‘Govt’s foreign labour reduction target meaningless, unrealistic’
The government’s target to reduce the participation of foreign labour in the workforce to below 15 per cent is unrealistic, said Centre for Market Education chief executive officer Dr Carmelo Ferlito.
Speaking on the New Straits Tim es’ podcast, Beyond the Headlines, Carmelo argued that unless the nation was faced with a high local unemployment, then reducing dependency on foreign labour would not make much sense.
“I think that the target per se is meaningless in the sense that if we were in a period or in an economy characterised by high unemployment I could understand the reasoning, that we should somehow prioritise local workers.
“But we are an economy that, at least in the past few decades, has never been characterised by heavy unemployment even at the peak of the lockdown.
“Now that the economy has normalised, we are at a very structural level of unemployment, around three per cent. So we need to feed our businesses with a workforce that comes from somewhere, at the risk that otherwise, these businesses would close shop.”
Carmelo added that the idea of automation to replace foreign labour should be dropped as it does not fit into the landscape of the economy, which is largely made up of small businesses.
“A total of 97.4 per cent of Malaysian businesses are small and medium enterprises (SMEs), while 78 per cent are micro businesses. So automation, if we look at it from a realistic perspective, requires economies of scale. Micro businesses do not have scale because they are micro.
“So let’s say you introduce an automatic coffee roaster machine in a small kedai kopi. They will never use it because they don’t have the scale of coffee production and consumption that make sense to invest in machinery.
“Even if we assume that they had the money for that capital expenditure, they don’t have the volumes to make that capital expenditure meaningful,” he said.
“So, I disagree that the target is a good target. I think that with our level of unemployment and structure of capitalism, which is characterised by micro businesses, we should not even discuss this.”
Carmelo said a meaningful discussion now would be on how to favour consolidation among businesses to encourage them to scale up production.
The government, through the multi-tier levy system, is aiming to reduce foreign worker dependency to below 15 per cent.
SME Association of Malaysia secretary-general Chin Chee Seong said government-linked companies (GLCs) must act as facilitators and collaborate with private companies, especially SMEs, to foster innovation in labour-intensive industries.
“GLCs could also provide financial backing, enabling SMEs to invest in automation technologies and enhance their competitiveness in the market.
“By encouraging synergy between these entities, access to the resources and expertise necessary to drive technological innovation and enhance productivity is achievable,” he added.
Between 2022 and March last year, the Human Resources Ministry approved a quota for the recruitment of 1,136,022 foreign workers.