Nasional Advisor for
Secretary of State for Professional Training and Employment Policy (SEPFOPE)
Remittance is amount of money which sent by overseas workers to their family at origin country. This type of income is significant in generate a number of important positive contribution to the economic development of many household whose mostly lives in rural areas. Viewed from the macroeconomic perspective, remittances also influences the increase of national income of individuals in each family who are getting the chance for the overseas employment and tend to reduce poverty and inequality in recepient countries, as well as increase aggregate investment and growth. At microeconomic stand point, the family who’s regularly earn income from remittances; can improve their economy condition such as increase the daily consumption for food and the basic needs. Futhermore, this income also used to increase saving, spend more on the education, improve children's health and estabelsihed a small or medium-sized of businesses in the community. The data from BNU (Banco Nacional Ultramarino) revealed that every year, workers in South Korea sending money to family with the total amount of US$ 1,746,250.22 (BNU, 2013). Meanwhle, the data from Western Union Agency recorded remittances every three months with the total amount ofUS$ 1,200,538.30. Total remittances recorded by SEPFOPE in 2013 reachedUS$ 2,946,838.53.
Timor Leste as a newly independent state in the era of milleneum, as a new country it is true that there are variety of challenges facing in the process of economic development. With the rapid rate of population growth about 3.3% each year, many of Timorese are still living under poverty line (World Bank, 2008; WFP, 2010). Beside the above condition, Timor Leste is rich with natural resources such as oil and gas. However, rely on natural resources will not guarantee the sustainability of the economic development for the future. Related to a sustainable development, the government has adopted some important policies in recent years through the implementationof varies programs in the sectors of agriculture, fisheries and tourism. The aims of these policies are to substitute the dependency on oil and gas sector. These productive sectors which mentioned above are related to the world's labour market. In the era of globalization, the demand of the workforce is increasing every year especially in developed countries. This is one of the indicators for youth in less developed countries to seek for overseas employment with the expectation to gained more skills and earned more income. Although it's considered as "low wages" for people in developed countries, the amount of money earned is very valuable for people in poor countries in order to improve the economy of their household.
Policy of the Government of Timor-Leste
The Timor Leste Government policy, through the Secretary of State for Professional Training and Employment Policy (SEPFOPE) is to reduce unemployment, improve the quality and skills of human resources, creating conducive working conditions for the workers through employment protection, and elaborate the"Labor Code" in accordance with the international provisions. Associated with the demand of the labor market opportunities in developed countries, the Government of Timor -Leste use this opportunity to reduce the rate of unemployment which has reached 3.6 % (SEPFOPE, 2010). To achieving this goal, the government has been implementing some programs in the area ofVocationalTraining at existing training centers and the implementation of Overseas Employment Program. This program will have two positive impacts, the fisrt is to increase the number of human resource which equiped with varies ability and ready to enter the labour market. The second is to fullfill the overseas employment program, this program will gives an opportunity to the youth to work overseas and support the family’s economy.
Overseas Employment Program
Overseas employment is one of the programs under the responsibility of the National Employment Department (DNE). Implementation of this program is based on the agreement with the countries that want to receive workers from Timor Leste. During this period, the Government of Timor -Leste has signed agreements with the Government of South Korea and Australia. In the agreement those countries agreed on some important issues, one of the agreement is the period of contract for the workers, The South Korean Government provides an employment opportunity for the period of one to three years, if the workershas estabelishedgood performance and behaviour, the contract will be extended for another two years; over five years if the workers still maintain positive performance and behaviour, the South Korean Government will provide the Special Visa namely E7 which give an opportunity for workers for the freely movement in South Korea as well as the right to choose on a company which they want to work for. On the other hand, the Australian Government opened a program called 'seasonal workers' contracts that provide opportunities to the workers from Timor Leste with the provisions of the working period for three to six months in each year. The type of the contract with a short period is one of Australia's policies to restrict foreigners to stay longer in Australia.
