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Journal of Contemporary Asia

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Policies and Laws Regulating Migrant Workers in


Malaysia: A Critical Appraisal

Evelyn Shyamala Devadason & Chan Wai Meng

To cite this article: Evelyn Shyamala Devadason & Chan Wai Meng (2014) Policies and Laws
Regulating Migrant Workers in Malaysia: A Critical Appraisal, Journal of Contemporary Asia,
44:1, 19-35, DOI: 10.1080/00472336.2013.826420

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Journal of Contemporary Asia, 2014
Vol. 44, No. 1, 1935, http://dx.doi.org/10.1080/00472336.2013.826420

Policies and Laws Regulating Migrant


Workers in Malaysia: A Critical Appraisal
EVELYN SHYAMALA DEVADASON* & CHAN WAI MENG**
*Faculty of Economics & Administration, University of Malaya, Kuala Lumpur, Malaysia, **Faculty of Business
& Accountancy, University of Malaya, Kuala Lumpur, Malaysia

ABSTRACT This paper reviews policies and laws governing migrant inflows and their presence in
the Malaysian economy. This study finds that policy failures are basically built on the ad hoc
management of in-migration, lack of enforcement of existing regulations and abusive practices of
various stakeholders. Likewise, work and provision of basic rights for migrants under specific laws
are found to be somewhat discriminatory and arbitrary. Hence, the immediate challenge for policy
makers is to ensure effective management of migrant workers, beginning with a clear policy on
recruitment, placement, monitoring and finally the return of migrant workers to their homeland.
Furthermore, amendments to specific laws are needed to ensure that migrant workers are accorded
equal labour standards and basic rights as those of locals.

KEY WORDS: Migrant workers, migrant worker policy, labour laws, basic rights, Malaysia

Malaysia records a total of 1.9 million registered (documented or regular) migrants,


constituting approximately 21% of the workforce in 2010 (MOF 2010).1 In percentage
terms, this makes Malaysia the largest importer of labour in Asia (Amarjit 2007). To date,
workers in various employment sectors in the Malaysian economy are sourced from a
total of 15 countries, with the largest number coming from Indonesia (1.2 million)
followed by Nepal as the distant second. Interestingly, despite their large presence in
the economy, the policies and laws regulating in-migration have been flawed and subject
to frequent revisions. Poor policy has resulted in the flood of unskilled migrant workers
into Malaysia, encouraged irregular migration and exposed migrants to abuse and
exploitation.
In trying to reign in the excess dependency on migrant workers, Malaysian migration
policies are largely built on the concept of a short-term remedy for labour shortage
problems. This, in turn, exposed the failure on the part of policy makers to recognise
the critical contribution of migrant workers over the long term (Yaw 2002). Specifically,
the presence of unskilled migrant workers has provided a low-wage option considered
necessary for foreign direct investment inflows to labour-intensive segments, as the
economy restructured from agriculture to industry. Furthermore, the rise of dualism in
the labour market, given that domestic workers remain reluctant to perform dirty, demean-
ing and dangerous (3-D) jobs, in some ways reflects the maturing of the labour market

Correspondence Address: Evelyn Shyamala Devadason, Faculty of Economics & Administration, University of
Malaya, Lembah Pantai, 50603 Kuala Lumpur Wilayah Persekutuan 50603, Malaysia. Email: evelyns@um.edu.my

2013 Journal of Contemporary Asia


20 Evelyn Shyamala Devadason & Chan Wai Meng

(Hugo 2009). As such, the 3-D jobs (semi-skilled and unskilled) have become the domain
of migrant workers as they fill slots vacated by domestic workers. The increased
participation of women in the labour market has also contributed to the growing need
for domestic services (Elias 2008). Failing to appreciate and recognise that the inflows of
migrant workers are an inevitable consequence of an industrialising society, as explained
above, no clear policy was chartered to manage and regulate these inflows for the long
term.
Following from this, the management of in-migration has been somewhat ad-hoc
despite the governments commitment to reduce its dependency on unskilled migrant
workers. Clear testimonies to this ad hoc approach are the policy reversals or rather policy
turnarounds on in-migration that are frequently deployed (see also Martin and
Abimourched 2009). It is thus not surprising to note that retrenchments, deportations
and migration bans are quickly followed with return migration and lifting of those bans
within short periods of time, lasting no more than a year, amidst confounding evidence of
serious disruptions across the various economic sectors. Since unskilled migrant workers
on temporary employment permits are characterised by frequent returns, a long-term story
appears relevant for an appropriate policy design on migrant inflows. The government has
begun to recognise only recently that with the current intense competition for global
capital investment, the sudden closing of doors on migrant workers, particularly in
manufacturing, may erode domestic competitiveness and result in the relocation of multi-
national corporations to low-wage countries.
Inconsistencies in the policies on in-migration have also led to the rise of undocumen-
ted workers due to the continuous demand for migrant workers (see Wickramasekara
2008; Hugo 2009). As such, many migrants either overstayed their visas, had them
renewed fraudulently by employers or shifted employers to avoid detection. The imple-
mentation of amnesty programmes from time to time has generally not met with much
success. In the July-August 2011 registration exercise, however, 1.3 million undocumen-
ted workers came forward to legalise their status. The government then announced that
these workers would not be deported but instead be absorbed into five major sectors that
claim critical labour shortages, namely manufacturing, plantations, agriculture, construc-
tion and services (The Malay Mail, October 4, 2011).
In April 2012, the Employment Act 19552 was amended to include a new provision
regarding the duties of a labour contractor who intends to supply employees to businesses.
Thus, upon the enactment of the amendment, businesses have an option to enter into
either a direct contract of employment with the worker or a contract with a supplier of
labour. Businesses which are restricted from employing migrant workers may circumvent
the restriction by outsourcing the jobs to contractors for labour, who will resort to using
migrant workers. The bargaining power of workers is likely to be severely reduced, and
local workers may find that the contractor for labour may monopolise the supply of labour
in certain sectors.
Apart from the above, the Malaysian government also requires employers of migrant
workers to pay an annual levy on each worker. The levy based on the latest 2012 revision,
ranges from RM410 for the agricultural sector to RM1,850 for the services sector. The
levy introduced in 1991, was initially fully borne by migrant workers. In 2009, the
government shifted the responsibility of the levy charges on to employers. The levy
system is yet another failed policy as it only served to impoverish migrant workers
since employers continued to pass on the costs of the levy to the workers even after the
Policies and Laws Regulating Migrant Workers in Malaysia 21

