MARKET DEVELOPMENT
31-01-2002
Implications of ‘Indon last’ policy
29 January, 2002 (Business Times) - EFFORTS to reduce the population ofIndonesian workers in Malaysia may appear to work well on paper but inpractice, it may carry a high price tag.In recent weeks Indonesian workers had made front-page news in Malaysiawhen they were involved in two rioting incidents.Almost immediately came the calls to halt the arrivals of new Indonesianworkers and to immediately deport those who are here illegally.It was a case of paying the price for the country’s economic success. Thecountry’s average 8 per cent economic growth, registered since themid-1990s, had generated plenty of jobs, and this had attracted thelargely unskilled workforce from Indonesia because Malaysians had turnedto better paying and less physically strenuous jobs. Filling the void hadbeen some 2 million foreign workers.While the economic downturn beginning 1997 had brought the number down toabout 1 million, it is widely believed that, including illegal workers,there are now about 3 million foreign workers in the country.Official estimate quotes a much lower number, 800,000 in all, but only onthe legal foreign workers as at September last year. Of this, 64 per centwas employed in the manufacturing and plantation sectors.Indonesians formed 74 per cent of the lot, followed by Bangladeshis (18per cent), Filipinos (2 per cent), Thais (1 per cent) and others (5 percent).Indonesia has been the biggest supplier of workers to Malaysia by virtueof its close proximity which translates into cheaper costs for employerswho engage them.Malaysian Employers Federation (MEF) executive director Shamsuddin Bardansaid Indonesian workers are easy to train as they speak the same languageas Malaysians, and share a rather similar culture.“Communication is an important factor when recruiting foreign workers,†hesaid.Malayan Agricultural Producers Association (Mapa) director Mohamad Audongsaid Indonesian workers are favoured in estates as most of them areengaged in agricultural work in their home country.However, the recent rioting incidents by Indonesian workers could changethe landscape altogether as authorities are close to adopting some sort ofa “hire Indonesians last†policy.Experts, however, think that the move may not be an easy one to implement,primarily due to the sheer number of Indonesians already present in theunskilled labour market in Malaysia.Economists and employers believe that the construction, plantation,services and other labour-intensive manufacturing industries would beaffected.RAM Consultancy Services Sdn Bhd chief operating officer Dr Yeah Kim Lengsaid employers who have to get replacements for their Indonesian workerswill probably incur additional costs in training workers from othercountries.Estate owners will likely replace the Indonesians with Bangladeshi workersbecause based on productivity, they are second after the Indonesians,Mohamad Audong said.Mapa members, which represent about 450 rubber and oil palm estates inPeninsular Malaysia, employ about 37,000 foreign workers.Mohamad Audong said in the long run, the higher cost of recruiting workersother than Indonesians will manifest in higher labour costs for employers.Mapa will be appealing to the Government for some flexibility in therecruitment of Indonesian workers if its members are unable to get therequired number of workers from other countries.“We’ll ask the Government to reconsider on a case-by-case basis,†MohamadAudong said.MEF’s Shamsuddin concurs, saying that the immediate impact of theGovernment’s ruling is serious. He urged the Government to give adequatetime for employers to adjust to the new ruling.“I believe the policy needs to have a lead time so that people will not becaught by surprise… give enough time for the employers to make allnecessary adjustments,†he said.He expressed concern that manufacturers may not meet their export ordersif they are not able to recruit adequate manpower.On another aspect, RAM’s Yeah sees the Government’s recent move as asignal for labour-intensive industries to go for automation.Meanwhile, economist Tan Sri Ramon Navaratnam said employers must see theneed to innovate and introduce more capital-intensive technologies.The plantation sector, he said, should adopt a long-term economic outlookand think of high-yield production methods while getting rid oflow-yielding rubber and oil palm trees.Navaratnam also suggested that Malaysia imports natural rubber fromIndonesia so that the value-added downstream activities can be carried outin the country.“We should let the low-cost labour-intensive industries be run bycountries with lower labour costs because they still have a unskilled orsemi-skilled workforce,†he said.He added that Malaysia should not delay its shift to higher technologicalproduction or else it will lose out in the competition with othercountries in the region with lower labour costs.Navaratnam sees the Government’s decisive step in deporting troublesomeforeign workers immediately as a move towards stabilising the local labourmarket as well as to increase business and public confidence.Navaratnam, however, cautioned that the policy regarding foreign workersshould be sustainable and not implemented on an ad-hoc basis.“It should be spelt out clearly so that employers are convinced that theGovernment has a new policy on migrant labour.“If not, employers will hope that the new measure will eventually fadeaway and they can revert to the old and unproductive way of employingforeign labour,†he said.Economists also agree that reducing foreign workers will help reduce theoutflow of money from the country.RAM’s Yeah said between RM3 billion and RM4.8 billion are repatriated in ayear, given that there are one million migrant workers in the country.This is based on the assumption that these workers save half of theirearnings which range from RM350 to RM800 amonth. “It is quite a substantial outflow,†he noted.Another economist pointed out that money taken out by foreign workers fromMalaysia could be considerably more, considering that there is also a highnumber of illegal workers in the country.He estimates that the figure could well be above RM5 billion a year.As for helping the domestic consumption, Yeah said foreign workers dospend locally but their expenditure may not be that significant comparedto the local people.“They are in the low-income group and they do not establish households inthe country, so their spending will be quite small,†he said.National Union of Plantation Workers (NUPW), which represents 50,000permanent workers in the Peninsular Malaysia’s plantation sector like oilpalm, rubber and cocoa estates, has another view.NUPW general secretary A. Navamukundan said the sector’s dependency onforeign workers can be reduced if the quality of life in the estates canbe further improved.He said the locals are leaving the estates to seek better opportunitiesand living conditions in towns and cities.He feels that the Government has to play a role in upgrading the livingconditions in the estates so that the younger generation of workers willbe attracted to job opportunities in the sector.The task of providing basic amenities to workers and their families inestates should not be left solely to employers, he added.He also stressed that the current ruling of hiring Indonesian workers asthe last resort will only diversify the sources of foreign labour and willnot really address the country’s dependency on foreign workers.
