“Economically and socially, foreign workers play a significant role in Malaysia’s development,” Malaysian Employers Federation (MEF) president Syed Hussain Syed Husman said.
According to World Bank data on Malaysia, a 10% net expansion of the manual or “low-skilled” migrant workforce will boost Malaysia’s GDP by as much as 1.1%.
However, this dependence is no longer sustainable for a number of reasons, Syed Hussain said.
A lot of money is leaving Malaysia through remittances to the foreign workers’ home countries, he said.
“This has resulted in substantial accumulation of foreign reserves in those countries,” he added.
Back in February 2022, MEF reported that foreign workers were sending out an estimated RM34 billion annually via official channels, a sum that could have spiralled up to nearly RM70 billion if remittances through unofficial channels had been taken into account.
“It is estimated that foreign workers remit about 80% of their incomes back to their home countries,” Syed Hussain told FMT Business.
Protect foreign workers, strengthen the ringgit?
Addressing concerns with Malaysia’s treatment of migrant workers would not only enhance its global perception and future sustainability but could also curb dependence on foreign labour and help to reduce outflows through remittances.
Malaysia University of Science and Technology economist Geoffrey Williams described Malaysia’s reliance on foreign workers as a matter of choice rather than one of necessity.
“Looking at remittances to home countries of foreign workers in this way is unwarranted and appears to be placing blame on innocent foreign workers who are simply doing their jobs,” he said.
“Malaysian companies opt for foreign workers simply due to their willingness to accept lower wages, substandard employment terms and conditions with no legal protection,” Williams said.
Putting the wages and rights of foreign workers on par with those of locals would force businesses to reconsider their hiring strategies and business models, he said.
“Otherwise, their salaries would continue to lag behind those of Malaysians, making them more attractive to employers. Raising wages for foreign workers will reduce the demand for them.
“Another way to reduce the demand for foreign workers is to give them proper legal protection. This will stop errant companies from employing and abusing them,” he added.
Syed Hussain said in this context, the outflow of the ringgit would vary according to the level of wages paid to foreign workers and the number of foreign workers in the country.
“The amount remitted to the source countries will increase further in the event of any increase in the minimum wage rate. On average, foreign workers send back an additional RM4 billion for every RM100 increase in the minimum wage.
“In the long run, reducing dependence on foreign workers can help to minimise the outflow of the ringgit.
“By reducing remittances, we will be able to retain the money in the local economy, which will spur its growth,” Syed Hussain added.
Tech integration — the way forward
According to a 2022 report by the International Federation of Robotics, several nations have made significant advancements in advanced robotics. Notably, China, Japan, the United States, South Korea and Germany have emerged as leaders in this domain.
China, in particular, has surged ahead in industrial automation by leveraging its proficiency in mass production.
As far as the Chinese government is concerned, the robotics industry is already poised for a “revolutionary leap”, one that could play a pivotal role in propelling the country’s overall development.
Many companies in Malaysia have already adopted strategies to advance their technological capabilities from the cost-benefit perspective.
“The use of technology is crucial in reducing our dependence on foreign workers,” Syed Hussain said.
Apart from reducing the risks attached to 3D (dirty, dangerous and difficult) jobs in sectors such as construction, manufacturing and plantation that are dominated by foreign workers, automating tasks and processes can also enhance workers’ well-being, he pointed out.
For instance, national carmaker Proton has successfully reduced its dependence on manual labour through its technology-driven manufacturing approach.
This has resulted in long-term cost reduction and increased production capacity.
While automation reduces the need for workers to take on routine tasks, it also raises the demand for skilled workers to operate and maintain advanced machinery and robotics.
Syed Hussain said the task now is to train workers to use new technology to optimise their performance.
“Talent development is key to success given the need to continuously upskill and reskill employees to be more productive,” added Syed Hussain.
“TVET (technical and vocational education and training) must be made a mainstream focus to ensure that our workforce, particularly the youth, are adequately prepared for the demands of Industrial Revolution 4.0 (IR4.0),” he said.
He added that higher education institutions have a pivotal role to play in aligning their programmes with market demands by fostering collaborations with industry partners and enhancing public perception of TVET as high-skill value-added jobs.
“Societal perception that 3D jobs are for migrant workers would be removed by rebranding and revamping these jobs to make way for clear career progression,” Syed Hussain said.
From a macro perspective, Universiti Keusahawanan Koperasi Malaysia senior lecturer Abu Sofian Yaacob said technology adoption could be a silver bullet for Malaysia to curtail the outflows and to tackle labour shortages.
Embracing technology will also propel Malaysia up the value chain and enhance its competitiveness at the international level, he said.
“For Malaysia to fortify its position on the global stage, it is crucial to enhance our operational methodologies.
“The incorporation of advanced technologies can bring forth a myriad of benefits, ranging from heightened efficiencies to keeping a larger chunk of the nation’s wealth within its shores,” he added.