FMM PRESS STATEMENT: Direct Hiring Is a Positive Step, but Clarity and Predictability Are Essential

February 6, 2026

Head Office, KL

Kuala Lumpur, February 6, 2026 — The Federation of Malaysian Manufacturing (FMM) welcomes the Government’s initiative to explore a direct hiring system for foreign workers. Reducing reliance on third-party recruitment agents, particularly where their involvement has historically contributed to high recruitment costs and vulnerabilities for workers, is a positive step towards a more transparent, ethical and efficient labour mobility framework.

From an Environmental, Social and Governance (ESG) perspective, this initiative strengthens the “Social” pillar by reinforcing fair labour practices, ethical recruitment and respect for workers’ rights across supply chains. A transparent and direct hiring mechanism would also support Malaysia’s National Action Plan on Business and Human Rights (NAPBHR), while addressing growing due-diligence expectations under international forced-labour compliance regimes, including those in the United States and the European Union.

In line with the Government’s New Industrial Master Plan (NIMP) 2030, Malaysian manufacturers are already moving decisively to embrace artificial intelligence (AI), automation and robotisation to remain competitive in an increasingly digital and technology-driven global economy.

However, this structural transformation cannot be achieved overnight. While the journey towards 2030 is both necessary and achievable, during this transition period, reliance on foreign workers remains an unavoidable reality rather than a policy preference. The focus should therefore be on ensuring a fair, transparent and well-regulated system, rather than on the volume of workers.

A Government-to-Government (G2G) recruitment framework, if properly structured, can help address long-standing concerns over exploitation and excessive recruitment costs, while improving accountability and traceability in the hiring process. This approach is broadly consistent with practices adopted in several labour-shortage economies.

FMM further emphasises the need for greater clarity on the system that will be used to facilitate the direct hiring process under a G2G arrangement. Clear rules, standardised procedures and transparent timelines are essential to ensure ease of use, fairness, predictability and cost efficiency for employers, while safeguarding worker welfare.

Crucially, the entire recruitment and approval process should be fully digitalised, end-to-end, with minimal to no human intervention or discretionary touchpoints. A fully digital system would reduce opacity, eliminate rent-seeking behaviour, minimise opportunities for abuse or manipulation, and enhance traceability, accountability and auditability across the recruitment value chain. Such an approach would be consistent with ESG principles, international best practices in ethical recruitment, and Malaysia’s broader digital government and governance reform agenda.

There is no need for Malaysia to start from scratch. The development of a fair, structured and ethical foreign worker recruitment system is well within reach. Proven models already exist. Countries such as South Korea, Singapore and other labour-shortage economies have demonstrated workable, transparent and ethical recruitment systems that balance employer needs with worker protection. Malaysia can draw on these experiences and adapt them to local realities, rather than starting from scratch.

Ultimately, industry requires a truly demand-based system, one that responds to genuine business needs rather than rigid quotas or administrative targets. In this regard, the proposed direct hiring framework should operate in tandem with the Multi-Tier Levy Mechanism (MTLM), which FMM has long supported as a market-based tool to moderate reliance on foreign labour while incentivising productivity improvements, automation and skills upgrading. A well-designed system should be predictable, timely and cost-efficient, enabling employers to hire only what they genuinely require while continuing to invest in automation, upskilling and localisation under NIMP 2030.

FMM hopes that the design and implementation of this framework will be undertaken through effective stakeholder engagement, including employers, worker representatives, source countries and relevant agencies, to ensure that the system is practical, ESG-compliant, aligned with international labour standards, and supportive of Malaysia’s ambition to strengthen its standing in Tier 1 of the United States Department of State’s Trafficking in Persons (TIP) Report.

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Mr Jacob Lee Chor Kok

President, Federation of Malaysian Manufacturing

FMM Advocates Transparency, Integrity, Accountability and No Corruption

About FMM

The Federation of Malaysian Manufacturing (FMM) (formerly known as Federation of Malaysian Manufacturers) has been the voice of the Malaysian manufacturing sector since 1968, advocating policies and initiatives that drive industrial growth, competitiveness and workforce development. Representing over 13,300 member companies (4,200 direct and 9,100 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-added services including training, business networking and trade opportunities as well as regular information updates.

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