Trade Undersecretary Ceferino S. Rodolfo said in an interview Friday the first round of talks between the Philippines and the EU would be held in Brussels from May 23 to 27 this year.

“We are eyeing to have an FTA with the EU as we want to secure more permanently the preferential duties for our products when we graduate from the generalised system of preferences (EU GSP+). For instance, some of our agricultural products were already being exported to Europe. But what we wanted to do is to be able to expand and not just penetrate the European markets,” Rodolfo said.

He said the country also wanted to attract more investments from Europe.

He said the upcoming meeting would also provide an avenue for the Philippines and the EU to explain their respective domestic rules and limitations, look at modalities and agree on proposed timelines. The first round would serve as an orientation of sorts for the negotiating parties, he said.

The Philippines currently enjoys a preferential trade treatment for over 6,200 product lines, which can be exported to the EU at zero tariffs under the GSP+ program. The country’s inclusion in this scheme, however, is time bound at 10 years, with a possibility that the Philippines would “graduate” early from this program, depending on how fast the economy would grow over the next decade.

The target, therefore, was to secure a more permanent and long-term relationship with the 28-member bloc through an FTA. Having a bilateral agreement with the EU was deemed highly significant for the Philippines as it would help the country corner a far more significant share of the foreign direct investments EU companies are pouring into the region.

If completed and signed, the PH-EU FTA would be the third bilateral agreement to be secured by the Philippine government after the PH-European Free Trade Association FTA and the Philippine Japan Economic Partnership Agreement (Pjepa).

The EU is currently ranked as the Philippines’ fourth largest trading partner, third largest import source and fourth largest export market. Major exports of the Philippines under the EU GSP scheme include crude coconut oil, canned tuna, spectacle lenses, etc.

A rough calculation by Malaysian Palm Oil Association chief executive Makhdzir Mardan showed that in 2013, when the plantation industry had a shortage of 23,500 workers, the opportunity cost came to 1.6 billion ringgit (US$408.4 million). He points out that in 2013, one foreign worker who works as a harvester equalled 500,000 ringgit in productivity.

While the over-arching industrial policy is to produce higher value-added goods and services, the truth is that large segments of the economy is still very much dependent on low-wage labour, particularly of the low-skilled foreign migrant-worker kind.

Migrant workers Manik and Mohammad Delowar, both 27 years old from Bangladesh, are two such workers working on the multi-billion ringgit Sungei Buloh-Kajang MRT line. Manik has lived in Malaysia for the last eight years and has worked on three property projects before being employed to work on the MRT project.

Both earn a salary of between 1,500 ringgit and 1,600 ringgit per month, 75 per cent of which is remitted home to support their families. Manik told StarBiz that the freeze, which came about after a public outcry over an agreement between the governments of Bangladesh and Malaysia to supply low-skilled workers, would definitely affect the flow of workers that wanted to work in Malaysia.

“I do not wish to go back to my country as I’ll not be able to find a job there,” he said, adding that unemployment in Bangladesh was high and he had to support a family of six.

Manik paid 8,000 ringgit to an agent and waited a year before securing a job in Malaysia. He sold land and borrowed money in order to pay for the fees. Mohammad, who has been working in Malaysia for eight months, paid 12,000 ringgit in fees.

Their experience tell the often unheard human story of foreign workers in Malaysia. These millions of workers who come from the most part from Bangladesh, Indonesia, Myanmar, Nepal, the Philippines and Vietnam are familiar faces in various sectors of the economy. The construction and agriculture sectors cannot do without them while the services sector, especially the hospitality, food and beverage and security industries, have large numbers of foreign workers.

Although the low-cost model of growth has served Malaysia well in the 1980s and 1990s, it has also made local firms reluctant to adopt technology or more efficient ways of doing things. Malaysia’s membership of the Trans Pacific Partnership makes higher productivity and efficiency ever more urgent.

Economists argue that without a rise in productivity, measured in the production of higher value-added goods and services, wages will continue to be low. The large number of foreign workers with their lower skill sets and low wages makes things worse.

This is not to say that there are no higher value-added goods or services being produced, or that the government is not encouraging it. The New Economic Model, together with the National Key Economic Areas, have identified various sectors and subsectors in which Malaysia can have a competitive advantage.