2009 ruling. In this respect, the levy system and the frequent upward revisions to the levy
charges did not deter employers from relying less on migrant workers, but instead fostered
rampant abuse of the system.
In-migration continues to remain a contentious issue and receives wide media coverage.
Malaysias policies have been subjected to increasing public criticism by labour-sending
countries in the region, such as Indonesia, Cambodia, the Philippines, Thailand and
Vietnam, on its treatment of migrant workers. For example, since June of 2009 the
Indonesian government imposed a moratorium on sending migrant workers to Malaysia.
Abuse in the form of deplorable working and living conditions, low wages, lack of
protection and union rights and violence are amongst the many reasons cited in com-
plaints about the treatment of migrant workers. These abuses, though not new, are now
gaining the attention of the Malaysian government as the respective governments of the
labour-sending countries take steps to restrict the outflows of their workers, specifically to
the domestic services sector, where mistreatment of workers has been widely reported.
One major reason for this is that this sector is dominated by female migrants, and the
existing policies have not been adequately gender sensitive to ensure a safe working
environment, thereby increasing the vulnerability of this group of migrants.
Malaysia is therefore considered an intriguing case study, given the paradox of the
importance of in-migration to the economy, followed by conflicting and pervasive laws
and regulations and, in some cases, outright policy failures. A few questions arising from
this paradox that are worth re-examining are: What is the role played by migrant workers
in the past? What are major setbacks in existing policies and laws related to migrant
workers? How best can the inflows of migrant workers be regulated to meet the demands
of the industry?
The paper is structured in the following manner. The next section documents some facts
on migrant workers to provide the context of the paper. This is followed by sections that
review the chaotic regulations that shape in-migration to Malaysia and appraise specific
labour laws deemed relevant to migrant workers. The paper concludes with some policy
challenges to regulate and manage migrant workers.

A Snapshot of Migrant Workers in Malaysia


The importation of migrant workers dates back to colonial times, but gained further
momentum when tight labour market conditions emerged in the late 1980s with the
aggressive promotion of the second-round export-industrialisation drive in the post-1985
economic crisis that saw the formulation of the First Industrial Master Plan (198595).
The sector that first hosted migrant workers was plantations in the 1970s and early 1980s
as rural-urban migration caused the agricultural labour to dry up. The advent of the New
Economic Policy (NEP; 1970-90) had also encouraged the rural-urban migration of young
Malay women to work in export-orientated factories in the 1970s. They occupied mainly
poorly paid jobs as production operators in the electronics industry. The rise of this new
female working class became more prominent with the advent of Free Trade Zones and
micro-chip assembling factories in the 1980s. Ironically, the feminisation of the workforce
through industrial restructuring was not the desired outcome of the states policy, as the
industrialisation strategy under the NEP was premised on creating a male Malay working
class. To resolve the tension between economic restructuring and hostility and concern in
22 Evelyn Shyamala Devadason & Chan Wai Meng

the Malay community, in-migration was permitted to sustain labour market demand and to
maintain Malaysia as a favourable manufacturing site to foreign investors.
At the outset, the governments policy stance was to permit in-migration as a short-term
response to address labour shortages in critical sectors.
In general, the 1968 Employment Restriction Act mandates the temporary nature of
migrant workers which bars their mobility, confining them to certain occupations and
certain sectors. Their mobility improved somewhat with the 2005 policy which provides
for migrant workers whose contracts have expired to change employers within the same
economic sector, as long as their work permits were still valid. These work permits are
renewed annually, though the employment agreements are normally three years.3
The use of unskilled migrant workers therefore gained wide acceptance, first in
agriculture (plantations), followed by construction and manufacturing (Table 1), where
it was perceived that any form of improvements in wages and conditions of work could
still not attract domestic workers in sufficient numbers to fill those gaps in demand.
Locals were considered to find work in the agriculture, domestic and non-domestic
services (wholesale, retail, hotel and restaurant services) to be below their expectations,
whilst many did not find the conditions in the estates and construction sites appealing,
even more so because construction work entails many risks.
The manufacturing sector has also moved towards greater utilisation of migrants vis--
vis the plantation and construction sectors (Azizah 2005), thereby emerging as the largest
employer of migrant workers. The intensity of the use of migrants in manufacturing also
saw the acceleration of a feminisation of in-migration, coinciding with the emergence of
gender-specific employment niches, mainly in the garments and electronics factories.
Unlike other sectors, concerns remain on the use of migrant workers in the manufacturing
sector, for several reasons. Importantly, this sector is not considered unappealing to the
locals. Manufacturing employers are therefore perceived to favour migrants over locals,
and are subject to frequent attacks by unionists and policy makers on the labour shortage
issue and the inability to secure local workers. Unionists assert that businesses and
enterprises prefer migrants for the following reasons. First, migrants may be exploited
easily, as they do not normally seek legal recourse given their temporary status. Second,
they are believed to be diligent, docile and willing to work overtime, including on public
holidays and weekends.4 Third, migrant workers are perceived as more willing to accept
lower pay than that offered to local workers. Finally, migrant workers are believed to be

Table 1. Distribution of migrant workers by key sectors (in %)

