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FMM PRESS STATEMENT: Shortage of workers will derail economic recovery, we need fast action from Government to prevent the fall out of industries

Kuala Lumpur, December 4, 2021 – The Federation of Malaysian Manufacturers (FMM) appeals to the Government to consider the plight of the manufacturers that are facing acute manpower shortages to lift the current freeze on foreign workers to fill the gaps in the unskilled general worker category as a short-term measure to assist the industries with their business revival so as to support economic growth for the country. It is feared that if the urgent manpower needs are not addressed quickly, it could derail the recovery of the industries including their ability to meet their orders in hand and expansion plans. Consequently, it would also impact the ability to fulfil supply obligations as part of global supply chains given that Malaysian is a key manufacturing and supply chain hub in the region and the significant role and contribution of manufacturing to the economy. It would also have serious implication to the sustainability of industries.

We are indeed very grateful to the Government for opening up the economic sectors in stages based on the phases of the National Recovery Plan (NRP) as well as company level vaccination rates. The opening up of the economic sectors was a huge relief to many industries whose businesses were suffering either due to total closure or reduced capacity rendering them incapable of meeting their order demands and some even faced with cancellation of order contracts as the delays were too costly to their end customers.

Most companies are now fully vaccinated and this has allowed them to resume full operations. The relaxation on the conditions for operating has been a great relief for many as businesses were in a dire state of affairs during the lockdown period that had severely impacted business sustainability. The reopening of the economic sectors has been most crucial for the industry for their business recovery and revival as:
  • Delays in production during the lockdown period had resulted in massive backlog in orders;
  • Many industries had lost important orders and customers during the lockdown period due to the inability to fulfil customer orders and thus have worked tirelessly to secure new orders and customers;
  • Some industries, particularly those in the essential sectors continue to see increases in demand for their products such as those in the medical and personal protective equipment industry such as face masks and medical rubber gloves as well as the semiconductor chips for the electrical and electronic sectors that persistently sees a global shortage and upsurge in demand. These industries desperately need to expand in order to be able to meet the demands.
However, many are now faced with new challenges, especially employers in the manufacturing sector, who are facing acute manpower shortages both at the skilled and unskilled level, but more critically in the unskilled level, which is hampering the pace of business recovery. The seriousness of the manpower shortage is supported by the feedback from industries via two recent surveys as well as the update on the current number of foreign workers in the sector as compared to the pre-Covid-19 pandemic period:

i. FMM's through its quick Survey on Manpower Needs conducted in early October 2021. The survey which involved 252 respondents had the following responses:
  • Reported an overall shortage of manpower was close to 22,000 workers;
  • The highest shortage faced was amongst the low/unskilled general workers category at close to 14,000 workers;
  • This was followed by skilled general workers, technicians, machinists and engineers totalling over 7,000 workers;
  • Top five manufacturing sub-sectors facing manpower shortages are the electrical & electronics, food and beverages, chemicals and chemical products, fabricated metal and rubber products;
  • The number of worker shortage would be more than 22,000 considering that the quick survey only captured the responses of 252 companies while FMM has a total membership of over 3,500 manufacturing companies.
ii. The National Chamber of Commerce and Industry Malaysia (NCCIM) which covers members from five constituent national chambers including FMM had also carried out a similar survey in October 2021. The survey covered 835 manufacturing companies from various economic sectors. Their response had similar findings as follow:
  • An overall shortage of 77,721 workers, in the manufacturing sector alone requiring 77.1% of the total manpower needed, followed by the construction sector (11.2%) and other services (8.9%).
In addition, NCCIM at the press conference to release the survey results had further reported that based on inputs from various industry associations the foreign worker requirement for the manufacturing sector alone is close to 86,300 with the rubber glove industry alone requiring 25,000 foreign workers, furniture (30,000), plastics (6,293) and manufacturing in general (25,000).

iii. Based on the employment trend of foreign workers by sectors:
  • Sharp drop in foreign workers in the manufacturing sector in 2021 compared to 2019 prior to the Covid-19 pandemic
  • Numbers have dropped 44% to 391,831 foreign workers in 2021 compared to 697,124 foreign workers in 2019 in the manufacturing
  • Drop is mainly attributed to workers whose permits and term of employment expired during the Covid-19 pandemic period and have since returned home. In view of the current freeze on new employment from source country, employers are unable to get replacements for their foreign workers who have returned during the pandemic period or just before the pandemic period.
FMM is of the view that in order for the industries, especially the export based companies, to bring the business outcomes to a level before the pre- pandemic level the general skill labour conditions in the year 2022 must be replenished with over 600,000 foreign labour workforce to fill the manpower gaps as quoted above as well as to cater for the some of the new investments that would still require some level of low skilled manpower for certain processes within their operations.

It must be recognised that the manufacturing sector continues to be a catalyst of overall economic growth and pillar of economic growth during the pandemic period and must continue to be supported especially during this very critical period of economic recovery:
  • The sector contributes a significant 23% to the Malaysian economy;
  • The sector recorded positive economic performance from 3Q2020 to 2Q2021 during the pandemic period. In the 4Q2020 economic performance, the manufacturing sector was the only economic sector with a positive growth of 3% and this performance continued in 1Q2021 with stronger growth where manufacturing led all other economic sectors with a growth of 6.6%. This trend continued in 2Q2021 with a growth of 26.6%. In the 3Q2021 where all economic sectors recorded a contraction, the manufacturing sector recorded the smallest contraction.
  • The sector has a significant contribution to exports i.e. 86% of total exports in 2020 with a value of RM847.66 billion. The electrical and electronic (E&E) products held the biggest share of Malaysia’s total exports in 2020 at 39.4% or RM386.11 billion.
‒ Exports of manufactured goods in October 2021 accounted for 86.2% of total exports and reached a new high at RM98.61 billion and rose by 23.3% year-on-year. Petroleum products, manufactures of metal, E&E products, chemicals and chemical products, palm oil-based manufactured products as well as machinery, equipment and parts respectively posted more than RM1 billion increase in exports. E&E products, valued at RM42.01 billion and accounted for 36.7% of total exports.
‒ For the period of January to October 2021, almost all products recorded export expansion. Exports of manufactured goods edged up by 25% to RM866.48 billion compared to the same period of 2020, contributed by higher exports of E&E products, petroleum products, rubber products, manufactures of metal as well as chemicals and chemical products.

Employers in manufacturing continue to face difficulties in sourcing for locals to fill the shortages in the unskilled general workers category arising from the current freeze in new recruitment of foreign workers. Industries have no choice but to rely on foreign workers as locals are not keen on certain jobs and industries especially in the 3D (Dangerous, Dirty, Difficult) sectors. This short-term measure is critical to the revival of businesses and the economy. The industry is however cognisant of the fact that in the long-term, concerted efforts have to be taken to reduce the dependence on foreign workers including structural policy changes which could otherwise impact the competitiveness of Malaysia as it moves to a high-income nation focusing on high technology and high value-added products and services.

Tan Sri Dato’ Soh Thian Lai
President, Federation of Malaysian Manufacturers

About FMM
The Federation of Malaysian Manufacturers (FMM) has been the voice of the Malaysian manufacturing sector since 1968. Representing over 10,000 member companies (3,000 direct and 7,000 indirect) from the manufacturing supply chain, FMM is actively engaged with government and its key agencies at Federal, State and local levels. FMM is also well-linked with international organisations, Malaysian businesses and civil society. Apart from benefitting from FMM’s advocacy, FMM members enjoy value-add services, including training, business networking and trade opportunities as well as regular information updates.

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