FOREIGN WORKERS AND THE MALAYSIAN ECONOMY
Extracted from the Economic Report 2004/2005, Ministry of Finance Malaysia
The Malaysian economy has consistently recorded impressive and sustained high growths over the period 1990-1997, i.e prior to the Asian financial crisis. The robust growth led to substantial job creation, with employment expanding faster compared with the labour force growth. Consequently, the unemployment rate remained low, reflecting a full employment situation, which remains until today.
Labour Market Scenario
Following recovery and sustained economic expansion after the crisis, the economy continues to be in a full employment situation. The tight labour market spread to the manufacturing and services sectors and permeated across the Klang Valley and major towns like, Penang and Ipoh. This attracted the influx of both legal as well as illegal foreign workers. Total foreign workers rose from 4% of total employment in 1990 to about 10.7% in 1997 and 9% in 2001. As at July 2004, there are about 1.3 million registered foreign workers, constituting 12% of total employment in the country.
Despite rapid industrialisation and corporate operational restructuring towards more capital intensive manufacturing activities, strong growth in the economy resulted in labour shortages at all levels. Other major economic sectors, namely agriculture, construction and services faced the same problem.
Several measures were taken to ease the tight labour market conditions, including increasing the supply of skilled manpower and greater mechanisation of operations. As an immediate solution to the problem, foreign workers are allowed to be employed in the plantation, construction and selected services sectors as well as the manufacturing sector. This is to avoid disruption to the economic growth process.
Foreign Labour Policy
Various policy measures pertaining to foreign workers have been instituted to regulate and administer their employment in selected sectors of the economy and to control the influx of illegal foreign workers. These include the Foreign Worker Rationalisation Programme to legalise illegal workers, amendments to the Immigration Act, 1977 and imposition of an annual levy. In addition, several Memorandum of Understanding (MOUs) were signed with labour exporting countries to authorise legal recruitment of foreign workers. Currently, Malaysia allows recruitment of foreign workers from several countries including Indonesia, Nepal, Bangladesh, India and Myanmar.
Export-oriented manufacturers (with more than 50% of their output meant for export market) are eligible to hire foreign workers, while those with domestic-oriented businesses are also allowed to hire foreign workers with certain conditions. Companies with a minimum paid up capital of RM100,000 and with a total sales of RM2 million are permitted to hire foreign workers on the ratio of 1 foreign worker for 1 domestic worker....