Analysis: Is southeast Asia still a safe bet for working expats?

Shifts in demand mean certain skills are now more valuable than others, but the region still needs its foreign labour

Most of southeast Asia’s dynamic economies have traditionally relied on expats, and there are no readily discernible signs that this is decreasing. However, there have been some shifts in demand, which could become more profound over time.

Singapore, for example, is still reliant on expats even though the city-state is far higher up the economic development ladder than other countries in the region.

At the end of 2016, Singapore had a foreign workforce of 790,000, excluding domestic helpers and construction workers.

Nilay Khandelwal, director of Michael Page Singapore, says that whereas historically most expats were employed in financial services, this trend has been shifting as the banking sector has shrunk and moved its focus to elsewhere in the region, including Malaysia, China and the Philippines.

“Demand has been increasing in technical fields and the R&D environment in sectors ranging from financial technology to renewable energy and life sciences,” says Khandelwal. “The other shift is from demand for junior to mid-level expats, to senior level, which is driven by the government promoting local hires, while demand for senior expats always depends on demand at the time,” he adds.

A good place for clues on expat demand in Singapore is its international schools, says Khandelwal. Rather than recording decreasing enrolment rates, these schools are now seeing more children of expats learning niche technical skills, with local talent taking over the roles previous generations of expats traditionally played.

“A third perceivable shift is that more expats are now coming on local contracts as opposed to expat packages,” he adds. “This is driven by Singapore’s income tax rates being significantly lower than in the West, at 18 per cent versus around 50 per cent,” he says.

In Vietnam, which has been benefitting from the migration of production lines from China, amid rapidly rising labour and land costs, a shortage of engineers and managers can be seen throughout most sectors.

Observers says local engineers are not up to date with the latest advances in technology, while managers remain weak in soft skills and lack important knowledge about international law and finance.

The developing nature of the Vietnamese workforce also makes it difficult to recruit highly skilled employees, especially in industries such as technology and banking.

“The possibility of Vietnam becoming a more competitive player for foreign investment is intricately linked to its ability to manage its HR problems,” says Hanoi-based Erasmo Indolino, an associate in the international business advisory team at Dezan Shira & Associates, in an interview with People Management.

“As a reflection of this, many international companies, in partnership with the Vietnamese government, are sponsoring workforce training programmes, and we have also seen several companies looking to attract Vietnamese expatriates, who have acquired expertise overseas, back to the country,” he adds.

Dezan Shira & Associates’ international clients are often asked by authorities to justify the reasons for which they use foreign workers, says Indolino, with authorities not issuing work permits unless they possess specific skills that local workers do not have.

“However, we see that in most cases, having a foreign client base does constitute a valuable reason – primarily in terms of communication – for employing foreign workers,” he explains.

In Hong Kong, Richard Poulter, retained search specialist at Maxim Recruitment (Hong Kong, Asia and the Middle East), observes that a construction boom of five to six years is coming to an end, resulting in decreasing demand for expat engineers.

The boom was primarily linked to Hong Kong’s rail expansion program, consisting of five major projects being rolled out at once.

Hong Kong’s official data on its foreign workforce is inconclusive as it does not permit a breakdown to separate white collar professionals and engineers on one side and domestic helpers on the other.

“As these projects are coming to an end, the market becomes localised again – expats in the engineering fields will find it harder to find a new role,” Poulter says. “Another factor is the influx of Chinese companies, which are winning many bids on price, pushing out the international players.”

According to Poulter, expats usually come to Hong Kong on contracts of between five and six years, with many staying after the contract has ended. This is made easier by Hong Kong granting permanent residency to anyone who has been paying income tax, on a constant basis, for a period of seven years.

“Many expats like living here, not least because it is only a short hop to attractive southeast Asian holiday destinations, such as Bali, as well as to Australia,” Poulter says.

“The main downside is that Hong Kong is a very expensive place to live, which means you are paying the same money for a three-bedroom apartment in a high rise development here as for a four-bedroom house with a garden and garage in the UK,” he adds.