Malaysia to enhance efficiency in foreign labour acquisition, empower local talents

A shift from quantity to quality employment and emphasis on local talents is imperative to foster progressiveness 

by AKMAR ANNUAR & VEISHNAWI NEHRU 

MALAYSIA’S over-dependency on foreign workers across almost all industries, bringing forth a complex set of economic, social and policy concerns as the country progresses and develops, is well documented. 

From the plantation and manufacturing sectors to domestic help industry, issues surrounding low wage, abuses, exploitation and crowding out 

of local talents have come to the fore, especially since unheralded low labour importation was practiced for years with impunity. 

Human resource practitioners and industry players however are confident that the ongoing effort to enhance transparency and efficiency in foreign labour acquisition will help to push the country into not only acquiring quality talents but also fostering local skills improvement. 

Malaysian Employers Federation (MEF) president Datuk Dr Syed Hussain Syed Husman said, the government’s policy of limiting foreign workers to 15% of total workforce and encouraging more youth to enrol in Technical and vocational Education and Training (TVET) are steps in the right direction in reducing reliance for foreign labour. 

Foreign workers are filling in the gaps for jobs that are shunned by local workers mostly due to the stigma attached to doing such jobs, says Syed Hussain (Source: Media Mulia)

To complement these efforts, Syed Hussain added, the employers would need to step up by continuously embracing higher technology while encouraging workers to upskill and re-skill to new processes. 

“However, it must be noted that not all jobs can be mechanised and automated. Some foreign workers will still be required,” he told The Malaysian Reserve (TMR). 

In the short term, some vacancies still need to be filled up by the foreign workers as it is clear that locals are not interested in taking up the vacancies, especially in the 3D (dirty, dangerous and difficult) sectors, he added. 

Syed Hussain said the government is embarking on an overall policy of reducing reliance on foreign workers. 

He affirmed MEF’s support for the government’s policy of limiting foreign workers to 15% of the workforce, emphasising the simultaneous need to upskill and reskill local youth and existing workforce to adapt to new technology processes. 

“Encouraging local workers to undergo certified skills training, particularly up to Cooperatives Commission of Malaysia (SKM) Level 4, is highlighted for recognition as skilled workers,” he said. 

He highlighted the positive, long-term economic effects, emphasising the role of affordable domestic helpers in facilitating dual-income households, particularly within the middle class. 

Discussing the challenges and benefits, he underscored the dynamic nature of labour requirements, with changing skill sets and urgent needs in the ever-evolving market. 

“As the market whether domestic or international becomes ever more dynamic, the requirements for manpower and certain types of skill set changes and the timeline to address these are always urgent and oftentimes critical in the business world. 

“Without planning and applying the right foresight it can have an adverse effect on Malaysians. Close monitoring and interventions are required from time to time to address this,” he told TMR. 

Looking ahead, Hazmi predicted future trends in Malaysia’s reliance on foreign workers, anticipating a shift with digital transformation.

He also noted that automation and robotics will reduce the demand for low-skill, low-paying jobs, emphasising the profound impact on employment. 

“The last decade saw digitisation which mainly consisted of transforming physical to digital. 

“Moving forward, we will see transformation through digitising which reduces human input and participation. This level of automation would have a profound impact on employment,” he added. 

Regarding policy considerations, Hazmi recommended improving ongoing efforts to enhance efficiency and transparency in the acquisition of foreign labour. 

He stressed the direct impact of cost and turnaround time on industry competitiveness, advocating adherence to internationally accepted standards in governing the foreign workforce. 

While not specifying regulatory measures, Hazmi expressed confidence that suitable measures can be identified. 

Delving into long-term strategies, he suggested the government’s role in establishing infrastructure, policies and regulations to create the right type of employment. 

He urged a shift from quantity to quality employment, emphasising the development of local talent in skills that foster progressiveness and agility. 

Recognising the challenges in balancing immediate needs with future requirements, he acknowledged the complexity of achieving this balance. 

Drawing inspiration from successful models, he pointed to Scandinavian countries and Singapore, and how they identify high-impact industries and employment and create policies and strategies around it is a good practice. 

