metadata: authors: 0: author: De Smet,Dieter J
count: World
docna: 0: docna: Employing skilled expatriates : benchmarking
            skilled immigration regimes across economies
docty: Policy Research Working Paper
subtopic: Human Migrations & Resettlements,Skills Development and Labor Force Training,Educational Sciences,Employment and Unemployment,International Migration,Migration and Development
abstracts: cdata!: The Employing Skilled Expatriates
            indicators analyze the skilled immigration regime relevant
            for foreign direct investment across 93 economies to provide
            comparable information about this regulatory space. The
            indicators focus on restrictions that control the inflow of
            skilled immigrants (quotas); the ease of hiring skilled
            expatriates (time and procedural steps to obtain a temporary
            work permit, existence of online application systems,
            availability of a one-stop shop and fast-tracking option);
            and the existence of a path to permanent residency and
            citizenship as well as the existence of spousal work
            permits. As governments increasingly seek to attract foreign
            direct investment as a driver of long-term development,
            reforming the investment climate -- including the skilled
            immigration regime -- is one policy option to consider. This
            analysis shows a positive correlation between the Employing
            Skilled Expatriates index and foreign direct investment
            inflows. As measured by the Employing Skilled Expatriates
            index, there is room for economies with a need for skilled
            workers to improve their immigration regimes as one means of
            attracting more foreign direct investment. In Singapore and
            the Republic of Korea, it only takes ten days on average to
            obtain a temporary work permit. In Honduras, the same
            process can take up to 22 weeks. The global average to
            obtain a temporary work permit is eight weeks. The process
            is the fastest in the East Asia and the Pacific region where
            it takes five weeks. With 11 weeks, the processing time in
            the Middle East and North Africa region is the slowest.
repnme: repnme: Employing skilled expatriates :
            benchmarking skilled immigration regimes across economies
display_title: Employing skilled expatriates :
            benchmarking skilled immigration regimes across economies
listing_relative_url: /research/2013/11/18524119/employing-skilled-expatriates-benchmarking-skilled-immigration-regimes-across-economies
topicv3: Education, Skills Development and Labor
            Market m1326135 1484,Education m1327048 470,Part-Time Work m1503863 2798,Skilled Workers m1504035 2732,Immigration m1504162 2837
publishtoextweb_dt: 2016-08-18T00:00:00Z
no_of_pages: 29
author_keys: 0: author_key: 1151275
model_extractions: WPS6708 Policy Research Working Paper 6708

# Employing Skilled Expatriates

Benchmarking Skilled Immigration Regimes across Economies _Dieter De Smet_ The World Bank Development Economics Vice Presidency Global Indicators and Analysis Department November 2013
Policy Research Working Paper 6708

# **Abstract**

The Employing Skilled Expatriates indicators analyze the skilled immigration regime relevant for foreign direct investment across 93 economies to provide comparable information about this regulatory space. The indicators focus on restrictions that control the inflow of skilled immigrants (quotas); the ease of hiring skilled expatriates (time and procedural steps to obtain a temporary work permit, existence of online application systems, availability of a one-stop shop and fast-tracking option); and the existence of a path to permanent residency and citizenship as well as the existence of spousal work permits. As governments increasingly seek to attract foreign direct investment as a driver of longterm development, reforming the investment climate —including the skilled immigration regime—is one policy option to consider. This analysis shows a positive correlation between the Employing Skilled Expatriates index and foreign direct investment inflows. As measured by the Employing Skilled Expatriates index, there is room for economies with a need for skilled workers to improve their immigration regimes as one means of attracting more foreign direct investment. In Singapore and the Republic of Korea, it only takes ten days on average to obtain a temporary work permit. In Honduras, the same process can take up to 22 weeks. The global average to obtain a temporary work permit is eight weeks. The process is the fastest in the East Asia and the Pacific region where it takes five weeks. With 11 weeks, the processing time in the Middle East and North Africa region is the slowest.

This paper is a product of the Global Indicators and Analysis Department, Development Economics Vice Presidency. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank. org. The author may be contacted at ddesmet@ifc.org.

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent._ Produced by the Research Support Team
# **Employing Skilled Expatriates**

# **Benchmarking skilled immigration regimes across economies**

**Dieter De Smet**<sup>**1**</sup>

Keywords: skilled immigration; FDI; investment climate; regulatory reform; benchmarking; indicators.

JEL classification codes: F220; J610; K370; O150.

1 Employing Skilled Expatriates is part of the FDI Regulations database of the Global Indicators and Analysis Department (GIA) of the World Bank Group. The author is a Private Sector Development Specialist working in GIA.
# **Acknowledgments**

Employing Skilled Expatriates (ESE) is part of the FDI Regulations database of the Global Indicators and Analysis Department (GIA) of the World Bank Group (WBG). The lead author, Dieter De Smet, is a Private Sector Development Specialist working in GIA.

