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Southeast Asia

Mar 16, 2005

Malaysia's enduring labor pains
By Anil Netto

PENANG - Malaysian businesses are struggling to cope and several have had to cease operations after the mass repatriation of undocumented migrant workers, and delays in regularizing their status, particularly in Indonesia, so they can return to work in Malaysia.

In response, the Home Affairs Ministry is scheduled to announce a comprehensive plan on Wednesday to overcome the shortage of workers in sectors such as construction that rely on foreign labor.

Several hundred thousand illegal migrant workers fled Malaysia during an amnesty that ended on February 28, after which any found remaining were threatened with prison terms, fines, whipping and deportation.

In the weeks since, a government-backed volunteer vigilante force, along with regular enforcement officials, has been scouring the country in search of those still remaining. Before the crackdown began, it was estimated that a million migrant laborers were working in Malaysia, and several hundred thousand illegal workers are still believed to be hiding in the country, having turned down the earlier amnesty offer for a variety of reasons: difficulties in securing back wages, inability to settle outstanding loans in their home countries or to stump up the cash required for the processing fee back home that would regularize their work status in Malaysia, and uncertainty over when and whether they would be able to return to Malaysia to work.

But while a number of firms have been hit hard by the illegal worker crackdown, recruitment agents and others who profit from the flow of migrant workers are still believed to be earning their cut. They say they aren't worried and know that the demand for migrant workers in Malaysia will not evaporate, given the persistent demand for cheap labor among many employers in the country.

Several countries, such as Pakistan, Sri Lanka, Nepal and Vietnam, have already lined up to send more workers to Malaysia to make up for the shortfall. Even Indonesian workers, who make up the bulk of Malaysia's migrant labor force and who have faced the greatest obstacles in securing their return, are expected to come back in time.

The labor bottleneck comes amid strained ties between Jakarta and Kuala Lumpur over Malaysia's shoddy treatment of its migrant workers; many employers allegedly have taken advantage of the crackdown by failing to pay wages to undocumented workers. Ties between Indonesia and Malaysia were further frayed last month when a maritime border dispute flared up in the oil-rich offshore area near northeast Kalimantan in Indonesia and Sabah state in Malaysia.

Small firms suffer more
Among the worst-hit Malaysian businesses are property developers and construction firms, as well as the plantation industry. In that sector, the smaller firms and small holders are hurting the most.

"The big players get their workers through legal means," a source working for a plantation owners grouping told Asia Times Online on condition of anonymity. "It is the small holders and small plantations that predominantly engage illegal workers. These employers prefer these undocumented workers because they don't have to pay government levies and they can even pay the workers' salaries at their whims and fancies. Now they are experiencing difficulty in getting these workers back."

The source pointed out that many of these workers, when they first arrived in Malaysia, did not know how to come in through legal channels. Those that knew were put off by the RM1,000 in charges and fees. "In order to avoid paying these charges, these migrant workers went through illegitimate [recruitment] 'agents' whereby they only pay a small fee," he said. "They came by sampan or tugboats. Or they came on the normal boats using a social visit pass, which allows them to stay for a month." During that time they vanish and find work in the country.

About half the oil palm plantations on the peninsula are owned by big plantation firms, with the remainder owned by smaller players. Following the repatriation, "many of these small holdings now lack oil palm harvesters, so they are making use of their remaining workers and getting them to work overtime," said the plantation grouping employee.

The plantation industry is definitely affected, he added. "I imagine the situation is worse in Sabah and Sarawak in North Borneo, where even the bigger firms hired undocumented workers because of the lax enforcement by the immigration department. In the peninsula you have the Malaysian Agricultural Producers Association and the National Union of Plantation Workers, which both negotiate an agreement on wages. This agreement is used as the basis for payment of salaries. In Sabah and Sarawak, where the area under plantation is larger, the unions are weaker and thus wage levels are lower."

Several Malaysian recruitment agents, working for accredited agencies, who declined to be named for fear of losing their recruitment licenses, sounded frustrated and upset when they spoke to Asia Times Online. "The authorities promised us that the workers would return [from their home countries] within 24 hours and that no payment would be required," said one of the agents who had just returned from Indonesia.

"But now [we see the workers] have to pay RM1,300 officially before they can return to Malaysia. Unofficially, there is a further RM1,500 that they have to pay in Indonesia, bringing the total to close to RM3,000," he complained. The workers cannot raise these funds to regularize their status, the agent added. (Indonesia has since announced the official fee would be halved to just over RM600.)