“These countries understood present and future employment and planned well,” he said. 

So far, the government has responded with initiatives aimed at regulating the employment of foreign workers within the plantation industry. 

Despite these efforts, challenges persist in ensuring equitable treatment and safeguarding their rights. 

Turning attention to the realm of domestic helpers, Malaysia hosts a substantial number of foreign workers, commonly referred to as maids. 

Originating from countries such as Indonesia, the Philippines, Cambodia and Vietnam, these workers contribute significantly to various households across the nation. 

Originating from countries such as Indonesia, the Philippines, Cambodia and Vietnam, domestic helpers contribute significantly to various households across the nation

Government regulations oversee the employment of domestic helpers, with specific guidelines in place for employers to follow. 

However, issues such as extended working hours, absence of standardised contracts and instances of abuse have surfaced as significant concerns. 

Malaysia has established laws governing the recruitment of foreign domestic workers. Employers are mandated to provide them with proper working conditions, reasonable wages and access to basic rights.

While efforts have been made to address challenges faced by migrant workers, the reliance on foreign labour in Malaysia remains a multifaceted and at times controversial issue. 

Continued vigilance and improvements are imperative to ensure fair and ethical treatment for them. 

Following the conclusion of Human Resources Ministry’s (MOHR) debate on the Budget 2024 Minister V Sivakumar provided an update on key developments. 

As such, from Oct 16 to Nov 15, 2023, the Department of Labour Peninsular Malaysia (JTKSM) received 329 applications for foreign workers in three service subsectors — textiles, barbers and gold. 

Out of these, 165 applications were rejected, primarily due to offences under Act 446, while 121 were mandated to attend an interview session at the ministry’s One Stop Centre for further quota approval. 

In a bid to reduce Malaysia’s reliance on foreign workers, MOHR has initiated skills training programmes for the barber subsector. 

Additionally, the Malaysian Indian Community Transformation Unit (Mitra) collaborates with Tabung Ekonomi Kumpulan Usaha Niaga (Tekun) to assist Indian entrepreneurs, particularly barbers with traditional and semi-traditional characteristics, in developing their businesses. 

Sivakumar further emphasised the importance of employers offering competitive salary packages and optimising the existing foreign workforce to train local workers. 

MOHR underscored that the employment of foreign workers should align with genuine industry needs, allowing it only in sectors with a real demand for such labour. 

“Employers must advertise job vacancies for at least 14 days on the MyFutureJobs Portal before applying for foreign workers,” MOHR said in a statement. 

Screening processes will be rigorous, ensuring that only eligible employers, compliant with labour standards and minimum wage regulations and devoid of any labour violations, can apply for foreign workers. 

Other notable efforts include the implementation of skills training programmes for employees to enhance self-advancement and adaptability to evolving work requirements in a competitive global environment. 

Development of the National Occupational Skills Standard for 21 economic sectors serves as a reference for training programmes in both public and private institutions. 

Citizens’ access to Technical and Vocational Education and Training (TVET) has also been expanded, with 562 public skill training institutions across the country offering industry-tailored courses. 

There are also continuous engagement sessions with industry stakeholders, departments, and agencies to assess workforce needs in the context of IR4.0 and create new job opportunities. 

Following the full reopening of the economy after Covid-19 shutdowns, many employers faced acute foreign labour shortages (pic: Hussien SHaharuddin/TMR)

Foreign Workers’ Impact On Local Talents

Malaysia also grapples with deep-rooted structural issues in its labour market, specifically the impact of foreign workers versus local talents, affecting productivity, income distribution and overall workforce resilience. 

These challenges, exacerbated by COVID-19 and emerging megatrends, prompt the nation to explore policy strategies for a more adaptive and sustainable future. 

Syed Hussain Syed Husman said generally local workers perform higher jobs compared to foreign workers as the latter normally perform lower jobs that are shunned by local workers. 

“Foreign workers, especially those with low skills, negatively impacted labour productivity. 

“Low-skilled foreign workers due to their educational levels may not be able to meet the demands of industries that have embarked on higher technology and may not be nimble enough to adjust to new technologies and new work processes, thereby slowing down their overall productivity,” he told TMR. 

