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Thursday, April 17, 2014

What does the AEC really mean?

While the trade bloc aims to boost the region’s competitiveness, Thailand stands to gain as well as lose

The advent of the Asean Economic Community (AEC) in late 2015 has been in the limelight in recent years, but how many people are truly aware of it or understand the effect it will have on the economy, businesses, the workforce, education or even society as a whole?

The AEC is not just about setting up free trade zones within Asean. It aims to create a single market and production base in order to boost the competitiveness of Asean countries. It is expected to create free mobility of goods, services, investments, capitalisation and skilled labour.

Free mobility of labour is a significant element as all businesses and economies rely on manpower. And since the agreements have been signed, the 10 Asean members — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Vietnam and Thailand — have tried to create a single clear standard for professional qualification screening in order to help the free flow of seven key professions plus one sector (hotel and tourism) within member countries and ensure standards of quality.

The professional services are medicine, dentistry, nursing, engineering, architecture, surveying, accounting and hotel and tourism.


Although the AEC comprises only 10 countries, the total population stands at 600 million — a gigantic market with ample opportunities. Nevertheless each country possesses different scales of economy, business characteristics, laws and regulations, cultures, languages and customs.

Based on research by the Thailand Development Research Institute (TDRI), 50% of the gross domestic product (GDP) of countries such as Singapore, Malaysia and the Philippines comes from a service sector. But half the GDP of Thailand and Cambodia, Laos, Myanmar and Vietnam (CLMV) is contributed by the agricultural sector. In 2009 Singapore had the highest professional employment, accounting for 36.44% of overall employment, followed by Malaysia (20.8%), Thailand (8.12%) and the Philippines (7.4%), while most CLMV employment was in the agriculture, forestry and fishery sectors.

In 2010 the International Institute of Management Development did a survey on the competitiveness of 58 countries, taking into account the economy, efficiency of government and private sector, and infrastructure. Singapore had the highest score while Thailand ranked 26.

Thailand scored higher in all areas against Indonesia and the Philippines, but lower than Singapore in all areas. Against Malaysia, Thailand scored better only for the economy; it lost over competency of government and the private sector and infrastructure.

EU precedence

The formation of the AEC is similar to the establishment of the EU in 1993, which has expanded to 28 countries. Advantages of the union include free trade agreements which have encouraged mobility of the workforce within the region, easing labour scarcity in many countries.

It has also promoted equality of professions and improved benefits and welfare of labour. This has also resulted in improved GDP of member states.

According to some studies, the union has also improved education standards and promoted higher education in many countries resulting in improvement in quality of people and professionals.

But the free mobility of labour has not happened in all professions. In order to protect their own labour markets, several countries have implemented rules and regulations screening entrance to their workforce.

Labour mobility within the AEC

For skilled labour mobility within the 10 Asean states, based on industry’s experts and academics, Thailand has  advantages over several of the other member countries, such as better education, good infrastructure and living conditions as well as higher salaries and remunerations.

“All these positive factors are likely to keep our talented professionals at home,” said Yongyuth Chalamwong, research director at the TDRI.

“Most Thai professionals don’t want to leave the country to work elsewhere. But they may have to when their companies relocate,” said Aat Pisanwanich, dean of the economics faculty at the University of the Thai Chamber of Commerce (UTCC).

Thai professionals in the hotel and tourism sector are the most likely to  explore new opportunities in countries with a serious shortage and high demand for their professions.

Meanwhile, there is also the possibility of semi-skilled and low-skilled labour from CLMV seeking work in Thailand to meet demand for lower level jobs in the tourism sector.

According to industry experts there is a high chance that professionals from Singapore and Malaysia will move to Thailand, particularly in the engineering and architectural sectors.

Regulations and barriers

Under the AEC, mutual recognition agreements (MRAs) are intended to ease the flow of professionals within member countries. To do so, standards of professional qualifications are set so all countries will have the same clear standards.

Before migrating to another country, a professional must register to work through the regulatory authorities in that country, pass a professional test in the local language to get a licence and follow other local rules and regulations.

These strict procedures and requirements are needed to screen the quality of professionals before entering the country.

“Though it is a free flow of skilled-labour, it’s not really a free flow in practice,” said Acharn Yongyuth.

On top of that, English proficiency is obviously a barrier for Thais entering English-speaking countries.

Additionally, under the mutual agreements signed in 2011, foreign business ownership will be allowed to more than 70% up from the previous 49%.

“Foreigners will definitely bring in their own people to work in their companies in Thailand.

"This may affect opportunities for Thai professionals. And our language handicap will even further lessen our chances,” said Acharn Yongyuth.

