Neglect of migrant workers could hurt Malaysia’s economic recovery

SINGAPORE — Researchers say Malaysia has done little to protect low-wage migrant workers from the effects of the coronavirus pandemic — which could hurt an economy that’s struggling to recover.

Low-wage and low-skilled migrant workers around the world have been among the most vulnerable as businesses cut wages and jobs to cope with the pandemic’s economic shock. Their predicament often is exacerbated by a lack of assistance from their host countries, as governments prioritize help for their own citizens.

In Malaysia, thousands of migrant workers have reportedly lost their jobs. The International Labor Organization, the United Nations’ labor agency, said in a report that there were cases of migrant workers being unfairly terminated or not getting paid when Malaysia’s nationwide coronavirus lockdown was first imposed in March.

Meanwhile, more than 1,000 undocumented or illegal migrants — who often seek work with unregistered businesses — were arrested in May when authorities conducted raids during the lockdown, Reuters reported. Those workers were placed in overcrowded detention centers that later became hotspots for the spread of Covid-19, according to local media reports.

The Malaysian government has provided limited help to the workers, with a senior minister arguing in April that the workers are the responsibility of their respective embassies, according to Jarud Romadan, a researcher at Khazanah Research Institute. The not-for-profit institute is sponsored by Malaysia’s sovereign wealth fund, Khazanah Nasional.

Government response has been confusing at times, Jarud said at an online seminar organized by the London School of Economics and Political Science’s Saw Swee Hock Southeast Asia Centre in mid-October.

He pointed out that authorities this year extended free Covid-19 testing and treatment to migrants regardless of their immigration status, and told undocumented migrants that they wouldn’t face any legal repercussions. But that amnesty was reversed, and authorities proceeded with the immigration raids, he said.

Malaysia’s Ministry of Human Resources did not respond to CNBC’s request for comment.

The ILO similarly pointed out in a report that most Malaysian government support measures don’t cover migrant workers. Trade unions and other organizations have stepped in to help the migrant workers, including by distributing food and providing shelter to them, according to the ILO.

He explained that the government has sought to justify that decision with three aims: Ease unemployment issues among locals, reduce Malaysia’s reliance on migrant workers, and encourage automation.

Reuters reported in July that the Malaysian government said only the construction, agriculture and plantation sectors were allowed to hire foreign labor. A month later, the news agency said that restriction was lifted after some employers said they still needed foreign workers, although the government still encouraged businesses to employ workers.

Over the past week, Malaysian local media reported that the government is considering issuing short-term work permits to undocumented migrants to ease the shortage of workers in the oil palm and rubber industries.

Even if the Malaysian government wants to improve employment of its citizens, freezing the employment of migrant workers may not help the job prospects of locals, said Tan Theng Theng, a public policy researcher focusing on inequality issues in Malaysia and Singapore.

Tan and Jarud co-authored a report on the economic case against marginalizing migrant workers in Malaysia published on the LSE Southeast Asia Blog. Tan is a research analyst at a Singapore-based charitable organization, The Head Foundation, but wrote the report on Malaysia’s migrant workers in a personal capacity.  

“The first reason is because migrant workers have been a very integral part of Malaysia’s economy and the failure to protect migrant workers’ jobs would actually have a spill-over effect on the survival of industries and businesses,” Tan said at the seminar.

She pointed out that several industries are heavily dependent on migrant workers, including manufacturing, construction, agriculture, forestry and fishing. That dependence is particularly acute among low-skilled roles, with nearly half of those jobs filled by foreign workers, she said.

“You may say that, well, locals can always fill in the vacancies once the migrant workers are gone,” Tan said. “But the thing is that local and migrant workers, they are not perfect substitute.”

Malaysia’s local workforce has become more educated over the last decade, Tan said, so Malaysians have been employed in skilled and semi-skilled jobs — leaving migrant workers to fill much of the low-skill gap.

Preventing businesses from hiring migrant workers could cripple Malaysia’s effort to revive the economy, she said, which in turn could hurt employment prospects of locals.

Malaysia’s economic outlook has worsened substantially as it battles what authorities have called a third wave of the coronavirus outbreak. The government has reinstated a lockdown in some states.

The International Monetary Fund forecast the economy could shrink 6% this year, worse than the 3.8% contraction it projected in June.

The government announced measures worth around 300 billion Malaysian ringgit ($72.2 billion) to support the economy. But one of the few government initiatives relating to migrant workers is a 25% cut in the worker levy paid by firms — which Tan and Jarud said in their report may be too small to be significant.  

Reducing reliance on migrant workers may not spur greater technological automation in Malaysia, said the researchers.

“At least, removing migrant workers shouldn’t be the first order of things,” Tan said during the seminar.

She explained that smaller firms may find cost a major barrier to upgrade their technology, and 90% of Malaysia’s manufacturing companies — which are reliant on migrant workers — are considered small.

In addition, automation and new technology are more likely to displace semi-skilled jobs held mostly by Malaysians — instead of low-skilled jobs filled by many migrant workers, she said.   

“What drives a successful transformation of Malaysia’s economy is a foundation of sound labor, industrial and educational policies — and not the removal of migrant workers,” said Tan.

Tan suggested two ways Malaysia and its Southeast Asian neighbors can better protect migrant workers within their borders.

First, she said that there are nearly seven million workers who migrate within Southeast Asia, so it makes sense for countries to work together to improve protection for foreign workers. That can help the region’s labor markets and economies to stay intact, and at the same time ensure the rights of migrant workers are being upheld, she said.

Within Malaysia, the government can extend public health and economic benefits to foreign workers regardless of their immigration status, said Tan. She added that those workers should be allowed to work legally in industries where they’re in high demand.

“These policies are very crucial to set the stage for more robust and quicker public health and economic recovery,” she said.