Tighter policies needed to curb influx of foreign labour

The ‘addiction’ to sourcing low-cost and low-skilled labours has impeded Malaysia’s productivity growth

by SHAHEERA AZNAM SHAH / pic by MUHD AMIN NAHARUL

MALAYSIA needs to tighten its labour policies to effectively address the country’s high dependency on low-skilled foreign workers.

Bank Negara Malaysia (BNM) deputy governor Marzunisham Omar (picture) said the “addiction” to sourcing low-cost and low-skilled labours has impeded Malaysia’s productivity growth, which in turn had led to a wage disparity for local labour.

“We have been seeing a slower productivity level. One of the reasons for that is the low rate of automation, which is linked to the businesses’ `addiction’ to low-cost foreign labour, on top of the surplus of graduates produced each year.

“The government has done a good job in creating investment incentives for automation, but we really need to be comprehensive in our foreign labour policy as we cannot continue to rely on the foreign labour,” he told reporters at the Malaysian Economic Association (MEA) Forum in Kuala Lumpur yesterday.

Marzunisham added that continuous reliance on lowskilled foreign workers will distort the development of Malaysia’s economy and disrupt the country’s effort in achieving a high-income nation status.

“We have to tackle the foreign labour issue because as long as we have the unlimited supply of foreign labour, we will continue to be reliant on the low-cost model and it is not sustainable.

“This will not help us to move to a higher-income status and in achieving a value-added economy that we want,” he said.

Marzunisham said the businesses have to be cognisant of the moderating global economy which has shown a synchronised contraction in some major countries.

“The signs are emerging, for the past months, that the global economy is moderating as clear indication noted that major economies are experiencing a moderation in their growth.

“The US for example, as a result of wearing off fiscal stimulus, their tax policies in particular, as well as the monetary tightening policy, we are expecting a moderation in the US economy,” he said.

On the local front, he said BNM’s projection of a modest forecast in the country’s economic growth is on the basis of softened private sector spending and business sentiments.

“The key driver of our private consumption is income and labour market condition. Most industry players that we have talked to will continue to provide a wage increase of 5%, while 92% of the companies indicated that they will continue to hire or retain the number of workers, and this is the major contributor to our private consumption.

“We are projecting private consumption to moderate this year from the exceptional growth in 2018, to long-term average of 6.6%,” he said.

He added that the central bank is expecting a recovery in the commodity production, particularly the liquefied natural gas (LNG), which is expected to contribute from 17 new manufacturing production facilities.

“We are expecting some normalisation in the production of the LNG production to come back on stream in the second half of the year or as early as in the second quarter.

“A manufacturing production facilities is coming on stream this year, at least 17 new facilities, and this will add to a higher production in our economy,” he added.