Malaysia faces challenges in reducing reliance on foreign workers

Malaysia faces challenges in reducing dependence on foreign workers and the need for a phased approach to transition to automation and upskill local workers.

Malaysia faces a challenging task in reducing its reliance on foreign workers, despite recent vows by the government to make fresh efforts in this direction. Reports of scammed and unemployed migrant workers persist, highlighting the complexities involved in the transition. The country’s monthly minimum wage, introduced in 2012 to address this issue, currently stands at RM1,500 (US$323).

Past attempts to decrease dependence on foreign labour, including the introduction of the minimum wage, have yielded limited results. The government’s commitment is met with scepticism, as industry observers argue that previous administrations have made similar promises without much significant change.

Efforts to shift from labour-intensive to automation-focused industries require a serious commitment to cutting dependence on foreign workers. While acknowledging the contributions of foreign labour to Malaysia’s development, there is a consensus on the need to limit their numbers to address unemployment among locals and spur technological advancements.

The government’s proposed multi-tiered levy system, charging higher rates for companies with more foreign workers, and a progressive wage model aim to incentivize the reduction of foreign labour dependency. However, industry players call for more time to invest in automation and upgrade workers’ skills, making so-called “3D (dirty, dangerous, and demeaning)” jobs more appealing to locals.

Despite acknowledging the need to reduce reliance on foreign workers, employers and industry associations urge a phased approach, emphasizing the importance of time for companies to adjust to new technologies. The Malaysian Employers Federation supports the government’s policy but advocates for gradual implementation to avoid abrupt disruptions, citing the bitter experience of a worker shortage in April 2022.

The manufacturing sector, the largest employer of foreign workers, requires time to adjust as it transitions to high-technology and value-added activities. Employers stress the need for fair, transparent, and pre-announced legislation, policies, and procedures related to foreign labour to facilitate a smoother transition.

While the government aims to prioritize reducing foreign labour dependence in 2024, challenges persist, including job scams, perception issues, and a history of contradictory short-term policies. The success of this depends on the buy-in of all stakeholders, with a focus on details such as the effectiveness of the multi-tiered levy system in encouraging automation and technology adoption by businesses.