The role of foreign workers

 

Rationale | Key considerations | Policy practices | Resources | Next

 

8.8 Do laws and regulations restrict the deployment of skilled workers from an enterprise investing in the host country? What steps have been taken to unwind unduly restrictive practices covering the deployment of workers from the investing enterprise and to reduce delays in granting work visas?


Rationale for the question

Foreign investors often wish to deploy experienced staff to their foreign ventures. Bringing in skilled employees from abroad helps to smooth the launching of a new facility, as well as to train local staff and ensure consistency in quality. The host country benefits from the diffusion of knowledge and international business practices that foreign workers bring with them. Once these employees have passed on their know-how to local staff, some may stay on while others may return home, leaving local hires in their place.


Restrictive, complex and non-transparent work visa regulations governing the deployment of skilled workers from an investing enterprise can stand in the way of a company’s smooth and efficient expansion to a new country. Obstacles can include strict government-imposed limits on the number of work visas allocated or mandatory local recruitment quotas linked to the number of expatriate staff. But equally important in many cases is the sheer amount of red tape involved which results in frustrating delays from the time-consuming approval process and which makes the outcome unpredictable. These impediments can increase the cost of doing business, impair the transfer of proprietary assets from parent to affiliate and ultimately discourage investment.

 

Related PFI questions:

1.12.43.14.1 and 10.5 all relate to simplifying administrative procedures for investors

1.62.63.4 and 4.5 all consider assessing the costs and benefits of policies which discriminate, in one way or another, among firms

10.3 discusses more broadly the use of regulatory impact assessments to evaluate policy effects on investment

 

Key considerations

Key considerations include both the policies governing the employment of foreign workers and how they are applied.

In terms of policies, the question deals specifically with what are called “key personnel” who are transferred from the parent company to the affiliate, particularly in the early stages of an investment. Host governments sometimes impose some form of restriction on key personnel not only to promote local employment but also to encourage the transfer of know-how to the local employee who is hired instead. Independently of any dissuasive effect this policy might have on overall investment flows, it is possible that the foreign employee – with extensive experience in the parent company – acts as a central conduit for transfers of expertise, technologies and other know-how to the affiliate. If this is the case, then restrictions on the employment of key personnel might actually retard technology transfer.

Some governments adopt a middle approach by allowing foreign expatriate employees in the early stages of the investment project while restricting the duration of their employment contract and also insisting that the foreign manager train a local understudy throughout the period of the contract. Whatever the approach taken, governments need to assess regularly the economic impact of existing policies, both on overall investment inflows and on the extent of technology transferred as a result.

Beyond the policy mix itself is the question of the clarity of laws and regulations, consistency and predictability of implementation and transparency in the approval process itself. Investors need to know what to expect.

 

Policy practices to scrutinise

Based on these considerations the PFI user should form an assessment of the regulations governing the deployment of foreign skilled workers from an enterprise investing in the host country.

Key issues for the reviewer are to determine what are the desired policy goals a country seeks to achieve through its visa laws and regulations, how successfully current visa laws and regulations accomplish these goals, and whether any shortcomings indicate a need to improve current procedures or whether effective reform requires more fundamental changes in policy objectives, to attract investors rather than to close borders.

The following policy practices and criteria ought to be considered:

  • The PFI user should assess the overall effectiveness of current work visa requirements and limitations by addressing the following questions:

o Are current work visa requirements in line with the country’s overall policy goals? Do they encourage foreign investment or help to transfer technology?

o How could work visa requirements be modified to achieve overall policy goals more satisfactorily?

o Are there any laws, regulations or other forms of restrictions, procedures or requirements that are unnecessarily burdensome or rigid?

  • Any requirements that are vague, contradictory or may be interpreted in more than one way create uncertainty for foreign investors. The PFI user should measure the clarity of current work visa laws, regulations and application requirements by addressing the following questions:

o How are work visa laws and regulations organised? Are rules consolidated into a small number of laws or are there several that build confusingly upon one another? Do implementing regulations exist, and, if so, do they stem from a small number of specific laws?

o Is the legal language vague or contradictory and if so how? Which aspect may be subject to multiple interpretations?

o Are regulations based on objective standards or do they leave room for subjectivity? It may be appropriate for laws to state requirements broadly as long as they are implemented by more specific regulations.

o Is it clear what type of visa a potential applicant should be applying for?

o Is it clear what types of forms and supporting documents are necessary?

o Do the forms state clearly what information must be provided and also how?

o Are there any ambiguities in the requirements that could be interpreted inconsistently, and have any of these in the past been exploited by corrupt government officials to extort bribes?

