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International Migration in the East Asia: A growing challenge for Japan -- Yasushi Iguchi

In t e r n a t i o n a l M i g r a t i o n i n t h e E a s t A s i a :
A g r o w i n g c h a l l e n g e f o r J a p a n

Y a s u s h i I g u c h i
K w a n s e i G a k u i n U n i v e r s i t y


1. Introduction 1

2. Migration policy as a policy-mix: the discussion in the 1990s 2

3 The economic development in the East Asia and international migration 3

4 Recent trends in international migration in Japan 5

5. Movement of the highly skilled in the Japanese multinationals 9

5. Concluding remarks 12

Bibliography 13


1 . Introduction

The growing international migration in the first half of the 1990s had been a serious challenge for the governments of the developed countries, as their domestic laws and policies concerning migration were driven to disfunctioning, so long as the sending pressures from developing countries had been very strong. Fortunately, the inflow of foreign population into developed countries, especially that of asylum seekers or illegal migrants seemed to slow down from the year 1993. This doesnít mean that measures taken by each country or bilateral and multilateral cooperation in the field of migration had been effective enough. On the contrary, the potential of international migration is still growing especially in the East Asia, as monetary crisis broke out in July 1997 and the economies are under strong deflationary pressures. However, domestic policies and international co-opoeration in the field of international migration have not been well coordinated in the East Asia. The governments should seek for more effective combination of migration policies, or a policy-mix concerning international migration on a firm basis of international cooperation.

In this paper, first, we consider what kind of "policy-mix" should be sought in the field of international migration. Second, we discuss policy issues in the East Asia in relation to economic development and then examine present situation and effects of policy measures in Japan with some theoretical considerations on the role of intermediaries. Then we make comparative analysis on the movement of highly skilled in the Japanese multinationals from the standpoint of transfer of technologies. At the end, we summalize the discussions and draw some con-clusions.

2. Migration policy as a policy-mix: the discussion in the 1990s
Through the policy discussions in the OECD, policy makers have acknowledged the concept of "reduction of sending pressures" as a new key-word at the begining of the 1990s, although it is very difficult to achive. They also shared three categolies of migration policies which are formulated through the discussions of the OECD (OECD 1993 and 1997).
Firstly, there are measures for selection and programming of migration flows, namely border control, landing and immigration inspection, work permits as well as some criterion of accepting foreigners, numerical quota, labor market test, sanctions against violations, deportation and encouragement of returning to home countries etc.

Secondly, there are measures for integrating foreign or migrant workers and their families in the host country, namely, equal access to official services, anti-discrimination in employment between nationals and foreigners, equal treatment between nationals and foreigners in working conditions, social security education social welfare and protection of foreigners from criminal cases etc.

Thirdly, there are measures to mitigate sending pressures of workforce or to prevent massive outflows from sending country usually based on international cooperation, including measures to contribute to creation of employment in sending country through liberalization of trade, facilitation of direct investment, or measures to improve living conditions through investment in infrastructures and medical or educational services as well as measures to stop outflow at the national border etc.

Until the mid-1980s, the migration policy was formulated as a combination of the first and second categories. But, as the effectiveness of these measures substantially declined as enormous amount of asylum seekers and illegal migrants flowed into developed countries since the second half of the 1980s. Nowadays, it has become evident that the first and second measures cannot be effective enough without taking the third measures.

In addition to these three groups, there appeared the forth measures which liberalize or facilitate movement of labor force which falls under a certain kind of highly skilled workers or a certain region of economic integration.

It is debatable whether economic development in developing countries leads to reduction of surplus labor and elimination of sending pressures from these countries. Anyway, it has become self-evident that developed countries cannot cope with the challenges of international migration without mitigating sending pressures of developing countries.

In the next chapter, we should examine whether the policy-mix approach is applicable in the East Asian region. If it has not been successful, what is the cause of mismanagement of migration policies? What should be done to overcome difficulties in implementing migration policies?

