World Bank: Foreign workers help Malaysians, country scale economic ladder

Foreign workers crowd the streets in Kuala Lumpur. According to a report, they help create demand for skilled Malaysian employees and contribute to the country’s economic growth. ― File pic
Foreign workers crowd the streets in Kuala Lumpur. According to a report, they help create demand for skilled Malaysian employees and contribute to the country’s economic growth. ― File pic

KUALA LUMPUR, Dec 18 ― Oft-maligned, untrained foreign workers help create demand for skilled Malaysian employees and contribute to the country’s economic growth, according to a World Bank report.

In its annual report titled “Malaysia Economic Monitor: Immigrant Labour”, the global fund projected that an influx of 10 migrant workers into a state’s sector results in 5.2 jobs for Malaysians and a 1.1 per cent net increase to the gross domestic product (GDP).

“Low skilled immigrant fill workforce gaps, reduce production costs and expand output and exports.

“As a result, unskilled employment increases and profits rise which increases investment and the demand for higher skilled Malaysians,” according to the report.

The report also found that migrant labour also slightly increases pay for most Malaysians, estimating that a 10 per cent increase in foreign worker numbers bumps wages for locals up by 0.14 per cent, but hurting salaries for existing migrant employees by 3.9 per cent.

Malaysians with SPM-level qualifications were those whose salaries increased the most as a result, said the World Bank report when speculating that this may be due to more supervisory and management positions needed to oversee the migrant workforce.

But the importation of unskilled workers was not wholly positive.

“Immigration has negative impacts on the wages of the least educated Malaysians, which represent 14 per cent of the total labour force, and whose wages decline by 0.74 per cent,” the report said.

It also noted that the overall fiscal impact of immigrant workers on the country is small and the fiscal burden is mostly borne by undocumented people. Undocumented people represent a higher fiscal burden as they do not pay a levy, are often uninsured and raise costs associated with their health care and detention.

The report pointed out, however, that the government must review its current approach to migration, which the World Bank said was disjointed and inefficient at controlling the influx of foreign workers.

“There are more than ten different ministries, and departments within these ministries, directly engaged in the approval of immigrant labour.

“Fragmentation limits coordination between institutions, resulting in frequent duplication of functions and difficulty in controlling non-compliance with immigration and labour law,” it said.

It added that the current approval of immigrant labour does not reflect labour shortages or labour market demands, and the system uses a combination of quotas and levies that are semi-static and uncorrelated with the varying of market conditions.

World Bank senior economist Rafael Munoz Moreno said one step that must be taken is to phase out the role of third-party agents in bringing in migrant workers.

“The role has to be taken by the employer; the responsibility has to lie with the employer. By doing that, it will reduce the cost and there is a very clear accountability of who is responsible for these people.

“In the current system, it is unclear whether it is the third party, intermediary or the final employer, and as a result, nobody takes responsibility on bringing them back when in the contract is over,” he told Malay Mail Online from its new office in Sasana Kijang.

Other recommendations include consolidating the number of ministries and departments involved in approving and bringing in migrant workers, identifying labour shortages in the full economy, phasing out static quotas by restructuring the levy system, and applying penalties for non-compliance in a consistent manner against employers and third-party intermediaries.

World Bank's country manager to Malaysia Faris Hadad-Zervoz stressed that the recommendations have to be complemented by human development policies to create an adequate supply of relevant educated Malaysians who are productive to meet the labour demand not only for 2020 but beyond.

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