Sector 1985 1990 2000 2005 2009

Agriculturea 50.1 37.7 24.8 26.0 26.1


Manufacturing 6.9 8.8 38.1 32.1 34.6
Construction 15.0 34.4 8.5 15.5 15.6
Non-domestic services 20.3b 19.1 6.7 8.8 10.6
Domestic services n.a. n.a. 22.0 17.6 13.1
% 95.3 99.5 100.0 100.0 100.0
Total number 212,000 441,000 807,000 1,815,000 1,918,000
a
Includes forestry, fishing and mining.
b
Includes domestic services.
Source: Athukorala and Manning (1999); Athukorala (2006); and based on unpublished official sources.
Policies and Laws Regulating Migrant Workers in Malaysia 23

less concerned about safety and working conditions, often having to accept deplorable
workplaces. The rise of female migrant workers further adds weight to the claims made by
the unionists above as the former are more vulnerable to rights violations, attested by the
most frequently encountered issues regarding female migrant workers working condi-
tions, which include low remuneration, long working hours and recorded abuses.
Despite debate on whether in-migration is shortage-driven or sector-driven, the
Malaysian economy continued to see a general rise in migrant workers, guaranteed by the
cheap and abundant labour supply from neighbouring countries (see also Wickramesekara
2008). Indonesia has been the main import source since 1992, given its cultural proximity
with Malaysia, when the government officially permitted their recruitment in manufactur-
ing. In 2001, there was a temporary halt on the recruitment of Indonesian workers due to
some undocumented demonstrations by migrants at a factory site. When the then
Malaysian Prime Minister Mahathir announced that the undocumented workers repre-
sented a major threat to national security and introduced new laws providing for the
caning and deportation of undocumented workers in 2002, there was a major diplomatic
confrontation with Indonesia. As a result, many Indonesians returned to their homeland.
Subsequently, the government reviewed its policy on migrants, seeking to limit the
number of workers from any specific country. Though the Indonesians still constitute
the largest share of migrant workers, there is now a relatively broader pool of migrants
from the Philippines, Bangladesh, Vietnam, Pakistan, India, Sri Lanka, Nepal, Thailand,
Burma, Cambodia, Laos, Vietnam, Uzbekistan, Kazakhstan and Turkmenistan. Cross-
border flows and recruitment preferences towards Muslim countries are no longer key
factors to in-migration.
The distribution of migrant workers remains heavily concentrated in specific occupa-
tional categories. Based on the occupational categories, Table 2 shows that migrant
workers are employed mainly as production workers/operators in manufacturing. A
majority of the production workers are employed directly instead of employed through
labour contractors. Whilst the share of production workers in total foreign employment
increased over time, the share of foreigners occupying professional and managerial
positions dwindled over the period of study. This means that migrant workers still largely
occupy unskilled jobs in manufacturing (World Bank 2010).
The main points of contention regarding migrant workers are their large and growing
numbers, their legality, and their penetration into so-called non-designated jobs, most
particularly in manufacturing, where they are seen to compete with locals and/or depress

Table 2. Percentage distribution of migrant workers by occupational categories in manufacturing

Occupational category 1985 1990 1995 2000 2005 2008

Professional & managerial 18.2 15.7 3.4 2.3 1.5 1.2


Technical & supervisory 3.6 3.0 1.2 1.3 1.2 1.1
Clerical & related occupations 1.5 0.8 0.2 0.2 0.2 0.4
General workers 3.7 2.8 0.9 1.5 2.3 1.4
Production/operative workers 73.1 77.8 94.4 94.8 94.8 95.9
Total 100 100 100 100 100 100

Percentage of total migrant workers in manufacturing.


Source: Calculated from unpublished returns from the Department of Statistics, Malaysia.
24 Evelyn Shyamala Devadason & Chan Wai Meng

wages (Idris and Rahmah 2006). Notwithstanding these sentiments, it is noted that
migrants do contribute to economic growth by raising the returns from other factors of
production (see Wickramasekara 2008). The subsequent discussion deliberates on the
shortcomings in the policies and laws governing the hotly debated presence of unskilled
production/operative workers migrant workers in Malaysia, which may have contributed
to anti-immigration sentiment.

Regulating and Managing Migrant Inflows


The inflows of migrants in the various economic sectors are governed by informal hiring,
followed by subsequent legalisation (Table 3). To regulate in-migration, the government
signed numerous Memoranda of Understanding (MOU) with several designated countries
(see Amarjit 2010). The first of such agreements was the landmark Medan Agreement
signed between Malaysia and Indonesia in 1984, followed by various MOUs between
Malaysia and the Philippines, Bangladesh, China, Vietnam, Pakistan and Thailand.
Following that, the private sector was permitted to set up employment agencies to
officially recruit migrant workers from the aforementioned countries. After failing to
stem the increasing inflows of undocumented migrants, the government, in 1995, put a
stop to private sector recruitment agencies and replaced them with a Task Force on
Foreign Labour. Table 3 indicates that the frequent sanctions on the importation of
migrant workers pre-1995 persisted into the post-1995 period, suggesting that the special
Task Force, likewise, failed to manage the employment of undocumented workers. The
Task Force was disbanded in 1997 and, in 2002, recruitment procedures were subject to
agreements between governments.

Table 3. Chronology of policies related to migrant workers, 1980-2011 (October)

Year Policy/regulation

1982 Formation of the Committee for the Recruitment of Foreign Workers.


1984 Medan Agreement with Indonesia for agri-plantation and domestic workers.
1985-86 Signing of the MOU between Malaysia and the Philippines for domestic
workers.
Permission given for employers to recruit workers from Bangladesh and Thailand
for the plantation and construction sectors.
1987 Legalisation of the use of Indonesian workers in the plantation sector.
1989 Regularisation programme.
Jan 1990 Freeze on labour importation from Indonesia.
1991 Formation of the Cabinet Committee on Foreign Workers.
Oct 1991 Introduction of an annual migrant-worker levy, which varies by sector and skill
category (general, semi-skilled and unskilled). Agriculture (RM360, RM540
and RM720); Construction (RM420, RM600 and RM900); Manufacturing
(RM420, RM600 and RM900); Services (RM360, RM540 and RM720).
Dec 1991 Launching of Ops Nyah I (Operation Expunge I to stop undocumented
infiltration).
Launching of Ops Nyah II (Operation Expunge II to weed out undocumented
immigrants).
(continued )
Policies and Laws Regulating Migrant Workers in Malaysia 25

Table 3. (Continued).

