East and SE Asia Region

Country review

Cambodia: Although officially a kingdom, decision-making for the last three decades has largely been in the hands of de facto ruler holding the title of Prime Minister. In 2017 the courts dissolved the one principal opposition party. Such political factors, coupled with extensive corruption in public life, have heavily reduced potential foreign investment, but many companies have been attracted to establish production because of low enforcement of those labour laws which do exist and the 2016 law that made forming a trade union far more difficult whilst reducing the prospect of lawful strike action.

China: The most populous country in the world. It consists of 22 provinces, 5 autonomous regions and four directly controlled municipalities, plus the special administrative regions of Hong Kong and Macau.
The country operates both as a centralised communist state and a market-led economy. There is considerable freedom to operate in the business sphere, although political and cultural constraints on the general actions of individuals and groups.
The emergence of China from past collectivism and the cultural revolution has been a huge success story and the country now stands on the brink of superpower status. Much emphasis in recent years has been placed on driving out corrupt practices from public life and opening up China to the outside world. As labour costs have risen it has had a declining reliance on investment from outside manufacturing companies seeking low-cost production. Many domestic companies are now on the verge of launching their operations and brands worldwide.
The rule of law is also now centre stage and this has exposed several central problems with labour laws. It is, for instance, very difficult to fire a Chinese executive – even if they have committed gross misconduct or failed to perform. The strictness of some laws also leads many employers to employ blue-collar staff officially on a part-time basis (up to 4 hours a day) and thus avoid operating to a formal contract.

Hong Kong: This former British colony returned to China in 1997 and is now a semi-autonomous entity within the People’s Republic of China and in its own economic zone. It is famed for having the highest concentration of skyscrapers, longevity of its population and the world’s most advanced urban transport system. Under its well-developed labour laws there is no distinction between the rights of temporary, part-time or permanent workers. Once a worker has been employed by the same employer for four weeks or more, with at least 18 hours worked in each week, they are entitled to rights such as rest days, annual leave with pay and sickness allowances.

Japan: A politically stable country with a highly chequered history. In recent years it has suffered from deflation and a relatively low female labour market participation rate – both of which have been limiting home demand and domestic production. Japan has massive overseas investments and many of the world’s leading brands – particularly in the automotive and electronic goods sectors. The maximum standard working week is 40 hours and overtime is payable at time+25% on addition hours (+50% on hours over 60 a week). Employers are obliged to negotiate with representative unions and closed shops are lawful in certain circumstances. All dismissals are potentially unlawful and employment protection exists from day one of employment.

Laos: This landlocked country is a one-party communist state controlled by a politburo. Much of its trade comes from selling hydro-electricity to neighbouring states – especially China. The rule of law is weak in Laos and judges are not independently appointed. Freedom of speech is also heavily constrained. Subsistence agriculture employs around 80% of the population and many of its vast mineral resources remain unexploited.

Philippines: This poor, but populous island state suffers considerably from its location in an earthquake belt and on the track of violent typhoons. It is a democratic republic with a President elected by popular vote for a six-year term. The Philippines is a strong ally of the United States and English is spoken widely. It has a diverse economy and has attracted considerable foreign investment. 47% of the working population are in the service sector and agriculture employs another 30%.
The economy is heavily dependent on remittances from abroad and much of this is generated from unskilled domestic worker jobs in the developed world.
Crime, particularly drug dealing and street mugging, have long been a major problem. The current President has, however, initiated a controversial solution based on vigilantes to deal with it.
Employment law is based largely upon the Labour Code. Many of the laws are highly protective and progressive – such as the right of those who are the victims of domestic violence to take up to ten days paid leave.

South Korea: This country has the highest proportion of its population with tertiary education in the world. It is a highly advanced economy with the world’s largest per capital spend of GDP.

South Korea also has the fastest internet and greatest concentration of smartphone owners on the planet. The modern population are urban dwellers living in large high-rise complexes. Nuclear power produces 45% of its electricity needs and it is a major exporter of nuclear reactors. The union movement is very powerful and the labour market is very regulated. The Labour Standards Act establishes the basic legal framework and all employers with 10+ workers must establish their own body of workplace policies and rules.

North Korea: This densely populated country is ruled by a dictatorship and its political leadership has a general suspicion and hostility to foreigners – especially from the west. It is a “no go” area for international business.

Taiwan: Ever since the flight of the nationalists from mainland China at the end of the revolution China has claimed this territory as its own. Hostility between both countries has reduced in recent years and there is now a fairly free flow of people and trade between them.

However, Taiwan still suffers from marginalisation in the world community due to China’s refusal to recognise any country that officially recognises Taiwan as an independent entity. Today it is a multiparty democracy with a high tech economy. It enjoys press freedom and has one of the most highly educated populations in the world.
The labour market is fairly tightly regulated and the main body of legislation is the “Labour Standards Act”. This was revised with effect from January 2017 by the introduction of a five-day working week, a reduction in the number of national holidays (but an increase in individual annual leave), a new premium for working on rest days, compensation for not taking any leave due, greater transparency in wage calculations, the introduction of whistleblower protection rights and grievance procedures and increased penalties for employers who break the requirements of the Act.

A number of further labour reforms are in the pipeline – including a facility to require workers to operate for up to 12 days in a row without a rest day, an extension of overtime hours, prolonged paid holidays, and a reduction in rest breaks between shifts from a minimum of 11 hours to 8 hours.

Vietnam: As the bitter Vietnam war disappears into history this now united country remains a one-party socialist state, but one that is gradually embracing the free market and opening up to foreign investment opportunities.
The Vietnam Labour Code was first established in 1994, but has subsequently been amended several times. In 2006 the National Assembly also approved a law on sending Vietnamese labourers to work overseas. All employees must be issued with an employment contract and for expatriate employees there is a requirement that this is both written in Vietnamese and the language of their country of origin

Greatest advantages: Proximity to huge markets, generally a strong commitment to education, training and the cultivation of talent,largely stable governments and access to low-cost labour – primarily for manufacturing.

Greatest disadvantages: Foreign language skills – especially in English (outside Hong Kong and the Philippines), substantial informal economies in some countries that increase costs for employers that do comply with the law and social security obligations (principally through economies of scale), strong labour unions (Japan, South Korea and Taiwan), political and military insecurity (largely due to North Korea).

Proportion of global land area: 8.5%
Proportion of global population: 24%
Annual rate of population increase: 0.43% China
Life expectancy: Men 81.4 years Women 89.3years (Hong Kong)
Working population in the informal economy: 5% (Japan) 20%(Philippines)
GSI Modern slavery (Forced Labour) 0.228 % (Japan)
Unemployment rate: 4-5% (China)
GDP/capita PPP (current) $34985 (South Korea) $14399 (China)
Female labour participation rate: 50.3% (Japan)
Male labour participation rate: 70.5% (Japan)

World Bank rating (doing business): 78/190 (China), 113/190 (Philippines)
FedEE overall employment potential rating: 8/10
FedEE regulatory rating: 7/10

Minimum wage rates (selected states)
– China (Shanghai): RMB 2,300 per month (May 2017) – Defacto minimum higher
– Japan: 848 yen per hour – central government recommendation (October 2017)
– Philippines: ₱512.00 per month NCR (September 2017)
– Taiwan: NT$22,000 a month (September 2017)