3 The economic development in the East Asia and international migration
The reduction of sending pressures and improvement of selection and programming of flows as well as integration foreigners have been experimented to cope with the growing pressures of international migration especially in Japan during the period of 1985 to 1995.
The Japanese manufacturing industries have spurred to invest overseas to relocate their production and created employment opportunities in the East Asian countries while they have reduced domestic employment and they had to mobilize workforce from declining division to growing division. This policy-mix meant, on the one side, reduction of excess labor demand domestically and, on the other side, creation of employment opportunities overseas. The Japanese government amended the Immigration and Refugees Control Act as well as other regulations to raise transparency of the acceptance of foreigners and strengthen the control of illegal workers in 1990. Although the Act facilitates inflow of foreign nationals of Japanese descent, foreign unskilled workers are not permitted while entry of the highly skilled workers are fascinated .The local governments have expanded their measures to integrate foreign workers and their families especially where foreign population has grown rapidly (MOL 1993).

But, this policy-mix was not always welcomed domestically. The process of relocating industries overseas has been negatively evaluated as "hollowization" of domestic industries. In this process, enterprises should undergo severe structural change and undertake technological innovation without interruption and solve employment problems in establishment, which should be shutdown or consolidated. The structural adjustment as a part of the policy-mix concerning international migration is associated with high economic and social cost concerning adjustment in industry and labor market (Iguchi 1996a and 1996b).

Moreover, observing the outflow of surplus labor from developing countries, the stereotype process of migration from rural area via urban cities to overseas do not explain a large part of growing international migration in the East Asia. Growing number of labor emigration occurs directly from rural area to overseas. Such rural areas with high potential of emigration have almost nothing to do with the foreign direct investment and local employment creation. It is not possible in such cases to expect foreign direct investment to reduce sending pressures of workforce.

Although the income level in urban areas have been improved through economic development, the income gap between urban and rural areas are expanding in the ASERAN 4 and China. The growing income gap within the country might resulted in growing emigration to Japan directly from rural areas with assistance of intermediaries.

In Malaysia, electronic industry has absorbed much amount of labor and shortage has become severer in traditional industries like plantation. The amount of foreign labor is estimated to be as high as 1.7 million in 1996. Nowadays Malaysia is the largest receiving country in the East Asia (Table1).

In Thailand, the demand for labor has been explosively grown in the Bangkok area, because of concentration of inward direct investment and expansion of real estate investment. But, the income gap between the NorthEast region and the Bangkok region has been widening for the past ten years. The labor market does not function smoothly to alleviate regional wage gaps. In the sector of agriculture and forestry, labor shortages of Thai workers has becoming severe and resulted in large inflow of workers from Myanmar and other neighboring countries. As the education and skill level of young workers are still low, there remains shortage of skilled manpower and as many as 50 thousand expatriates have been accepted per year, while 200 thousand unskilled Thai workers per year are going abroad. In 1996, unskilled illegal workers from neighboring countries estimated to be 730 thousand in 1996.

In Indonesia is famous for its population over 170 million. Concerning workforce, nearly two thirds of its labor force are working in the informal sector. Legal export of manpower amounted to be 176 thousand in 1994-95 period, while illegal working in Malaysia was estimated to be from 0.5 to 1 million. The Government has changed its policy recently from neutral to active concerning labor export.

In the Philippines, although industrialization has not been successful for the last decades because of political uncertainties or lacks of infrastructures especially that of electricity, the situation has been improving rapidly. But, the income disparities between the Manila metropolitan area and the peripheries islands are about ten times as big as the income level in those island. The labor export has long history and the departures of Filipino workers abroad reached from 600 to 700 thousand persons per year and the total number of Filipino workers abroad is estimated to be 4.2 million in 1995.

In China, estimated excess labor in rural area is amounted to be 150 million and redundant workers in state enterprises may be 20 million in 1995. The income gap between the coastal area and Shanghai is narrowing year by year while that between the mountainous area and Shanghai is still nine times as big as the income per capita in that area. The Chinese Government has allowed movement of rural population to cities with one year or two years rotation and several millions of rural population are working in cities especially construction and manufacturing industries. Through the official labor-export scheme, 285 thousand workers went abroad in 1996, while foreign workers associated with inward direct investment to China amounted to be 80 thousand (JIL 1998).