Overseas Employment has been implemented by the government since 2008: in the first phase, the Government of Timor-Leste through SEPFOPE sent 50 workers to South Korea. In 2011 the South Korean Government was asking for 2,500 workers, but Timor Leste was only offering 400 workers; in 2012, South Korea raised the number of employees reached to 2750 people, Timor Leste once again releasing only 500 workers. In 2013 the South Korean government demanded workers jumped up to 3,500 people, but the number which derived from the Government of Timor-Leste only reach to 280 workers. Judging from the small number that sent by the Government of Timor Leste, South Korea also reduce the number of employees to 1,750. In 2014 the number of bids not receive yet an answer from the Government of Timor-Leste on how many number of workers will be delivered.Total number of workers which sent by the Government of Timor-Leste was not in accordance with the amount requested by South Korea in 2011 until 2013, which should reach 7,570 workers, it can be concluded that the Government of Timor-Leste has wasted opportunity in improving human resources while reducing the income of remittance that should be received by Timor Leste in large numbers. Based on the information from the relevant department which responsible for the program said, "SEPFOPE has its own criterias that should be met by prospective workers to South Korea such as attending Korean language course in a few months: in fact, many workers did not pass the final exam" (Alves.P 2014). This statement can be concluded that the approach of the Government policy through SEPFOPE should be improved, and it’s necessary to overcome challenges as fallowed:
1. Limitations of training centers which only localizing in a few districts.
2. Dissemination of information on overseas employment to the rural areas is not evenly distributed.
3. Korean language training techniques do not work well because the candidates do not attend to the fullest.
4. Mechanisms of teaching from Korean teachers are not effective due to the limited recognition of local languages.
5. The allocation of funds from the Timor-Leste Government for Korean language training is not included in the category of priority to the Human Resources Development Funds in each year.
If these constraints be addressed and corrected the results of this training for the candidates will offer a large number of workers in accordance with the request submitted by the South Korean Government.
Workers in South Korea and Australia
The number of workers currently working in South Korea reached 1,358 people. Data from the National Employment Department which administers overseas employment can be seen in the following figure :
Through this figure, it can be analyzed that the workers employed in the fisheries sector achieve the highest number compared to the number of workers in the agricultural sector and factories. This shows that the fisheries sector is a priority for the labor market in South Korea. Based on the facts, SEPFOPE need to focus in creaating good estrategis on training techniques in the fisheries sector and maksimised coordination with relevant ministries such as the Ministry of Agriculture and Fisheries. The goal of coordination is to prioritisedthe investment in the fisheries sector in Timor-Leste. Another point is to prepare labour market of this sectors in order touse the lebour withskills, knowledge and experience when the contract with South Korean Government is end.Compared to the number of workers employed in South Korea, the number of workers employed in Australia is very small and only apply to the two sectors such as hospitality and agriculture. The total number of Timorese workers in Australia can be seen in the following graph :
From this graph shows that, Australian labor market is in need of people who have skills in the hospitality sector. The number on the chart above becomes an indicator for the Government of Timor-Leste to more focus on technical training in the hospitality sector. To support this, one of the training to focus is the English Language Training, this training as a way to respond to the selection with more competitive bycompanies in Australia which seeks for more workers from Timor Leste. Another point is that the Improvement of the skills of human resources in the hospitality sector is very useful because in the coming years Timor Leste can become a tourist destination for neighboring countries such as Australia and New Zealand.
Remittance from the Workers
When disccused about the number of overseas workers, it’s closely tied to the income earned by workers every month. Income earned on a monthly basis mostly sent to families living in Timor Leste. Based on the data obtained from the BNU Bank (Banco Nacional Ultramarino), each year the total money sent by workers in South Korea to their families in Timor Leste totaled US$ 1,746,250.22. Data from Western Union Agency indicates the progress of income for the quarterly remittances was US$ 1,200,538.30. If counted the whole amountof income from overseas employment program has received a remittance of US$ 2, 946,838.53. The data is considered incomplete because some finacial institutions operating in Timor Leste as Mandiri Bank, ANZ and small agencies that deal with the money transference services has not report yet the information of remittances through their service.
The total income earned by the workers overseas is very significant. Workers and their money is theimportant elements to supportthe improvement of family economy at the country origin. Nevertheless a few percent of the money had to be cutted for the operational cost as a fees on transferes services which apply in all the financial institutions which work in this sector.. For example, Western Union, if it received a total transfer of US$ 1000.00, operating rates for tax can reach 10% of the amount of money sent. The system does not provide a profit to the workers remitters receivers because the money sent to the family must be cut with a high percentage of tax payments.