Leadership, clear-cut policy on foreign workers and investment in education as well as technology are just some of the issues that come into play as the country strives to reduce its reliance on low-wage workers and move up the value chain.

Master Builders Association Malaysia president Matthew Tee and Makhdzir agree that the adoption of technology and mechanisation will reduce dependence on foreign workers.

Tee said the government should provide more incentives for construction firms to adopt more efficient processes such as the industrialised building system (IBS) that could reduce dependence on low-skilled migrant workers. He pointed out that reducing the import duties on construction machinery could also help.

Meanwhile, Makhdzir said more funds should be allocated to oil-palm research and development (R&D) to make the industry more competitive. “If we desperately need to make that progress, we need to put in more talent, and more money to make it competitive in terms of R&D,” he added.

Makhdzir said the policy needed to be more flexible where R&D was concerned as talent must be sourced from outside the country if necessary.

But in the meantime, the freeze on foreign workers is causing a lot of problems as news headlines in recent months show. The problem is particularly acute in the construction and agriculture sectors.

Tee said there was a shortage of 1.3 million workers in the construction sector and predicted a shortage of up to 2 million by 2020. “This will cause delay in projects which could result in liquidated damages by clients translating to thousands of ringgit per day,” he adds.

Tee observed that the government-initiated rehiring programme that in part would also legalise illegal foreign workers had only attracted 3 per cent of the 1.7 million total number of illegal workers in the country. He said the requirements to legalise the workers were inflexible and because of that, many did not fit the requirements – one reason why the overwhelming majority had decided not to get properly documented.

He said firms wishing to hire workers under the rehiring programme found it more expensive than hiring fresh foreign workers. On the other hand, Makhzir said there needed to be leadership in tackling the issue while Tee said there needed to be more engagement with industry as the reaction from the authorities had been slow.

President Joko “Jokowi” Widodo said the latest deregulation package aimed to achieve the goal of boosting Indonesia’s place in the World Bank’s Ease of Doing Business rankings from 109th at present to 40th. In the 10 policies, the government has condensed 94 procedures into 49.

“This will help the entire business world, especially SMEs, to start businesses,” Jokowi said in Jakarta on Thursday, adding that the time required to start a business had been cut to 132 days from 1,566 days, while the required permits had been cut from nine to six.

Jokowi explained that it had previously taken 13 procedures, 47 days and Rp 6.8 million to Rp 7.8 million to start a business; the government has slashed that to seven procedures, 10 days and Rp 2.7 million.

For construction permits, the government has slashed the process to 14 procedures and 52 days from a previous 17 procedures and 210 days. To register property, investors only need seven days and three procedures, compared with five procedures and 25 days before.

The fourth point concerns tax payments. Currently, taxes are paid manually, in 54 installments. In the latest package, tax payments are brought online, with installments cut to 10.

Regarding contract enforcement, Jokowi said lawsuit settlements had been simplified, with resolution simplified to eight procedures with 28 days.

On electricity, meanwhile, the President said it would take four procedures to subscribe to a new grid for 25 days from a previous five procedures within a period of 80 days.

The government has also cut export-processing time from four and half days to a maximum of three. In addition, the cost of exports, which was previously US$424, will be slashed to $83, Jokowi said.

In terms of resolving insolvency, Jokowi said the cost, previously calculated based on the value of the debtor’s assets, would be calculated based on the value of debt ( through a negotiation scheme ) or on the value of settlement ( through a settlement scheme ).

The statement will reflect elements in a 2002 Declaration of Conduct (DOC), a pact signed by China and Asean members stating that all parties should resolve their disputes peacefully and avoid doing anything that would complicate or escalate these disputes.

Chinese Vice-Foreign Minister Liu Zhenmin yesterday (April 28) said it was “necessary” for members of the 10-nation grouping to reaffirm their commitment to the DOC, which has not been fully implemented.

This comes at a time when Asean and China are negotiating a legally binding Code of Conduct (COC) to prevent conflicts in the sea, where China has overlapping claims with Asean members Vietnam, the Philippines, Brunei and Malaysia.

