By Khairie Hisyam
The Malaysian government has made good initial moves in pushing the construction sector towards greater automation to reduce its dependency on cheap foreign labour. Will it go all the way?
Malaysia’s addiction to cheap foreign labour is not a new issue. It has been raised and raised again for decades, yet the number grew steadily to hit an estimated four million – both legal and illegal – today.
However, it is only now that there seems greater intent on the government’s part to push for automation in a crucial sector – construction — that had also relied heavily on cheap foreign labour of the years. While positive, the delay begs questions.
The construction sector had asked for a reduction in import duties for heavy machinery since 2006, for example. Go back further to March 1985 and even a former finance minister, Tan Siew Sin, was asking for illegal foreign workers to be legalised and not deported.
“In my view, that would be the surest way of ruining the nation´s economy,” said Tan, at the time a plantation owner and president of the Malayan Agricultural Producers Association (MAPA), on the proposed deportation of 20,000 illegal foreign workers.
But today foreign labour is entrenched in the Malaysian economy. Consider manufacturing and construction, two crucial sectors, that rely heavily on foreign workforce, according to the 11th Malaysia Plan (11MP).
It is an unhealthy dependency. Economically the influx of cheap labour from abroad depresses wages and hinders a shift toward automation, also depressing productivity levels due to the unskilled nature of the workers. Socially many point to ills associated with huge foreigner enclaves, though this is perhaps disproportionately so.
In any case, the need to reduce such undue reliance on cheap foreign labour has been clear. Yet much of what had been done over the years mainly centres on regulating the inflow of more cheap labourers from abroad.
This focus on regulating the inflow of foreign workers is, on one level, positive. They are screened for health and physical condition, among others, and they come in documented.
On the other hand, the process had also become arduous. For the construction sector, for instance, the process takes as long as seven to eight months, say industry players. Some even question the value-add of certain stages of the process compared to the fees involved.
In contrast, contractors may need to start work several months after winning a tender and the smaller ones simply cannot afford to retain foreign workers without first securing the construction job – a chicken-and-egg scenario.
So what happens then? These contractors turn to illegal foreign workers because they are available much faster. Their illegal status means they may be cheaper to hire, too.
Meanwhile this leads to constant law enforcement raids on construction sites to seek out these illegal foreign workers, yet somehow despite the number of raids reported in the news from time to time, the issue persists. This in particular is a murky area that begs further investigation.
It’s a bushfire that can never be put out, especially considering in July this year the Indonesian government unilaterally increased the wages of its citizens working in the Malaysian construction sector by 25% without consulting either the Malaysian government or the sector.
Much simpler would be to remove the need for so many foreign workers by pushing for greater automation. Credit to the government, it seems to have finally smelt the coffee and made several positive moves toward this, particularly in the construction sector.
The government now seeks to raise the requirement for Industrialised Building System (IBS) use in both government and private sector construction works, though this is in process of being gazetted. It has set aside RM500 million in Budget 2016 to promote the use of IBS via soft loans.
But this isn’t enough. The government needs to go all in by supporting the Construction Industry Development Board’s (CIDB) five-year plan to transform the sector through-and-through.
This means taking more measures to reduce the cost of adopting IBS, for instance. The construction sector’s request for lower import duties for heavy machinery imports would not harm any local businesses as these machinery types are not manufactured locally.
And the inflow of foreign workers must be reduced, gradually. This raises concern given the government’s stated intent of bringing in 1.5 million Bangladeshis over the coming years – are they high-skilled or simply more cheap unskilled workers?
This may be a big mistake in the making. Focus must shift on bringing in higher skilled labourers as opposed to unskilled ones on the cheap. Only then can the 11MP goal of transforming the Malaysian economy into a knowledge-based economy powered by professional, high-skilled labour be achieved.
The question now is whether the government, having started well despite the delayed reaction to a long-burning issue, has the gumption to go all the way.
GRRRRR!!!
Yesterday: Rebuilding the Malaysian construction sector
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