International Labour Migration and Foreign Direct Investment in East Asian
Development: Taiwan and Japan Compared
Ching-lung Tsay
Pan-Long Tsai
The Institute of Economics
Department of Economics
Academia Sinica
National Tsing Hua University
Taipei ,Taiwan
Hsin-Chu, Taiwan
e-mail: ctsay@econ.sinica.edu.tw
e-mail: pltsai@mx.nthu.edu.tw
November 2003
D:\533577936.doc
International Labour Migration and Foreign Direct Investment in East Asian
Development: Taiwan and Japan Compared
Abstract
The factor movements of international labor migration (ILM) and foreign
direct investment (FDI) are integrated parts of the global or regional development
process. They represent the outcomes of market forces generated to equilibrate
factor rewards across countries at different stages of development. This paper first
introduced a conceptual framework of the Investment-Migration-Development Path
(IMDP), which was constructed by combing two strands of literature on ILM and FDI.
Based on the experiences of Japan and Taiwan, the study then utilized the IMDP
framework to highlight the development-FDI-ILM nexus observed in the East Asian
development.
Japan was under the pressure for importing foreign workers or relocating
production abroad in the 1960s and 1970s. While labor importation was prohibited,
the first wave of Japanese FDI landed Taiwan and other Asian NIEs around 1970.
The Japanese FDI fitted the comparative advantages of the NIEs. As observed in
Japan, Taiwan entered the stage of labor shortage in the 1980s and had to face the
choices of investing overseas or receiving foreign workers. In the late 1980s and
early 1990s, there were massive out-flows of FDI from Japan, Taiwan and other NIEs
to Southeast Asia. In the meanwhile, a growing number of illegal workers emerged
in Japan and Taiwan to meet the needs of firms and to fill the vacancies of the
dead-end and 3-D jobs shunned by local workers. While Japan insists on the refusal
of unskilled laborers from overseas, Taiwan started to import a limited number of
contract workers form Southeast Asia in 1992.
The IMDP analysis found that FDI and ILM have been treated asymmetrically
in policy formation. Internationally, there are no comparable institutions like WTO
in trade and FDI, which endeavour to facilitate ILM. At the national level, there
remains strong resistance to (unskilled) foreign workers in many countries, despite the
evident trend toward further capital deregulation and liberalization. However, there
is no way for a (more) developed country to avoid the ILM problem. More
pragmatic considerations and economic ways of thinking are surely needed.
-1-
1. Introduction
The factor movements of foreign direct investment (FDI) and international
labor migration (ILM) have been continuing parts of the world development process.
Most developed countries in the West experienced problems related to FDI and ILM
policies at different phases of economic growth.
With the surge of FDI and ILM
circa the mid-1960s, the issues emerged as crucial and sensitive topics in both
domestic and international political agenda. The East and Southeast Asian flock of
flying geese is no exception to this general trend (Freeman and Mo, 1996).
The unprecedented upsurge of FDI and ILM among East (including Northeast
and Southeast) Asian countries since the mid-1980s has reflected the working of the
market mechanism.
Differential levels of economic development and different
speeds of economic growth lead to growing income disparity as well as diverging
labor market transformations.
The “pull” and “push” forces are generated to
equalize capital and labor rewards across the markets in different countries.
In this
sense, it is clear that the acceleration of FDI and ILM in East Asia is basically of
economic origin.
Indeed, the phenomena could be well understood as integral parts
of the flying geese pattern of economic development.
In general, it is expected that
the economies in the leading group tend to be the net outward foreign investors and
the net foreign labor importers whereas those in the following group the net importers
of FDI and the net exporters of workers.
The current paper intends to explore the development-FDI-ILM nexus by
examining the experience of Taiwan with references to Japan. For this purpose, an
Investment-Migration-Development Path (IMDP) framework, which was constructed
by integrating two strands of literature on the international capital and labor
movements, will be introduced. The basic argument is that both FDI and ILM are
-2-
outcomes of market forces generated to equilibrate factor rewards across countries at
different phases of economic development.
It should be noted that the discussion is
confined to the stylized phenomena of FDI and ILM in East and Southeast Asia, in
particular what occurred after the mid-1980s. The major focus is placed on the
temporary, and economically motivated ILM as it is most relevant to the Taiwan and
Japan during the past two decades.
Likewise, the FDI refers to the part flowing from
the more developed economies to the developing ones in search of lower labor costs.
The remainder of the paper is organized as follows.
The theoretical
relationship between development, FDI and ILM is sketched in Section 2.
Section 3
surveys empirical evidences of FDI and ILM for Taiwan as compared with Japan.
For each of the two cases, some relevant policy issues are also addressed.
The last
section summarizes the research findings and provides some concluding remarks.
2. Conceptual Framework: The IMDP1
2.1 Economic Development and FDI
The impact of FDI on economic development could be examined from the
home country’s or the host country’s point of view. While there are concerns on
unemployment and the hollowing out of industries in some home countries, most
studies focus on the development effects in the host countries. The debate between
dependency and modernization schools during the 1960s and early 1970s are well
documented. However, this debate has become virtually irrelevant since the 1980s
when the East Asian newly industrializing economies (NIEs) demonstrated that FDI
1
A comprehensive discussion on the construction of the IMDP (Investment-Migration-Development
Path) framework could be found in Tsai and Tsay (2000).
-3-
could indeed contribute to growth and development of the host countries via channels
such as transfers of technology, management skills and access to export markets.
There are two relevant theories on how economic development affects FDI.
To the extent of a positive relationship between the wage level and the level of
economic development, Vernon’s product cycle theory (Vernon, 1966) predicts that
developed countries tend to be the sources of FDI, while the developing ones the host
countries. A more direct and sophisticated description is Dunning’s “investment
development path (IDP)” thesis (Dunning and Narula, 1996). Built on the eclectic
paradigm, the IDP hypothesizes how economic development interacts with ownership
advantage and location advantage of both domestic and foreign firms, and thus the
patterns of inward and outward FDI.
The IDP thesis argues that, at a very low level of development, a country
cannot possibly have any outward FDI. At the same time, factors such as limited
market size, inadequate infrastructure, and under-educated labor force would fence off
inward FDI, except in some industries of natural resources. Only when economic
development reaches a minimum level will outsourcing or market-seeking FDI from
abroad appear.
In general, outward FDI, if exists at all, remains insignificant at this
phase. As a result, the net outward FDI is typically negative in countries with a low
level of development.
When economic development brings about changes in ownership advantage
and location advantage, countries might see a slowdown of inward FDI along with
increasing outward FDI.
Indeed, outward FDI would eventually catch up inward
FDI and turn the net outward investment into positive as witnessed in the East Asian
NIEs after the 1980s.
As development continues, the outward and the inward FDI
tend to balance each other so that the net outward investment fluctuates around zero.
-4-
2.2 Economic Development and ILM
The ILM could affect economic development of both the sending and the
receiving countries. From a sending country’s point of view, out-migration influences
its economic development mainly through remittances and the potential loss of human
capital.
The migrants’ remittances could alleviate the foreign exchange constraint of
a country and, at the same time, contribute to national savings. Unfortunately, with a
few exceptions such as Bangladesh, Pakistan, Sri Lanka and the Philippines, available
data indicate that the scale of remittances is too low to have practical significance.2
As for the loss of human capital, it occurs to the extent that the workers have accepted
various levels of education and training in the sending countries. The loss would be
very substantial if the migrant workers comprise of well-trained professionals.
However, this could hardly be the case in the migration from Southeast Asia, of which
the great majority is unskilled labors.
The obvious benefit for the labor receiving country is the relief of labor shortage,
which is particularly important for countries depending on labor-intensive exports as
the engine for economic growth. The importation of foreign workers is especially
useful when domestic workers become reluctant to take up menial tasks due to rising
living standard. Nevertheless, the acceptance of labor forces from abroad does not
go without concern. Not only is it likely to have an adverse income distribution
effect, but it could retard technology upgrading and therefore long run economic
development.
Moreover, the long run social costs could be very substantial.
