Localization Strategies in Response to Recent Changes in the Southeast Asian Labor Market Environment

Southeast Asia still has the potential to attract FDI from Korean firms even though the labor market environment has been changing at a very swift pace as of late. For example, as the increase in FDI improves the total factor productivity of firms operating in Southeast Asia, the wages of workers in this region have accordingly skyrocketed. As income growth led workers in the region to devote greater attention to democracy and human rights. Ongoing changes in Southeast Asia's labor market are likely to have an adverse impact on Korean firms operating in the region, though the extent of the impact will differ across industries, firm sizes, and technology levels. Therefore, we suggest that government policies for FDI should be redirected to support localization efforts of firms operating in Southeast Asia. As these firms operate in foreign countries, they do not create jobs domestically. The existing literature, however, tells us that they positively affect domestic productivity and employment. This provides a reason for governments, including Korea’s, to identify effective policy measures that can support firms to successfully meet challenges and localize in these ever-changing markets of Southeast Asia.