The author is grateful for valuable peer review comments received from World Bank Group colleagues Pierre Guislain, Christine Qiang, Roberto Echandi, Peter Kusek, Harald Jedlicka, David Robalino, Arvo Kuddo and Dilip Ratha. External peer reviewers include Julia Onslow-Cole and James Perrott at the global immigration network of PwC Legal LLP, Ayelet Shachar, at the University of Toronto Faculty of Law, and Madeleine Sumption, at the Migration Policy Institute in Washington, D.C. Additional valuable comments were received on earlier drafts of the paper from Carolin Geginat, Melissa Johns, Augusto Lopez-Claros, Tanya Primiani, Federica Saliola, and Hulya Ulku from GIA.

Two groups of people provided pro-bono contributions to ESE without which the data and indicators could not have been gathered and developed.

The first is the group of lawyers and government regulators in each of the 93 economies covered by the report who responded to the ESE legal questionnaire. Their input about the skilled immigration regime in their economy was the fundamental source of data for the analysis. Grateful acknowledgment of these contributors is made in the Contributors section at the end of this report. Additional details about the contributors across all topics of the FDI Regulations database are provided at <u>http://iab.worldbank.org/Local-Partners/2012. Particular acknowledgment is made to the Global</u> Immigration Network of PwC Legal, which responded to questionnaires in more than 60 economies.

The second is the expert consultative group formed to provide technical input to the development of the ESE topic. This group of global immigration experts provided input on the focus of the ESE legal questionnaire and on the methodology to develop the ESE indicators. Members of the expert consultative group include:

- Dr. Lucie Cerna, Assistant Professor in Global Challenges, Leiden University, Netherlands and Research Associate at the Centre on Migration, Policy and Society (COMPAS), Oxford.

- John Craig, Partner, Heenan Blaikie Law Firm, Canada.

- Harald Jedlicka, Investment Policy Officer, WBG Investment Climate, Vienna, Austria.

- Graeme Kirk, Senior Partner, Gross & Co. Law Firm, Washington DC.

- Khalid Koser, Deputy Director and Academic Dean at the Geneva Centre for Security Policy, Switzerland.

- Susan Martin, Herzberg Professor of International Migration Director, Institute for the Study of International Migration, Georgetown University, Washington DC.

- Julia Onslow-Cole, Partner and head of global immigration network of PwC Legal LLP.

- Linda Rahal, Partner, Trow & Rahal Immigration Law Firm.

- Ted Ruthizer, Partner and Co-Chair of the Business Immigration group of Law Firm Kramer Levin, New York.

- Ayelet Shachar, Professor of Law, Political Science & Global Affairs, Canada Research Chair in Citizenship and Multiculturalism, University of Toronto Faculty of Law, Canada.

- Elizabeth Stern, managing partner and head of the Global Immigration & Mobility Practice Group, Baker & McKenzie, Washington DC.

- Madeleine Sumption, Senior Policy Analyst, Migration Policy Institute Washington DC.

- Hong Tran, Partner Mayer Brown, Hong Kong SAR, China.

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# **_1. Introduction_**

In Honduras, the average time taken to obtain a Temporary Work Permit (TWP) for an Information Technology (IT) specialist is 22 weeks. The hiring company is required to submit an application to the Work Secretariat to obtain a certificate of compliance with the quota requirements. It is then required to apply, on behalf of the applicant, for a special stay permit to the Director of Immigration and Foreign Affairs. Upon receipt of the special stay permit, the skilled expatriate must register him/herself in the National Foreign Register and then submit an application to obtain the TWP before the Work and Social Security Office of the Department of State. This is followed by an official visit to the company by the migration officers from the Department of State to verify compliance with the quota requirements. The Department of State then reviews the application and grants the TWP.

In Singapore, in contrast, the same process takes 10 days on average. The hiring company applies for an Employment Pass at the Ministry of Manpower, which issues an in-principle approval letter. Upon entering Singapore, the skilled expatriate is required to follow the instructions stated in the in-principle approval letter (for example, to comply with a medical check-up) and upon compliance, the employment pass is issued.

The Employing Skilled Expatriates indicators (ESE indicators) analyze the skilled immigration regime relevant for Foreign Direct Investment (FDI) across 93 economies and aims at providing comparable information about this regulatory space. As governments increasingly seek to attract FDI as a driver of long-term development, reforming the investment climate – including the skilled immigration regime – is one policy option to consider.