Since economically motivated ILM is caused by differences in employment
opportunities and wage rates between the sending and receiving countries, the relative
2
It is noteworthy that the data could in fact seriously understate the remittances since much of the
money is transferred through unofficial channels (UN, 1996).
-5-
level and speed of economic development in the two countries play critical roles in
the migration process.
This relationship is best captured by the Lewis-Fei-Ranis
model of the open economy (Athukorala and Manning, 1999). According to the
model, as the growth process continues to the point where domestic surplus labor is
depleted, the increase in labor costs ultimately threats a country’s international
competitiveness.
To avoid losing export market, importing cheap foreign workers
becomes a direct extension of what the firms used to do in the domestic market.
The
model therefore nicely depicts how economic development drives a country to
become a labor importing country.
In a potential labor sending country, the out-migration of workers is limited at a
phase of low development level simply because of high migration costs.
Out-migration would gradually gain momentum with the improvement in the financial
capacity of potential migrants due to economic development.
However, the trend of
rising out-migration would reach a turning point and then taper off once the country
attains a higher level of economic development (Pang, 1994). The transition occurs
since economic growth generates sufficient employment opportunities and better
economic perspectives.
If the economy keeps growing, it eventually becomes a net
labor importer as depicted by the open economy Lewis-Fei-Ranis model.
2.3 FDI and ILM
FDI could influence ILM directly through employment creation in the short
term, while indirectly through economic development in the long term (Sauvant et al.,
1993; UN, 1996).
The previous two sub-sections have discussed the long term
effects of FDI on economic development and the impacts of economic development
on ILM. The short term effects of FDI through employment creation could affect
potential migrants in the developing countries either positively or negatively.
-6-
In a
country at a lower level of economic development, FDI (through employment creation)
is likely to reduce the financial constraints and thus facilitate poverty-driven workers
to go abroad. Therefore, FDI might induce out-migration for lower end developing
countries. On the contrary, FDI (by providing better opportunities) might reduce the
immediate pressure for poverty-driven workers to migrate.
The opening of the possibilities for upward mobility and career advancement,
which are not available without FDI, provides strong incentives for potential
opportunity-seekers to remain at home. Moreover, the presence of FDI could have
crucial psychological effect.
By its very characteristics, FDI inflows represent a
commitment to a national economy and provide a sense of economic opportunity and
hope in the host country.
This confidence-building effect could be no better
captured by the following passage: “FDI inflows are to economic hope as capital
flight is to economic despair: opportunity-seeking migration declines with the former
while it increases with the latter” (UN, 1996, 53-54).
The relationship between economic development, FDI and ILM could be
illustrated by Figure 1, which is referred to as the investment-migration-development
path (IMDP). As shown by the Net Outward Migration (NOM) and Net Outward
Investment (NOI) curves, a country starts as a net labor exporter as well as a net
capital importer, and might expect rising in both during the first phase of development
(Phase I).
When a certain level of economic development is attained, the
development per se, along with the endogenous interaction between FDI and ILM,
work to reduce net labor export as well as net stock of inward investment.
what happens in the early portion of Phase II of development.
This is
The IMDP further
predicts that a country’s net FDI and net ILM position would reverse as its economic
development exceeds some level in Phase II, namely point A for ILM and point B for
-7-
FDI.3
Depending on the speeds of adjustment of FDI and ILM, it is perfectly
possible that a country becomes a net importer of both foreign workers and foreign
capital.
This possibility is represented by the portion between points A and B and
could be identified with some second-tier NIEs like Malaysia and Thailand today.
The country eventually becomes a net labor importer and net outward investor if it
develops beyond a point like B in Figure 1.
It should be cautioned that the IMDP illustrated above assumes an idealized
situation without any impediments to FDI or ILM.
Both FDI and ILM arise to
equilibrate disparities in factor rewards driven by different levels of economic
development across countries.
In reality, FDI and ILM are constrained by complex
economic, institutional and policy variables.
The interaction of these variables
jointly determines the shape and position of the two curves in Figure 1 and explains
the diverse trajectories of FDI and ILM among countries.
3. Experiences of Japan and Taiwan
3.1 The Japanese Path
3.1.1 International Labor Migration
Japan was a net sending country of international migrants before it achieved
high rate of economic growth in the 1960s. To resolve the over-population problem in
the immediate post-war period, the Japanese government encouraged and helped
emigration, which amounted some 110,000 in the 1950s and 79,000 in the 1960s. A
3
It is theoretically possible to have NOI (Net Outward Investment) curve changing sign at a lower
level of development than the net labor export curve.
But this possibility implies that there exists a
range of development in which a country is a net exporter of labor and capital, which seems
nonexistent in practice.
-8-
lion’s share of the migrants settled in the USA and South American countries,
especially Brazil, Argentina and Bolivia (Mori, 1997; Athukorala and Manning, 1999).
However, as a result of rapid economic expansion, labor outflows virtually stopped by
the mid-1960s. By the outbreak of the first oil crisis in 1973, Japan managed to
maintain a high rate of economic growth without importing foreign manpower.
Besides relocating labor-intensive production overseas, it was estimated that some 4
million workers left agriculture between 1960 and 1969, and another 1.2 million
between 1970 and 1973 (Abella and Mori, 1996). This labor mobilization helped
Japan weather through the difficult period and earn what called “Japanese
exceptionalism” in the literature of international labor migration.
The “Japanese exceptionalism” did not go without challenges.
In the early
1970s when the labor market became tightening, the Japanese Federation of
Employers’ Association for the first time called for permitting the importation of
foreign workers to meet the labor shortage (Mori, 1997; Athukorala and Manning,
1999). The policy debate lost momentum following the outbreak of the first oil
crisis and the ensuing economic slow down.
Although the Japanese economy
remained subdued during 1974-1983, the first phase of foreign labor inflows in fact
quietly set in.
The first phase started from late 1970s to the middle 1980s, consisting
of mainly Asian females from the Philippines, Korea, Thailand and Taiwan in the
entertainment sector. The salient feature of this group is that they were admitted to
enter Japan legally, though many of them overstayed their visa and became illegal.
The number was 13,132 in 1978, and rose to 34,569 1n 1985 (Abella and Mori, 1996).
The second phase of labor inflows emerged with the Heisei boom (1985-1991),
during which the economy recorded an annual growth rate above 6 percent.
Labor
shortages became so severe that home-makers as well as retired aged workers were
-9-
mobilized to meet the lasting demand. The situation was particularly awkward for
the SMEs, which lost labor to large firms on the one hand and lacked adequate
resources to restructuring production or to relocating abroad on the other. Another
group of firms seriously suffered from the labor shortages was the one with so-called
“3-K” jobs or “dead-end” jobs.
The former are works that are kitanai (dirty), kiken
(dangerous), and kitsui (difficult or demanding) (and so, 3-D in English), examples of
which include plastic molding, metal working, dyeing, and construction. The latter
are menial works carrying relatively low wages and with little prospect for career
advancement, such as waiters and cleaners.
Besides the general tightening of the labor market due to the booming
economy, the development was also the consequence of growing labor market
segmentation (Abella and Mori, 1996; Athukorala and Manning, 1999).
One reason
was the exhaustion of the agriculture manpower that used to be willing to take
unskilled blue-collar work in SMEs.
The other reason was the changing job
preferences of the younger generations in the workforce.
With higher education
attainment, they were reluctant to work in SMEs which were normally of poorer
working conditions.
Likewise, they tended to shun the 3-K or dead-end jobs simply
because of the nature of work involved. The rapidly disappearing of the workers
willing to work in SMEs, especially those with 3-K or dead-end jobs thus provided
the setting for foreign labor inflows.
During the second phase, the migrants were predominantly unskilled, male
workers employed in manufacturing, construction and small service companies. The
bulk of the flows were from Asian countries, notably China, Korea, the Philippines,
Bangladesh and Pakistan (Abella and Mori, 1996). Since the Japanese migration
policy prohibits the importation of unskilled workers, they were illegal, usually
- 10 -
coming in as tourists or other short-term visitors and overstaying their visas to work.
