Issues and Challenges Facing the Plastics Industry

Contents
Minimum Wage Issues MITI Dialogue 2013 Bank Negara Dialogue 2012

Chronology of Events on Minimum Wage

Dates Description

Aug Sep 2011

Survey on the min wage paid by MPMA members was conducted

Dec 2011

Proposal on min wage was submitted to the National Wages Consultative Council (NWCC) through MEF but it was rejected
MPMAs proposal Min wage of RM600 for less economically developed areas like Kedah, Kelantan, etc and East Malaysia Min wage of RM650 for economically developed areas like KL, Selangor, Penang and Johor

9 Feb 2012

MPMA met with MEF and submitted a revised proposal. MPMAs proposal was again rejected by NWCC MPMAs revised proposal Min wage of RM700 for less economically developed areas Min wage of RM750 for economically developed areas

Chronology of Events on Minimum Wage

Dates Description

17 Feb 2012

MPMA was concerned when the Government announced that a min wage level of between RM800 and RM1,000 would be submitted for Cabinets approval early March MPMA initiated a meeting with trade organisations A Joint Press Conference was held with 16 trade associations and 36 representatives from 21 media companies. 43 articles and 12 mentions on television and radio were published/aired Highlights of the Joint Press Conference A sudden and substantial increase in wages will result in closure of at least 30% of the small and medium sized plastics companies 10,000-20,000 job losses due to company closures and companies adjusting to the high wage bill from the national min wage Urged the Government to consider introducing the min wage policy in phases over a period of time to give companies and businesses time to adjust

27 Feb 2012 6 Mac 2012

Chronology of Events on Minimum Wage

Dates Description

12 Mac 2012

MPMA sent a letter to the Prime Minister following the Press Conference, proposing the following: The definition of Min Wage should be based on Take Home Pay which includes Basic Salary + Overtime + Incentives + Allowances + Bonus An increase in wages must commensurate with an increase in productivity The implementation of min wages should be staggered as sufficient time is required to upgrade the skills of the workers to improve their productivity Min wage quantum should be differentiated by geographical locations as well as between rural and urban areas

Updates on Minimum Wage

Dates Description

27 Mac 2012

MPMA received a reply from the Secretary-General, MoHR stating the following: The Government had taken note of MPMAs proposals The Government would consider all or part of the cash allowances be included into the min wage
Prime Minister announced that a min wage of RM900 would be implemented for Peninsular and RM800 for East Malaysia. Government announced that the National Min Wage Act would be gazetted on 1 July 2012.

30 Apr 2012 14 Jun 2012

Updates on Minimum Wage

Dates 6 Aug 2012 Description Meeting with the Secretariat of the National Wages Consultative Council (NWCC) and submitted a written proposal on 17 August 2012 based on the following: With the current unemployment rate of 3.1%, it is extremely difficult to employ local workers (LW). As such, the industry is heavily dependent on foreign workers (FW) Employers have to pay additional RM293-343 per month for employing every FW, as the costs of levy, amenities and insurances have to be borne by the employer LWs do not enjoy such benefits, and are therefore discriminated Huge outflow of cash being remitted overseas RM 14.4 billion Min wage policy would have a severe impact on manufacturing cost, if the basic pay of FW increases to RM900 Closure of companies means that LWs shall be rendered jobless

Updates on Minimum Wage

Dates Description

6 Aug 2012

MPMAs appeals 1.The costs of levy, amenities and insurances to be borne by FW 2.The existing contracts with FW should be allowed to continue until the expiry date, the min wage for FW should be phased in over two years 3.Shift allowance and attendance allowance be allowed to be computed as part of min wage but the quantum shall not be fixed 4.Transport allowance and housing allowance be part of the computation of min wage 5.Meal allowance should be included in the computation of min wage 6.Different regions within Peninsular Malaysia and Sabah/Sarawak be accorded a lower min wage
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Updates on Minimum Wage

Dates Description

13 Aug 2012

Sent Circular No. 33e/2012 Template which members can use to request for deferral of the implementation of min wage
MPMA invited various trade associations to brief them on the outcome of the meeting between MPMA and the NWCC . Provided them with soft copy of application for them to also submit to the Govt. Several of which were submitted. Submitted an appeal to NWCC for a blanket approval to defer the implementation of min wage for all the 800+ members for a period of one year from 1 January 2013 NWCC issued the Guidelines on min wage implementation in early September. Briefing by Labour Officer on min wages Implementation at MPMA Head Office. 8