While the economic growth in the East Asia had been high, it cannot be said that economic development had resulted in reduction of unorderly international migration of surplus labor, because there exist a large income disparities within each country as well as between countries and that the gaps age even growing. The policy-mix approach in the East Asia has not been constructed on a close international co-operation. Without improving regional economic discrepancy or functioning of domestic labor market and measures against illegal intermediaries as well as prevention of illegal outflows from respective areas, it is not possible to mitigate sending pressures from specific regions even if there exist conditions of sustainable economic growth and employment creation.

It should also be pointed out that Japan, Korea, Singapore and Hong Kong China are "sending countries" of the highly skilled and the number is not negligible. Technology transfer related to foreign direct investment may be the main reason of international migration from developed to developing countries. We will be analyzing such movement within Japanese multinationals in the chapter 5.

4 Recent trends in international migration in Japan
(1) Entries of foreign nationals
The number of nationals who entered Japan in 1997 excluding those who entered Japan with re-entry permit amounted to 3,80,976. This figure is much bigger than the previous year (+11.7% or +399,711 persons). The main reason of such increase should be attributed to that of "temporary visitor", especially for the purpose of sightseeing with the background of devaluation of the Yen.

According to home countries, 58.9% of the new entrants come from Asia. The largest share was occupied by South Korea, followed by Taiwan (China), US, Hong Kong (UK), Mainland China and United Kingdom.

(2) Foreign population

In 1997, the number of registered foreign nationals amounted to 1,482,707 by 4.8% more than the previous year. The share of registered foreign nationals in the total population is 1.18%).

The highest share of registered foreign nationals according to nationality is

occupied by Korea (645 thousand), followed by China(including Taiwan, 252 thousand), Brazil(233 thousand), the Philippines (93thousand) etc. To sum up nationals, 1,086 thousand or 73.3% of the total foreign nationals are from Asia and 285 thousand or19.2% from South America.

According to status of residence, permanent resident (including special permanent resident stipulated in the Special Law) stands for 625 thousand. The number of permanent residents is in the declining tendencies. Those who hold status of residence with the objectives of working amounted to 107,298(+9.2%).

(3) Employment of foreign workers

In Japan there is no official statistics, which may cover foreign workers as a whole. According to the estimates by the author, the number of foreign workers excluding those with permanent resident status has increased rapidly in the second half of the 1980s, it is gradually increasing even though the low growth of the Japanese economy. In the Year 1997, the estimated number amounted to 660 thousand, which corresponds to 1.2% of the total employees. The characteristics of the foreign workers are summarized as follows.

Firstly, nearly the half of the foreign workers is illegal overstayers, who are estimated to decline gradually but the number of crackdown is reduced. More than half of the illegal overstayers is estimated to be working for more than two years and it is becoming more and more difficult to find them.

The estimated number of overstayers is nearly 270 thousand at the beginning of 1998. The sending countries are Thailand, Korea, China, the Philippines and other Asian countries and Peru. The most of them are countries with economic discrepancies within the countries or a large amount of surplus labor except the case of Korea. The illegal workers cracked down are mainly construction or production for male and hostesses or service workers for female. To reduce dependence of domestic industries on illegal workers and to avoid social problem and violation of human right, it is important to achieve steady decline of over stayers. However, there is a tendency towards long-term overstay and growing involvement of criminal organizations in illegal working, Therefore, it is becoming urgent to prevent illegal working and its recurrence on a basis of international cooperation. Practically speaking, more cooperation between administration and NGOs are indispensable to protect workers from trafficking.

Secondly, the inflow of foreign workers of Japanese descent mainly from the Latin-American countries are increasing, although the labor market situation is becoming worse with total unemployment ratio 4.3% in August 1998.

trics, transport machinery and manufacturing of food etc (Table 3).