  • The entire visa application and approval process needs to be as straightforward as possible, including by providing forms that are easy to fill out, with instructions clearly stating what types of accompanying paperwork is required, the filing fees, and the expected turn-around time. The PFI user should evaluate how efficient and predictable work visa application procedures and the decision-making process are, as well as how predictably consistent are the outcomes of decisions whether or not to grant a visa. To do this, the PFI user should determine:

o The steps to apply and obtain approval for a work visa for a foreign employee.

o Steps or requirements that can be eliminated to streamline the process without significantly compromising security and other goals.

o Paperwork which can be eliminated, thereby speeding up processing and helping to avoid clerical errors.

o The number of government agencies involved in the visa approval process and the scope for relying on a single agency.

o The time to process applications and its variability.

o The predictability of decisions of whether to grant a visa. Creating a system of recording approvals and rejections, and the reasons for each, will allow for a better evaluation of consistency and fairness.

o Examples where the government has prematurely withdrawn a work visa and for what reasons. Legitimate reasons exist, such as when the visa-holder violates the terms of the visa, but, withdrawing visas as a protectionist measure or as a form of diplomatic retaliation against another country sends a negative signal to prospective foreign investors.

  • The PFI user should appraise the ease of accessing relevant information and application forms and the quality of the information provided, including:

o Are relevant information and forms made available to the public? Is there a dedicated website? Is information easily and uniformly accessible through embassy websites and national labour department/manpower office sites? Is there a telephone number for providing information and forms? Must someone appear in person at a government office or embassy?

o Is there an investment promotion agency to provide meaningful assistance with visa applications to investing companies? If so, how satisfied are foreign investors with the quality of its assistance? How many foreign investors know of its services and have taken advantage of them?
o If a country has a dedicated website, the PFI user should examine:

- How complete, accurate and clear is the information provided on the site? This applies to everything from the descriptions of visa types to the lists of supporting documentation that must be submitted.

- Does the website provide downloadable and printable application forms and instructions?

- Is the information up-to-date? How often are the contents updated? Does the website specify the date of the last revision? Do the same standards apply to application forms downloadable from the site?

- Is the site easily navigable? Is it translated into a language likely to be understood by potential investors?

  • The PFI user should examine the level of transparency of the visa approval process, focussing in particular on:

o The quality of the information provided as to the turn-around time for processing a visa application.

o Can applicants easily track the progress of their dossiers, such as on the website? What is the level of detail provided?

o For rejected applications, does the government provide clear reasons in writing?

o Is there a telephone number applicants can call for additional information specific to their own applications? Is it prominently displayed on a website or on application forms?


Further resources and case studies:

The following resources provide information on regulations governing the deployment of foreign skilled workers from an enterprise investing in host countries.

  • The Investing Across Borders (www.iabindicators.org) project is a global benchmarking initiative for measuring the ease of starting and operating a foreign-owned business. Developed by the World Bank Group’s Foreign Investment Advisory Service (www.fias.net), it compares investment climates across countries, identifies best practices and encourages reforms. One indicator, Starting a Foreign Business, examines the procedures for obtaining work permits for foreign employees by measuring the amount of time necessary to process an application and the number of agencies involved.

  • Natlex (www.natlex.ilo.org) is a database of national labour, social security and related human rights legislation maintained by the International Labour Organization (ILO). Legislation is organised by country and subject.

  • Investment policy reviews of selected countries are published by both the OECD (www.oecd.org/daf/investment/countryreviews) and the United Nations Conference on Trade and Development (www.unctad.org). Approaches differ, but both sets of reviews evaluate a country’s legal, regulatory and institutional framework to determine how well-equipped it is to attract foreign direct investment and to reap the benefits. Information on work permit procedures for foreign workers is often included.

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