15 Aug 2012

21 Sep 2012

25 Sep 2012

Updates on Minimum Wage

Dates Description

10 Nov 2012
20 Dec 2012 31 Dec 2012

Attended a meeting with NWCC, explained the rationale for the one year deferral
Received notification from NWCC, informing MPMAs appeal for the one year deferral had been rejected MPMA issued a press release, expressed its concerns on the impact of min wage: Direct labour cost would increase by 30% to 40% Appealed for a grace period of at least one year for the implementation of min wage Cabinet announced that the levy would be borne by the FWs. However, the new policy would apply to new FWs or when the existing FWs renew their work permits 9

30 Jan 2013

Updates on Minimum Wage

Dates 4 Feb 2013 Description MPMA participated in a dialogue session between the Ministry of Human Resources (MOHR) and coordinated by the Malaysian Employers Federation (MEF), together with the SMI Association, Furniture Association and a few other associations. Employer associations expressed their concerns on the impact of min wages on businesses Pointed out that there is growing discontentment by LWs increase of only 3-6% vs 60-70% for FWs. Strikes and protests, with expectation that there could be more protests after CNY Requested for the deferral of min wage implementation Requested that the cost of levy, amenities and insurance for FWs in included as part of the min wage, or borne by FWs MPMA sent a proposal comprising the following to NWCC on steps and measures to be taken by the Government to assist companies adversely affected by the implementation of min wage: 10

12 Feb 2013

Updates on Minimum Wage

Dates Description

12 Feb 2013

Levy - The Government to consider absorbing the levy cost for FWs that are currently paid by the employer before the renewal of the permit, in the following manner:
a)For companies with a low profit margin of less than 3%, the Government to absorb the FW levy cost in the form of a direct payment to SMEs b) For companies with a profit margin of more than 3%, the Government to absorb the FW levy cost in the form of a corporate tax relief

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Updates on Minimum Wage

Dates Description

12 Feb 2013

The Government to consider providing a tax relief for costs incurred on overtime, accommodation and transportation for FWs HRDF and SOCSO - The Government to consider suspension of HRDF contributions and that SOCSO contribution be paid for by the Govt. Transport and accommodation - The government to assist the industry by requiring that the FWs bear the cost of transport and accommodation. To assist the renegotiation of this provision, it would be necessary to first nullify the existing contract and be replaced by new work contract. Proposal is to revoke the work permit with the arrangement that a new work permit be issued upon a new work contract being signed by the FWs. The new work contract would set out the min wage and that the FWs would bear the cost of levy, transport and accommodation
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Updates on Minimum Wage

Dates Description

15 Feb 2013

MPMA attended a meeting coordinated by MEF for selected industry associations After the meeting, MEF submitted recommendations based on inputs from MPMA and other associations to the Government on strategies to assist companies to mitigate the high cost of doing business arising from the implementation of min wages. The following is a summary of the joint recommendations: 1) Defer the implementation of national min wages by 12 months for all employers to allow more time and flexibility for employers to plan and restructure their businesses, which is necessary given that the current global economic situation is challenging.

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Updates on Minimum Wage

Dates Description

15 Feb 2013

2) Government to allow employers to recover the cost of levy that have already been paid by deducting the salaries of the foreign workers beginning on 30 January 2013. The term levy be replaced by some other appropriate and neutral term, such as public facilities fees or utilities fees 3) Employers should be allowed to charge a fee for providing amenities such as accommodation, transport, airfare, insurance provided to FWs which can be recovered through the deduction of wages
4) Contributions to HRDF and SOCSO be suspended for a minimum period of three years 5) Enforcement of min wages by Labour Department be deferred for 24 months beginning January 2013

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Updates on Minimum Wage

Dates Description

20 Feb 2013

Cabinet announced measures to assist employers to mitigate the impact of minimum wages:
A.For employers which have not implemented minimum wages for FWs:

(i)Employers can submit their application for deferment for FWs to NWCC Secretariat through association or individually;
(ii) Evaluation based on individual company basis and if need be, officers from JTK (Labour Dept.) would be required to verify documents, and interview unions/workers, at workplace;

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Updates on Minimum Wage

Dates Description

20 Feb 2013

(iii) Employers applying deferment cannot make deduction from wages for levy or accommodation;
(iv) Min wage must be implemented for LWs beginning 1 January 2013