# **_2. Why does skilled migration matter for foreign investors?_**

The ease of hiring skilled expatriates is one of the factors which are taken into consideration in the location decision of multinationals. When the required expertise cannot be sourced in the hosting country, skilled immigrants are necessary to start-up new subsidiaries and train workers. In other cases, a company may need to deploy a skilled immigrant with specific expertise from within the corporate group. In the latter scenario, companies frequently resort to the intra-company transfer scheme under Mode 4 of the World Trade Organization’s General Agreement on Trade in Services (GATS) which allows companies to temporarily transfer employees from one member country to another. For this paper, we have opted to exclude GATS or any other multilateral or bilateral treaties, in order to improve comparability of skilled immigration regimes across 93 economies. Differences in the various multilateral and bilateral agreements with regard to definitions of skilled expatriates and prerequisites related to nationality and recognition of credentials would have prevented transparent comparisons across economies.

Overly restrictive or cumbersome skilled immigration regimes may result in lengthy work permit processing times which potentially imply stalled productivity or loss of strategic or first-mover advantage for companies. Other restrictions (for example, quotas) may impact the viability of new ventures and may lead companies to invest in economies with less restrictive skilled immigration policies. A recent research paper provides evidence that a less restrictive skilled immigration regime is conducive in attracting FDI (Medina, 2012). Our paper builds further on this premise.

In 2012, under the supervision of Michael Porter, the Harvard Business School conducted an in-depth survey with 10,000 Harvard alumni in senior leadership positions to identify the roots of the 3
competitiveness problem in the United States (Porter and Rivkin, 2012). Better access to skilled labor was stated as the third main reason for moving existing activities out of the United States, behind lower wages and proximity to customers. Immigration policies, next to taxation, were identified as the main impediment to investing and creating jobs in the United States. In a 2010 report, the McKinsey Global Institute concluded that “limits on the immigration of skilled workers handicap US companies when competing abroad and in some cases discourage investment at home” (Cummings et al, 2010). As such, economies which have smart and fast immigration regimes for skilled expatriates have a competitive advantage in attracting FDI.

There is a consensus among experts that international migration can positively contribute to global economic growth and development. The impact of skilled expatriates on hosting, predominantly developed, economies is already well acknowledged by most economies: skilled immigrants enhance hosting economies’ productivity and competitiveness and significantly contribute to their GDP (World Economic Forum, 2010).

Opponents of skilled migration refer to the consequences of the human capital flight for sending (typically developing) economies. When highly skilled migrants leave to pursue more lucrative opportunities in developed economies, their departure creates a number of externalities. The first is loss of net contribution to the government budget, increasing the fiscal burden on those left behind. The second is the negative effect of human capital depletion on a country’s growth prospects due to decreased human capital formation which is a central engine for growth. In this view, developing economies should create incentives for skilled workers to return to their home country. Finally, the fact that skilled labor is instrumental in attracting FDI and fostering research and development expenditures is contributing to the concentration of economic activities in specific locations, at the expense of origin economies. A summary of the possible effects of this type of migration on sending and receiving economies is shown in Figure 1.

While these traditional negative effects of the brain drain were stressed in the early literature, more recent contributions ask whether these may be offset by possible beneficial effects arising from remittances (Adams, 2003), return migration (Mayr and Peri, 2008), the creation of trade and business networks (Aleksynska and Peri, 2012), and possible incentives of migration prospects on human capital formation at home (Docquier and Rapoport, 2004). With regard to the positive effects of the diaspora externality on FDI, a recent study (Kugler and Rapoport, 2011) found that the presence of migrants in the host country may also facilitate the formation of the types of business links which lead to FDI project deployment in the skilled immigrant’s home country (sending country).

An important barrier to a multinational corporation’s viability to set up a subsidiary in a developing country can be uncertainty, especially the type of uncertainty linked to low institutional quality (Kugler, 2011). To the extent that migrants integrate into the business community, a network can emerge whereby migrants liaise between potential investors and partners (both private and public) in various aspects of setting up a production facility in the migrant’s country of origin. In other words, networks of (skilled) migrants can also be important sources of FDI and know-how, both of which promote productivity growth in sending economies. Figure 1 summarizes possible positives and negatives for sending and receiving economies with regard to skilled migration as well as possible global effects.

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# **Figure 1. Possible global and national effects of high-skilled international migration**

|**SENDING ECONOMIES: POSSIBLE NEGATIVES**|**RECEIVING ECONOMIES: POSSIBLE NEGATIVES**|
|---|---|
|· “Brain drain”: lost productive capacity due to at<br>least temporary absence of higher skilled workers<br>and students<br>· Less support for public funds for higher<br>education|· Decreased incentive of natives to seek higher<br>skills<br>· May crowd out native students from best<br>schools<br>· Language and cultural barriers between native<br>and immigrant high-skilled workers<br>· Technology transfers to possibly hostile<br>economies|
|**SENDING ECONOMIES: POSSIBLE POSITIVES**|**RECEIVING ECONOMIES: POSSIBLE POSITIVES**|
|· Increased incentive for natives to seek higher<br>skills<br>· Possibility of exporting skills reduces<br>risk/raises expected return of personal<br>education investments<br>· May increase domestic economic return to<br>skills<br>· Knowledge flows and collaboration<br>· Increased ties to foreign research institutions<br>· Export opportunities for technology<br>· Return of natives with foreign education and<br>human capital<br>· Remittances and other support from diaspora<br>networks|· Increased R&D and economic activity due to<br>availability of additional high-skilled workers<br>· Knowledge flows and collaboration<br>· Increased ties to foreign research institutions<br>· Export opportunities for technology<br>· Increased enrolment in graduate<br>programs/keeping smaller programs alive|

