Malaysia’s 12th Plan 2021-2025 Special Report: Industries Insist It Takes Much Longer to Adjust to 15% Foreign Labor Cap

IN tabling Malaysia’s 12th plan (12 MPs), Prime Minister Datuk Seri Ismail Sabri Yaakob said that in the long term, the number of foreign workers will be capped at no more than 15% of the total workforce. country and enforcement measures related to foreign workers. will be strengthened to support this policy.

He urged industries to increase automation and mechanization of their production processes to overcome heavy reliance on foreign workers.

As a gauge, Malaysia’s total workforce stood at 16.07 million in July, and a cap of 15% would limit the number of foreign workers to 2.4 million in the long run.

The 12MP report found that at the end of 2020, registered foreign workers in the country were 1.48 million, or 9.9% of the total workforce. However, that number is expected to be much higher when combined with the number of undocumented foreign workers in the country – estimated by some to be equal to or even greater than the number of documented workers.

“The presence of a large pool of foreign workers discourages the industry from embracing automation and mechanization and moving up the value chain. In addition, lax enforcement and the lack of an effective mechanism to deal with low-skilled foreign workers are contributing to the increase in the number of illegal immigrants, ”the plan says.

“Many of the illegal immigrants were originally documented workers who stayed in the country without renewing their work permits. According to the World Bank study in 2019, the total number of foreign workers was estimated between 2.96 million and 3.26 million in 2017. Among these, [an estimated] 1.23 million to 1.46 million were… illegals.

Restricting the entry of low-skilled foreign workers is a 12MP goal to ensure the creation of more skilled jobs. While Ismail Sabri did not specify the timeframe for employers to comply with the 15% cap, industry players say it will take them between five and 18 years to comply, as progress in process automation vary by industry.

The Edge spoke with industry captains in the plantation, glove and foodservice sectors to find out if this new cap will be sustainable in the long term.

Planting

Malaysian Palm Oil Association CEO Datuk Mohd Nageeb Wahab said the industry welcomes the 15% cap in the long run, but maintains that foreign labor is still needed, especially in the harvest.

“We, the industry, fully support the government’s plans to reduce the number of guest workers in the plantation sector in the long term. However, the most critical job in planting, which is harvesting, is still a manual process that has not yet been automated. And, for that, we would still need to rely on guest workers for the time being. “


He adds that the industry is aggressively pursuing the process of automating the harvest, but stresses that it will not be immediate. “We have actually mechanized a lot of our operations in the plantation industry such as fertilizer application and crop removal, and this is evidenced by the fact that our man-to-land ratio has increased from one worker for 6 ha of plantation in 30 years. there is one worker per 10ha now. The most efficient plantation companies even make one worker per 12 ha.

“The Malaysian Palm Oil Board has formed a consortium called Mechanization and Automation Research Consortium of Oil Palm (Marcop) for the sole purpose of finding a solution to fully automate the industry. Marcop is now aggressively pursuing this.

“However, the discovery to automate the harvesting process will take some time and we may not see it pay off for the next five years. In the meantime, we still need guest workers to work in the plantations, especially for the harvest, as our local workforce does not want to take on these kinds of jobs.

The plantation industry employs around 750,000 workers, 85% of whom are foreigners.

“The reason people don’t want to work on the plantations is the nature of the work, especially harvesting, as it is backbreaking work. Once we have completed the discovery process in automating harvesting operations, the job will be easier, ”says Nageeb.

“Then the opportunity to hire locals will be there and we won’t need that many workers. At the same time, we can afford higher wages. “

He agrees that reducing the number of foreign workers can be a win-win solution for government and industry players in the long term. “The pandemic was an eye opener for the plantation industry and made us realize we were being too complacent as we relied completely on the availability of guest workers. The freeze on the hiring of foreign workers by the government has had a very serious impact on the industry in terms of labor shortages, resulting in a potential loss of production of 20-30%.

“In the long term, we are open to hiring locals. If possible someday we might just want to have local workers, because it is actually not cheap to hire foreign workers, and we don’t know how long they are willing to work here and how much. their country of origin will allow it.