About the same time, another type of illegal workers appeared in the labor market.
They were college and pre-college students facilitated by the Japanese government’s
decision in 1983 to accept up to 100,000 foreign students (Hayase, 2000). These
students took up low-wage, dead-end jobs in the urban labor market as store clerks,
dishwashers, newspaper deliverers, etc.
The drastic revaluation of Japanese Yen after the Plaza Accord and a rapid
increase in illegal workers from China and Southeast Asian countries forced the
government to review the decades old Immigration Control and Refugee Recognition
Act (ICRRA). On 1 June 1990 the newly amended ICRRA came into effect. The
amendment partially legalized the importation of three groups of unskilled foreign
workers: (1) Nikkeijin (descendants of previous Japanese emigrants) from Latin
America, (2) college and pre-college students, and (3) foreign trainees.
In other
words, the amendment opened the “side door” and marked the onset of the third phase
of unskilled foreign labor inflows, but the “front door” remained firmly closed (Mori,
1997; Hayase, 2000).
Despite the relaxation in the migration policy, the number of the legal foreign
workers was obviously too small to satisfy the needs of the business community,
especially many small firms.
This point was clearly attested by the continuing
massive inflows of illegal workers from the neighboring cheap labor countries such as
China, Korea, Malaysia and Iran after the implementation of the new ICRRA. The
stock of illegal foreign workers jumped from 124,800 in 1990 to 292,800 in 1992
(Mori, 1997).
It is widely believed the number of illegal workers was around
270,000-300,000 in the decade of 1990s, though no direct records are available.
Even the prolonged stagnation of the Japanese economy in recent years does not lead
- 11 -
to noticeable attenuation in the excess demand for unskilled foreign workers.
Persistent income disparity and differences in employment opportunities between
Japan and the neighboring countries at the lower end of the development ladder are
expected to put tremendous immigration pressure on Japan in the foreseeable future.
The situation would undoubtedly be exacerbated by the transition of demographic
structure in Japan, which augurs a continuing decline in the number of children and
thus labor force in the foreseeable future.
3.1.2 Foreign Direct Investment4
Japan has pursued a rather nationalistic strategy of industrialization from the
early post-war period.
To avoid being controlled by foreigners, at the policy level it
intentionally minimized inward FDI, yet encouraged the extensive use of licensing
and other non-equity forms to acquire advanced technology from the West. The FDI
policy in Japan is thus characterized by an apparent asymmetry; it is an
inward-FDI-inhibiting, but outward-FDI-fostering regime.
This asymmetric trend
goes on up until today, though the government is recently making efforts to redress
such imbalance. Available data show that the ratio of outward/inward FDI stock was
6.0 in 1980, 20.5 in 1990 and 8.8 in 2000 (Table 1). For this reason, the following
discussion will focus on the Japanese outward FDI, especially the part directed toward
East and Southeast Asia.
The Japanese outward FDI has evolved concomitantly with its phases of
industrialization and level of development.
From 1950 to the mid-1960s, when labor
was abundant and capital was scarce, Japan focused on labor-intensive manufacturing
such as textile and sundries.
While the successful export-led, labor-driven
development strategy helped resolve serious unemployment problem and earn much
4
The following discussion draws heavily upon Ozawa (1992, 1996).
- 12 -
needed foreign exchange, it quickly dried up surplus labor by the early 1960s.
Rising income and the education-based promotion system encouraged younger
generations to seek higher education and thus speeded up the labor shortage problem.
By 1967 the ratio of job offers to job applications reached 1, and exceeded 2 for the
least-skilled workers (Ozawa, 1996; Athukorala and Manning, 1999).
In
consequence, labor-intensive manufacturing firms, most of them were SMEs
producing textile and apparel, were forced to relocate to neighboring countries such as
Taiwan, Hong Kong and South Korea where cheap labor were still available. This
wave of Japanese outward FDI culminated in the early 1970s when Japanese Yen
appreciated by some 24 percent between 1970 and 1973.
The pressure on the labor market came to a pause when the first oil crisis
broke out in October 1973. The Japanese economy suffered a negative growth for
the first time in the post-war period. The subsequent second oil crisis of 1979
further delayed the recovery. Only in 1985-86 when the Heisei boom (1985-1991)
set in did the Japanese enjoy their latest and last period of buoyant economy.
Less
tight in the labor market though, there were no clear signs in slowing down Japanese
outward FDI. Many factors could have contributed to this development, but looming
trade frictions caused by sustained trade surplus with the USA and the consequent
sharp Yen appreciation were most important.5
To maintain their market share and
circumvent protectionism, the Japanese firms with assembly-based mass production6
engaged in “export-substituting-cum-surplus-recycling” type of FDI.
5
While this
This was particularly acute after the Plaza Accord of 1985, which had the Yen revalued by 30 percent
in 1986 and another 24 percent by 1988. The rising Yen against dollar implies higher labor costs
expressed in terms of US$ in addition to making the prices of Japanese exports more expensive.
6
Notably automobiles and consumer electronics.
- 13 -
type of FDI was directed mainly to North America, the firms also relocated
production of standardized parts and components to nearby low wage Asian countries.
This was what took place in the second half of the 1980s and before the burst of
Japan’s bubble economy.
The appreciation of the Japanese Yen in early 1993 again seriously harmed the
competitiveness of Japanese firms in the international markets.
As a result, there
was another surge of FDI from Japan. More importantly, there was a crucial change
with respect to the pattern of Japanese FDI, especially in the manufacturing sector.
The annual share of manufacturing FDI in Asia has been rising much faster than other
regions including North America. Within the Asia, Japanese FDI shifted from the
NIEs, where production costs were also rising and currency were appreciating, first to
ASEAN and later to China.
It is noteworthy that the objectives of Japanese FDI in
Asian countries also changed from utilizing cheap labor to produce the exportable to
aiming at the burgeoning local markets made possible by the outstanding economic
growth in this region.
3.2 The Taiwan Case
3.2.1 International Labor Migration
There are no reliable records of economically motivated out-migration from
Taiwan. However, the number should be rather small even if they did exist.7
On
the other hand, Taiwan historically accepts only skilled foreign workers 8 as
temporary residents.
The number of the principal migrants in this group along with
their dependents was near 5,000 in 1961, around 20,000 in 1986 and reached 56,000
7
The Japanese data discussed above do give some clues concerning Taiwanese workers in Japan.
8
They include mainly managers for foreign or multinational enterprises, professionals, religious
workers, foreign language teachers and visiting scholars.
- 14 -
in 1999 (Tsay, 2000).
As a result, the volumes of inward and outward migration
flows were more or less balanced by the early 1980s. This finding seems to deviate
from what predicted by the IMDP thesis.
Nevertheless, the unique social, political
and economic situation in Taiwan during that period of time well explains the
phenomenon.
Being at the phase of recovery, Taiwan was a poverty-stricken
country with per capita income less than US$200 in the 1950s. This condition, along
with the fact that Taiwan had been under the martial law, virtually stopped any
economically motivated inward or outward migration. When the economy took off
in the 1960s, the labor reserve from the rural area provided the needed workforce for
the burgeoning export-oriented sectors and saved the firms from resorting to foreign
workers. This observation is similar to what had happened in Japan as indicated
previously.
The Taiwanese economy underwent dramatic changes in the first half of the
1980s as the island started the process of economic liberalization, social
diversification and political democratization.
In the economic aspect, the factors
driving Taiwanese firms overseas to be discussed in the next sub-section also served
to pull in foreign workers. However, investing abroad is not a feasible solution for
all kinds of firms.
Non-traded sectors such as construction and services, by their
nature, cannot be relocated to other countries for production. Consequently, like
those producing labor-intensive traded products, firms in the non-traded sectors had
all the incentives to import foreign labor lest they should be driven out of business
because of wage pressure. The situation was even worse if the works belong to the
3-D or dead-end jobs.
There were also problems on the labor supply after three decades of
remarkable economic development, the affluent, well-educated young generations
- 15 -
started shunning away from the inferior 3-D jobs. The upshot is that these jobs
became confined to the rapidly aging generations and firms could not find sufficient
domestic workers to fill the vacancies at affordable wage rates.
