Firms need to adopt innovation, move away from ‘cheap’ labour
Covid-19 exposed many flaws in our labour market. The pandemic disrupted the global and regional movements of migrant labour – both documented and undocumented – with nations slamming shut borders to keep out both virus and labour.
Malaysia, which is heavily dependent on migrant labourers who fill nearly half of the low-skilled jobs, reported a contraction in GDP numbers when border closures and Covid-19 caused significant manpower shortages for export-oriented industries.
The experience and ongoing disruptions to labour pose a threat to our export-reliant growth model and the supply of essential goods.
Malaysia is an integral part of the global supply chain for semiconductors, medical gloves and palm oil. It accounts for 7% of the world’s semiconductors and 13% of assembly testing and packaging – goods that are already experiencing shortages.
The country also supplies 28% of the world’s palm oil production and 33% of global exports. Malaysia also produces 65% of the world’s rubber gloves supply.
To profit from the pandemic, some industries forced their employees to work excessive hours without adequate breaks, withheld wages, reduced rest days and housed workers in unhygienic dormitories. As a result, the US Customs and Border Protection banned several Malaysian companies after uncovering evidence of forced labour practices.
In response, Putrajaya amended the Employment Act, adding fines and jail time for those guilty of forced labour practices, launched a National Action Plan on Forced Labour and implemented a labour recalibration programme.
These will not, however, address long-term labour needs nor encourage industries to innovate and reduce their reliance on foreign workers. Socio-economic problems related to the presence of foreign workers and the artificial depression of local wages will also continue to impact negatively on Malaysians.
The time is ripe for reforms to the migrant worker policy. It should not only penalise labour abuses but also push industries to adopt automation and other technological innovations. The government has prepared a multi-tier levy system for foreign workers – which ensures that their numbers are based on the actual needs of a specific industry. But its implementation has been delayed since 1 January 2019 with the next rollout pushed back to 1 July.
This delay is counterproductive. Bank Negara Malaysia had crunched the numbers in 2018, showing that once implemented, an additional levy should be imposed on industries heavily reliant on foreign workers.
The new levy can be calculated on automation possibilities, wage growth and productivity improvements. It will create a differentiated deterrent mechanism based on the workforce profile. A levy will force firms to invest in ways to increase productivity through innovation and move away from relying on foreign workers.
Malaysia must also look further and push for a regional labour recalibration initiative. A multilateral agreement should be formulated with other Asean member states on a centralised approach towards economic migrants. We as a country can solicit support from neighbours Thailand (hosting 3.49 million foreign workers in 2021) and Singapore (1.33 million).
Asean should create a one-stop agency present in all countries to tackle issues concerning the recruitment and treatment of foreign workers, thereby eliminating piecemeal government-to-government deals and middlemen.
The United Nations reported in 2020 that manufacturers in developed nations are likely to implement reshoring business strategies post-pandemic, with the aim of reducing the risks of sourcing from distant suppliers located in poorer countries.
Given that the global value chain participation of conglomerates in places like Malaysia is likely to decline, Asean countries are at higher risk of premature deindustrialisation or losing out on industrialisation opportunities. Regional coordination is, therefore, necessary to ensure nations remain on the path towards industrialisation.
The pandemic also prompted restructuring across industries and employment sectors across the region. This gives rise to race-to-the-bottom issues and exacts a toll on workers. With Covid travel restrictions easing, many economic migrants are returning home to lower-income countries dependant on remittances.
Regardless of their migration or legal status, foreign workers need access to some form of safety net. State actors must see the importance of treating labour migration as an integral part of labour and social protection issues.
An Asean multilateral agreement on social protection and integration will not only mitigate the negative impacts of the pandemic but also recalibrate regional economies in a more ethical, efficient and sustainable manner.
As the global economy reopens, Malaysia and Asean should act quickly to ink a multilateral agreement to promote policy coordination on border control. It would ensure regional economic growth and long-term job creation, while securing the health and safety of all workers.
This article was also published as “Asean must lead the way in tackling cheap migrant labour” in New Straits Times on 11 June 2022.