countries have declined • Most of labour markets is still in Asia. However, the demand trend of Thai labours

has been declined

Annual direct remittances and potential remittances (personal savings) of alien migrant workers, 2007–2008

Remittance &Saving

Cambodia Lao PDR Myanmar Total average

Remittances 10,000 13,000 15,000 12,500

Personal savings 12,000 6,000 12,000 12,000

Potentialremittances

22,000 19,000 27,000 24,500

Estimated numbers of migrants

150,000 prs. 200,000 prs. 1,650,000 prs. 2,000,000 prs.

Total estimated potential remittances

3.3 billion baht 3.8 billion baht 44.5 billion baht 49 billion baht

$100 million $115 million $1,350 million $1.48 billion

Note: The remittances and personal savings of migrant workers are estimated based on the median amount sent and save.Source: ILO

Labour income losses, capital gains and net economic gains from the employment of foreign migrant workers

Years Real GDP (millions of baht at 1988 prices) adjusted labour share

Labourlosses

Capital gains

Net economic

gains

1995 -427 880 453

1996 -447 937 490

1997 -459 1,116 657

1998 -435 1,079 644

1999 -493 985 492

2000 -506 1,139 633

2001 -511 1,242 731

2002 -525 1,291 766

2003 -558 1,357 799

2004 -597 1,846 1,249

2005 -593 2,039 1,446

Source: P. Pholphirul and P. Rukumnuaykit, “Economic contribution of migrant workers to Thailand” inInternational Migration (Geneva, International Organization for Migration, forthcoming).

-1000

-500

0

500

1000

1500

2000

2500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Labour losses Capital gains Net economic gains

Economic Impact

Positive side:

• Using of international labours to substitute the shortage of labours in Thailand can help support the manufacturing industries

• Contribution to GDP growth

Negative side:

• Increasing burdens on budget and resource allocation

• Possible effect in international trade forums e.g. Trade sanctions in WTO

• Potential obstacle to the development of production technology

• Labour wages structure

• Competition in alien worker business

• Etc.

Social Impact

• Problems of human trafficking and illegal immigrants

• Problems of crimes, narcotic drugs, security to lives and assets

• Problems of stateless people and accompanying persons

• Problems on public health and environment

• Potential changes in Thai social structure

• Potential problems to international and cross-border relations especially with the neighbouring countries

Related Policies and Measures on International Labour MigrationThailand has adopted short-term measures to address the labour shortages and the influx of irregular migrant workersthrough a series of Cabinet resolutions allowing the temporary extension of migrant workers’ resident permit and theannual registration of a work permit.

Year Chronology of Policies and Measures on Alien Workers in Thailand

1997 Allowed the hiring of alien workers from Myanmar in 10 border provinces : Chiangrai, Chiangmai, Kanchanaburi, Tak, Ranong, Prachuab Kirikan, Mae Hongson, Ratchaburi, Petchburi and Chumphon

1998 Allowed the hiring of Myanmar, Lao and Cambodia labours in in other 43 provinces that labors were shortages in marine fishery (7 businesses)

1999 Extended to cover 54 more provinces (47 businesses)

2000-01 Allowed the hiring of alien workers in 43 provinces (18 businesses)

2002 Allowed the hiring of alien workers in 76 provinces

2003 Changed business types and regrouped those businesses into 6 groups for alien workers

2004-06 Major change – Thailand set up Policy on the Entire management of Alien workers to manage the whole system of alien workers in Thailand, aimed to legalize the use of alien workers, and to be in line with the MOU on hiring of international migrants which Thailand agreed with LaoPDR and Cambodia in 2003, and Myanmar in 2004, comprised 2 types of job: labour works and house services

2007 • Cabinet resolution to register alien workers in 5 Southern Border provinces : Yala, Pattani, Narathiwat, Satun and Songkhla, in Chana, Na thawee, Saba Yoi and Thepa districts – (in restricted areas)

• Started to hire legal migrant workers under the MOU between Thailand and LaoPDR, and MOU between Thailand and Cambodia (10,000 persons each).

2008 Allowed more access to health services and health insurances for alien workers where it is necessary

National Economic and Social Development Plans 4

The Evaluation of the Country’s Potential

•Use the strengths to create opportunity. Cooperate with high growth economies/neighboring countries in terms of Trade and Investment. Encourage production for elderly/ cultural consumption.