Beginning in the
mid-1980s, a sizable number of illegal foreign workers appeared in numerous
manufacturing factories and construction sites or served as housemaids.
Taiwan thus
entered the phase of being a net labor importing country.
While unskilled foreign labor was prohibited, the relatively lenient monitoring
procedure created a “back door” as the labor market turned tight in the mid-1980s.
As in the case of Japan, most clandestine workers came in legally as tourists or
visitors, overstayed their visas and illegally engaged in paid employment.
Although
the problem of illegal migrant workers has since then received much attention in the
mass media and become a hot topic of public debate, there was no consensus about
their numbers.
Informal estimates for the late 1980s vary from 10,000 to 30,000
according to the government agencies, to 100,000 to 300,000 made by private sources.
The number has been decreasing after the legalization of labor importation in May
1992. By 2000, the total number of illegal foreign workers in Taiwan was estimated
to be about 43,000, mainly from Southeast Asia and China (Tsay, 2000).
Figure 2 shows the changes in the number of registered foreign residents in
Taiwan by nationality for 1980-2001.
It stayed between 20,000 and 30,000 before
1987 and increased only slightly in the late 1980s and early 1990s.
After the
legalization of labor importation in 1992, the size of foreigners shot up rapidly and
almost reached 400,000 in 2000. The data clearly reveal the importance of the
imported workers in the foreign population in the past decade. The major source
countries of the contract workers include Thailand, Philippines and Indonesia. There
- 16 -
have been only little increases in the number of foreigners other than contract
workers.
The detailed information of the imported contract workers by sex and
nationality for 1991-2002 is presented in Table 2, which carries some important
messages. (1) The total number increased sharply from less than 20,000 in the early
1990s to reach the peak of over 326,000 in 2000. (2) The sex composition has
shown a rapid process of feminization in the recent years. The proportion of female
workers increased from 26 percent in 1998 to 54 percent in 2002. The speed of
feminization is particularly high among Indonesians and Vietnamese, who take most
jobs of health care services. (3) Thailand has lost the dominant role in the Taiwan
market of imported workers. The market share shrank from 69 percent in 1994 to 49
percent in 1998 and then 39 percent in 2002. Concurrently, the share of Indonesians
increased from 4 percent to 8 percent and then 32 percent, while that of Filipinos
changed from 25 percent to 42 percent and then 22 percent.
(4) Vietnam is a newly
added source country from 1999, accounting for 7 percent in 2002. Malaysia was a
major provider of clandestine workers to Taiwan in the 1980s (Tsay, 1992), but has
been a trivial player in the 1990s.
Table 3 presents the industrial distribution of the contract workers by
nationality for September 2002.
For the imported workers as a whole, the
manufacturing industry accounts for slightly over a half of the total (52%), while the
share of the household and personal service industry and the construction industry is
38 and 8 percent, respectively. Table 3 further reveals significant differences in the
industrial composition of workers among the source countries. Thais distinguish
themselves in the manufacturing and construction sectors. Among the 120 thousand
Thai workers (39% of the total contract workers in Taiwan), the proportion having
- 17 -
been employed in the manufacturing (especially textiles) and construction sectors is
77 and 21 percent, respectively.
In terms of national composition of workers in each
industry, Thais virtually dominate the construction jobs (97%), and account for 57
percent of the manufacturing employment of foreign workers.
The majority (88%) of the 97 thousand Indonesians (32% of Taiwan’s total
contract workers) are employed in the service sector, accounting for 72 percent of the
number of service providers from abroad.
Over two thirds of the 68 thousand
Filipinos are employed by the manufacturing sector, especially the electrical and
electronics industry.
In the service sector, the market share of Filipinos is 17 percent
in the early years. Their dominant role in the household service employment has
recently been taken over by Indonesians. The 226 hundred Vietnamese are almost
evenly distributed between the manufacturing and service industries. They account
for only 7-8 percent in the employment of contract workers in each of the two
industries.
The dramatic changes in the industrial composition (by country) and the
national composition (by industry) of the contract workers are depicted in Figures 3A
and 3B.
In 1995-2002, for the imported laborers as a whole, the proportion of
service workers increased from 10 to 40 percent, while the manufacturing and
construction industries lost 20 and 10 percentage points, respectively (Panel (1) of
Figure 3A). This change reflects the fact that the importation of foreign workforce
was mainly for easing the labor shortage in the construction and manufacturing
sectors in the early 1990s.
In recent years, the control on using migrant workers in
the household sector to provide health care for the aged and the disabled has been
significantly relaxed. The service jobs have mostly been taken by the newly arrived
Indonesian workers. As a result, almost 90 percent of Indonesians are currently
- 18 -
employed in the service sector (Panel (3) of Figure 3A). There is also a significant
shift of Filipino females from the service industry to manufacturing jobs in 1998-2002
(Panel (4) of Figure 3A).
The composition of contract workers by nationality has changed significantly
in the past several years, too.
For the total migrant laborers employed in all
industries, the pattern has from the Thai dominance in 1995 to the equal share
between Thais and Filipinos in 1998, to the coexistence of three major players of
Thais, Indonesians and Filipinos in 2002 (Panel (1) of Figure 3B).
In the
manufacturing industry, Thais have remained the leading role of having close to 60
percent (or higher) of the contract workers from all countries.
30 percent of Filipinos (Panel (2) of Figure 3B).
It is followed by the
As mentioned earlier, the major
changes in the service sector include the take-over of dominance of Filipinos by
Indonesians between 1998 and 2002, and the emergence of Vietnamese after 2000
(Panel (3) of Figure 3B).
The last panel of Figure 3B indicates a continuous
domination of Thais in the construction industry.
In the development context, two distinctive features with respect to the
importation of foreign workers to Taiwan deserve attention. Firstly, the growth of
foreign workers in the social and personal service sector is astonishing. The number
increased from 669 in 1992 to 17,847 by 1995, and then 53,392 by 1998.
It went
over 118 thousand in September 2002, more than 6 times that of the 1995 size. The
increase is surely related to the relaxation of import controls on the service sector.
This trend certainly also signals that Taiwan not only is entering the rank of
developed economies, but also is undergoing profound demographic and social
transitions.
It augurs that a further dependence on foreign labor might be
unavoidable in the near future.
- 19 -
Secondly, Taiwan has quickly become an important new destination of
migrant workers in the Southeast and East Asian region.
For example, Taiwan
imported only 3.5 percent of Thailand’s total registered labor exports in 1991, but the
proportion has reached 50 percent or more since 1994 (Tsay, 2002). Similarly, the
share of Filipino overseas workers in Taiwan was less than .001 percent in 1991
(Athukorala, 1993), but rose to 22 percent as of 1998. The result would be even
more starling if we consider only their labor exports to the East Asian countries; the
percentage is 62 percent and 45 percent in 1997 for Thailand and the Philippines,
respectively.
3.2.2 Foreign Direct Investment
Taiwan has been favoring inward FDI since the early days of development,
initially for the purpose of obtaining badly needed foreign exchange, then for
implementing export-oriented industrialization, and finally for transferring advanced
technology.
Various instruments such as fiscal and financial incentives, export
processing zones, and science-based industrial parks have been provided to facilitate
inward investment during the last four decades (Hoesel, 1996).
However, this
approach was not the case with respect to the outward investment prior to the
mid-1980s.
Taiwan made its first outward FDI in Malaysia as early as 1959. While the
“Regulations Governing the Screening and Handling of Outward Investment and
Outward Technical Cooperation Projects” was promulgated in 1962, the government
clearly tilted towards prohibition for worrying about capital flight and for the purpose
of saving precious foreign exchange. Only in the mid-1980s, when Taiwan’s foreign
reserves quickly soared and trade frictions with the United States loomed larger, did
the government’s attitude change. The deregulation of capital outflows in June 1987
- 20 -
proved to be a great watershed.
It permitted a business or an individual to send
annually up to US$5 million abroad without the government’s approval.