# **POSSIBLE GLOBAL EFFECTS**

· Better international flow of knowledge · Better job matches · Greater employment options for workers/researchers · Greater ability of employers to find rare/unique skill sets · Formation of international research/technology clusters (Silicon Valley, CERN)

**·** International competition for scarce human capital may have net positive effect on incentives for individual human capital investments

Source: Regets, 2001 Nevertheless, governments may have policy goals beyond attracting FDI that justify, in their view, certain restrictions on skilled migration. As such, a broader policy debate needs to be considered when evaluating restrictions on skilled migration. We acknowledge the fact that this paper measures two different issues: temporary entry of skilled expatriates who intend to seek permanent immigration and temporary entry of skilled expatriates who do not intend to seek permanent immigration. While the former is a social and highly sensitive political issue, and is predominantly a South-North phenomenon, temporary entry of skilled personnel is clearly an FDI issue which does not necessarily entail a SouthNorth flow of skilled expatriates.

5
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3. _<u>Restrictions on permanent residency / citizenship and Spousal Work Permit</u>_ <u>: Measures the</u> attractiveness of an economy to the skilled immigrant in terms of being able to obtain a permanent residency and/or citizenship on the basis of temporary employment, and the ability to obtain a work permit for a spouse based on employment of the other spouse (Spousal Work Permit).

The ESE indicators also include nationality or residency limitations imposed by economies on the composition of the board of directors. The aim of such limitations is usually to achieve different policy objectives: nationality limitations influence control over the investment and usually are related to national security or political considerations. Residency requirements are associated with the interest of the host state of having at least one physical person representing the legal entity in case of any wrongdoings. As a result the indicators are not included in the index but Annex II provides an overview of conditions imposed on the composition of the board of directors in the surveyed economies.

# **3.2 How the data were gathered**

The data were gathered through a questionnaire which was filled out by lawyers specialized in immigration and/or labor law, as well as government officials (from a country’s Board of Investment, Labor or other Ministries, and Investment Promotion Agencies). To make the data comparable across economies, several assumptions are made about the parent company, the business and the skilled expatriate.

Data were gathered about the laws and practices that would affect a locally registered subsidiary of a multinational firm when hiring a skilled expatriate. The subsidiary has a start-up capital of 10 million USD and does not operate in a special economic zone. The company is looking to hire a foreign worker (skilled expatriate). The skilled expatriate is an Information Technology (IT) specialist who is 35 years old, male, holder of a Master of Science degree, and will not hold an executive or managerial position. It is important to note that labor mobility regimes under bilateral or multilateral trade agreements (for example, the intra-company transfer regime) are excluded. In many economies, temporary licensing by professional associations may present an additional hurdle for skilled expatriates. For this paper we selected one particular category of skilled expatriates (IT specialists) which normally is not subject to local certification requirements. This approach allows for streamlined comparison across the surveyed economies. We nevertheless acknowledge that, depending on the economy, specific survey results may not be fully applicable to other categories of skilled immigrants.

# **3.3 The aim of the indicators**

This paper does not take a position on an ideal skilled immigration model for the surveyed economies. Each economy is unique and there is no global all-inclusive best practices model which can or should be implemented. Improved skilled migration policies need to be tailor-made for each economy. In this paper we focus on a number of issues which are common to most of the skilled immigration regimes without taking a position on whether reforms at this stage would be advisable or how reforms should be sequenced.

The goal of this paper is to contribute to the literature on FDI which, for the most part, leaves aside migration considerations. We do this by mapping how long it takes to obtain a TWP, identifying bottlenecks which limit the inflow of skilled expatriates or decrease the attractiveness of an economy to a skilled expatriate, while at the same time discussing best practices with regard to common characteristics of skilled immigration regimes across the surveyed economies.

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A number of data points were used to create an ESE index which is used to find correlations with FDI flows in order to answer the question of whether skilled immigration regimes affect FDI. The ESE index is also correlated to external existing data from the Global Migration Barometer (Economist Intelligence Unit, 2008) to determine whether economies with a need to attract migrants (to spur economic growth) have in effect put appropriate skilled immigration regimes in place.

# **_4. Results_**

# **4.1 Restrictions that control the inflow of skilled immigrants**

# **4.1.1 Immigration quotas**

Quotas are limits on immigrants that cap the number of people who are allowed to move into a country during a specified period. Quotas therefore function as a funnel and impact foreign investors who seek to bring in skilled staff to start up a company.

