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FMM PRESS STATEMENT: Removal of Special Quota for Foreign Workers Welcomed but Critical for Foreign Worker Recruitment System to Support Sector-Based and Company Demand-Based Requirements To Accelerate Economic Recovery

Kuala Lumpur, January 25, 2022 – The Federation of Malaysian Manufacturers (FMM) supports the recent announcement by YB Minister of Home Affairs on the removal of the special quota for foreign workers to certain parties which would remove possible misuse and abuse of the system resulting in excessive entry and the possibility of foreign worker human trafficking issues which could result in greater damage to the image of the country and severely impact the country’s competitiveness and reputation. However, in order to accelerate business and economic recovery, the foreign worker recruitment policy and system must support sector-based and company-demand based requirements expeditiously via a credible, consistent and transparent system.

As industries resume certain level of normality in business operations and restart their business recovery journey following the long period of non-operations or reduced capacity due to the lockdowns last year, they are currently severely hampered by acute manpower challenges especially in filling their unskilled manpower positions given the prolonged freeze in foreign workers recruitment. Employers have put in all efforts to employ locals to fill the shortages but continue to face difficulties in sourcing for locals to fill the shortages in the unskilled general workers category as locals are not keen on certain jobs and industries especially in the 3D (Dangerous, Dirty, Difficult) sectors.

FMM had previously indicated 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 arising from the sharp drop in foreign workers in the manufacturing sector in 2021 compared to 2019 prior to the Covid-19 pandemic which is mainly attributed to employers being unable to get replacements for their foreign workers who have returned during the pandemic period or just before the pandemic period. In addition, there would be also some new investments and expansion of current operations that would still require some level of low skilled manpower for certain processes within their operations.

This critical manpower shortage must be immediately addressed to assist business revival which could otherwise derail the recovery of industries including their ability to meet their orders which include clearing all the back-log in orders, expansion plans for those industries that persistently see upsurge in demand for their products but are unable to cope with their current capacity and support global supply chains. This is very critical given that Malaysia is a key manufacturing hub and the continuous need to boost Malaysia as the preferred supply chain hub in the region. As such, we urge the concerned authorities to put their acts together in resolving and facilitate the importation of the foreign workers approval process urgently.

Post- pandemic period business configuration or landscape is very competitive due to potential reassessment of product segmentation as part of risk management. In addition, it is feared that companies may lose their customers as well as risk the possible relocation of the manufacturing base by the principal company to other locations that are able to meet the order obligations on a timely basis. Ultimately supporting the industry in quickly addressing their manpower shortages is critical for economic growth and in maintaining the country’s export competitiveness which is key to economic recovery and in improving investors’ confidence.

In addition, we also seek for greater clarity on the foreign worker recruitment process including the changes that have been introduced including the Standard Operating Procedures (SOP) on the entry of foreign workers and new terms that have been agreed in the Memorandum of Understanding (MoU) with the source countries. We request that the details be released early including having engagements with the stakeholders to ensure that the procedures are workable and result in a win-win outcome for all. More importantly the changes should be progressive and enhance efficiency of the system including moving the entire process online and preferably involving only one Ministry/agency for approval of the manpower requirement. There must also be no undue cost burden added on employers during this fragile economic period with full transparency on all cost elements involved.

The industry also notes that the implementation of the multi-tier levy mechanism has been postponed to July 1, 2022 and thanks the Government for recognising the timing sensitivity of implementing this policy change. FMM has always supported the implementation of the multi-tier levy mechanism which will allows the forces of demand and supply to determine outcomes and will effectively influence market behaviour without distortions; provides clarity and certainty to approvals; reduces bureaucracy and removes opportunities for abuse and corruption. We humbly request that the details of the multi-tier levy and the rate be announced immediately to give industries the necessary time to plan and adjust to the new levy system and factor in any increase in cost.


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

FMM Advocates Transparency, Integrity and No Corruption

About FMM
The Federation of Malaysian Manufacturers (FMM) has been the voice of the Malaysian manufacturing sector since 1968. Representing over 11,300 member companies (3,500 direct and 7,800 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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