He added that the limited education and skills of these workers hinder their ability to adapt to new technologies and complex tasks, leading to lower productivity levels. 

“Foreign workers are filling in the gaps for jobs that are shunned by local workers mostly due to the stigma attached to doing such jobs that are not socially acceptable. 

“Thus, foreign workers are not competing with local talents for jobs,” he said, because locals are looking for better and higher-paying jobs. 

Following the full reopening of the economy after Covid-19 shutdowns, many employers faced acute foreign labour shortages as the government imposed a freeze on the intake of foreign workers at the end of 2019. 

Syed Hussain said even then, locals who had lost their jobs due to the pandemic, at about 3.7% at the material time, are just not interested in taking up jobs seen as 3D (dangerous, dirty and difficult) jobs. 

Local workers need to go for certified skills training through courses offered under HRD Corp (Source: hrdcorp.gov.my)

Rising Paycheques for Everyone: How Wage Growth Benefits All

Syed Hussain said many quarters alleged that foreign workers in Malaysia suppressed wages, which is not true. 

“Based on the lower-end wage growth, it can be seen that wages growth accelerated at a faster pace. 

“For example in May 2022, the lower-end wages almost doubled and saw high growth culminating in increases ranging between 25% and 36%. 

“When the wages at the floor level increased, the salaries at the higher levels also increased,” he said. 

Syed Hussain said the rollout of the progressive wage model (PWM) scheduled for April or May 2024 will increase the wages of local workers. 

“PWM will not apply to foreign workers. Local workers are encouraged to constantly upskill and reskill to ensure that their skills remain relevant to the changing skill sets in the job market. 

“Meanwhile, local workers need to go for certified skills training through courses offered under Human Resource Development Corp (HRD Corp),” he said. 

Furthermore, he noted that the government had taken the right step by mainstreaming and encouraging more youth to enrol in TVET. 

The private sector is taking the lead in ensuring that the TVET curriculum meets the needs of industries, especially through the National Dual Training System (NDTS) and the Academy in Industry programmes. 

Better collaboration between the Higher Education Ministry (MoHE) and the private sector aims to reduce skills gaps and better prepare graduates for private sector roles. 

“It is important to certify existing employees’ skills through Recognition of Prior Learning programmes, suggesting that offering this certification free of charge could help achieve the goal of having 40% skilled workers in the workforce, up from the current rate of less than 30%,” Syed Hussain said. 

Locals who had lost their jobs due to the pandemic are just not interested in taking up jobs seen as 3D jobs (pic: TMR)

MSME Revolution: The Crucial Role of Tech Adoption and Workforce Development

Syed Hussin said embracing new technology is expensive and the government must assist the micro, small and medium enterprises (MSMEs) to adopt digitalisation, automation and mechanisation. 

“It is important for MSMEs to be assisted to embrace new technologies as they represent 98% of all registered companies in Malaysia. 

“When MSMEs can modernise their operations and processes, they will be able to attract local talents to work with them,” he said. 

He added that looking ahead, the white paper on PWM tabled at Dewan Rakyat by Economy Minister Rafizi Ramli promises to be the game changer to ensure that local talents are given appropriate training for career advancement and skill enhancement and be rewarded with higher wages based on their performance and productivity. 

Besides, he noted that it is important for employers to rebrand and upgrade the jobs to attract locals. 

“Employers in Malaysia need to invest in technology such as digitalisation and automation while employees should improve their skills to handle advanced technology. This can boost productivity. 

“A performance-linked wage system is suggested to reward employees based on their performance. Policies such as the PWM aim to address concerns about career progression and better rewards for local talents,” he added. 

Foreign Workers and Dynamic Landscape of Technology Industry

VV Consulting Group founder Vaishana Vasuthavan noted that foreign workers are actively contributing to increasing productivity by bringing diverse skills and perspectives. 

She said this enriches Malaysia’s working environment and fosters a culture of learning and collaboration among local talent. 

“Leveraging this diversity is critical to overall business growth especially where the importance of diversity, equality and inclusivity is the focus in an organisation,” she told TMR. 