Figure 4
shows clearly that the upsurge of Taiwan’s FDI has been significantly facilitated by
this policy.
In 1987-1988 Taiwan’s outbound FDI flows and stocks surpassed
inbound FDI to become a net capital exporter.
Aside from snowballing foreign reserves and liberalization of capital control, a
couple of other factors directly or indirectly related to economic development also
contributed to driving Taiwanese firms abroad.
The most important ones include: (1)
the increase in wage rates and looming shortages of unskilled labor, (2) the rapid
appreciation of the Taiwan currency (New Taiwan Dollar: NT$) after 1985, (3)
deteriorating domestic investment climate due to a drastic increase in rental and land
prices, stricter environmental regulations, and the promulgation of the Labor Standard
Law in 1984, (4) rising protectionism in the US market and the loss of GSP status in
1989, and (5) liberalization of the FDI regime in most Southeast Asian countries and
China in the 1980s.
The fifth factor is pertinent to the distribution of Taiwanese FDI rather than
the general incentives for firms to invest abroad. The fourth factor increases the
prices of Taiwanese products in the US market, but it does not affect production costs.
Consequently, it should not affect the competitiveness of Taiwanese firms in markets
outside the USA.
In contrast, the other three factors directly undermined the overall
international competitiveness.
Since a substantial proportion of Taiwanese exports
was labor-intensive products before the early 1980s, the increase in wage rates and the
appearance of labor shortages were particularly detrimental.
The situation was
exacerbated by the abrupt appreciation of the NT$ after 1985. Using 1980 as the
base year, Figure 5 shows that the hourly rate of labor earnings in manufacturing shot
- 21 -
up 200 percent in 1990 and more than 400 percent in 1998 and after.
At the same
time, the NT$ appreciated rapidly (11 percent in 1985-86, 20 percent in 1986-87, and
another 11 percent in 1987-92).
To combine the effects of wage increase and currency appreciation, Figure 5
further expresses the hourly rate of labor earnings in terms of US$.
Compared to
1980, the hourly rate rose almost 300 percent in 1990, and more than 400 percent in
all years after 1992! To most SMEs specializing in labor-intensive products, the
increase in labor costs was not only substantial, but indeed devastating.
This view is
confirmed by the findings of Chen (1998) and two recent surveys conducted in 1996
and 1998.
It was found that, in both investigations, about two thirds of the firms
ranked the cheap labor as the main motivation for investing abroad (MOEA, 1998).
Being unable to import sufficient amount of foreign workers legally and unable to
upgrade production structure timely, many SMEs were forced to relocate their
production to the neighboring countries.
Like Japanese SMEs in the late 1960s and
after the mid-1980s, Taiwanese firms invested abroad were aiming at prolonging or
restoring the competitive advantage lost at home.
As of 1997, the stock of Taiwan’s approved outward FDI exceeded US$26
billion, with China accounted for more than 42 percent and the four Southeast Asian
countries Indonesia, Malaysia the Philippines and Thailand (ASEAN-4 hereafter)
accounted for some 12 percent. 9
For overall outward FDI in 1959-1997, the
investment in social and personal services has the largest share (53.6 percent), with
9
Theoretically, the realized data are more appropriate for analyzing issues such as the relationship
between FDI and ILM.
However, the lack of information on distributions by sector and/or host
country prevents the use of those data for detailed country-specific investigation.
As a result, the
approved data is used in the following discussion, supplemented by some survey reports.
- 22 -
the manufacturing industries coming in as the close second (44.7 percent).
However,
the manufacturing investment dominated in the cases of ASEAN-4 and China
(exceeding 90 percent each). This fact implies that Taiwan’s FDI in the nearby
developing countries differed significantly from that in other (mostly developed)
economies.
This point is consistent with the above argument of relocating
production for survival among Taiwanese manufacturing firms.
It is indeed an
important piece of information in studying the outward FDI from Taiwan.
To show the empirical relationship between investment and migration, Figure
4 presents the amount of realized Taiwanese outward FDI and the number of legally
imported workers in the manufacturing sector since 1980.
It is clear that outward
FDI gained momentum only after the mid-1980s when the increase in the domestic
wage rate and appreciation of the NT$ accelerated. The outward FDI peaked around
1989, plummeted, and rebounded after 1992-93.
There are certainly complex factors
responsible for the sudden decrease in the outward FDI around 1990.
The
indications showing that the government was to relax control on labor importation
have definitely played an important role.10
Notwithstanding ad hoc administrative
actions without legal basis, the business community did take the actions as precursors
of legalizing labor importation. Accordingly, the short-lived drop of outward FDI
around 1990 at least partially reflected the fact that firms in Taiwan were expecting a
sufficient amount of guest workers to come in so that they did not have to rush
overseas.
10
To ease the severe labor shortage, the government gave permission in October 1989 to the
construction companies involved in the Fourteen Key National Development Projects to import
guest workers.
With similar justifications, the government again permitted the importation of
15,000 guest workers for the manufacturing and construction industries in October 1991.
- 23 -
Given that most Taiwanese small and medium size enterprises (SMEs) were still
specializing in low-skilled labor exportable in the 1980s, Tsai and Tsay (1999)
maintain that the importation of guest workers and outward FDI are substitutes in
essence.
Why, then, did outward FDI rebound with the importation of guest
workers legalized after 1992?
Superficially, this empirical evidence seems to lend
some support to the assertion that Taiwanese outward FDI to some Southeast Asian
countries has positively affected the importation of guest workers from that particular
region (Lee, 1992). However, it has been shown by a formal model that, even with
substitutability between outward FDI and inward ILM, a positive relation between
them could be induced by restrictions on the importation of guest workers (Tsai and
Tsay, 1999).
3.3 The Taiwan-Japan Comparison
Japan has successfully gone through various phases of economic development
since the 1950s.
Following its comparative advantage at any particular point of time
and orchestrated by the government’s industrial policy, Japan has transformed itself
from an economy relying on labor-intensive (from early 1950s to the mid-1960s)
exportable to one producing the most advanced technology and R&D-intensive
outputs (the mid-1980s onwards). Mainly as a result of the remarkable success, the
structural change in the economy in general and in the labor market in particular has
put increasing pressure on the wage rates.
It is generally agreed that Japan achieved
full employment in the early 1960s, and the first sign of low-skilled labor shortages
showed up in the second half of the so-called Izanagi boom (1965 to mid-1970s).
However, contrary to its Western counterparts, Japan was able to maintain high
economic growth without importing foreign workers.
- 24 -
It resorted to mobilizing
self-employed manpower and labor force from the rural sector on the one hand, and
relocating labor-intensive manufacturing to neighboring countries such as Taiwan,
Hong Kong and South Korea on the other. While Japan has since then emerged as a
major overseas investor, only in the 1980s did Japan begin to face a serious foreign
worker problem.
In many aspects, the development experience of Taiwan is a replay of Japan’s,
though in a shorter time horizon and a smaller scale.
Both countries have to face
problems related to FDI and ILM at some phase of development.
Nevertheless, the
two countries diverge in their policies towards FDI and ILM. While Japan adopts
inward-FDI-inhibiting, outward-FDI-fostering regime, Taiwan has welcomed inward
FDI, but maintained quite negative attitude towards outward FDI until the mid-1980s.
As for the ILM, Taiwan runs the work permit system of labor importation with the
number of foreign workers under tight control, whereas Japan embraces denial
approach but uses the trainee program as the side door.
Figure 6A, 6B and 6C present the major results of examining the IMDP model
(Figure 1) with empirical data of Taiwan and Japan in 1980-2001. The figures
depict the relationship between the net outward FDI stock and the net outward ILM at
various development levels as indicated by the GNP per capita. At a rather high
level of economic development, Japan is clearly at Phase III of the IMDP, receiving
workers while sending net FDI outflows (Figure 6A). The available data reveal the
fact that in the 1980s (per capita GNP between US$ 12 and 26 thousand) Japan had
significant amount net outward FDI, but no net inward labor migration due to the
denial policy.
