This article first appeared in The Edge Malaysia Weekly on August 27, 2018 - September 2, 2018

SHOULD migrant workers in Malaysia go on strike, the economy would literally collapse. That is how heavily dependent we are on foreign cheap labour.

For many decades now, the government has talked about reducing the number of foreign workers.

Temporary employment pass statistics from the Immigration Department of Malaysia show that the number of foreign workers dropped from 2.06 million in 2008 to 1.76 million as at July 31 this year, says the Ministry of Human Resources (MOHR) .

“Foreign workers are heavily employed in sectors requiring physical use and those of a less conducive environment,” MOHR says in an email to The Edge.

Meanwhile, the percentage of documented foreign workers in Malaysia has dropped from 19.3% in 2008 to 11.9% as at the second quarter of 2018. However, it is a known fact that undocumented foreign workers outnumber documented ones by a large margin.

It is estimated that for every documented foreign worker, there are 2.5 undocumented ones. Together, they number six million, or one-fifth of Malaysia’s population of 30 million.

The 11th Malaysia Plan set a cap on total employment of foreign workers to not more than 15%, or 2.3 million of the total workforce, by  2020. But many believe the country is far off the target.

“Right now, there are so many undocumented workers ... just too many. And they are all hired, working right now in different factories, restaurants, plantations and so on. If we go after all of them, I tell you, all the companies will close shop,” says Klang MP Charles Santiago.

“Now, I’m not supporting the use of undocumented workers but it is because we have not carefully planned human resources and the way we manage migrant workers that we are facing this huge problem today.”

MOHR says employing local workers is always the priority, as is reducing the dependency on foreign workers.

Some of the initiatives that have been taken include ensuring priority is given to Malaysian citizens in terms of job opportunities by advertising vacancies on the Jobs Malaysia website before allowing applications by foreign workers.

The ministry says it is strict about the terms and conditions of foreign worker employment and that companies will be supervised by regulatory agencies responsible for determining the actual numbers needed in the respective sectors.

Undeniably, reducing our dependency on cheap foreign labour is necessary.

But given that they are predominantly employed in sectors that are deemed dirty, dangerous and difficult (3D), reducing their numbers will not necessarily create more jobs for locals.

After all, it is widely known that locals are not interested in 3D jobs.

What needs to be done — and this has often been reiterated — is to make a conscious effort to move up the value chain.

“We can’t keep depending on cheap labour forever. There comes a time when you have to say, ‘Okay, this has to stop and we need to move up the supply chain’,” says Santiago.

“We can move up the supply chain with technology, automation and so on. The government gives money to innovate but nobody is taking it up. People are happy with their cheap labour.”

According to his estimates, cheap labour may be good in keeping costs down, but only for the near future. Businesses may arguably have benefitted, however, from the policy indifference for many years already.

On the flip side, many feel that slashing the intake of foreign labour when companies have not automated would have an adverse impact on the economy as a whole.

“If we are serious about automation and mechanisation, then employers should do it. But with employers not serious about it and still relying on cheap labour, efforts to reduce foreign labour will have an adverse impact on locals as well,” a market observer remarks.

“What happens when there is supply disruption because there simply aren’t enough workers to get the job done? It will be Malaysians who will have to deal with a cost increase because of the lack of supply, won’t they?”

That said, our addiction to cheap labour is beginning to show. While many of our Asian neighbours have made the big move into automation, we are behind the curve. As at 2016, robot density in the local manufacturing sector is 34 robots per 10,000 employees, well below the Asia average of 63 robots, according to the International Federation of Robotics.

Employers are asking for more time to get onto the automation track, citing cost as one of the main deterrents. But how much more time should be given?

There is no easy solution to the problem. It is a balancing act to wean employers off cheap labour while considering the economic consequences of pushing industries, which are not ready, too hard.

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