“Then there are the [alleged] forced labor issues with the restraint order issued by U.S. Customs and Border Protection (CBP), which affects the plantation industry as we hire a lot of guest workers, which CBP sees as a group vulnerable. The US State Department has also lowered Malaysia’s ranking in its Trafficking in Persons Report to Level 3 from Level 2 previously. Therefore, if we can automate and reduce the number of guest workers in this country, then we will address these issues on forced labor and level 3 that Malaysia has been relegated to.

Gloves

The Malaysian rubber glove industry has maintained the same workforce of around 72,000 employees since 2013, of which 55% are foreigners, according to the Malaysian Rubber Glove Manufacturers Association (Margma).

According to Margma’s chairman, Dr Supramaniam Shanmugam, the industry currently has a five-year plan to reduce its foreign workers by an additional 15% through automation.

“The industry has continuously automated itself over the past 15 years. This is illustrated by our glove production, where it has grown from a minimum of 3,000 pieces per hour to the current production of 42,000 pieces per hour. Likewise, production efficiency has increased, resulting in downsizing – from a maximum of 10 workers to produce a million gloves, we now only need 1.7 workers to produce the same number ” , he said.

“As it is, automation is at the 85% level, while the last 15% possible is the most difficult and requires at least three to five more years, by which time we would have been automated at a level optimal. This last mile automation will certainly reduce manpower, as it involves stripping, stacking, wrapping and cartoning the gloves.

Supramaniam insists the industry will need an additional 15-18 years to reach the 15% cap, even with automation at optimal levels. “Remember that our industry has an annual growth rate of 15-20%, and building capacity to meet global orders and demand is key to our country’s export trade and economy. .

Besides automation, hiring locals is another viable option for the industry and they plan to encourage more locals to participate.

“The 24/7 nature of this manufacturing process, however, will require shifting and overtime, two aspects loathed by locals. Thus, during years of high unemployment rates, we may attract more than the usual number of locals to join the industry. However, their turnover is extremely high, as many leave for more comfortable and often less well-paid jobs, ”underlines Supramaniam.

“Our five-year plan is to reduce the percentage of foreign workers to 40%, or about 3% per year. This will be done through further automation and the targeted rubber glove training program for locals. This training program, designed by Margma, is tailor-made for the glove industry. We believe that with such training and certification of locals, the industry will appeal to locals. This training program – a joint effort between the Ministry of Plantations Industries and Commodities, the Malaysian Rubber Board, the Malaysian Rubber Council and Margma – is expected to start in 2022. ”

Restaurants

Malaysian Indian Restaurant Owners Association (Primas) President J Govindasamy @ Suresh estimates that it will take five years to reach the 15% cap on foreign workers in the service industry, especially the restaurant industry.

“This is because the inhabitants are not inclined to take on the work of waiters. Primas as well as restaurants have launched campaigns and placed ads in local media to recruit locals for the jobs, but many are not enthusiastic. Locals prefer office jobs, and even those who take the jobs quit after a week, saying they prefer daytime jobs.

Primas represents the interests of 1,500 restaurants across the country. Suresh believes the government should help restaurateurs to help them cope with losses suffered from the pandemic.

He says, “The government should provide interest-free loans or grants to restaurants and also fund training for locals to take over jobs held by foreigners.

“Restaurant owners need the government’s help as they will incur huge expenses to move to semi-automation and digitalization in an effort to reduce reliance on the workforce. foreign. Even some restaurants wishing to switch to industrial revolution 4.0 are put off by the large investment required for new equipment and skilled employees.

“If the government is really committed to reducing the foreign workforce, then we propose the establishment of a joint committee between the government and representatives of different professional associations for constant dialogue and ways to reduce Workforce. At the moment, meetings between government agencies and Primas are not that frequent.

A win-win solution?

In its wishlist of 12 MPs, the Research for Social Advancement think tank said policies that offer generous incentives, as well as training and guidance for automation, are needed, starting with the most important sectors. dependent on foreign labor. “The goal is to eventually equalize the cost of foreign and Malaysian workers and dramatically increase productivity so that individual wages can rise, especially for low-paid positions, all without increasing the unit cost of the product or of the manufactured service. “

If the government could find a win-win solution in the management of foreign workers – a viable solution for industries without compromising their profitability – it would certainly help reform a long-standing structural problem in the country.


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