In the 1990s, when the per capita GNP was mostly US$ 30 thousand
or over, the net FDI stock stayed between US$ 200 and 300 billion. At the same
time, the net import of foreign workers became very substantial.
- 25 -
The number
doubled from 250 to 530 thousand in the two years of 1990-1992, and then increased
form 530 to 641 thousand in 1992-2001.
The case of Taiwan is shown in Figure 6B. With a much lower level of per
capita GNP than Japan, nevertheless, Taiwan had a similar experience of labor
importation as Japan in the 1990s. The island state started to officially receiving
migrant workers from abroad in 1991 while the per capita GNP was US$ 10 thousand.
The stock of net labor migration quickly reached 300 thousand in late 1990s, when the
per capita GNP increased to only US$ 12 thousand. For the net outward FDI, the
Taiwanese experience is different from that of Japan, in having a change from
negative to positive values. The turning point happened at the per capita GNP
around US$ 600 in 1986-1987.
In the 1990s, the net outward FDI stock increased
significantly from US$ 3 to 10 billion. If the migration data were more complete, it
is believed that a turning point should also be able to be observed. It probably
happened some time in the early 1980s when the per capita GNP was around US$
4-5,000.
It is true that Figures 6A and 6B do not show the first turning point of the
IMDP model (Figure 1), because the relatively high levels of development of Japan
and Taiwan.
If data from some less developed countries in Southeast Asia were
added, a more complete ILMP picture will certainly emerge. Some preliminary
findings from the data of Indonesia, Philippines, Thailand and Malaysia have clearly
suggested the existence of the first turning point (Tsai and Tsay, 2002).
In
consequence, the empirical evidence from the East and Southeast Asian economies
generally corroborates the prediction of the IMDP framework, despite the difference
is their attitudes and policies towards FDI and ILM. This finding in turn supports
the basic argument that both ILM and FDI reflect the working of market mechanism.
- 26 -
4. Summary and Concluding Remarks
This paper has introduced an investment-migration-development path (IMDP),
which was constructed putting together two strands of literature on international factor
movements (i.e., ILM and FDI). The basic thesis is that both FDI and ILM are
integrated parts of the global or regional development process.
The two movements
are the outcomes of market forces generated to equilibrate factor rewards across
countries at different phases of economic development.
While this phenomenon had
been sufficiently visible in the Western development history, it is most clearly
demonstrated in the East and Southeast Asian flying geese pattern of development.
The
study
further
applied
the
IMDP
framework
to
highlight
this
development-FDI-ILM nexus by examining the experiences of Taiwan and Japan,
which are at different phases on the development ladder.
As the leading goose, Japan successfully implemented its export-led,
labor-intensive development strategy in 1950s and 1960s. The success led to rising
local wages and shortages of unskilled labor because of persisting excess demand and
the emergence of labor market segmentation.
As a consequence, Japan gradually
lost its comparative advantage in labor-intensive products.
Japan was quite efficient
in restructuring the economy towards capital-intensive, skill-requiring production
where its new comparative advantage lay.
Nonetheless, disequilibrium in factor
markets persisted and the pressure for importing cheap foreign workers or relocating
production abroad mounted. As the channel of labor importation was not available,
the first wave of Japanese outward FDI thus landed the neighboring Taiwan, Hong
Kong and South Korea.
This wave of export-oriented, labor-intensive Japanese FDI fit the comparative
advantage of Taiwan very well. Following Japanese footsteps, Taiwan entered the
- 27 -
phase of producing and exporting labor-intensive light manufacturing in the
mid-1960s.
As what had happened in Japan, Taiwan had to face shortages of
unskilled workers in the early 1980s.
Mounting pressure in the labor market,
together with other unfavorable factors familiar from the experiences of other
developed countries, set the phase for outward FDI and labor importation. The
drastic revaluation of Japanese Yen and NT$ after the Plaza Accord of 1985
precipitated massive out-flows of FDI from Japan and Taiwan to Southeast Asian
countries and China.
However, outward FDI alone was not enough to restore equilibrium in factor
markets.
In the first half of the 1980s, Japan and Taiwan witnessed a growing
number of illegal workers within their borders.
These workers entered illegally to:
(1) satisfy the needs of the firms which were neither able to move abroad nor to
upgrade their technology, and (2) fill the vacancies of the dead-end and 3-D jobs shun
away by domestic workers, a direct result of economic development and rising living
standard.
Like Dunning’s IDP, the IMDP is not intended to be normative.
It simply
describes systematic relationships between patterns of ILM and FDI on the one hand,
and economic development on the other.
Nevertheless, given the strong policy
expectations involved in almost all the discussions surrounding FDI and ILM, it is
inevitable to touch upon some normative implications.
In this respect, it is
astonishing to find that FDI and ILM have been treated extremely asymmetrically
both in a global/regional context and in a national context.
Following international
trade, foreign direct investment has been greatly liberalized under the GATT/WTO
framework (and in essentially all regional arrangements) in the past two decades.
However, population flows across country borders continue to be under tight controls.
- 28 -
There are no comparable international institutions like WTO in trade and FDI, which
endeavor to the improvement of ILM.
In fact, there are no signs for one to come in
the foreseeable future.
At the national level, the asymmetry in policies with respect to FDI and ILM is
equally striking if not worse.
Contrary to the late 1960s and 1970s, today
developing countries, and developed ones as well, not only are receptive to but indeed
are competing for inward FDI.
It is true that some countries are still worrying
about losing scarce foreign exchange or being hollowed out due to massive outward
FDI.
But, in general, the trend toward further capital deregulation and liberalization
is clear-cut and irreversible.
In sharp contrast, public hostility to immigrants in
general, and unskilled labor in particular is in no sign of waning.
Importation of
unskilled workers remains a political taboo virtually in most countries.
The IMDP thesis introduced in this study and the experiences of Thailand and
Malaysia suggest that there is no way for countries at a higher position of the
development ladder to escape the ILM problem.
The same implication was also
learned from the experiences of Taiwan and Japan (Tsai and Tsay, 2000).
no lasting “exceptionalism” to the market forces.
There is
If the turnaround of FDI policy in
the 1980s provides any lesson for the other type of international factor movement, it
would be for the labor receiving countries to think about ILM more pragmatically and
more in economic terms.
In an age of declining costs of communication and
transportation, if unskilled workers cannot come in through the front door, they will
come in through the side door.
If they cannot come in through the side door, they
will always find the back door.
- 29 -
Figure 1: The Investment-Migration-Development Path
Phase
I
Phase
II
A
Phase
III
NOI
B
0
Level of Development
NOM
Net Outward Migration (ILM) ( ------ )
Net Outward Investment (FDI) (
)
- 30 -
Table 1: Foreign Direct Investment, Japan
Year
(millions of US dollar)
Stock b
Inward
Outward
a
Flows
Inward
Outward
1961
47
104
1962
46
62
1963
88
125
1964
70
44
1965
51
105
1966
43
101
1967
37
137
1968
93
228
1969
56
230
1970
113
397
1971
210
417
1972
165
852
1973
-28
2,200
1974
213
1,839
1975
207
1,976
1976
89
1,871
1977
31
1,725
1978
10
2,584
1979
290
2,665
1980
252
2,993
3,270
19,610
1981
160
4,170
1982
400
4,100
1983
380
3,370
1984
-10
5,800
1985
620
6,330
4,740
43,970
1986
200
12,220
1987
1,170
19,520
1988
-520
34,210
1989
-1,060
44,160
1990
1,760
48,050
9,850
201,440
1991
1,290
31,620
1992
2,760
17,390
1993
120
13,830
1994
910
18,090
1995
40
22,510
33,531
238,452
1996
200
23,440
1997
3,200
26,060
27,080
271,905
1998
3,270
24,620
30,272
296,056
1999
12,741
22,743
33,555
248,778
2000
1,477
32,886
31,960
281,664
Sources: a. 1961-1980, Ozawa(1996) ; 1981-1998, Balance of Payments
Yearbook, various years.
b. World Investment Report, 2001.