She noted that industries such as construction and manufacturing often experience significant impacts from foreign workers. 

“However, the technology industry often relies on hiring foreign talents due to the demand for diverse skills not always available locally, particularly in fields like software development, artificial intelligence (AI), data science and cyber security. 

“To navigate the opportunities and challenges in the technology industry, HR professionals are advised to implement comprehensive workforce strategies and provide continuous learning opportunities for both local and expatriate employees to succeed in roles that may face increased competition,” she emphasised. 

According to Vaishana, foreign workers are mainly employed in menial jobs, while Malaysians are mainly employed in semi-skilled and skilled occupations (Pic courtesy of Vaishana)

Vaishana added that according to research done by Khazanah Research Institute, foreign workers operate in a completely different economic environment than Malaysians and therefore do not directly compete with Malaysians, so they do not have a direct impact on employment opportunities and wages for Malaysians. 

“Foreign workers are mainly employed in menial jobs, while Malaysians are mainly employed in semi-skilled and skilled occupations. 

“All of the two million Malaysians employed between 2010 and 2017 were in semi-skilled and skilled jobs,” she said. 

In contrast, of the 570,000 foreign workers employed during the same period, 80% were in unskilled labour. 

She explained although there is evidence that the overall impact of foreign workers is relatively modest, there remains a minority of the least educated Malaysians who are disadvantaged by the presence of foreign workers. 

“As direct competitors for unskilled work, this segment of Malaysia’s population faces both job losses and wage cuts. The long-term impact of foreign workers is also unclear,” she said. 

Commenting further, Vaishana noted that the impact of foreign workers on the wage trends of local workers in Malaysia varies depending on factors such as industry characteristics, government policies and economic conditions. 

“Potential changes in wage levels are expected in sectors heavily reliant on foreign workers, with varying impacts across industries. 

“Government regulations, including minimum wage policies and restrictions on foreign worker employment, are crucial factors shaping this influence,” she said. 

She emphasised that the effects on skilled and unskilled labour markets may differ in scale, and overall economic conditions could further modify these trends. 

Talent Development Strategies in the Presence of Foreign Workers

Vaishana said initiatives should focus on career development programmes, upskilling, mentoring programmes and performance-based incentives tailored to the evolving labour market. 

These measures will ensure that local talent receives fair compensation and secures career opportunities despite the influence of foreign workers. 

It is important for leadership teams to work with their human resources business partners (HRBPs) in each organisation to conduct thorough market research across regions on compensation and benefits and IDCP (Individual Development Competency Plan), she added. 

“First and foremost, HRBPs play a critical role in organisations implementing talent development programmes in close collaboration with stakeholders. 

“Now, the presence of foreign workers in the workforce can have a dual impact on training efforts,” she noted. 

Overcoming Challenges: Skill Development and Diversity in the Workplace

Vaishana elaborated that the challenges in skills development may be in the area of training programmes tailoring to specific skill sets or implementing Diversity, Equality and Inclusivity (DEI) training. However, these challenges present unique opportunities. 

She explained for instance, that in the technology industry, a diverse workforce brings different perspectives and approaches to problem-solving and fosters innovation and creativity. 

“Promoting a collaborative learning culture and addressing skill gaps is key to harnessing the strengths of a diverse workforce. 

“This not only fosters individual professional development but also allows companies to thrive in a rapidly changing technology landscape through global collaboration and robust leadership development,” she told TMR. 

She said HR oversees mentorship programmes and a comprehensive IDCP, ensuring equal access to advancement opportunities and skills development for local talent, irrespective of the presence of foreign workers. 

Vaishana elaborated that HR plays a crucial role in this sector of the organisation through a strategy and inclusiveness such as workforce planning, career development, succession planning and performance recognition. 

“The strategy that I often implement is transparent communications about career development which impacts the compensation and benefits and the value of diversity. 

“Through this approach, I create a comprehensive IDCP. This way HR ensures that all employees, regardless of their background, are valued in the workplace and contributes to an environment where people feel they have equal opportunities for professional development,” she said. 


  • This article first appeared in The Malaysian Reserve weekly print edition