•Use the opportunities to fix the weaknesses. Cooperate with international community to add value to products and services. Use the conservation and climate change trend to create green economy. Induce a political trend towards democracy, human rights protection and participation in the changing process of the society.

•Use the strengths to stop any threats. Create a strong production base of agricultural, services and creative economy. Create a strong financial sector. Reduce external risks. Follow Philosophy of sufficiency economy to create balanced development.

•Mitigate weaknesses and avoid threats. Improve Education quality. Encourage greater investment in basic/scientific research. Amend law, rules and regulations. Reduce public debt ratio. Strengthen environmental and natural resource capital

Vision“A happiness society with equality and immunity to changes”

Main Objectives

•Balanced and Strong Self-reliant Economic Structure

•Higher Competitiveness

•Quality and Inclusive Social Security System

•Peaceful and Good Governance Society

External Changes

The recovery of the global economic

The changing global rules and regulations

The development trend towards a multiple-centered world where “Asia” has a leading role

Moving towards Aging Society

Global Warming

Food and Energy Security

Changing Technology

Internal ChangesStrong Financial Sector, Fiscal

Balance, High Agricultural

Cost, Limited Area and

Labor, Industrial Reliance on Foreign

markets, and Service and Tourism

opportunities.A change to an individualistic society

, Thai culture has become more affected

by foreign ones, Improvement in

Education and Health Care but lower in

child’s IQ /EQ , Lower labor

productivity, Problem of Elderly Care

Environmental degradation, Climate

change affects the agricultural

sector, Poverty/ Migration

problems, more forest

invasion, reliance on foreign

energy sources

Development Strategies

•Strategies to improve social imbalanced.•Strategies for sustainability of human quality towards a knowledge-based and learning society.•Strategies to balance and secure between food and fuel.•Strategies to create knowledge-based economy and supportive factors.•Strategies to link Thailand economy with countries in the region and beyond.•Strategies to sustain natural resources and environment.

21

• ช รงงา ราคา ก

• Labor based Economy

• ร ยากร รรมชาต ป ก

•Mass production & Efficiency

•Creative Economy

• Value Creation

• Hub by Location

• Globalization

• Global-local link

• Niche Market

• Area based approach

• Green based Economy

• Harmony with nature /Material cycle/ Low Carbon Societies

• Industrial Symbiosis (Zero-waste)

• Pollution Prevention/ Green Products

• People Participation

2500 2520 2540 2550 2570 ป

• Green Productivity/

Competitiveness•Sustainable

Society

Next step of development

Low labor cost and advantage

Natural resource base

1957 1977 1997 2007 2027

Trends and Challenges 5

• Thailand has to gear its production away from low-skilled labour industries, whichcannot easily remain competitive. This means it must acquire a skilled workforce andtechnology rather than rely solely on providing factory space and cheap labour.Hence, the future challenges for Thailand rests critically on promoting knowledge-based private investment and increased productivity.

• Thailand needs to place more emphasis on advanced skilled workers to produceinnovative and creative products, to drive productivity growth and to lay a solidfoundation for future growth, especially in making the transition from a low-costresource based manufacturing economy to a provider of knowledge-based services, oras the “creative economy”.

• The ASEAN Free Trade Area (AFTA) launched in January 2010. The regional singlemarket as envisioned under the AEC blueprint is to realize in 2015, withproducts, services, capital and skilled labour allowed to move freely around theregion. These developments should bring about the relocation of upstream andlabour-intensive industries within ASEAN Member Countries.

• AEC in 2015: free movement of skilled migrants across the borders of ASEAN membercountries (ASEAN countries agreed on MRA in seven work areas:engineer, nurse, architect, survey, doctor, dentist, accountant)

• Problem cases with controlling immigrants across the borders persisted e.g. between theUSA-Mexico border which has been the cause of the immense rise of the USunauthorized population. Thus, a registration program or legalization of immigrants alienworkers/cross border labours in Thailand has to be properly designed.

• Cooperation on co-production between Thailand and neighbouring countries has beenpromoted under subregional cooperation areas such as the GMS, ACMECS, and IMT-GT.

• In order to improve the migrant labour system in the future, it is necessary to giveemphasis on issues such as:

– provision of adequate public welfare for migrant workers

– redesign of system to increase more flexibility, effectiveness and lower transactioncost for both employer and employee

– improvement labour communication skill and standard for migrant workers