Quotas can be nationwide, but can also be on a company- basis or even per industry sector. Forty of the 93 surveyed economies (or 43%) have quotas which restrict the inflow of immigrants and therefore impact all categories of skilled expatriates which are employed.

Figure 3 provides an overview of the applicability of immigration quotas to the surveyed economies. Figure 4 provides examples of quotas in surveyed economies.

**Figure 3. Applicability of immigration quotas to surveyed economies**

**<mark>Non-quota economies</mark>** **<u><mark>Quota economies</mark></u>** Afghanistan; Albania; Argentina; Armenia; Australia; Algeria; Angola; Azerbaijan; Bangladesh; Bolivia; Austria; Belarus; Bosnia and Herzegovina; Bulgaria; Brazil;  Brunei Darussalam;  Chile;  Cyprus;  the Burundi;   Cambodia;    Cameroon;   Canada;   Chad;  Dominican Republic; Ecuador; the Arab Republic Colombia; Costa Rica; Côte d’Ivoire; Croatia; the Czech of Egypt; Ghana;  the Democratic Republic of Republic; Ethiopia; France; Georgia; Germany; Greece;  Congo; Guatemala; Honduras; India; Indonesia; Hong  Kong  SAR,  China;  Japan;  Jordan; Kenya; Ireland; Italy; the United Kingdom; Kazakhstan; Madagascar; Malaysia; Mauritius; Morocco; Nepal; the Kosovo; the Kyrgyz Republic; FYR Macedonia; Netherlands; New Zealand; Pakistan; the Philippines; Mali; Mexico; Moldova; Montenegro; Poland; the Republic of Korea; the Russian Federation; Mozambique; Nicaragua; Nigeria; Peru;  Romania; Rwanda; Senegal; Serbia; Singapore; the Slovak  Saudi  Arabia;  Tanzania; Thailand; the United Republic;   South  Africa;  Spain;  Sri  Lanka; Taiwan, States; República Bolivariana de Venezuela; the China; Tunisia; Turkey; Uganda; Ukraine; Vietnam; Republic of  Yemen. Zambia.

Source: FDI Regulations Database 8
# **Figure 4. Examples of applicable quotas in surveyed economies**

|**Company-based**<br>**quotas**<br>**which do not take**<br>**into account the size**<br>**of the company**|**Company-based**<br>**quotas**<br>**which take into**<br>**account the size of**<br>**the company**|**Company-based quotas**<br>**dependent on the foreign**<br>**investment amount**|**Nationwide**<br>**applicable quotas**<sup>**2**</sup>|
|---|---|---|---|
|Cambodia:<br>Maximum 6 % of the<br>workforce can be<br>skilled expatriates.<br>Congo, Dem. Rep.:<br>Maximum 4 % of the<br>workforce can be<br>skilled expatriates.<br>Egypt, Arab Rep:<br>Maximum 10 % of<br>the workforce can be<br>skilled expatriates.<br>Guatemala:<br>Maximum 10 % of<br>the workforce can be<br>skilled expatriates.<br>Kazakhstan:<br>Maximum 30 % of the<br>workforce can be<br>skilled expatriates.<br>Saudi Arabia:<br>Maximum<br>20 % of the workforce|Mozambique:<br>•<br>In large firms (><br>100 employees):<br>skilled<br>expatriates<br>cannot exceed<br>5% of the total<br>number of<br>workers.<br>•<br>In medium firms<br>(> 10 but <100<br>employees):<br>skilled expatriates<br>cannot exceed 8<br>% of the total<br>number of<br>workers.<br>•<br>In small firms (<<br>10 employees):<br>skilled<br>expatriates<br>cannot exceed<br>10 % of the total<br>number of<br>workers.|Ghana:<br>• US$10,000 to<br>US$100,000 = 1 skilled<br>expatriate.<br>• US$100,000 to<br>US$500,000 =2<br>skilled expatriates.<br>• US$500,000 and<br>above=4 skilled<br>expatriates.<br>Nigeria:<br>In practice<sup>3</sup>, 2 skilled<br>expatriates are allowed in a<br>company with a share<br>capital of 15 million Naira<br>(95,000 USD) and 4 in a<br>company with a share<br>capital of 30 million Naira<br>(190,000 USD).<br>Thailand:<br>One skilled expatriate for<br>each 2 million bath of<br>registered capital<br>(67,000 USD)with a limit|Romania:<br>Yearly annual quota for<br>foreigners (for all types<br>of work permits). For<br>2011, the quota was set<br>at 5,500 work permits.<br>United Kingdom:For<br>the period of 6<br>April 2011 to 5 April<br>2012 the maximum<br>has been set at<br>20,700. New hires from<br>outside of the EU who<br>will earn more than<br>£150,000 are exempted<br>from quotas.<br>United States:The<br>quota<sup>4</sup>per fiscal year<br>(October 1 - September<br>30) is<br>65,000 regular H-1B<sup>5</sup>s<br>regardless of position.<br>The first 20,000 petitions<br>received<br>who have a Master’s<br>degree or PhD obtained in<br>the United States are|

2 Nationwide applicable quotas refer to an annual limit on foreigners; applications of eligible candidates are approved on a first-come first-serve basis until the limit has been reached.