According to case studies, the ratio of foreign workers of Japanese descent is remarkably high in shift work and night work, while in general terms, the dependency is as high as 10 per cent of manufacturing firms which employ foreign workers. This ratio is much less than that in the United States (Kuwahara Y. and Cornelius W. 1998)

In Sao Paulo, Brazil, there are hundreds of private intermediaries, which are exchanging job information with Japanese counterparts on line. In Japan, there are several well-known cities like Hamamatsu, Oota and Ooizumi, where Brazilian communities are established. Recently, growing number of Japanese Brazilians live in Japan and sometimes make travel to Brazil. The Japanese and Brazilian Governments have agreed in 1992 to protect Japanese-Brazilians by acknowledging the official recruitment channel through the Japan-Brazil Employment Center in Sao Paolo. This channel is linked to the network of public employment service in Japan.

Thirdly, the inflow of foreign workers with status of residence for working has been relatively stable. The number has been around 100 thousand for the past three years, although the regulation concerning entertainers had been tightened since 1996.

According to the basic principle of the Japanese Government, those foreign workers who have technology and knowledge are accepted as much as possible. But because inward direct investment to Japan is so small, that the number of those foreigners who acquire status residence for working has not grown as it had been expected. The main status of residence for the highly skilled workers are "Investor and manager", "Intra-corporate transfer", "Technology" and so forth.

Among them, about 2500 foreigners per year changed their status of "College student" and acquire status of residence for working to have some business experience in Japan. Alongside with facilitation of inward direct investment to Japan, the number of highly skilled workers will be growing and placement service for highly skilled workers should be strengthened on a basis of international cooperation. A discussion concerning institutionalization of internship program is just under way.

Fourthly, the inflow of trainees had slowed down reflecting stagnant economic activity. Among them, those trainees who changed their status to "Designated Activity" and became technical intern trainees have been growing.

The Technical intern traineeship program was introduced in 1993 to extend traineeship program (TITP). The Technical intern trainees are workers who have passed official skill test and are able to engage in working to brush up their skills on the job. They can naturally earn wages and are covered by social security systems applicable to Japanese workers. The duration of stay including period of trainee is three years as maximum. In the fiscal year 1997, the number of Technical intern trainees who have changed their status amounted to more than 6 000. This may be reflecting the growing recognition of the TITP among small and medium sized enterprises in Japan as well as the growing needs to send trainees especially from China and Indonesia. There are concerns that as the result of the monetary crisis and restructuring of industries in these countries, more trainees would be sent to Japan reflecting surplus labor in these countries. The management of TITP would become more and more difficult as Technical intern trainees who fled away in Japan is steadily increasing. This problem is intensively discussed in another occasion (Iguchi,1998b).

Anyway, it is an important task for Japan to cooperate with the East Asian economies through technology transfer or human resources development so as to restore sound economic growth in this area. The TITP should play an important role to realize international cooperation through technology transfer.

(4) Theoretical consideration on the recruitment process of foreigners

In 1998, the unemployment ratio in Japan has reached 4.3% in July, which is the highest record since 1953. The labor market situation in Japan is not always advantageous for foreign workers at present. However, illegal migrants are growing in number and pressures to enter Japan for working does not decline remarkably. At the same time, involvement of private intermediaries are even growing according to the statistics of reporting system and the number of vacancies for foreign workers filled through public employment service is also declining.

To understand this phenomenon, we are trying formulate theoretical explanation. We assume that the role of private intermediaries is to enhance "probability of workingî in a certain period (fore example for a month). Naturally, when a person has concluded an employment contract before coming to Japan, he or she has 100 % "Probability of working" during the stay.

We assume that the wage of a foreign worker who is working in a rural area is W, the wage of the foreign worker who might earn in Japan is W. The "Probability of working" in Japan time t is q (t) when

0

0 Nÿ 0

0 0

0 0

0 Tÿ 0

0

0 Nÿ 0

0 0

0 Tÿ 0

-ÿ

0 0 0

-ÿ nverse of the wage gap between Japan and the home country, the foreign worker will be coming to work in Japan with the assistance if intermediary.

If the probability of working is very low or unemployment situation is serious in Japan, the length of stay n should be long enough; otherwise it is very difficult to fulfill the condition.