Liu said: “Pending the final conclusion of COC, we believe that issuing a joint statement to reaffirm our commitment to the DOC is a positive move to ensure stability and peace in the South China Sea.”

However, former Asean secretary-general Ong Keng Yong questioned the need for the statement. “Why is there a need for another statement when there already is the DOC that Asean members have agreed upon, reiterated and reaffirmed over the past 14 years?”

Ong, executive deputy chairman of the S. Rajaratnam School of International Studies, told The Straits Times: “Asean members will have to re-examine the wording, tone and thrust of the joint statement to determine if it is the same as that in the DOC.”

Liu was speaking at a press conference to wrap up a two-day meeting in Singapore of Chinese andAsean diplomats. Chaired by the Singapore Ministry of Foreign Affairs Permanent Secretary Chee Wee Kiong and Liu, it discussed how to implement DOC guidelines and improve Asean-China cooperation.

Singapore is the current coordinator for the Asean-China dialogue partnership, which is celebrating its 25th anniversary this year. Chee announced a series of activities to mark the anniversary, including a commemorative summit.

But tensions are expected to rise when the Permanent Court of Arbitration in The Hague gives its ruling by early June on a petition brought by the Philippines against China’s claims in the South China Sea.

Liu said China does not recognise the tribunal and will not accept its ruling, adding that the DOC continues to be the “common basis” to address territorial issues.

In a move said by senior Singapore diplomats to divide Asean on the ruling, China reached a consensus with three Asean states on the South China Sea, including that the disputes are not an issue between China and Asean as a whole. While Asean does not take sides in the claims, it takes the stance that the grouping and China should manage these disputes together to prevent conflicts through the COC.

Ong responded to Liu’s remarks on Tuesday that China was shocked by his comments – that the consensus amounted to China meddling in Asean’s internal affairs – at a forum in Jakarta on Monday. “I was in a forum, responding to a question from the floor… it was said in my private capacity and not as an MFA official,” he said.

They were responding to a comment by Deputy Prime Minister Dr Ahmad Zahid Hamidi that a decision on the freeze on foreign labour would be announced soon.

SME Association of Malaysia national president Michael Kang said lifting the ban was “urgent”, claiming that 12 per cent of his member companies have been forced to fold or downsize because of the freeze.

“Our association members are projected to lose 30% of revenue in the next 12 months if this goes on. They don’t have enough workers to keep up production and collect orders. We hope Zahid can announce this as soon as possible,” he said.

The Indian business community has also been badly hit by the freeze, said Malaysian Associated Indian Chambers of Commerce president Tan Sri K. Kenneth Eswaran, adding that Indian-Muslim restaurants, barbershops and scrap metal dealers were running on skeleton crew now.

Though he applauded the government for listening to their grouses, Kenneth said stakeholders should have been engaged with in the first place before the freeze was implemented.

“We need the foreign workers because no locals want to work in these businesses. Frankly, they should have talked to the necessary organisations first because this has affected many business people,” he said.

Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) secretary-general Low Kian Chuan hoped for good news, which could mean businesses could finally get back into full gear after a two-month slump.

“We welcome this, we thought this was going to be indefinite so some companies had to take drastic measures by reducing operations and orders. Now if we can get workers, companies can get back to business as usual,” he said.

Malay Merchants and Entre-preneurs Association (Perdasama) vice-president Datuk Naim Mohamad said if workers were allowed in again, companies and employers must provide better lodging for them and impose tougher security on their movements to curb social ills and public fears.

“We need foreign labour, but it has become a matter of sentiment because there are social problems and crime attached to it. If the industry is willing to guarantee and take care of these problems, then everyone wins,” he said.

Naim suggested that employers track the movements of their workers via the GPS in their phones when they were off duty to prevent any crime or “moral issues” from happening.

Minister in the Prime Minister’s Department Datuk Seri Dr Wee Ka Siong applauded Dr Ahmad Zahid, saying that his comment proved that the Government was listening to local businesses.

“He (Zahid) is listening to their problems. The associations, from time to time, have submitted memos to him and he has been responsive. I’m sure his announcement will be for the betterment of the workers,” he said.