3 In Nigeria there are no standard characteristics of quotas granted or a calculation employed. It is granted at the discretion of the Ministry of Interior. Factors that are taken into account in the determination of the quota applicable to the applying company are: (1) the share capital of a company; (2) training and under-study of Nigerian employees in order to acquire the relevant skills for the eventual take-over of the positions.

4 During the most recent years, the H-1B quota has been reached many months prior to the end of the fiscal year, resulting in substantial delays before companies may apply for H-1B visas on behalf of many foreign nationals. In the current fiscal year, the H-1B quota was reached only two months after the start of the new fiscal year. H-1B petitions may be filed up to 6 months prior to the start of a fiscal year, but employment may not begin until the start of the fiscal year.

5 The H-1B is a non-immigrant visa in the United States under the Immigration and Nationality Act, section 101(a)(15)(H). It allows US employers to temporarily employ foreign workers in specialty occupations.

9
|can be skilled<br>expatriates.<br>Ireland:|of 10 skilled expatriates.|exempted from the<br>65,000 figure. There are<br>no quotas for O-1 visas<sup>6</sup>.|
|---|---|---|
|Maximum 50% of<br>employees can be<br>non-EU citizens.||Italy: The Quota<br>Agreement ("decreto<br>flussi") for 2011 is 86,580<br>for workers without<br>permit of stay in Italy; 11,<br>500 for workers with<br>Italian permit of stay for<br>other reasons<sup>7</sup>.|

Source: FDI Regulations Database

# **4.2 The ease of hiring skilled expatriates**

This indicator measures the time and procedural steps required to legally start working in the host country on a TWP. For ease of reference this period will be referred to as “time to obtain a TWP”.

# **4.2.1 What is specifically measured when measuring the “time required to obtain a TWP”?**

The time required to obtain a TWP measures the number of calendar weeks it takes for a skilled expatriate (IT specialist) to comply with all requirements of an economy after which s/he is legally allowed to start working. The details of each step are provided in Figure 5.

The starting point of the time period measured is when the company has a need for a foreign IT specialist and has identified a suitable candidate who they want to hire (Step 1). Our case study states that the company is a newly established company which previously has not hired foreign expatriates.

In some economies, companies are required to obtain a certification before they are able to hire foreign expatriates (Step 2). Step 3 entails all procedures which the company and/or employee need to comply with in order to legally start work. The end point of the measured time period (Step 4) is the moment when the foreign IT specialist is legally allowed to start working.

> 6 An O visa is a classification of non-immigrant temporary worker visa granted by the United States to an alien "who possesses extraordinary ability in the sciences, arts, education, business, or athletics, or who has a demonstrated record of extraordinary achievement in the motion picture or television industry and has been recognized nationally or internationally for those achievements," and to certain assistants and immediate family members of such aliens.

> 7 There is no distinction between specialized and non-specialized workers. The application scope of the quota depends of the nationality of the worker and industry sectors. The quota's decree is binding if the foreign worker does not have a permit to stay in Italy. Quotas are calculated on the basis of market requests.

10
The company ie eos The company has complies with labor at d/ = suruns : SS determined it has a certifications or EqLiVES SLE Is ee Ww needto hirea other mandatory wiyall tie Specialist is legally foreign IT Specialist requirements which — Saar alows : * at and has identified a are required before (25.24 aia working in the candidate it can start the the start of legal host country hiring process employment in the : host country
# **Figure 6. Regional average time required to obtain a TWP (in calendar weeks)**

<!-- Start of picture text --> MENA<br>OECD<br>LAC<br>Global average<br>SSA<br>SAR<br>ECA<br>EAP<br>0 2 4 6 8 10 12<br><!-- End of picture text --> Source: FDI Regulations Database Note: Regional abbreviations, and the number of economies covered by the ESE indicators per region, are as follows: EAP = East Asia and the Pacific (10 economies); ECA = Eastern Europe and Central Asia (21 economies); LAC = Latin America and the Caribbean (14 economies); MENA = Middle East and North Africa (8 economies); OECD = High Income economies in the Organization for Economic Cooperation and Development (17 economies); SAR = South Asia Region (5 economies); SSA = SubSaharan Africa (18 economies).