Year Policy/regulation

Jun 1992 Permission given for employers to recruit workers from Indonesia, Thailand,
Philippines, Bangladesh and Pakistan for manufacturing and services sectors.
Apr 1993 -Jan Ban on unskilled worker recruitment. Ban lifted for manufacturing sector. Ban re-
1994 implemented on unskilled and semi-skilled workers for all sectors.
Oct 1995 Special Task Force on Foreign Labour (the sole agency for recruitment a one-
stop agency to deal with the processing of immigrants).
Dec 1995 All levies increased by 100% except for agriculture and domestic service. It was
raised to RM1,200 for construction and manufacturing and RM720 for
services.
Jan 1996 Freeze on the importation of skilled and unskilled labour except for critical
sectors in manufacturing and recreation/tourist industries.
Apr 1996 Hari Raya Amnesty for Indonesian undocumented workers.
Aug 1996-Jan Freeze on labour importation (employers were instructed to recruit directly from
1997 the immigration detention depots) eventually cancelled the exercise due to the
lukewarm response from employers.
Mar 1997 Task Force disbanded functions taken over by the Foreign Workers Division of
the Immigration Department.
Aug 1997 Ban on new recruitment on migrant workers due to the Asian Financial Crisis.
Second regularisation exercise for undocumented migrants from Indonesia,
Thailand, the Philippines, Bangladesh and Pakistan.
Jan 1998 Annual levy per worker raised to RM1,500 for the construction, manufacturing
and services sector. It was maintained at RM360 for the plantation and
domestic services sector. Mandatory contribution to EPF (12% and 11% of
monthly wages by employers and employees, respectively).
Jul 1998 Ban on the renewal of work permits for the services sector lifted.
Oct 1998 Ban on new recruitment lifted 120,000 new work permits approved for migrant
workers in plantation and construction sectors.
Nov-Dec 1998 Freeze on the importation of migrant workers lifted.
Feb 1999 Levies are lowered for all categories (from RM1,500 to RM1,200), except
domestic workers. New hirings of mostly Indonesian workers.
Oct 1999 Recruitment of Sri Lankans in the manufacturing sector.
2001 Mandatory contribution to EPF revoked.
May 2001 Ban on intake of Bangladeshis following clashes with locals.
Oct 2001 Maximum limit of temporary work pass limited from 5 years to 3 years.
Feb 2002 Maximum work permit extended to a 3+1+1 ruling (except for domestic services).
Ban on new recruitment of Indonesian workers in all sectors, except for
domestic services.
Mar-Jul 2002 Amnesty programme.
Jul 2002 Recruitment of Cambodians in the agri-plantation, manufacturing and
construction sectors.
Jan 2003 Restrictions lifted on Indonesian workers in the manufacturing and construction
sectors.
Apr 2003 Freeze on hiring of migrant workers from SARs-related countries.
Sept 2003 Signing of MOU between Malaysia and China for workers in ceramics and
furniture.
Oct 2003 Amendment to Immigration Act 2002 higher penalty for undocumented
immigration. Mandatory whipping of up to six strokes of the cane for irregular
migrants and their employers.
Dec 2003 Signing of the MOU between Malaysia and Vietnam.
(continued )
26 Evelyn Shyamala Devadason & Chan Wai Meng

Table 3. (Continued).

Year Policy/regulation

Mar 2004 New requirement migrant workers to attend classes on Malaysian language and
culture.
Oct 2004 Undocumented workers allowed to return to Malaysia on official permits.
2005 Permission granted to migrant workers whose contracts have expired to change
employers within the same economic sector as long as their work permits are
still valid.
Mar 2005 Signing of the MOU between Malaysia and Pakistan.
Aug 2005 (i) RELA, or the Peoples Volunteer Corps given power to arrest unauthorised
migrants until mid-2009 provided opportunities for extortion.
(ii) Levies are revised: RM1,200 (RM960) for manufacturing and construction in
Peninsular (East Malaysia); RM540 for plantations; and RM1800 (RM1,440)
for non-domestic services in Peninsular (East Malaysia).
2006 (i) Ministry of Home Affairs licensed 270 outsourcing companies to recruit
mainly South Asian migrants.
(ii) Electronic Labour Exchange (ELX) created at the MOHR mandatory for
employers in plantation, construction, manufacturing and services to advertise
vacancies in the ELX before they can apply to bring in migrant workers.
Nov 2006 Signing of the MOU between Malaysia and Indonesia Malaysian employers are
asked to pay RM2,415 to a local agent while the domestic worker has to pay
their Indonesia-based agent RM1,228.
2007 New outsourcing system that does not attach workers permits to a particular
employer dilutes the control of the government.
Jul 2007 Major operation to round up an estimated 500,000 irregular migrants.
Oct 2007 Ban on the recruitment of Bangladeshi workers because of problems arising from
agents (both recruiting agencies in their home country and outsourcing
companies in Malaysia).
Jan 2008 Unskilled migrant workers will not have their work permits extended if they have
been in the country for five years or more.
2009 Freeze on the issuance of new licences for labour-outsourcing companies.
Jan 2009 Freeze on labour importation to the manufacturing sector.
Apr 2009 Cost of levy to be borne by employers, instead of workers.
Oct 2009 Protests by migrant workers that employers continued deducting wages to cover
the levy charges.
Jul 2009 Freeze on the importation of migrant workers lifted for specific industries.
Nov 2010 Compulsory medical insurance policy for migrant workers (excluding domestic
maids) effective Jan 2011 annual premium of RM120 per worker.
Jul-Aug 2011 Amnesty programme to legalise undocumented migrants under a biometric
identification system.