- 31 -
Figure 2: Foreign Residents at the End of Year by Nationality, 1980-2001
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
1980
1985
Total
Sum*
1990
Year
Philippines
Indonesia
1995
Thailand
2000
Japan
Note: * The sum of Indonesia, Philippines, Thailand, Vietnam and Malaysia (the major source countries foreign workers in Taiwan).
- 32 -
Table 2: Foreign Contract Workers in Taiwan by Nationality, 1991-Sept. 2002
Year
1991
Both Sexes
Male
Female
Total
2,999
-
1992
Both Sexes
Male
Female
1993
Both Sexes
Male
Female
Indonesia
Malaysia
Philippines Thailand Vietnam
-
-
-
15,924
-
-
-
-
-
-
97,565
-
-
-
-
-
-
1994
Both Sexes 151,989
Male
Female
-
6,020
-
2,344
-
38,472
-
105,152
-
-
1995
Both Sexes 189,051
Male
Female
-
5,430
-
2,071
-
54,647
-
126,903
-
-
1996
Both Sexes 236,555
Male
Female
-
10,206
-
1,489
-
83,630
-
141,230
-
-
1997
Both Sexes 248,396
Male
Female
-
14,648
-
736
-
100,295
-
132,717
-
-
1998
Both Sexes 270,620
Male
199,061
Female
71,559
22,058
17,800
4,258
940
834
106
114,255
60,197
54,058
133,367
120,230
13,137
-
1999
Both Sexes 294,967
Male
167,880
Female
126,956
41,224
11,712
29,512
158
125
33
113,928
37,855
76,073
139,526
118,188
21,338
131
12
119
2000
Both Sexes 326,515
Male
163,444
Female
163,071
77,830
12,126
65,704
113
99
14
98,161
30,100
68,061
142,665
118,563
24,102
7,746
2,556
5,190
2001
Both Sexes 304,605
Male
145,273
Female
159,332
91,132
10,336
80,796
46
41
5
72,779
23,284
49,495
127,732
107,635
20,097
12,916
3,977
8,939
Sept. 2002 Both Sexes 307,567
Male
140,209
Female
167,358
97,359
9,943
87,416
26
22
4
67,908
22,167
45,741
119,675
100,909
18,766
22,599
7,168
15,431
Source:
Monthly Bulletin of Labor Statistics. 116 (Sept. 2002): 170, Table 11-4.
Taipei: Council of Labor Affairs, Executive Yuan
- 33 -
Table 3: Foreign Contract Workers by Nationality and Industry, Sept. 2002.
Industry
Total
Agriculture(Crewmen)
Manufacturing
Food manufacturing
Textile mill products
Wearing apparel
Leather & fur products
Wood & bamboo products
Furniture & fixtures
Pulp, paper & paper
products
Printing processing
Chemical matter
Chemical products
Petroleum & Coal products
Indonesia
Malaysia
Philippines
Thailand
Vietnam
Total
Number
%
Number
%
Number
%
Number
%
Number
%
Number
%
97,359
100.00
26
100.00
67,908
100.00
119,675
100.00
22,599
100.00 307,567
100.00
815
601
14
1,064
0.84
0.00
0.89
0.01
4.71
2,494
0.81
11,256
23
46,874
91,941
11,097
11.56
88.46
69.03
76.83
49.10 161,191
52.41
358
1,159
2,671
334
0.37
0.00
1.71
2.23
1.48
4,522
1.47
2,018
2
4,525
19,677
2,406
2.07
7.69
6.66
16.44
10.65
28,628
9.31
163
797
1,060
469
0.17
0.00
1.17
0.89
2.08
2,489
0.81
112
221
1,100
137
0.12
0.00
0.33
0.92
0.61
1,570
0.51
378
132
665
30
0.39
0.00
0.19
0.56
0.13
1,205
0.39
8
455
27
171
124
-
0.01
0.47
0.03
0.18
0.13
0.00
1
-
0.00
0.00
0.00
0.00
3.85
0.00
37
679
43
323
307
-
0.05
1.00
0.06
0.48
0.45
0.00
186
2,288
247
1,220
1,061
-
0.16
1.91
0.21
1.02
0.89
0.00
1
90
6
106
162
-
0.00
0.40
0.03
0.47
0.72
0.00
232
3,512
323
1,820
1,655
0
0.08
1.14
0.11
0.59
0.54
0.00
141
768
419
917
1,227
0.14
0.79
0.43
0.94
1.26
2
2
1
3
0.00
7.69
7.69
3.85
11.54
413
1,968
985
1,128
2,865
0.61
2.90
1.45
1.66
4.22
3,663
6,635
4,161
7,763
12,509
3.06
5.54
3.48
6.49
10.45
168
838
529
341
622
0.74
3.71
2.34
1.51
2.75
4,385
10,211
6,096
10,150
17,226
1.43
3.32
1.98
3.30
5.60
Machinery & equipment
381
1,048
4,865
269
0.39
0.00
1.54
4.07
1.19
Electrical & electronics
2,878
11
27,303
12,984
3,978
2.96
42.31
40.21
10.85
17.60
Transportation equipments
355
1,062
5,534
237
0.36
0.00
1.56
4.62
1.05
Precision instruments
17
558
168
88
0.02
0.00
0.82
0.14
0.39
Miscellaneous industrial
339
1
1,321
3,484
286
0.35
3.85
1.95
2.91
1.27
products
Construction
75
1
395
24,879
349
0.08
3.85
0.58
20.79
1.54
Social & Person services
85,213
2
20,038
2,841
10,089
87.52
7.69
29.51
2.37
44.64
Source: Monthly Foreign Contract Workers Statistics, End of Sept. 2002, Table 13. Taipei: Council of Labor Affairs, Executive Yuan.
6,563
47,154
7,188
831
5,431
25,699
118,183
2.13
15.33
2.34
0.27
1.77
8.36
38.43
Rubber products
Plastic products
Non-metallic mineral
Basic metal industries
Fabricated metal
- 34 -
Figure 3A: Industrial Composition (%) of Contract Workers, 1995, 1998 and 2002
(1) All Countries
(2) Thailand
80.0
90.0
70.0
80.0
70.0
60.0
60.0
50.0
50.0
40.0
40.0
30.0
30.0
20.0
20.0
10.0
10.0
0.0
0.0
1995
1998
2002
1995
(3) Indonesia
1998
2002
(4) Philippines
100.0
80.0
90.0
70.0
80.0
60.0
70.0
60.0
50.0
50.0
40.0
40.0
30.0
30.0
20.0
20.0
10.0
10.0
0.0
0.0
1995
1998
2002
1995
- 35 -
1998
2002
Figure 3B: National Composition (%) of Contract Workers, 1995, 1998 and 2002
(1) All Industries
(2) Manufacturing
80.0
80.0
70.0
70.0
60.0
60.0
50.0
50.0
40.0
40.0
30.0
30.0
20.0
20.0
10.0
10.0
0.0
1995
1998
0.0
2002
1995
1998
2002
(4) Construction
(3) Service
100.0
100.0
90.0
90.0
80.0
80.0
70.0
70.0
60.0
60.0
50.0
50.0
40.0
40.0
30.0
30.0
20.0
20.0
10.0
10.0
0.0
0.0
1995
1998
2002
1995
- 36 -
1998
2002
Figure 4： Outbound Foreign Direct Investment and Imported Guest Workers in the
Manufacturing Sector, Taiwan, 1980-2001.