To respond to the high operational cost by the financial institution or business which focuses in this sector, the Government of Timor-Leste needs to implement some of the policies as follows:
1. Reduce taxes on money that is transferred by the workers.
2. The government of Timor Leste working closely with companies that provide contract to workers, to immediately create a permanent form of deposits in accordance with the duration given by the Bank.
3. Forming a National Bank that provides operational with a small tax percentage of the price to the workers who work abroad and give high interest money that helped workers to deposit their money for their overseas employment contracts.
This idea is reasonable when viewed from the paradigm of macro-economic stand; this system is effective to improve the economy in the country from the income which regularly sends to to existing bank. Furthermore, the Nasional Bank can implement the "saving & loan" system to people that requires capital for their businesses. If workers (owners of money) have completed their contracts and intend to return to Timor Leste, they can take all the money in the refer bank.
The national income of every family is one of the indicators to measure the growth of economic of its citizens. Through the national income, experts can evaluate the progress of economic development. . Looking on the positive contributions, in the 2014 State Budget Debate, SEPFOPE pick the issue in the plenary and addressed by parliamentarian from the opposition party, Nina Rangel dos Reis who questioned the national income that does not count the remittances. Vice Finance Minister, Santina Cardoso acknowledges this weakness when answering the question of annual remittances as income for the State.SEPFOPE Plans to conduct in depth analysis about impacts of the overseas workers’ remittances on the state economic development, SEPFOPE admits that over the years there has been no thorough analysis of overseas income which sends by Timorese workers. Looking at these shortcomings, in 2014 SEPFOPE had planned to provide funding support to conduct useful analysis in depth on the issue of remittance to Timor Leste. Support will be given to Timorese students who are conducting studies on master's degree in the field of development in New Zealand. The thesis entitled "Overseas Activities that contribute to the Economic development of Timor Leste: an analysis of remittance of overseas Timorese workers." Through this article, we can see a thorough analysis of the overseas employment program policy and resulting benefits for long-term economic development.
Many people talk about government ineffectivity in addressing the problems of unemployment faced by the State at this time. Some said that the government does not give attention to the necessities of the overseas workers. It is true that there are many reasons that support the ideas presented above and SEPFOPEacknowledges the advantages and disadvantages of the program implemented. Disadvantages of this program are visible such as sending workers abroad means that the country loses more skills labor or workers. However in the reality, this program has its advantages to reduce the rate of unemployment in the country, moreover the workers gain new skills, knowledge and more importantly gain income and sent back to their family in Timor Leste.
The remittances obtained by Timorese overseas workers very positively contribute to the economic development of the family who mostly lives in rural areas. The total numbers of workers with 1,389 people working in South Korea and Australia have produced a remittance of US$ 2,946,838.53 each year for the local economy. However in some point, the Government of Timor -Leste failed to respond to the number of workers requested by South Korea and Australia. Looking at this reality, the government needs to improve the overseas programs working systems, and the efforts of the new policy should be done in order to support workers income bydeposit their money into the National Bank at the country origin which might raise high interest of the money and give them an advantage when the contract period is completed. SEPFOPE needs to undertake training through overseas employment program with the clear mission where workers can learn and has good work experience and when they get the chance for the overseas employment; those experiences that they get might change their mentality to be more professional in the area they chose. SEPFOPE policy by implementing overseas employment program have a positive impact such as enhance skills and good experience and included moreincome in order to improve the economy of the family and provide significant income for the State. ***
Alves, P. (2014)" Director fo Nasional Employment Department" SEPFOPE, Dili, Timor-Leste
BNU (Banco Nacional Ultramarino), 2013: "Specific data of income transference from workers in South" Dili, Timor-Leste.
National Employment Department (DNE), 2013: "2013 Annual Report of National Employment Department, Overseas Employment Program: Dili, Timor Leste.
SEPFOPE (2013): "Work Guidelines of Secretariat of State for Professional Training and Employment Policy” Dili, Timor Leste.
World Bank (2013), Qouted from World Food Programe: "Fighting hunger worldwide" Dili, Timor-Leste.
Western Union - Timor Leste (December 2013):"Specific data of income transference from workers in South" Dili, Timor Leste.