Source: Chin (2002), Kanapathy (2004), Scalabrini Migration Center, Asian Migration Atlas, and updated from
official publications and press releases.

Apart from the changes in the recruitment process, frequent import bans were imposed
to cut the intake of migrants, particularly during economic downturns. These measures
were generally short-lived, not lasting more than a year. Retrenchments and deportations
of legal workers following any economic downturn were often reversed soon after
employers bemoaned problems of labour shortages. For example, the Asian Financial
Crisis (AFC) in 1997 led to a temporary movement to expel unskilled and undocumented
migrant workers in August 1997 (see Horton and Mazumdar 2001; Shamsulbahriah 1998,
Policies and Laws Regulating Migrant Workers in Malaysia 27

2003). Soon after, in July 1998, migrant inflows were encouraged to arrest the decline in
foreign direct investment. Furthermore, the government had in some cases resorted to
encouraging the re-migration of undocumented workers as an immediate measure to
alleviate labour shortages. In October 2004, undocumented migrant workers who were
deported under a four-month amnesty programme were thereafter allowed to return on
official permits. Similarly, the global economic crisis in 2008 again reversed the pre-
ference towards migrants, as policy makers froze their intake in manufacturing in January
2009 amidst a rising number of company closures and job layoffs. Yet, within six months,
the government again increased the intake of migrant workers in the electrical, electronics
and textile industries, following appeals by key industry players on cancelled international
sales orders due to labour shortfalls.
Cutbacks on foreign workers are also related to changes in the sourcing countries
following misdemeanours by foreign workers. For example, the government stopped the
recruitment of Indonesian workers in 2002 after about 450 Indonesian workers at the
Hualon textile factory clashed with the police during a urine testing exercise to identify
drug addicts among the factory workers (New Straits Times, January 24, 2002). Likewise,
the government has imposed frequent bans on the import of Bangladeshi workers since
2001.
In terms of the governments approach to slowing down undocumented migrant
inflows, several amnesty programmes have been launched since 1991. However, most
have met with little success, except for the March-July 2002 programme that saw the
departure of 570,000 undocumented migrants (Kanapathy 2004; Athukorala 2006). It
appeared that shutting down legal channels for the recruitment of migrant workers were
counter-productive as the inflows of undocumented workers continued, largely abetted by
corrupt practices of agents, immigration officials, police and employers (Asian Migrant
Centre 2004). The situation worsened when the government enacted a new outsourcing
system in 2007, permitting licensed companies to recruit migrant workers. This not only
created an outsourcing industry that flourished on rent-seeking behaviour, but in turn
spawned a range of abusive practices (NEAC 2010; Amarjit 2010). The government
responded to this with a freeze on licences to outsourcing companies in 2009. Despite the
bad track record of these companies, which reflected a failure of the outsourcing or
contract system, it is surprising to note that the government institutionalized the very
system when it included provisions on contractor for labour in the latest amendment to
the Employment Act, in 2012. Though the amendment was supported by the National
Union of Plantation Workers as it was deemed more appropriate for the plantation sector,
the Malaysian Trade Unions Congress (MTUC) was not in favour of this amendment.
According to the MTUC, such a system was not necessary with the availability of short-
term employment contracts. They also argue that it contradicts the general aims of the
Cabinet Committee on Foreign Workers, which is to retain a two-party direct employment
relationship between the principal and the worker.
Likewise, an amnesty programme in July-August 2011 to legalise undocumented
workers has also received much criticism for its postponements and problems. There
was speculation about profiteering by registration agents and the unstipulated and exor-
bitant fees foreign workers were charged. There was also criticism of the confusion
created by also requiring documented workers to register. Nevertheless, the programme
resulted in 2.32 million foreigners being registered, of which 1.3 million were undocu-
mented workers.
28 Evelyn Shyamala Devadason & Chan Wai Meng

In the course of regulating the use of migrant workers across the various economic
sectors, the government also sought to deter the recruitment and retention of legal
migrants by instituting market-based measures, such as the levy system in 1991 (with
subsequent levy increases in 1995, 1998, 2005 and 2012), mandatory contributions to the
Employees Provident Fund (EPF) in 1998 and the reduction in the maximum currency of
the work permit in 2001. All policies were aimed mainly at increasing the costs of hiring
migrants. Similar to that of non-market-based measures, these policies backfired as
employers switched to hiring undocumented workers, deducting workers wages to
cover the levy charges and work permit fees and under-reporting migrant wages to reduce
their contributions to the EPF. As a result, the levies were lowered in 1999, the mandatory
contribution to the EPF was withdrawn in 2001 and the limit on the work permit was
revised from three years to five years.
The problems associated with migrant worker schemes were, however, not alleviated
with the relaxation or revision of market-based measures. The unacceptable conditions
and unfair treatment of migrant workers employed at Hytex Apparel Ltd (a Nike con-
tracted apparel factory), exposed in July 2008, clearly illustrated the continuous severity
of the breach in the code of conduct by employers as required by the law and expressed in
the source countrys MOU with Malaysia. Investigations revealed that the migrants
wages had been deducted to pay for work permits, their passports taken and withheld
by factory managers, and that they were not given a copy of their labour contracts in their
local languages (Nike 2009). The plight of the migrant workers in this factory received
global coverage mainly because of the global reach of its customers, though the infringe-
ment of migrant workers rights remains prevalent in other factories in Malaysia.
Relying on comprehensive laws that govern migrant workers is not sufficient, as these
laws need to be translated into regular practice and action at the grassroots level by
recruitment agencies, immigration officials and employers alike. The incidence of corrup-
tion needs to be brought under control especially in the recruitment, placement and return
of migrant workers, whilst greed and inhumanity at the workplace needs to be checked to
ensure the proper treatment of migrant workers.
It appears that the core problem is the weak governance structure and lack of transpar-
ency and consistency, associated with the rise of corrupt and exploitative practices (see
Hugo 2009). The chaotic management of migrant workers follows from the lack of co-
operation and accountability of the various stakeholders pursuing their own vested inter-
ests and, finally, the conflicting views over labour market needs. Effective management
requires clear policies, beginning with recruitment, placement and finally returns to the
homeland (if necessary, return migration). The placement and monitoring of migrant
workers at the workplace seems to be a neglected issue. The following section details
the shortcomings of specific laws related to work and provision of basic rights for migrant
workers.

