This article first appeared in The Edge Malaysia Weekly on May 30, 2022 - June 5, 2022

AT a time when vacancies are crying out to be filled, economic sectors such as plantations, construction and manufacturing appear to be worst hit by the labour shortage. Several listed companies have already highlighted that labour problems weighed on their latest financial performance.

What is the latest update on the intake of foreign labour for labour-intensive industries, and is the solution in sight?

Master Builders Association Malaysia (MBAM) president Tan Sri Sufri Mhd Zin says there are still unresolved issues between Malaysia, Indonesia and Bangladesh.

“For Indonesian workers, as the embassy is dealing with too many applications, it may take a longer time to process.

“For Bangladeshi workers, both governments have signed the MOU, but applications for Bangladeshi workers are still not open yet because of some unresolved issues,” Sufri tells The Edge in an email reply.

He points out that the quota application procedure under the Ministry of Human Resources for construction companies is still not very clear compared with when it was under the Home Ministry.

“While companies applying for more than 100 workers can submit directly through the FWCMS (Foreign Workers Centralised Management System), those applying for fewer numbers will not be accepted by the system.

“As a result, companies under grades G4 to G7 applying for fewer than 100 workers will not have a solution to their workers shortage problem.”

The difficulty in hiring foreign workers was exacerbated particularly by the Covid-19 pandemic, and now the construction industry is facing a shortage of about 550,000 workers, Sufri says.

“We have no idea how many employers have applied for foreign workers and how many have been approved. As far as we know, there are none. The reason is that the process of application must start from advertising their job vacancies on the MYFutureJobs portal under the Social Security Organisation (Socso, or Perkeso). After 30 days, if the employer fails to get any workers, then a clearance letter will be issued to them to proceed with the application process.

“From the start of application until the arrival of a foreign worker, it is estimated to take at least six months or 200 days. The long process and time for getting foreign workers will cause a huge delay in all the construction works.”

As such, he hopes the government can set up a “green lane” to fast-track the entry of foreign workers into the industry.

The Federation of Malaysian Manufacturers (FMM) president Tan Sri Soh Thian Lai says employers would prefer to have locals fill up the labour shortages, given the many challenges and frustrations faced in the foreign worker recruitment process. Hiring locals, especially to fill the unskilled general worker category, continues to face difficulties, however, and comes with different sets of challenges such as high attrition rates despite being offered higher wages.

“There are high wage demands [from workers] and the unwillingness to work overtime, which is critical at this stage, as many industries are catching up on orders and sales after the disruptions during the pandemic,” Soh notes.

Other issues are the unwillingness to work in the 3D work environment, attitude and a greater inclination towards gig jobs, which provide better income as well as more flexible working arrangements.

Soh urges the government to hasten the application and interview process for foreign workers as well as resolve the outstanding issues with the source countries so that local industries can resolve their manpower issues and focus on ramping up operations.

Malaysian Palm Oil Association (MPOA) CEO Datuk Mohd Nageeb Abdul Wahab notes that the industry’s labour shortage has surpassed 100,000, more than two years into the pandemic, causing a loss of revenue and production of 15% to 25%.

In absolute terms, the loss was estimated at RM20 billion last year, underscored by Malaysia’s crude palm oil (CPO) production, which came in at a multi-year low of 18.1 million tonnes versus 19.14 million tonnes in 2020.

Nageeb stresses that the fat profits that plantation firms are making at the moment are purely because of higher commodity prices and not efficiency. He is concerned that high prices will camouflage inefficiencies and the high cost of production.

Owing to manpower constraints, planters have had to extend their harvesting rounds from between 12 and 15 days to 30 to 40 days or even 50 days, according to Nageeb. In addition, planters are abandoning the harvesting of tall palms, focusing on high-yielding areas and mobilising workers from other functions to harvest fresh fruit bunches.

Although some level of mechanisation has been introduced to reduce the need for workers, he says harvesting has to be done manually. In a bid to ease the problem, the government has launched the Mechanisation and Automation Research Consortium of Oil Palm (Marcop) to find ways to automate the industry.

Nageeb says there have been engagements with the government to speed up the process of bringing in foreign workers, especially harvesters.

“The Ministry of Plantation Industries and Commodities (MPIC) has helped a lot in getting the approvals. We believe the shortage can be alleviated in the second half of the year, with workers arriving soon in the next one to two months. Some are already coming in but the numbers are low.”

Driven by the global commodity surge, he says, CPO prices are likely to remain at a high level until year-end, at an estimated average price of RM5,000 a tonne, from RM4,400 a tonne in 2021.

Last week, Malaysia Productivity Corp (MPC) director-general Datuk Abdul Latif Abu Seman projected a higher loss this year of RM28 billion for the oil palm industry, compared with the RM21 billion loss in 2021, owing to the shortage of workers to carry out harvesting work. He stressed that the entry of 32,000 field workers from Indonesia must be accelerated.

The Malaysian Estate Owners’ Association (MEOA) does not rule out the level of losses rising another 5% to 10% in view of the government’s apathetic attitude in solving the issue.

It says: “Plantation and estate owners have submitted applications for these 32,000 workers twice as requested by the Ministry of Human Resources and MPIC. They are still waiting [for the labour].”

The association says the lack of labour has forced many estates to purchase machines for fertilising and fresh fruit collection.

“Systems had to be developed to utilise these machines adapted in different field conditions. Unfortunately, there are no readily available systems for plantations or a system that fits all plantations. This takes time and requires long hours of trial and error, which is tedious and frustrating. Not many estates are fully successful in this.”

Kuala Lumpur Kepong Bhd CEO Tan Sri Lee Oi Hian points out, despite higher earnings of 11.44% year on year (y-o-y) to RM546.57 million the quarter ended March 2022, the labour crunch remains challenging and has resulted in a huge, albeit avoidable, loss of revenue for Malaysia. He hopes the government will expedite the inflow of migrant workers before the upcoming peak production period.

Plastic packaging manufacturer Thong Guan Industries Bhd, which saw a 13% y-o-y rise in its profit to RM24.6 million for 1Q ended March 2022, warned of an increasingly acute shortage of manpower amid the recovery from the pandemic. It noted that foreign workers ended their contract without new replacements, and an increase in minimum wages and other costs did not help matters.

Blaming the escalation of employment costs caused by a competitive job market and higher utility expenses, SAM Engineering & Equipment (M) Bhd registered lower profit contribution from its aerospace segment. Overall, however, its net earnings expanded 28.29% y-o-y to RM75.46 million in the first quarter of the year.

The property sector has not been spared the effects of labour woes. The margins of S P Setia Bhd came in lower than expected, owing to rising raw material prices and a labour shortage. Its 1Q net profit was down 10.27% y-o-y to RM67.5 million.

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