Workers
(thousand)
FDI
(Million US$)
8,000
400
7,000
350
6,000
300
5,000
250
4,000
200
3,000
150
2,000
100
1,000
50
0
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
Foreign Workers in Manufacturing (Right Scale)
Realized FDI (Left Scale)
Sources:
1. Monthly Bulletin of Labor Statistics, Taiwan ,Taipei: Council of Labor Affairs, January 2003.
2. Financial Statistics, Taiwan District, ROC: The Central Bank of China, January 2003.
- 37 -
2000
Figure 5: Indices of Average Hourly Rate of Pay
in Manufacturing and Exchange Rate
700
600
500
400
300
200
100
0
1980
1982
1984
1986
Manufacturing
1988
1990
Exchange Rate
1992
1994
Manufacturing A
Source: Taiwan Statistical Data Book, 2002
1. Base 1980 = 100
2. Exchange Rate = NT$ per US$
3. Manufacturing A is Hourly Rate of Pay index from that Expressed in Term of US$
- 38 -
1996
1998
2000
Figure 6A: Net Outward FDI, Net Outward ILM and Per Capita GNP, Japan, 1980-2001
300,000
200,000
100,000
Per Capita GNP
(in US$)
0
11,792 12,283 11,114 11,885 12,268 12,619 18,260 22,206 26,481 25,728 25,767 28,315 30,012 34,292 37,325 41,490 37,008 33,232 32,545 32,717 38,838
-100,000
-200,000
-300,000
-400,000
-500,000
-600,000
-700,000
Net Outward FDI (in Million US $)
Net Outward ILM (in Person)
Source: Japan Statistical Yearbook, Statistics Bureau of Japan, various year; International Financial Statistics Yearbook, various year; and
Hayase (2002).
Note: ILM of 1991 is lost.
- 39 -
Figure 6B: Net Outward FDI, Net Outward ILM and Per Capita GNP, Taiwan, 1980-2001
12,000
10,000
8,000
6,000
4,000
2,000
Per Capita GNP
(in US$)
0
3,651
3,710
3,565
3,722
4,139
4,284
5,284
6,610
7,899
9,142
9,373
9,994
11,317
11,405
12,044
12,686
12,860
-2,000
-4,000
Net Outward ILM( in Hundred Person)
Net Outward FDI(in Million US $)
Source: Taiwan Statistical Data Book, 2002; World Investment Report, various year; and Table 2 of this paper.
- 40 -
12,963
11,486
12,476
13,610
12,332
References
Abella, Manolo and Hiromi Mori, 1996, “Structural Change and Labor Migration in
East Asia,” in: David O’Connor and Leila Farsakh (eds.), Development
Strategy, Employment and Migration: Country Experiences, Paris: OECD,
pp.35-62.
Athukorala, Prema-chandra, 1993, “Statistics on Asian Labor Migration: Review of
Sources, Methods and Problems,” in: International Labor Migration Statistics
and Information Network in Asia, New Delhi: International Labor
Organization, pp.44-113.
Athukorala, Prema-chandra and Chris Manning, 1999, Structural Change and
International Migration in East Asia: Adjusting to Labor Scarcity, Oxford
University Press.
Chen, Tain-Jy (ed.), 1998, Taiwanese Firms in Southeast Asia: Networking Across
Borders, Edward Elgar: Cheltenham, UK.
Dunning, John H. and Rajneesh Narula, 1996, “The Investment Development Path
Revisited,” in: John H. Dunning and Rajneesh Narula (eds.), Foreign Direct
Investment and Governments: Catalysts for Economic Restructuring,
Routledge: London, pp.1-41.
Freeman, Gary P. and Jongryn Mo, 1996, “Japan and the Asian NICs as New
Countries of Destination,” in: Peter J. Lloyd and Lynne S. Williams (eds.),
International Trade and Migration in the APEC Region, Oxford University
Press: Melbourne, pp.156-173.
Hayase, Yasuko, 2000, “International Migration and Human Resource Development
in Japan,” in: Michio Kimura and Yasuko Hayase (eds.), Proceedings of the
International Workshop on International Migration and Human Resources
Development in the APEC Member Economies, Institute of Developing
Economies, JETRO, Chiba, Japan, pp.70-110.
Hayase, Yasuko, 2002, “Japan’s Immigration Policy, Trend and Characteristics of
Recent Immigration to Japan,” Japan Study Seminar, Sept. 19 2002, Institute
of Developing Economies.
- 41 -
Hill, Hal, 1990, “Foreign Investment and East Asian Economic Development,”
Asian-Pacific Economic Literature, 4(2), pp.21-58.
Hoesel, van Roger, 1996, “Taiwan: Foreign Direct Investment and the Transformation
of the Economy,” in: John H. Dunning and Rajneesh Narula (eds.), Foreign
Direct Investment and Governments: Catalysts for Economic Restructuring,
Routledge: London, pp.280-315.
Lee, Joseph, 1992, “Capital and Labor Mobility in Taiwan,” in: Gustav Ranis (ed.),
Taiwan: From Developing to Mature Economy, Westview Press: Boulder,
pp.306-355.
MOEA, 1998, Survey Report of Manufacturing Firms’ Foreign Investment,
Department of Statistics, MOEA: Taipei. (in Chinese)
Mori, Hiromi, 1997, Immigration Policy and Foreign Workers in Japan, Macmillan
Press Ltd, London.
Ozawa, Terutomo, 1992, “Foreign Direct Investment and Economic Development,”
Transnational Corporations 1, No. 1, pp.27-54.
Ozawa, Terutomo, 1996, “Japan: The Macro-IDP, Meso-IDPs and the Technology
Development Path (TDP),” in: John H. Dunning and Rajneesh Narula (eds.),
Foreign Direct Investment and Governments: Catalysts for Economic
Restructuring, Routledge: London, pp.142-173.
Pang, Eng Fong, 1994, “An Eclectic Approach to Turning Points in Migration,” Asian
and Pacific Migration Journal 3(1), pp.81-91.
Sauvant, Karl P., Padma Mallampally and Persephone Economou, 1993, “Foreign
Direct Investment and International Migration,” Transnational Corporations
2(1), pp.33-69.
Tsai, Pan-Long and Ching-Lung Tsay, 1999, “Foreign Direct Investment and Labour
Migration: Substitute or Complements?” The Taipei International Conference
on Labor Market Transition and Labour Migration in East Asia. Taipei: The
Institute of Economics, Academia Sinica. June 1999.
Tsai, Pan-Long and Ching-Lung Tsay, 2000, “Economic Development, Foreign
Direct Investment and International Labor Migration: The Experience of Japan,
Taiwan and Thailand,” paper presented at the Symposium on Experiences and
- 42 -
Challenges of Economic Development in Southeast and East Asia, October
2000, Taipei, Taiwan.
Tsay, Ching-Lung, 1992, “Clandestine Labor Migration to Taiwan,” Asian and
Pacific Migration Journal 1(3-4), pp.637-655.
Tsay, Ching-Lung, 1995a, “Taiwan,” ASEAN Economic Bulletin 12(2), pp.175-190.
Tsay, Ching-Lung, 1995b, “Taiwan: Labor Shortage,” in: Gordon L. Clark and Won
Bae Kim (eds.), Asian NIEs and the Global Economy, The Johns Hopkins
University: Baltimore, pp.197-216.
Tsay, Ching-Lung, 2000, “Trends and Characteristics of Migration Flows to the
Economy of Chinese Taipei,” in: Michio Kimura and Yasuko Hayase (eds.),
Proceedings of the International Workshop on International Migration and
Human Resources Development in the APEC Member Economies, Institute of
Developing Economies, JETRO, Chiba, Japan, pp.131-166.
Tsay, Ching-Lung, 2002, “Labor Migration and Regional Changes in East Asia:
Outflows of Thai Workers to Taiwan.” Southeast Asian Studies 40 (3),
pp.138-160 (Special Issue on Population and Globalization edited by Andrew
Mason, Summer LaCroix and Abe Shigeyuki). Kyoto, Japan: Center for
Southeast Asian Studies, Kyoto University. Dec. 2002.
United Nations (UN), 1996, Foreign Direct Investment, Trade, Aid and Migration,
United Nations Publication: Geneva.
United Nations (UN), 1999, World Investment Report 1999: Foreign Direct
Investment and the Challenge of Development, United Nations Publication:
New York and Geneva.
Vernon, Raymond, 1966, “International Investment and International Trade in the
Product Cycle,” Quarterly Journal of Economics 80, pp.190-207.
Watanabe, Osamu, 2002, “Prospects for the Japanese Economy: The accelerating
Drive for the Japanese Structural Reform and Moves towards Economic
Integration in East Asia,” Chatham House Speech, Dec. 11 2002, Japan
External Trade Organization (JETRO).
- 43 -