Laws Governing Migrant Workers


In Malaysia, it may be that immigrant inflows do not just cause shifts in labour supply, but
also make supply more elastic. In short, the supply of cheap unskilled migrant workers
may in fact erode the bargaining power of their domestic counterparts. There is anecdotal
evidence of this nature, with a wage gap identified between unskilled immigrants and their
local counterparts (Ruppert 1999). It is difficult to comment conclusively on this matter.
Policies and Laws Regulating Migrant Workers in Malaysia 29

However, the ad hoc management of migrant workers that allows for abuse by various
stakeholders provides clear indications that unskilled migrant workers have indeed
become a cheaper option for employers.
Beyond government policy, the role of unions is important in ensuring adequate
protection of migrant workers. Traditionally, trade unions in Malaysia have not played
an active role in the protection of migrant workers. There are several reasons for this.
First, under their contracts, many migrant workers are prevented from joining unions.
Therefore, their interests remain unrepresented and unprotected, and this further under-
mines the growth of unions. Second, the union, basically the MTUC, has been resistant
to the inflow of unskilled migrant workers in the belief that they compete with the local
counterparts for jobs and further undermine their working conditions. This meant that
the union has prioritised its concerns of local workers mainly vis--vis migrants. This
has changed as the MTUC came under pressure from the International Labour
Organisation, civil society activists and trade unionists from source countries (Elias
2008, 2010). Change in the MTUCs leadership in late 2004 saw a realisation that
increasing standards for migrant workers will also result in better standards for local
workers.
Since 2005, the MTUC has been actively bringing the complexity of problems for
migrant workers into the public domain, seeking policy improvements. This proactive and
inclusive approach has more recently exposed many of the abusive practices faced by
migrant workers. Table 4 lists some of the abuses towards migrant workers, akin to that of
bonded or forced labour, as expounded by various human rights activists, unionists
and non-governmental organisations (NGOs).
Based on Table 4, there are some provisions outlined in labour laws with inherent
biases against migrant workers, which are worth noting.5 The minimum benefits of
employment for migrant workers are basically found in the Employment Act 1955, the
Labour Ordinance of Sabah and the Labour Ordinance of Sarawak. The provisions
which are relevant to migrant workers are similar in all three statutes. In the event of
redundancy, the employer may terminate the employment of a local worker only after it
has first terminated the employment of all migrant workers employed in a similar
capacity as that of the local worker. The law provides that the employer cannot terminate
the employment of a local worker for the purpose of employing a migrant worker. This
provision was added on August 1, 1998 when Malaysia was in the midst of the AFC,
purportedly to protect Malaysian citizens against unemployment. The inclusion of this
provision, however, appears to be only a minor setback for migrants, relative to some
other rights which were earlier conferred on them but subsequently removed. One such
right pertains to the compulsory savings scheme for workers, which was established
under the EPF Act in 1991. The EPF scheme is not compulsory for migrant workers, but
if the worker chooses to contribute, he/she may do so at the minimum rate of 11% of
wages. The rate of the employers contribution depends on when the worker elects to
contribute to the EPF. If the worker elected to do so before August 1, 1998, the employer
is required to contribute a rate which is similar to that for a local worker, at 12% of the
wages. Conversely, if the foreign worker elected after that date, the employers minimum
contribution is fixed at only RM5 per month. Thus, to a migrant worker, the EPF is a
forced savings scheme. Further, unlike that for a Malaysian, the funds can be withdrawn
only upon death, in the event of mental or physical incapacitation or upon return to their
homeland.
30 Evelyn Shyamala Devadason & Chan Wai Meng

Table 4. Summary of abuses of foreign workers

Abuses and restrictions

Absence of employment contracts or contracts that are not honoured, given that the terms and
conditions become less favourable compared to those that were agreed upon before their
departure from their homeland.
Outsourcing system that denies workers the benefits of collective bargaining agreements, given that
the terms are agreed upon between recruitment agents and employers.
Discouraged from joining unions by unscrupulous employers (violation of the Trade Union Act,
1959). In practical terms, the Ministry of Home Affairs has set an absolute prohibition on migrant
workers from joining any sort of association.
Discouraged from contributing to the EPF as the employer merely contributes RM5 per worker
instead of the rate applicable for a local worker. Further, a foreign worker is not allowed to make a
nomination under the Employees Provident Fund Act 1991.
Inferior benefits accorded under the Workmens Compensation Act 1952 that is applicable to foreign
workers relative to the protection of local workers under the SOCSO scheme.
Non-payment of wages and unfair dismissal.
Wrongful deduction of wages to cover the cost of the work permits (though it has been mandated in
April 2009 that employers have to bear the cost).
Substandard living conditions and lack of workplace protection against industrial injuries.
Workers not insured (violation of the Workmens Compensation Act 1952) and insurance
compensation not meted out in the case of occupational injuries.
Employers who do not renew their permits, leaving migrants to lose their legal status.
Passports withheld by employers and recruiting agents, leaving them vulnerable to arrest, ill-
treatment and extortion by police (violation of the Passport Act 1964).
Loss of status as documented workers when their rights are violated and they are waiting for their
matters to be resolved by the Labour Department or Industrial Relations Department (or even the
Labour Court). At present, a 3-month special pass is issued by the Immigration Department at
RM100 per month which forbids them to work.
Some outsourcing companies recruit, transport and receive workers through fraud and deception
(e.g. jobs that do not exist; different economic sectors; different destination of work) mainly to
exploit them, resulting in migrant workers becoming victims of trafficking in persons (violation of
the Anti-Trafficking in Persons Act 2007). The Malaysian border police and immigration
authorities are said to be directly involved in trafficking.

