KUALA LUMPUR, May 12 ― Putrajaya's move to lift a foreign worker hiring ban for four sectors will provide some respite to local companies, especially in manufacturing that have been struggling from labour shortage, BMI Research said in a report today.

The Fitch Group unit noted the Federation of Malaysian Manufacturers had previously complained that 84 per cent of its members were facing labour shortage.

“We had previously noted that the hiring freeze presented downside risks to the manufacturing, palm oil, and construction sectors as these sectors are particularly reliant on foreign labour for production.

“Accordingly, we expect the partial lifting of the ban to provide some respite for these sectors, particularly the manufacturing sector, and to lend some support to the economy, which continues to face domestic and external challenges,” the report said.

The group maintained its 2016 real GDP growth forecast of 4.5 per cent for Malaysia in view of the slight improvement to the country's labour market.

The government announced a hiring freeze on foreign labour recruitment from all countries in March following a negative public reaction to a government announcement in June 2015 that Malaysia planned to bring in 1.5 million Bangladeshi workers over five years.

The initial announcement resulted in a strong backlash from businesses who felt that the government should instead seek to legalise existing illegal foreign workers, as that would enable them to be absorbed into the workforce.

But the government announced recently that the blanket ban would be partially lifted in June to help producers resume production following complaints of severe operations disruption due to manpower shortages.

“We expect the manufacturing sector to benefit from the loosening of foreign labour hiring requirements.

“While it would appear that the requirements are somewhat stringent, requiring employers to prove that they are unable to find Malaysians to fill the positions, the blue-collar nature of most jobs in the affected sectors suggest that Malaysian are unlikely to work in the sector in the first place necessitating the supply of foreign labour,” BMI Research said.

Under the new regulations, foreign labour hiring will be allowed if employers can produce evidence that locals had been prioritised to fill vacancies. Companies are also required to specify areas where their operations need the most help.