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**Figure 7. Average TWP Processing Times (in calendar weeks): Top 10 fastest and slowest economies**

<!-- Start of picture text --> Singapore<br>Mozambique<br>Mauritius<br>Côte d'Ivoire<br>Dominican Republic<br>Montenegro<br>Thailand<br>Taiwan, China<br>Albania<br>Global average<br>Austria<br>Slovak Republic<br>Algeria<br>South Africa<br>United Kingdom<br>Costa Rica<br>Morocco<br>Honduras<br>Greece<br>Saudi Arabia<br>0 5 10 15 20 25 30<br><!-- End of picture text --> Source: FDI Regulation Database

# **4.2.2. Good practices with regard to processing Temporary Work Permits**

# • **Online TWP processing**

A good practice with regard to the TWP application process is ensuring the process can be completed online. Completion of the TWP online means that (1) the application form(s) can be downloaded online, (2) documents can be submitted online, (3) confirmation documentation is received online and (4) the progress of the application can be monitored online. In addition, when the work permit becomes available, (5) notification is received online. Online completion entails that no paperwork<sup>8</sup> needs to be submitted to the relevant authority.

> 8 In certain economies documents can be submitted online but those same documents are also required to be submitted separately in person. For example, in Turkey even though the documents can be submitted online, hard copies signed by the applicant must also be submitted to the Labor Ministry. Some economies are taking active steps to upgrade to a fully online application system. For example, even though in the Netherlands currently requires sending in a hard copy of the application documents (which can be downloaded) to the work placement branch of the Employee Insurance Agency (UWV WERKbedrijf) by ordinary mail. The Dutch Modern Migration Policy and the National Visa Act both entered into force on June, 1, 2013, and it is expected that once the new information system (INDIGO) is fully operational applications will be able to be to be completed online (no hard copies are required).

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Currently, Singapore and the Republic of Korea, top performers with regard to the TWP processing time, are the only economies with a complete online TWP processing system.

75 % of the economies which have advanced online capability (meaning the system allows more than only downloading the TWP application form) have average TWP processing times which are lower than the global average of 8 weeks. Figure 8 shows what the specific characteristics of application systems in surveyed economies are. In 80% of the surveyed economies there is no advanced application system (a system which allows more than only downloading the application form: e.g. the ability to monitor the application process).

**Figure 8. Characteristics of the application system in the surveyed economies (in %)**

<!-- Start of picture text --> 20%<br>35%<br>45%<br><!-- End of picture text --> <!-- Start of picture text --> Advanced online capability (the<br>system allows more than<br>downloading the TWP<br>application form)<br>Only the TWP application form<br>can be downloaded online<br>No online component (all<br>documents need to be<br>physically obtained)<br><!-- End of picture text --> Source: FDI Regulations Database

# • **One-Stop Shops**

Before the applicant can apply for a TWP, some economies require a number of approvals or documents from competent authorities in the economy where s/he wants to work. This requires coordination on the part of the applicant and may also impact the total time required to obtain the TWP.

Having a one-stop shop where the processing unit manages the relationship between the different competent authorities is applicant-friendly and normally results in shorter timelines. Figure 9 shows that 80% of economies with one-stop shops have TWP processing timelines which are at or below the global average of 8 weeks.

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trend of women who reach senior positions in their companies, who also need international experience and this has increased the proportion of male spouses and partners. The percentage of male partners often varies with the type of organization or industry. Many companies report an average of 10% male partners.

In April 2013 the Permits Foundation conducted an International Survey with regard to work permits and global mobility of Expatriate Spouses and Partners. The survey examined the views of 3,300 expatriate spouses and partners of 120 nationalities, who were at the time accompanying international employees working in 117 host economies for over 200 employers in both the private and public sector. The survey found that economies which enable spouses or partners to work are considered as attractive destinations by 96% of respondents. Economies with work permit restrictions are less attractive and 58% of spouses or partners indicated that they would be unlikely to relocate to a country where it was difficult to get a work permit. Twenty-two percent of spouses or partners reported that the expatriate employee had turned down at least one assignment because of concerns about the accompanying spouse’s or partner’s career or employment and 7% had terminated an assignment early for the same reason. For employers, these assignment refusals and early terminations imply lost potential and financial cost.

Spouses and partners face a number of challenges. Whereas the employee usually transfers within his or her company as part of a career plan, the partners have to uproot themselves from their current job and company. They may have no professional network in the new country and the market for their skills may be completely different. They may face language and cultural barriers and their qualifications may not be recognized at the same level.

Many economies require expatriate spouses or partners to have a separate work permit, even though they are legally residents. This is often difficult and time consuming. In short, the lengthy work permit regulations represent a real deterrent both to the partners themselves and to companies that might otherwise be prepared to employ them.

Allowing spouses and partners to work in a host country does not have a negative effect with regard to reducing employment opportunities for local staff since the proportion of expatriate staff and spouses/partners is very small. What is more important is the positive impact on the economy and labor market of attracting international companies and organizations to base their operations in the country.