Source: Compiled by the authors from press releases.

Greater disparities in the treatment of migrants under labour regulations relate to


occupational health and safety. There are two schemes established by legislation to protect
injured workers and their dependants. They are the Social Security Organisation (SOCSO)
scheme under the Employees Social Security Act of 1969; and the compulsory insurance
scheme under the Workmens Compensation Act of 1952. From September 1, 1993, the
SOCSO scheme was limited to local workers whilst migrant workers are covered under
the 1952 Act. The maximum amount of contribution by the employer for each of its local
workers under SOCSO is RM51.65 per month, whereas the employer pays a premium of
only RM72 per annum towards the insurance policy covering each migrant worker. The
lower premium under the 1952 Act translates to lower benefits for injured migrant
workers. For example, the injured local worker is entitled to free treatment at a SOCSO
panel clinic or at any government hospital or clinic and the medical bill is settled by
SOCSO. Under the scheme for migrant workers, however, the employer is required to pay
for the workers medical and rehabilitation expenses. This is open to abuse as the
Policies and Laws Regulating Migrant Workers in Malaysia 31

employer may not provide the injured worker with proper medical treatment. Further, the
employer may not settle the medical bills. This problem is quite real, for in 2010, there
were RM18 million in public hospital bills that have been incurred and not settled by
employers (The Star, November 25, 2010). In addition, a local injured worker who has
been certified by a doctor to be unfit for work for at least four days is entitled to temporary
disability benefit equivalent to 80% of the daily wage between RM10 and RM78.67 per
day. This entitlement is for a maximum period of 5 years. Foreign workers are entitled
only to a bi-monthly payment of one-third of monthly wages or RM165, whichever is
lower. The maximum amount of compensation payable to a migrant worker is only
slightly higher than the minimum entitlement of a local injured worker (RM10 per day).
Finally, if local workers suffer permanent total disability, they are entitled to 90% of daily
wages, subject to a minimum of RM10 and a maximum of RM88.50. If a migrant worker
becomes permanently disabled, he is entitled only to a one-off compensation capped at
RM23,000, depending on the age of the worker.6
Apart from the observed differences in the compensation for migrant and local workers,
SOCSO also covers a local worker who is employed in any of the industries detailed in
the Act. It is immaterial if that worker is registered with SOCSO at the time of the
accident or is registered but failed to contribute, as SOCSO will pay the compensation due
to the worker. An injured migrant worker, however, must claim compensation from the
employer; to ensure that the injured worker is duly paid, the employer is required to insure
under the Act. Thus, the injured migrant worker may not receive any compensation if
there is no valid insurance. Unlike the SOCSO scheme, there is basically no assurance that
the injured migrant worker is compensated for injuries under the Workmens
Compensation Act of 1954.
The provisions under the governing Acts, as discussed above, discriminate against
migrants. A 2010 announcement by the government requiring employers to buy hospita-
lisation insurance coverage for migrant workers effective from January 1, 2011 offers
some positive news (The Star, November 25, 2010). This mandate, though it ostensibly
benefits migrant workers, is implemented mainly because of the unsettled public hospital
bills mentioned above. It is therefore not surprising to note that the compulsory insurance
coverage was announced, not by the Human Resource Minister, but by the Health
Minister. The government appears more concerned with the unpaid bills than the welfare
of the migrant workers. This is affirmed by the directive from the Health Ministry to
insurers to stop offering personal accident policies together with the hospitalisation
policies. Personal accident policies are packaged for the benefit of workers and the
removal of such policies tantamount to a reduction in benefits conferred upon them.
Furthermore, the premium on the new hospitalisation insurance coverage scheme is higher
relative to the previous hospitalisation and personal accident schemes offered by indivi-
dual insurers (The Sun, November 14, 2011). This raises the issue of profiteering by the
insurers rather than benefiting the migrant workers.
Finally, it is worth noting that there has been a serious lack of policies addressing the
specific needs of women migrant workers (Elias 2008, 2010). Gender sensitive policies
for migrant workers are essential in light of the incidences of violation of human rights
and, in the worst case, violence at the workplace. In this sense, the inclusion of some
additional clauses related to sexual harassment in the amended Employment Act is a
positive step. However, piecemeal amendments to the Employment Act to deal with
sexual harassment remain inadequate in terms of coverage, as working relationships
32 Evelyn Shyamala Devadason & Chan Wai Meng

based on contract and sub-contract (which largely involves women workers) are ignored
in the definition.
The domestic services sector in particular requires specific attention as the Employment
Act excludes domestic workers from key labour protections, such as weekly limits on
hours of work. The vulnerability of women migrant domestic workers is further accen-
tuated as some employers foster a dependency of these workers by limiting their contact
with the outside world and confiscating their passports. The new pact between Malaysia
and Indonesia, which ends the 2009 ban on sending Indonesian domestic helpers to
Malaysia effective in December 2011, provides for domestic workers to keep their pass-
ports and guarantees them one day off per week. However, it fails to provide safeguards
linked to low wages and high recruitment fees as it ignores the issue of minimum wages
and continues to allow the repayment of recruitment fees by the workers.
From the abusive practices related to terms and conditions of work, the observed
differences in the provisions for migrants and local workers and the lack of gender-
sensitive policies, it is clear that basic rights, equal treatment and equal labour standards
remain out of reach for migrants in the Malaysian context.

