New Foreign Labour Laws: A Bullet Headed for the Heart of the Thai Economy

Photo: Government of Thailand/Wikimedia Commons
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Thailand Prime Minister Prayut’s tougher measures on undocumented foreign migrant workers could wreak havoc on an already uncertain Thai economy.

By Oliver Ward

Anti-immigration sentiments have slithered their way into Thai labour regulations as strict new penalties on foreign workers will take effect on January 1st, 2018.

In an environment of economic stagnation, many Thai’s are concerned that foreign workers are stealing Thai jobs. But, with foreign workers providing much-needed labour for many of Thailand’s key industries, Prayut may have just loaded the gun that will shoot the Thai economy dead.

Employers who hire illegal foreign workers face huge fines

The Royal Decree on the Recruitment of Foreigners outlines new punishments for employers who hire illegal foreign workers. The new fines will range from 400,000 to 800,000 baht (US$12,000 to US$24,000), and the employees themselves will face up to five years in prison.

The regulations are a reflection of the anti-immigration sentiment that has crept into Thailand. The Thai economy went through a period of stagnation in recent years. Many Thai’s believed the 3 million migrant workers were to blame. However, as the economy begins to pick up, these new regulations targeting illegal foreign workers could spell disaster, thrusting the Thai economy back into slower growth figures.

(Source: World Bank)

Along with stealing Thai jobs, the public believes that cheap foreign labour is keeping Thai wages low, as Thais have to compete with the migrants who will do the same jobs for less pay.

Sunai Phasuk of Human Rights Watch expressed his concerns, “We haven’t seen this kind of rise in anti-immigrant sentiment for decades. This has a lot to do with economic concerns”.

The Thai government are framing the legislation as an attempt to combat human trafficking

This is not the first time anti-immigration sentiment has spilt over from public outcry into tangible government policy. In 2016, the government cracked down on illegal workers working in markets, restaurants and supermarkets. Between the 1st and the 26th of September 2016, 153 illegal foreign workers were caught in raids and hit with prison sentences and fines of up to 3,000 baht (US$90).

There are around two million undocumented foreign workers currently working in Thailand. Every one of them now faces serious consequences if discovered.

Initially, the legislation was framed as an urgent measure to preserve Thailand’s “national economic security”. However, after the harsher punishments received criticism from the business world, Prayut repackaged the laws as an attempt to meet Thailand’s international commitment to end human trafficking. However, this attempt to make the pill easier to swallow is fooling nobody.

It is a solution to a fairy-tale problem

Thailand has an incredibly low unemployment rate, which stood at just 0.8% at the start of 2017. With such low unemployment rate, there are enough jobs to go around for both the Thai population and the migrant workers, both legal and illegal.

The allegation that the immigrant population is keeping wages low is equally as fanciful. Studies undertaken among skilled and unskilled Thai workers show that higher levels of immigration have led to an increase in wages for skilled Thai workers, as the labour pool has become flooded with large numbers of unskilled foreign workers. The decrease in real wages for unskilled Thai workers is also negligible. Studies show that a 10% increase in immigration has led to a domestic wage reduction of just 0.23%.

Rather than tackling human trafficking, the measures are contributing to it

The introduction of the stricter penalties has already caused between 30,000 and 60,000 workers to flee Thailand and head home to neighbouring countries. These migrant workers fell into the hands of human traffickers as they attempted to cross the country and borders in a state of panic.

On July 9th, the two Yu brothers were among 21 migrants from Myanmar who left Phuket to return home. Each paid a border broker 13,000 baht (US$390) to arrange transport and government documents to enable them to leave the Phuket province and return home. A broker gave them fake Thai documents, and when police pulled over the bus the migrants were travelling in, they arrested all 21 of them and took them to Phetchaburi prison.

The Yu brothers now face fines of between 2,000 to 100,000 baht (US$60 to US$3,000) or a five-year prison sentence for forging official documents, despite not being able to read or write in Thai. Unfortunately, cases like these are occurring all over Thailand as traffickers and brokers take advantage of the panic of illegal workers and sudden movement of people to cash in.

The Thai economy depends on migrant workers

Not only are the measures dangerous to foreign workers, but they could also ruin the Thai economy. Thailand needs cheap labour to drive their key industries. Thailand is the world’s biggest shrimp exporter, and the industry relies on migrant workers. In 2011, shrimp exports accounted for US$3.5 billion of the Thai GDP; and today migrant workers account for 90% of the industry’s workforce.

Thais would not want to take jobs in the shrimp industry. The working conditions are poor, the workers have to deal with long hours and potent smells, and the pay is low by Thai standards. Without cheap migrant workers, industries like the shrimp industry would simply relocate to another country with cheaper labour.

This situation is not unique to this industry. The same goes for food processing, the agricultural industry and the textile industry. The loss of migrant workers would have a severe impact on these thriving Thai industries.

(Source: World Bank)

Foreign workers are also net contributors to the Thai GDP. In 2005, foreign workers alone enhanced the Thai GDP to the tune of 1.25%, a figure of around US$2 billion. They should be welcomed, legalised and embraced, not punished and pushed into the hands of human traffickers.

There is a looming labour shortage

The tighter penalties will undoubtedly exacerbate the impending labour shortage. By 2040, Thailand will have a working population that is 11% smaller than they do now. The population is ageing, and there is not enough younger generation to replace those in the labour pool. The government should be taking steps to promote immigration to plug that deficit, not stifle it.

This is a concern for Thirapat Chirapipat, Managing Director of a construction company, Chiangmai Rimdoi Plc. “The new regulations may cause a labour shortage”, he said, adding “costs will also be higher because we rely on 80-90% alien workers”.

These rising costs and tougher regulations could kill off struggling smaller companies. Larger companies have the resources to adjust, but smaller businesses will notice a big difference. Small and medium-sized Thai businesses use cheap labour to stay competitive in a country where there are limited initiatives to promote smaller businesses, removing this as an option will stack the odds even more against small Thai businesses.

Why did the Thai government not consult Thai businesses?

The Thai Chamber of Commerce (TCC) and the Federation of Thai Industries (FTI) have voiced their disapproval. The TCC is now trying to evaluate the impact of the bill on smaller businesses and assess the extent of future damage on the Thai economy.

The glaring issues with the bill beg the question- why were Thai businesses not involved in the decision to introduce these new regulations? The way Prayut runs his government, without public intervention or private sector input, leaves the Thai economy open to the severe disruption caused by irresponsible and untested policies.

Although the laws will not take effect until January 1st, the gun Prayut is pointing at the Thai economy is locked and loaded. More than 770,000 workers have applied to become legalised in the wake of the bill, but there is no guarantee that these applications will be approved or the government will permit the workers to stay. With tens of thousands of undocumented migrant workers already heading for the borders, the bill’s damage may already be done.

Given the contribution migrants have made to the Thai economy, the government should be offering them protection and legalising them, not vilifying them and punishing them for not having documentation. On January 1st, 2018, Prayut will pull the trigger in his game of Russian roulette with the Thai economy, risking the future of key Thai industries and hundreds of small businesses. The only hope now is that he will see sense, put the gun down and reverse the measures before then.