5.2 Foreign Investment and Labor Migration Policy with Shifting
Demographics
Over the long run, the benefits from trade liberalization will be considerably larger if
accompanied by reforms in other sectors. For instance, if the movement of factors of
production such as capital and labor is also freed up, the gains from trade liberalization
will be magnified. This will occur as investors respond to the changed structure of
incentives with new capital investments and entirely new industries develop in response
to new opportunities (Warr et al. 2010).
The importance of factor mobility takes on an additional dimension in ASEAN when we
consider differences in demographic profiles between countries. ASEAN countries
comprise populations that can be described as either ageing or youthful, especially given
shifts expected to occur over the next decade and beyond. With countries facing an
ageing population, there will be a decrease in the labor supply in the future as a result of
a ―shrinking‖ labor force, while countries with a relatively young population will
experience the opposite phenomenon of a ―bulging‖ labor force. Specifically, the CLV
countries will experience bulging labor forces, as will Brunei Darussalam and the
Philippines, while the other ASEAN countries will likely experience shrinking ones. The
ageing phenomenon will also characterize the labor forces of the East Asian countries of
the PRC, Japan, and Republic of Korea (Menon and Melendez 2009).