Malaysia mulls freezing foreign labour, but experts say may not be enough

Bracing for nationwide layoffs and as ‘returnees’ from Singapore add to the gloom

By Wong Choon Mei

Malaysian authorities are contemplating a temporary freeze on foreign labour in anticipation of escalating retrenchment within the country and as neighbouring Singapore prepares to lay off some 500,000 workers - many of whom will be Malaysians.

But financial experts think the move may come a little too late to deflect the onset of the global recession that is expected to blow full-force onto local shores by the middle of 2009.

“It may provide a temporary respite by freeing up some space in the labour market to absorb those who have been retrenched,” said Azrul Azwa, senior economist at Bank Islam Bhd.

“But it may not be enough to prevent the unemployment rate from shooting above the 4 percent level next year. In 2009, the unemployment rate can hit as high as 4.5 percent. If it does, this will be the highest, the worst since the first quarter of 1999,” he added.

Malaysia’s traditionally low unemployment rate was 3 percent at the end of 2007 and is expected to hover close to the 4 percent psychological ceiling by the end of this year.

Between 2,000 to 3,000 jobless Malaysians register with the Ministry of Human Resources each month. According to Ismail Abdul Rahim, director-general of labour, a total of 28,000 jobless Malaysians were registered as of last month.

So far, his department has managed to find jobs for only 6,000 of these.

Risking public anger

The looming joblessness is also a cause for concern that social unrest might strike here, following the example in Greece recently, where youth made redundant as companies slashed payrolls vented their frustration through street violence.

“Traditionally, economic slowdown coupled with unemployment will result in a rising crime rate and increasing incidents of public unrest,” Azrul said.

“The question is will Malaysia see the same kind of public anger. Perhaps not, because even though a 4.5 percent unemployment rate is very high for us, it is not an out-of-control figure. So perhaps, if we can prevent it from spiralling above 5 percent, we can contain that sort of public rage, but then this sort thing is ever-changing and debatable,” he added.

Ismail also told the local press his Ministry would take proactive measures to assist jobless Malaysians, even if that meant a temporary ban on foreign workers.

His assurance was hailed by the Malaysian Trades Union Congress (MTUC) which represents 550,000 private sector workers, and the Congress of Employees in the Public and Civil Service (Cuepacs) which is an umbrella union for 1.2 million government workers.

Economic growth likely to surprise on the downside next year

MTUC vice-president A. Balasubramaniam said there was now a surplus of foreign workers in the country and suggested that those who had completed their contracts be sent home to make way for locals to replace them.

Said Cuepacs secretary-general Ahmad Shah Mohd Zin: “We notice that there is an increase in crime in our country and this can be attributed to foreigners and jobless Malaysians.”

There are an estimated 2.1 million foreign workers in the country, or about 20 per cent of the total workforce.

Malaysia recorded a GDP growth rate of 6.3 percent for 2007 and is expected to wrap up 2008 at a clip of 5.5 percent. For 2009, the government has slashed economic growth rate from 5.4 percent to 3.5 percent.

But even so, many experts believe economic growth will surprise on the downside next year.

According to Joseph Tan, chief economist at Credit Suisse, GDP growth may only be 2 percent next year, versus 3.5 percent in Indonesia, 3 percent in Thailand, 2.2 percent in the Philippines and zero growth in Singapore.

“We will feel the full effect of the global slowdown next year. The economic outlook too has gotten gloomier as the recession in the UK, US and Japan start to bite. Thirdly, our own Asian economic powerhouses - China and India - are showing their most sluggish performance in years. Malaysia should also feel the heat next year,” Azrul said.

Malaysians working in Singapore hit

Meanwhile, alarm bells resonated across recession-hit Singapore, where some 300,000 Malaysians work, representing about 30 percent of the city-state’s overall foreign workforce.

The ubiquitous Malaysian worker can be found in nearly every layer in of the island’s economy - as professionals, skilled and unskilled labour in various industries including manufacturing, banking and finance, services, IT and oil and gas.

According to Ministry of Manpower there, more than 35 people in lost their jobs every day between July and September this year, a large jump from 21 a day in the preceding three months.

The ministry’s report showed 3,178 people were laid off or had their contracts ended prematurely in the third quarter. This represented a 70 per cent spike compared to 1,884 in the second quarter and marks the highest number of job losses since the last quarter of 2006.

Yet, analysts too expect the ride in Singapore to get bumpier before it gets better.
They said the July to September figures has not even fully capture the total impact of the financial fallout sparked by the collapse on Sept 15 of American investment bank Lehman Brothers.

The Manpower ministry’s report appeared to back their suspicion, showing that all sectors of the Singapore economy were still underperforming. Fewer jobs were being created and hiring is set to slow down, adding to the gloom of the growing pool of 65,400 jobless Singaporeans.
“In the case of Singapore and Hong Kong, where exports as a percentage of GDP are above 200 percent, we are likely to see near zero growth rates for 2009,” said Credit Suisse’s Tan. “Virtually, all export-dependent economies are highly likely to slip into technical recession.” 3

Sumber: Suara Keadilan