This article first appeared in Forum, The Edge Malaysia Weekly on May 22, 2023 - May 28, 2023

Seems unbelievable? Well, this issue is a complex interplay of three main factors: the number of foreign workers in Malaysia, the amount of wages paid to them and how much the average foreign worker wants to repatriate. This is where it gets horribly complex.

The International Monetary Fund defines “remittances” as: “When migrants send home part of their earnings in the form of either cash or goods to support their families, these transfers are known as workers’ or migrant remittances. They have been growing rapidly in the past few years and now represent the largest source of foreign income for many developing countries.”

The amount of Malaysia’s own outward remittances and their rapid growth is quite mind-boggling. (See Chart 1.)

The data is from Bank Negara Malaysia, and RM40.6 billion is not an insubstantial amount, as it is some 2.9% of the gross domestic product (GDP) for 2018. Chart 1 shows that outward remittances have been on a sharply rising trend since 2010.

Malaysia enforced minimum wages in 2014, and it has been rising from the initial RM900 a month to the current RM1,500. (See Chart 2.)

Could all this be caused by the number of foreign workers in the country? Has there been a strong increase in their number in the past years?

First, statistics of foreign workers in Malaysia are very hard to find, and our search at the time of writing could not locate a reliable source. Searches in the Ministry of Home Affairs (MoHA) and Ministry of Human Resources websites revealed no data.

Further, the World Bank, in its publication “Who Is Keeping Score? Estimating The Number Of Foreign Workers In Malaysia” in April 2020 noted that different methods of calculations would yield substantially different numbers. They did, nonetheless, share the numbers that they obtained from MoHA. (See Chart 3.)

It appears that even by 2020, one could only obtain data from three years ago. Hence, the question arises: Who is actually keeping their eye on this? Why aren’t there current and publicly available numbers?

Nonetheless, based on Chart 3, it seems, at “eyesight guesstimate” the average of foreign workers per year was around two million during that time period.

There are no consistent estimates of how much an average foreign worker remits overseas in a year over a number of years. Simply averaging, say, the RM40 billion in 2018 by two million workers gives an average of some RM1,667 a month, which means that the average foreign worker earns substantially more than the remitted amount of RM1,667 a month, a sum that appears high for those who work as labourers. It seems to say that there are substantially more than two million “official” foreign workers in the country.

In summary, for the years 2014 to 2017, when all three datasets converge, it appears that the minimum wage of RM900 a month (from the anecdotal RM400 a month being paid before) has led to an increase of some RM10 billion in three years to a total of RM35 billion or so in outward remittances in 2017, without a substantial increase in the number of foreign workers.

Here’s the question: What happened to outward remittances in the years of the Covid-19 lockdowns (2020 and 2021) and thereafter, especially since a new minimum wage of RM1,500 a month was imposed for all types of firms in 2023?

Try as we might, we could not find figures of outward remittances as published by Bank Negara Malaysia since 2019.

As any economics student can tell you, “capital”, also known as money, is one of the four major factors of economic development alongside land, entrepreneurship and labour. These are the things one adds onto and builds up on to develop one’s country. Outgoing capital (that is, outward remittances) is a leakage to the system whose absence just cripples economic growth.

This has been so critical that the first economists recommended absolute bans on the export of capital, even for the purchase of raw materials for their countries’ own manufacture, preferring instead that payments be made by domestic manufactured goods.

Economist Antonio Serra, in 1613, said this of Venice’s riches and development prospects with regard to outward remittances of money: “Venice, it must be noted, permits the export of domestic money but forbids the export of foreign money (Author’s note: that is, remittances). The reason is simply that foreign money exports ‘dry out’ liquidity domestically and will only benefit other countries, while keeping it locally serves to drive local industries more.”

Time to reassess the numbers of foreign workers here, perhaps? We can certainly reassess the number of labourers imported. Mechanisation appears to be more appealing for the country at the moment.

Huzaime Hamid is chairman and CEO of Ingenium Advisors, Malaysia’s financial macroeconomics advisory

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