Medical, nursing and dentistry

The quality of Thailand’s medical services, including doctors, nurses and dentists, is higher than many other Asean countries. Yet its medical fees are considered moderate or even cheaper than many countries including Singapore. The earnings of these professionals are considered competitive compared with other Asean countries.

Thailand has established itself as a “medical hub”. The large number of foreign patients have boosted medical tourism. On top of that, a number of Thai physicians and nurses working abroad have been lured back home.

According to Chalerm Harnphanich, president of the Thai Private Hospital Association and CEO of Bangkok Chain Hospital Plc, medical tourism earned about 140 billion baht in 2012, up 18% from a year earlier. And the figures have kept increasing.

According to Acharn Aat, the focus group interview revealed that it is unlikely that medical professionals will migrate to other countries in Asean, but if they do so Singapore will be the first destination.

There is a severe shortage of these professional services in Thailand particularly in remote provinces as a large number of practitioners have opted to work at private hospitals where the pay is better. He added that Thailand is short of 10,000 nurses.

Meanwhile, he continued, the Philippines is a key producer of nursing professionals and there has been a high rate of migration of them to other countries.

However, under AEC restrictions the free flow of talents may not easy as they must obtain licences and pass tests in the local language. This is viewed as a reasonable screening measure and also a barrier.


Generally speaking, the quality of Thai architect is second to none. The AEC will definitely open doors for professionals to migrate to other countries such as Brunei, the Philippines, Laos and Myanmar at senior levels while it also offers opportunities for professionals in other countries to enter Thailand’s labour market.

According to Pongsak Vadhanasindhu, Thailand Monitoring Committee, Asean Architect Council, competition in this field should not be fierce as the mutual agreements stress that foreign registered architects must work in partnership with local architects in an equal manner.

“This means there will be less competition among local and foreign architects as they will have to work in collaboration than alone,” said Prof Pongsak, adding that Thai architects should continue to develop their skills and know-how in order to stay competitive.

Prof Pongsak believes the competitive situation will boost the quality and proficiency of local staff. “And working with foreign staff will definitely enhance skills and experience of local staff.”

But he acknowledged that Thai architects need to improve their English proficiency as they may lose out to Singaporeans and Malaysians who speak English well.


According to Nitaya Chanruang Mahabhol, secretary-general of the Consortium of Professional Council of Thailand and member of the executive board of the Council of Engineers, engineers from Singapore and Malaysia are likely to aggressively enter the Thai market. Hence it is necessary to enhance Thai engineers’ capability, know-how and English proficiency in order to gain acceptance for big national projects.

“On top of that, standards used to gauge registered architects must be Asean standards and not others in order to be fair,” she said.

Liability of construction projects is another key concern. “It’s important to define or share liabilities with those foreign engineers who enter Thailand to work on projects. That’s because they will also need to be responsible for their projects even when they leave Thailand. These liabilities must be shared accordingly,” Ms Nitaya said.

She also expressed concern over small and medium-sized enterprises (SMEs). “I don’t worry about big construction companies, but the small ones might not be able to fight the battle. So I’m not very sure if we’re ready to compete with others in this field.”


Although accounting is currently guided by the International Financial Reporting Standards (IFRS), there are still differences in accounting and taxing regulations among countries.

According to Sira Intarakumthornchai, chief executive officer at PwC Thailand, the challenge for Thai accountants will be English proficiency and knowledge about taxation and business acts in different countries.

“If they can overcome these limitations then they will become strengths. And then they will be in high demand for local and overseas employment,” said Mr Sira.

While he has no worries about big accounting firms, small and medium ones may face problems due to local language and some restrictions.

“Hence small and medium-sized firms will need to adjust themselves fast for this competition. In the future there may be mergers among local firms or with foreign ones in order to stay competitive,” said Mr Sira.

Hotel and tourism

Within Asean, Thailand is considered the best in hotel and tourism services.

Surapong Techaruvichit, president of the Thai Hotels Association (THA), says Thailand, Malaysia, Singapore and Indonesia are tourism leaders among Asean members. But demand for professionals in this sector in CLMV is high and there is a high chance that Thai professionals will migrate to these countries as many are offering high remuneration particularly Myanmar.

“However, we don’t expect to see many Thais migrating as our tourism industry is much bigger than those of CLMV. Last year we welcomed 26.7 million tourists, while only slightly more than 2 million visited Laos and about 1 million visited Myanmar,” said Mr Surapong.

According to Acharn Yongyuth, there is still no clear mutual competency standards for professionals in this sector as several parties are involved with no recognised certified body in charge.

Meanwhile, Thailand is trying to solve labour shortage in this sector through developing education in the field and staff training.

Sumber - Bangkok Post

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