In allowing spouses to work freely, governments recognize the value to the economy of creating an attractive climate for inward investment, international organizations and knowledge workers. Allowing spouses and partners to work represents a "triple win" for internationally mobile families, the organizations that employ them, and their host and home economies, which ultimately is beneficial to their economic competitiveness and ability to attract foreign direct investment.

Taking into account the specifics of the case study, respondents answered that Spousal Work Permits are only available in Australia, Canada, the Netherlands, the United Kingdom and Hong Kong SAR, China. For the rest of the surveyed economies, it is difficult for an accompanying partner to work even though they are legally resident. Normally, the spouse is entitled to receive a dependent visa which is linked to the TWP of the working spouse. A dependent visa generally prohibits spouses taking up employment. If the accompanying spouse would like to work then s/he would normally need to apply separately for a TWP.

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<!-- Start of picture text --> 60,000<br>50,000<br>a_ ¢ ¢<br>Ss 40,000<br>= ° Sd<br>s 30,000 ¢ ¢<br>=)— - Sd<br>25<br>2<br>20,000 ¢ o¢¢<br>10,000 ><br>8 ge Ke BFos wd<br>fe) 20 40 60 80 100<br>Average ESE score per economy<br><!-- End of picture text -->
<!-- Start of picture text --> 2,500<br>£ _. 2,000<br>ao ¢<br>2<br>a<br>=<br>«<br>2 2% & 1,500 ©<br>os<br>-— 7<br>3 = 1,000<br>a + 9 %<br>co ¢<br>= 500<br>=<br>.<br>0<br>0 20 40 60 80 100<br>ESE index<br><!-- End of picture text -->
**Figure 13. Economies ranked according to their need for migrants (economies with the greatest need are ranked first)**

|1 Japan|35 Australia|
|---|---|
|2 Italy|36 New Zealand|
|5 Czech Republic|37 Costa Rica|
|6 Greece|38 Venezuela, RB|
|7 France|39 Canada|
|9 Austria|41 Thailand|
|11 Hungary|42 Ecuador|
|11 Ukraine|43 Ireland|
|14 Bulgaria|44 Singapore|
|15 Germany|46 Mexico|
|17 Netherlands|47 Chile|
|18 United Kingdom|48 South Africa|
|18 Russian Federation|50 Ghana|
|22 Spain||

Source: Economist Intelligence Unit, 2008. Global Migration Barometer The underlying economic and social attractiveness of an economy will certainly be an important driver of migration flows. Once such attractiveness is accounted for, however, analysis of the data yields an interesting result: there is no correlation between the ESE index and an economy’s need for migrants. Consider two economies with the same level of attractiveness to migrants, but with different degrees of need. As measured by the Global Migration Barometer, Italy and New Zealand have the same level of attractiveness to migrants.

However, they have a different need for migrants: Italy is ranked second and New Zealand is ranked 36 on the need for migrants. A more open immigration policy would be one way for the country with a greater need to attract more skilled migrants; but there is no difference on average between such economies’ immigration policies as measured by the ESE index. This implies that there is room for economies with a need for migrants to improve their immigration regimes as measured by the ESE index as one means of attracting more skilled migrants.

Economies with a greater need for migrants and that have restrictive migration policies could do better by being more liberal. For instance, Italy could improve its migration policies by reducing the time required to obtain a temporary work permit (it takes on average 13 weeks to obtain a temporary work permit) and could also reconsider the use of quotas or how they apply to skilled expatriates.

# **6.  Conclusion**

The importance of skilled immigration reform cannot be underestimated and is an essential building block for the sustained global competitiveness of any economy. This paper has highlighted the main components of the current skilled immigration regimes in 93 economies which companies take into consideration when deciding where to invest (how easy is it to hire skilled expatiates). In addition, we measured components which influence the relocation-decision of the skilled expatriate (is there a path leading to permanent residency and citizenship and is a spousal work permit available).

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By correlating the ESE index, which incorporates the aforementioned components, with GNI per capita we established that, on average, poorer economies have lower ESE scores and thus have more restrictive regimes for employing skilled expatriates. When correlated with FDI outflows, we find that less restrictive economies attract more FDI. An interesting result is yielded when the ESE index is correlated with the Global Migration Barometer: here we find that there is no correlation between the ESE index and an economy’s need for migrants. As such, an economy with a greater need to attract skilled migrants could achieve this by making immigration policies more liberal.

A first uncontested step with regard to skilled immigration reform could be to adhere to the good practices in processing temporary work permits as described in this paper. A second, potentially more difficult, step could be to identify bottlenecks (quotas and other restrictions which make a skilled immigration regime unattractive or burdensome) and consider eliminating these or adjusting their impact on skilled immigrants. Economies which are willing to engage in such a holistic, broader skilled immigration reform will be better situated in terms of attracting FDI and global talent, thereby contributing to the competitiveness of their economy.

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