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Business community welcomes deferment of 80:20 local-foreign ruling

FMM In The News:  THE SUN DAILY, PETALING JAYA, Monday, July 18, 2022 - The Malaysian business community comprising 51 industry organisations, trade associations and chambers of commerce supports the decision by the Ministry of International Trade and Industry (MITI), to defer the implementation of the 80:20 local-to-foreign worker ratio due to labour shortage.

Federation of Malaysian Manufacturers (FMM) president Tan Sri Soh Thian Lai said with the country transitioning to the endemic phase of the Covid-19 pandemic with the reopening of international borders but amidst global economic headwinds, a conducive business ecosystem is most critical at this juncture to ensure the sustainability of business and overall economic growth.

He said the imposition of the ruling has impacted the business community, either directly or indirectly, to meet sales orders to fulfil the increasing global demands.

“Labour shortages have led to companies experiencing delays in fulfilling delivery of goods, huge backlogs, loss of existing customers and loss of potential business. The deferment of the ruling, which we recognise is a temporary measure for two years, will certainly provide relief to the business community as apart from the acute labour shortages, businesses are also currently under tremendous pressure to contain increasingly challenging high operating costs given the rising inflationary pressures contributed amongst others by the global supply chain disruptions due to the pandemic, geopolitical tensions, soaring energy prices, rise in freight rates as well as local cost factors as a result of the increase in minimum wages, energy costs and the weakening of the ringgit,” Soh said in a statement today, which he signed on behalf of the 51 industry organisations, trade associations and chambers of commerce.

The business community does not favour foreign workers over locals and filling job vacancies with locals has always been a top priority.

“Moreover, employing foreign workers is not cheap and easy with the ever-changing labour policies as well as demands of international labour standards. The reality is that companies are unable to obtain a sufficient supply of local workforce, especially general workers as our locals are not willing to take up such positions.

“Not all traditional labour positions can be replaced with automation and as such, there will continue to be a demand for labour to fulfil this manpower requirement. Hence, the demand for shop floor workers cannot be equated to the lack of efforts by industries to automate,” he said.

Meanwhile, Small and Medium Enterprises Association of Malaysia (Samenta) supports the plan to postpone the 80:20 quota for hiring of foreign workers in the manufacturing sector. The quota would have mandated SMEs in the manufacturing sector to hire 80% local workers before being permitted to hire foreign workers.

“Our SME are not ready for this ‘system shock’ at a time when we are already facing the triple whammy of rising costs of raw materials, huge jump in minimum wages and a debilitating labour crunch,“ said Samenta Central Datuk William Ng.

It has been widely reported that the industry is short of between 1 million to 1.5 million foreign workers, primarily to do work that locals shun – specifically the 3D jobs (dirty, dangerous and difficult).

“For example, despite offering wages above the minimum of RM1,500, many SME find it difficult to attract locals to work in small factories. As such, it is wrong to assume that SME prefer foreign workers to local workers – especially since the costs of hiring foreign workers are far higher and complicated.”

Unlike larger factories that are better automated, SME generally require more feet on the shop floors. In fact, this is one of the reasons why multinationals outsource their more labour intensive work to SMEs. Samenta is looking at helping members and SME in general to quickly automate and digitalise – but this goes beyond technology and requires mindset and process change that will take time

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