This article first appeared in The Edge Financial Daily on October 25, 2018 - October 31, 2018

KUALA LUMPUR: There will be no more middlemen, who earn super-high profits, in the hiring of foreign workers in Malaysia soon.

The joint committee between the home ministry and human resources ministry on the management of foreign workers has decided to discontinue the practice of outsourcing foreign worker recruitment to agencies as early as next year.

It also intends to implement a multi-tier levy system, which is expected to result in a 20%, or higher, increase in levy, by next year.

This matter was previously handled by the home ministry. The committee, in its first meeting yesterday, decided to have the human resources ministry’s private employment agency take over the task of foreign worker recruitment.

According to Home Minister Tan Sri Muhyiddin Yassin, there are at least 100 companies handling over 26,000 foreign workers involved in the outsourcing system. The committee will hold negotiations with the companies later.

“We are giving them (existing agents) some time so they can decide to relocate their employees to selected employers. This will take some time and we will let the human resources ministry handle it,” Muhyiddin told reporters after chairing the committee’s first meeting at the Parliament building yesterday.

“Our goal is to avoid undesirable things happening [to the foreign workers]. There [have] been complaints [about the outsourcing agencies], that there is unfair treatment of the workers, cases of human trafficking, and various issues related to foreign workers,” he added.

As of Sept 30, Muhyiddin noted, there were a total of 1,892,247 foreign workers who had been issued temporary passes by the immigration department. Indonesia, Bangladesh, Nepal, India and Myanmar are the top five countries from where Malaysia sources foreign workers.

Muhyiddin also noted that the committee has decided to accept the proposal to implement a multi-tier levy system for the hiring of foreign workers.

“The quantum of levy, as per regard to respective sectors, will have to be looked at again so that it will not be too burdensome. But generally from the figures that we have worked out, roughly [it will be] an increment of about 20% over the present levy, so it’s not that big. But in some sub-sectors or some other sectors, it will be slightly bigger,” he said, adding that the decision will be subject to the cabinet’s approval.

Time will be allocated, Muhyiddin stressed, for the government to further consult the respective sectors to take into account the effect of the new policy.

“We have agreed to further consult the respective sectors and sub-sectors because we have to take [them] into account so that when we implement this they will not be adversely affected. So we have agreed for that discussion to be continued,” the minister added.

Elaborating on the multi-tier levy, Human Resources Minister M Kulasegaran said the system is based on the principle of the more foreign workers hired, the higher the levy imposed. “The system has been used in Singapore for years, whereby foreign employment is subject to the ratio of how many new local workers to foreign workers are allowed,” he told reporters after the committee’s meeting.

Kulasegaran said the quantum of the levy has yet to be determined but it will differ according to different industries. But as a point of reference, the current levy imposed will be used for the first tier of the levy.

“Even the quantum has not been agreed on, so the time frame is not certain yet, but it (the implementation) will be sometime next year,” he said.

“All this (levy) is tax deductible, so there isn’t a big problem on that issue. But I think we also need to use a certain amount of the money to train our workers to make them more adequately employable in all kinds of sectors, and not forgetting [training for] automation.

“These are things that we also want to encourage, otherwise it will be a situation where we are always in need of foreign workers,” Kulasegaran added.