-ÿ

0 0

-ÿ 0

0

national migration directly from rural area in the home country to Japan. But, we should also pay much attention to the cost of C and T. the probability of working and the duration of stay in Japan should be large enough to compensate the cost of traveling and the premium for the intermediary. This condition is not easy to meet.

0

0 0 0 0

0

0 0_0_0_0_0 0 0 0 0 0

0 0

0 _0 0 0 0 0 0

0 0

0 0 0 0 0 0

0 0

0 0 0_0 0 0 0 0 0 0 0

0 0

0 0_0 0 0 0 0 0

0 0

0 0 0 0

0

0

0 0 0 0

0

0

0

Movement of the highly skilled in the Japanese multinationals
As mentioned earlier, the movement of the highly skilled is another important phenomenon in the East Asia. To explore the mechanism of the movement, I have been conducting an interreginal study on transferees in Japanese multinational enterprises. Concerning conceptual problems and background of such study, it is requested to refer to the other paper (Iguchi 1997c). Here we concentrate ourselves to comparative study on regulations concerning highly skilled and estimation of "migration function".
(1) Regulations concerning the highly skilled

With the risk of simplification, the regulations on entry of the highly skilled workers in the Asia-Pacific region is summarized (Table4).

There may be four types of regulations in this region. Firstly, open principle for highly skilled workers, which can be found in Hong Kong and Singapore. It means no positive or negative lists, but does not necessary mean that door for highly skilled is totally open. In some cases, highly skilled people should get wage or salary, which exceeds a certain ceiling. Officially, there is no quota or labor market test, but discretionary measures taken by immigration authority are not excluded. For example, in Australia, the labor agreement between social partners should influence the maximum number of foreign workers in certain occupations.

The next type is institutionalized "intra-corporate transfer" as well as additional positive list for highly skilled workers. In these cases, neither quota nor labor market test is applied for example in Japan and Korea. But, in the US, quota is also applicable to some visa status, taking into consideration of labor market situation according to occupations.

The third type is labor market test combined with ban in some occupation or sector. The availability of the highly skilled worker should be tested by immigration or labor market authorities, if the worker would like to work in sectors or occupations, which are not banned for foreigners. The test is in principle a procedure with which for a certain vacancy notice there is no appropriate native workers who apply for the vacancy. In other cases a company should submit a document which verifies that the foreign worker is indispensable or not substitutable with national workers.

The forth type is characterized as issuance of work permit on the condition that the local staff should be trained to substitute the foreign worker in the future or the number of foreign workers are limited to a certain number. If he company cannot localize the position in a certain period, the company may be ordered to pay a certain kind of levy.

In the sum, the regulation on highly skilled workers is also different from one county to another. Labor market test and quota still exist in many countries. A certain category of highly skilled workers, including professionals, are subject to other qualifications or are totally banned. In addition, in some countries, employment contract in the host country is a prerequisite.

(2) Interregional-analysis of the movement of the highly skilled-the case for the Japanese multinationals-

As discussed by Prof. John Salt (Salt J.1995), transferees within multinationals may be substituted by short-term business travelers. In this chapter, we will be examining the hypothesis based on surveys concerning Japanese multinationals and regressional analysis of immigration and direct investment statistics.

In comparing movements of the highly skilled from Japan between long-term stayers and short-term business travelers, we should observe such movement according to three regions as destinations. Strategies of Japanese multinational enterprises concerning transfer of technology and personnel may differ in these three regions because of different features of regional economic integration.

The movement of long-term stayers from Japan to three regions grew in the late 1980s, but this flow stagnated from the beginning of the 1990s, while short-term business travelers continue to increase (Table5). This phenomenon can be explained by the low-growth of Japanese direct investment at the beginning of the 1990s and process of localization of employment in host countries as we studied in the previous chapters. In addition, the appreciation of Yen from 1985 to 1995 has exerted much influence on the comparative cost of long-term and short-term movement of highly skilled Japanese.

Under such circumstances, the hypothesis that the short-term business travelers are substituting the long-term stayers might be applicable. To verify such a hypothesis, we will formulate "migration functions" of long-term stayers and short-term business travelers according to three regions and adopt simple regressional analysis to identify relations between several important variables as local employment and currency exchange rate.

