Why the hurry for new levy on foreign workers?

Rarely have so many powerful business organisations and high powered business leaders unite so quickly to protest against the new foreign workers’ levy that was surprisingly introduced on Monday.

This serious situation raises the basic question – why is this new levy introduced in a hurry? Why were the business community apparently caught unaware of this huge and untimely levy hike?

We have a rich tradition in our country of government and private sector consultations on even the details of major economic policy changes, except budget tax proposals.

The surprised and stern reaction from the business leaders showed that there was inadequate consultation on the rate and timing of the hefty rise in the levy.
There also appears to be some lack of coordination among all the relevant government agencies.

Otherwise the trade ministry and other economic branches of government, would have influenced the Home Ministry to be more cautious about the pricing and timing of the new foreign worker levy

The businessmen have valid reasons to protest, on the following grounds.

The new hikes in the new Levy are too high, ranging from 100% to 300%, For example, levy for construction workers will increase from RM1,250 to RM2,500.

At the time of global and the Malaysian economic slowdown and falling oil prices and the ringgit, the high increase in levies could raise business and consumer costs and reduce our competitions well.

The sudden increase could cause major disruption and a further slow down in production and exports.


In view of the above, I have the following recommendations for consideration.

1. It is ill advised for the business community to ask for the abolishment of this new levy. Instead it would be more reasonable and practical for businesses to ask the government, for a “calibrated phase”. The new levy could also be much lower initially and could be raised later when the economy and the businesses are more ready to adjust.

2. The government can avoid flip-flop decisions by keeping the new policy, but lowering the increases to make the levy more acceptable to the business sector and consumers.

3. In the meantime, please treat and consult the private sector as equal partners in development and do not spring surprises on them or catch them off guard.

4. The rise in foreign worker levy has much benefit, which should be highlighted to the public. The public need to be better informed on the overall costs and benefits on raising the worker levy, in the wider public and longer term interests.

5. The additional RM2.5 billion that the government hopes to gain from this new levy is attractive but it need not be overzealous in its collection, as it might also reflect government’s desperation to protect the budget’s integrity.

6. There needs to be greater integration between this new policy on foreign worker levy and the new minimum wage policy which will come out this June. I hope there are no more sudden surprises on rates and timing.

7. There is plenty of speculation that these new levies could benefit monopolies. If there is any truth in this, the government must be bold to clear the air and increase competition, to benefit the vast majority of consumers rather than protect a few cronies.

8. It is encouraging that the government is finally trying hard to reduce the unnecessary influx and use of imported labour. Estimated at about 2.2 million legal and about six million illegal foreign workers. But it should have wider and deeper consultations with all the relevant stakeholders with more care and consideration for the good of the public.

Finally, it is agreed that we need to better manage the vast problems of the unwieldy and continuing inflow of foreign workers. But good policies must be backed up by more open and proper practices, for our country and people to prosper and succeed.

Article published in The Star and The Malaysian Insider.

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