A consortium was recently set up to facilitate the regularization process in Indonesia and several one-stop stops have begun issuing visas in the Philippines, but according to the agent, the new consortium "is nonsense". What's more, he pointed out, Malaysian employers have to fork out close to RM1,700 a year in levy, insurance and bank guarantee charges for each of their workers that returns (RM1,200 of this is recovered from monthly deductions of RM100 from the workers' wages).

"It's a miscalculation on the part of the Malaysians," said another agent. "Everyone wants to make quick money. They should have legalized the workers here [instead of sending them home to be legalized]. But they were afraid that this would have encouraged more illegal workers. Now, it is tit-for-tat [between Indonesia and Malaysia]."

Malaysia has upped the ante by giving "notice" that if the workers do not come back within a month, it will look elsewhere in the region for workers.

"The Indonesian side will not release even one of the [repatriated] workers if payment is not received," said the first agent, who claimed that Malaysia's one-month deadline was unrealistic: "300,000 workers to return in one month? Nonsense, no way!"

The agents said the construction industry has almost ground to a halt. They claim that about 90% of construction worksites use foreign workers, the majority - in many cases up to 85% - of whom are undocumented. "Many of the main contractors use sub-contractors [for their workforce] and these sub-contractors have stopped work," the agents said. "Their undocumented workers have not all gone back to their home countries; so these firms are afraid to continue operations for fear of the raids."

Many Malaysian employers prefer Indonesian workers as the Indonesian language is almost similar to Malay, which makes for easier communication.

"In the short term it is going to be very difficult," said a Penang-based property developer. "Many construction firms rely on these [migrant] workers." At the same time, he sees the problem as only a temporary blip. "Definitely they will come back to earn a living [in the longer term]. I don't see them not coming back."

Meanwhile, Human Resources Minister Fong Chan Onn admitted that the critical shortage of migrant workers has also jeopardized local and multinational operations, including electronic components producers. "This is bad because there is a demand boom in global electronics at present and we were hoping to benefit from this," Fong was reported as saying. "We know that some factories have had to suspend their operations because they cannot find employers to work the machinery."

Small and medium-sized enterprises face a shortage of 100,000 workers, the construction sector another 100,000, and even the country's popular Indian restaurants are in need of about 8,000 employees.

One senior government official told Asia Times Online that the problem should be looked at holistically. "As long as there is this attitude of seeking out cheap labor, we will continue to face problems. Employers seem to prefer cheap, exploitable workers and they are not interested in raising the skill levels of their construction workers." Steven Gan, the editor of independent news portal Malaysiakini, has referred to these employers as "cheap labor cheapskates".

Malaysian labor and immigration laws are stacked against migrant workers, including those with legal documents, the majority of whom have to hand over their passports to their employers. The lack of enforcement against abusive employers and those that exploit migrant workers has encouraged many employers to believe they are immune to prosecution.

One source told Asia Times Online that this fixation on cheap migrant labor is largely due to the lucrative business of recruiting migrant workers. Some of those involved in the "business" are believed to be politically well connected and stand to earn huge sums of money in commissions and other fees by bringing in thousands of workers. "As long as people are profiting from the bringing in of migrant workers, we will never solve the problem."

However, countries in the region should be working together on this issue, said one of the recruitment agents mentioned earlier. "This problem will go on for the rest of the year and it will affect our economy. The Malaysian and Indonesian governments should sit down together and solve the problem instead of adopting a confrontational position."

That same agent told Asia Times Online he believes a portion of the fees collected from migrant workers in Indonesia and Bangladesh who want to re-enter Malaysia legally is remitted to agents within Malaysia who channel these workers to their employers in the country.

Even if relatively few workers are willing to pay the huge charges required in Indonesia, workers from other countries in the region - where they too, have to pay hefty charges before they can come to work in Malaysia - are already on their way. Last week some 20,000 Filipinos were issued work permits for Malaysia, according to a labor official.

And so despite the setbacks, it seems the business of profiting from the flow of migrant workers will continue.

Anil Netto is a freelance journalist based in Malaysia, covering political and social issues. A former accountant, he is currently joint coordinator of Charter 2000-Aliran, a network promoting press freedom in Malaysia.

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