B. For employers already implementing min wages for FWs:

(i) Employers can apply to JTK for deduction of levy and cost of accommodation for FWs (appropriate amount to be determined by JTK); and (ii) No further deferment for employers already implementing min wage 16

Updates on Minimum Wage

Dates Description

22 Feb 2013

MPMA attended a briefing by MOHR on the new measures. MOHR further informed that the Ministry is working with relevant Ministries on other incentives package such as: Grants Double tax deduction for extra cost of labour MPMA expressed our views as follows: (i)It is unfair for those employers already implementing min wage be prohibited to apply deferral; (ii)The deferral, which means only some employers would be granted, would create issues including strikes, job hopping and unhappiness amongst the FWs and LWs; (iii)Grants are not suitable as past results had shown that very few applicants were successful; proposed for the extension Reinvestment Allowance instead; (iv)Appealed for a deferment across the board for one year.
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Updates on Minimum Wage

Dates Description

27 Feb 2013

MPMA and about 20 representatives from various trade associations were invited for a meeting with the NWCC to discuss the implementation of min wage.
During the discussion, some NWCC members requested trade associations to accept the latest decision made by the Cabinet on 20 Feb 2013. However, associations were of the view that the deferment must be across the board for all employers. NWCC emphasized that the above had been made into a law by the Cabinet, employers must accept it. Trade associations felt that since there is no further room for discussion, they decided not to participate the meeting. Association representatives had a post-discussion amongst themselves and decided that the last option is to write an appeal letter to the Prime Minister to express the difficulties for 18 SMEs to implement min wage for foreign workers.

Updates on Minimum Wage

Dates Description

28 Feb 2013

The Minimum Wage Implementation Steering Committee of SMI Association prepared a joint letter to the Prime Minster requesting for a review on the implementation of Minimum Wage Policy on Foreign Workers in Malaysia to lessen the burden on the small and medium sized companies. The Steering Committee was looking towards collecting 10,000 or more signatures from both associations and individual companies for support.
MPMA had circulated the letter to all members, about 110 companies had signed the joint letter.

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8 March 2013 - Meeting with MITI Minister

20

8 March 2013 - Meeting with Health Minister

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MITI Dialogue, 7 Jan 2013

Issue 1. National Minimum wages MPMAs Proposal 1) The costs of levy, amenities and insurances to be borne by FW 2) The existing contracts with FW should be allowed to continue until the expiry date, the min wage for FW should be phased in over two years MPMA attended the Annual Industry Dialogue with MITI on 7 January 2013 together with 5 other associations from the chemical and petrochemicals industry. MPMA was the only association which raised the issue on min wage Immediately after the dialogue, the MITI Minister called a press conference and announced that MITI would assist the employers to reduce the burden arising from the implementation of min wages, by proposing to the Ministry of Labour to allow the levy for foreign workers be included into min wage 22

MITI Dialogue, 7 Jan 2013

Issue 2. Reinvestment Allowance 3. Electricity Tariff MPMAs Proposal The Government to relax the RA claimable period by allowing manufacturing companies to claim on RA on their reinvestment expenditure with no time limit 1) TNB should extend its off-peak rates to all the plastics manufacturing companies which are low-voltage users. MPMA proposed that a 40% discount to be given for offpeak rate under Tariff D (low-voltage) 2) Off-peak electricity tariff be extended to cover all day ( ie including day time) of Saturdays and Sundays for all categories of TNB users, both in the Tariff D and Tariff E 4. EUs GSP Effective 1 January 2014, Malaysia will no longer be a beneficiary under the European Commission (EC)s Generalised Scheme of Preferences (GSP). MPMA suggested that MITI expedites the Malaysia-EU FTA negotiation process in order for Malaysia to become competitive in the EU market. 23

Bank Negara Industry Dialogue, 14 June 2012

Issue 1. Min Wage MPMAs Proposal Briefed BNM on the various proposals submitted by MPMA to the Government on min wage issues Re-emphasised MPMAs stand on min wage issues as per the letter sent to the PM on 12 March 2012 Explained the possible impact of min wage on SMEs and businesses Expressed MPMAs concerns on the impact of the min wage The Government to relax the RA claimable period by allowing manufacturing companies to claim on RA on their reinvestment expenditure with no time limit

2. Reinvestment Allowance

3. MPMAs TDP

Briefed BNM on MPMAs Talent Development Programme (TDP), as a long term strategy to increase the productivity of the workers and hence less dependent on FWs
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