Managing International Migration for Development in East Asia Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Editors Richard H. Adams, Jr. Ahmad Ahsan Public Disclosure Authorized Office of the Chief Economist East Asia and Pacific Region World Bank Managing International Migration For Development in East Asia Editors Richard H. Adams, Jr. Ahmad Ahsan Office of the Chief Economist East Asia and Pacific Region World Bank Washington, DC 20433 June 2014 © 2014 International Bank for Reconstruction and Development / International Development Association or The World Bank 1818 H Street NW Washington DC 20433 USA Telephone: 1-202-473-1000 Internet: www.worldbank.org This report was printed by The World Bank Printing & Multimedia Department using only FSC certified paper and environmentally sustainable water based inks. This work is a product of the staff of the World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of ASEAN or The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because the World Bank encourage dissemination of its knowledge, this work may be freely quoted or reprinted, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202- 522-2422; e-mail: [email protected]. ACKNOWLEDGEMENTS This collection of papers was produced by the Office of the Chief Economist, East Asia and Pacific Region and used as background papers for the World Bank report, International Migration and Development in the East Asia and Pacific Region, 2014, forthcoming. Bert Hofman (Chief Economist of East Asia and Pacific) provided guidance to the work. The Institute for Policy Studies, National University of Singapore, kindly acted as the host for the 2010 Workshop where paper authors presented the original drafts of the papers. Participants at that workshop, including Fabio Baggio, Yukon Huang, Vikram Nehru, Chia Siow Ye, provided very helpful comments on the papers. Doris Chung and Mildred Gonsalvez processed this report. The World Bank also gratefully acknowledges support from the Government of Japan and Government of Korea that funded several of the papers in this volume TABLE OF CONTENTS TABLE OF CONTENTS ......................................................................................................................... i OVERVIEW ......................................................................................................................................... iii PART 1. MIGRATION AND ITS IMPACTS Chapter 1: Labor Migration and Economic Growth in East and South-East Asia by Terrie Walmsley, Angel Aguiar, S. Amer Ahmed ............................................................................. 1 Chapter 2: Remittances, Household Investment and Poverty in Indonesia by Richard H. Adams, Jr . and Alfredo Cuecuecha .......................................................................... 29 Chapter 3: More or Less Consumption?: The Effect of Remittances on Filipino Household Spending Behavior by Emily C. A. Cabegin and Michael Alba, ........................................................................................ 53 Chapter 4: Impacts of International Migration and Remittances on Child Outcomes and Labor Supply in Indonesia: How Does Gender Matter? by Trang Nguyen and Ririn Purnamasari ....................................................................................... 84 Chapter 5: The Effects of Immigration on the Thai Wage Structure by Dilaka Lathapipat ........................................................................................................................ 111 Chapter 6: The Impact of Foreign Labor on Labor Productivity and Wages in Malaysian Manufacturing, 2000-2006 by Tham Siew Yean and Liew Chei Siang ................................................................................... 136 PART 2: MANAGING MIGRATION Chapter 7: Indonesia’s Regulatory, Institutional and Governance Structure for International Labor Migration by Ari Kuncoro, Arie Damayanti and Ifa Isfandiarni ......................................................................... 159 Chapter 8: The Philippine Labor Migration Industry for Health and Educational Services: Regulatory and Governance Structures by, Tereso S. Tullao, Jr., Mitzie I. P. Conchada and John P. R. Rivera ........................................... 177 i Chapter 9: Vietnam’s Regulatory, Institutional and Governance Structure for International Labor Migration by Nguyen Huyen Le and Daniel Mont .................................................................................199 Chapter 10: Singapore’s System for Managing Foreign Manpower By Yap Mui Teng , Senior Research Fellow, Institute of Policy Studies, Lee Kuan Yew School of Public Policy, Singapore ..................................................................................................................... 220 Chapter 11: The Management of Foreign Workers in Malaysia: Institutions and Governance Regime by Azizah Kassim, Terence Too and Mahani Zainal Abidin .................................................241 Chapter 12: A Cost-Benefit Analysis of the Legal Status of Migrant Workers in Thailand by Charamporn Holumyong and Sureeporn Punpuing ................................................................... 263 Contributors ……………………………………………………………………………………….283 ii OVERVIEW INTRODUCTION International migration, defined as the movement of people across international borders, is emerging as an important development issue in the East Asia and Pacific region (EAP). East Asia currently has an international migrant population of about 21 million people. More than a third of these migrants in the East Asia region are regional migrants working in other countries within the region. The wide disparities in income across the countries in the region make East Asia home to both “labor receiving” (or destination) countries and “labor-sending” (or source) countries. Migrant workers in the region remitted more than US $112 billion in 2013 to their home countries. These remittance flows are huge not just for the small Pacific Island countries but also for the large economies of Philippines and Vietnam. Five stylized facts characterize international migration in the East Asia region. First, East Asia represents its own migration hub. Five of the top 10 destination countries for migrants from the East Asia region are also in the region – Hong Kong, Malaysia, Singapore, Thailand, and Republic of Korea. East Asia serves as its own migration hub because of the large income differences between labor receiving and labor sending countries in the region. For example, per capita incomes in the richer labor receiving countries of Japan, Korea and Thailand are often ten times those of incomes in the poorer, labor sending countries of Indonesia, Vietnam and the Philippines. Second, remittance flows in the region are huge and expanding faster than those to the developing world as a whole. Between 1989 and 2009, remittances to East Asia grew at an average annual rate of 15.8 percent vs. 7.8 percent for the developing world as a whole. Third, most migrants in East Asia are unskilled, defined as those having a secondary school education or less. For example, 67 percent of the migrants from Indonesia have less than a secondary school education, and about 70 percent of the migrants from Vietnam fall into this category. Fourth, there is a high level of irregular and undocumented migration in the region. In the early 2000s it was estimated that there were more than 1.6 million undocumented migrants from the Philippines, and that more than half of all Indonesians migrating abroad were undocumented. The high level of irregular migration in the region reflects the strong desire of migrants to escape the twin problems of poverty and unemployment in their home countries. Fifth, females dominate migration flows in East Asia. In 2000, the number of female migrants surpassed that of male migrants for the first time: 5 million females versus 4.9 million males. These female migrants tend to work as domestic helpers in such countries as Saudi Arabia, Malaysia, Hong Kong and Singapore. The objective of this book is to analyze the economic and social impact of international migration on labor sending and labor receiving countries in the East Asia region. More specifically, the book seeks: (a) to examine the impact of international migration on key development indicators, including poverty, investment, labor force participation, labor productivity and wages; (b) to evaluate current government structures and institutions for managing migration, with a view to identifying future policies for maximizing the benefits of international labor migration. The book includes new work on these key policy issues from six East Asian countries: three labor sending countries (Indonesia,