The data used here is taken from Immigration Control Statistics of the Ministry of Justice, Direct Investment Statistics of the Ministry of Finance, Overseas Activities of Japanese Enterprises of the Ministry of International Trade and Industry and statistics by the Bank of Japan.

First, the business travelers to three regions should be examined from three aspects. Namely, 1) relationship with flows of Japanese direct investment, 2) cost of travel changeable according to foreign exchange and 3) substitutability with intra-corporate transferees.

Second, those who leave Japan as long term stayers for Japanese affiliates in three regions should be examined from two aspects. Namely, 1) opportunity cost of staying in foreign countries and working at Japanese affiliates changeable according to foreign exchange and 2) relationship with local employment and functions of transferring technology and know-hows to local staffs under close connection with the parent company in Japan.

The results of the analysis shows (Table 6) that between Japan and Asia or Europe, the appreciation of Yen is correlated with short-term business travelers positively but with long-term stayers negatively. This implies that the travel cost becomes lower but cost of long-term stayer higher. In other words, under the appreciation of Yen, the flow of business traveler may substitute for that of long-term stayers.

The direct relation between the flow of long-term stayers and that of short term stayers can also be identified between Japan and Europe while this relation between Japan and Asia is not statistically significant.

It should not be overlooked that the flow of long-term stayers are positively correlated with local employment in Asia, while the relation in Europe is correlated negatively. It may seem to be curious that in Europe, as local employment increases, long-term stayers decreases.

The results mentioned above cannot be identified between Japan and North America, as the all of the coefficients are statistically not significant. It is not easy to identify the reason why the migration function between Japan and North America is not statistically significant. It is necessary to conduct further research.

However, the followings are implications of the estimates: In Asia, where expansion of market and production capacity continued. So far as R&D center as well as Headquarter for Asian market is not relocated to outside Japan, the importance of transferring Japanese managers and engineers as long-term stayers in production cites in Asia still remains. But, if evaluation of Yen advances, the substitution of long-term stayers with short-term business travel will proceed.

In Europe, because of severe competition within the EU market, technology intensive production and differentiation of product will be more and more important. In many Japanese affiliates, R&D center for the European market already exists. Naturally, grand design of new products will come from R&D center in Japan, but investment to R&D center for the European market is growing.

These may be the reasons why Japanese transferees does not increase irrespective of growing local employment. Short-term business travel is becoming more frequent.

In the North America, competition is the most severe and efficiency in management as well as R&D is indispensable. Under such circumstances, more use of local staff, reduction of time for development of new product, fast decision making and implementation is important. In addition to such re-engineering within organization, exchange of persons and information should be flexibly conducted between Japanese head quarter and the affiliates in the North America. Business travelers increase and transferees should often remain there longer than usual.

The above interpretation is based on studies on Japanese affiliates in Asia Europe and the North America as well as the headquarter in Japan from 1996 to 1998. The studies are still under way. When we talk about the future of international migration of the highly skilled, it is more and more important to take different regional strategies and regional economic integration into consideration.

5. Concluding remarks
It is true that the "economic miracle" of the East Asia should reduce surplus labor and create better conditions under which orderly international migration should realize. In reality, for the lack of international cooperation in this region, the economic development resulted in growing intra-regional disparities which have been creating more sending pressures.
Therefore, it is essential for Japan to realize a better policy-mix in the field of international migration on a basis of effective international cooperation within the East Asia. It is especially urgent to cope with the effects on international migration by the monetary crisis in the East Asia.

We have paid much attention on the rolle of intermediaries in this region. By using the concept of "Probability of working" we can highlight the functioning of the intermediaries and the process of international migration even if the labor market situation in the host country (Japan) deteriorates.

In addition, the growing movement of the highly skilled is an important fact or which promotes economic development in the Asian Pacific region. By calculating migration function, we have found that the location of R&D center and presence of highly skilled personal may be the factors which differentiate movement of the highly skilled from region to region. The strategies of multinationals may also influence such movements. To achieve more effective transfer of technology in Asia, the liberalization of movement of the highly skilled is of great

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