Conclusion: The Policy Challenges Ahead


The Malaysian case is a classic case of the failure of decentralisation in the recruitment
and placement of migrant workers, further exacerbated by the lack of enforcement of
existing regulations by various stakeholders. In this respect, the government needs to
improve upon monitoring and regulatory procedures in managing migrant workers beyond
recruitment, importantly of the workplace of migrants, to ensure that employers meet their
statutory obligations. For example, though Malaysia is party to the Labour Inspection
Convention, inspections in the manufacturing sector are noted to have declined by 45%
from 2006 to 2007 and by 78% from 2007 to 2008 (Amnesty International 2010). Regular
inspection is needed to ensure that the welfare of migrant workers is taken care of by their
prospective employers. Particularly, these inspections are needed to ensure that the terms
and conditions of work (pay, working hours, days-off) are honoured by employers and
their safety and health conditions are maintained in the workplace.
Furthermore, several regulations and labour laws need to be tightened to avoid abuses
by errant police and immigration officials, outsourcing companies and employers. Some
of which have already been announced but have yet to be implemented, whilst others are
under consideration. At least three main policy contexts for regulating migrant inflows
through the price effect (labour cost encompassing wages, non-wages and other intan-
gible benefits) need to be considered.
First, some of the provisions outlined in the specified Acts/Regulations that are applic-
able to migrants need to be reviewed to ensure their equal protection as compared to their
local counterparts. Of importance are the compensations meted out under the Workmens
Compensation Act 1952. The compensation packages offered to foreigners in the event of
occupational/workplace injuries and disabilities need to be improved as the payment is
much too low in comparison with the SOCSO plan for local workers. In addition to
inadequate or precarious access to social security benefits, problems such as low wages,
unlawful deduction of wages, long working hours and poor accommodation also need to
be dealt with. Equal treatment of migrants with that of local workers will tax away any
undesirable cost-saving gains borne by employers.
Policies and Laws Regulating Migrant Workers in Malaysia 33

Related to this, the government should reconsider the amendment to the Employment
Act which proposes to confer legal recognition on contractors for labour. The proposed
legislation may be counter-productive to the policies implemented thus far to reduce
Malaysias dependence on migrant workers and to accord migrant workers equal rights
and protection as local workers. With contractors for labour having a role in the supply of
labour to businesses, the bargaining power of workers generally for better working
conditions and benefits will at the very least be considerably weakened. Sectors with
restrictions on the employment of migrant workers will outsource jobs to the contractors
for labour, thus depriving locals from employment. Eventually, the contractors for labour
may monopolise the supply of labour, particularly in the unskilled segments.
Secondly, the 2012 revised levy system still needs to be reconsidered as it continues to
suffer from several shortcomings. In the case of manufacturing, an annual levy of
RM1,250 is imposed on a migrant worker. A blanket levy for manufacturing is not
feasible given that the dependency on migrant workers varies considerably across indus-
tries. The levy on migrant workers should be lower for industries within manufacturing
that face critical labour shortages, to avoid the imposition of unfair adjustment costs
across industries. The new levy structure should, therefore, be redesigned based on
differential industrial levies and according to workers skill levels.
The third policy issue is minimum wages.7 The MTUC pressured the government to
introduce a minimum wage of RM900 plus a cost-of-living allowance of RM300 to attract
local workers and reduce the dependence on migrant workers. The minimum wage
campaign, covering all workers including migrants, was initially started by the MTUC
in 1996. Having no success, this initial campaign was followed by nationwide pickets in
2007, and gained further attention in 2008, when the government gave indications that the
proposal would be considered. Towards this end, the National Wages Consultative
Council Act 2011 was promulgated and, after many consultations, the Minimum Wages
Order 2012 was gazetted. According to the Order, the minimum monthly wage of a
full-time worker in Peninsular Malaysia is RM900 and RM800 for a full-time worker in
Sabah, Sarawak and Labuan. The minimum wage, which took effect on January 1, 2013,
applies across the board, without consideration for the skill of the worker or sector of
employment. Concurrent with introduction of the minimum wage policy, the government
has taken a counterproductive stand on the levy system. Effective January 30, 2013, the
Malaysian government has provided for employers to recover the payment of the levy
made on migrant workers through deduction of workers wages.
The challenge for the government is to identify the appropriate rate for minimum wages
as corresponds to the basic wage of a semi-skilled worker, lest displacement of jobs poses
a greater problem as higher wages relative to neighbouring countries attract more
migrants. The argument that a minimum wage will reduce the dependency on migrant
workers is contested for the following reasons. First, the flow of migrant workers may
increase unless transaction costs (such as work permits and levies are increased suffi-
ciently to render them unattractive). Second, local workers may still not be willing to
undertake dirty, difficult and dangerous jobs and, even if they do, productivity with
minimum wages becomes another concern. Third, the problem of non-compliance and
abuse has plagued in-migration and may worsen as unscrupulous employers resort to
undocumented workers to undercut competitors. Employers in the manufacturing sector
remain divided on this policy (The Star, April 26, 2010).
34 Evelyn Shyamala Devadason & Chan Wai Meng

Amidst the challenges that prevail, the immediate focus of any policy action should be
on the various stakeholders of in-migration instead of on the migrants alone. With proper
enforcement and regular inspection, for example, the policy makers can, at the very least,
ensure that, in terms of wages and working conditions, migrant workers are accorded
equal treatment as local workers and, therefore, do not become a desirable option for
employers based on ability to exploit migrant workers. More importantly, policy makers
should also recognise that with regulation and management, migrant workers are an
economic asset. In short, underlying all of this is the role of migrant workers in the
various sectors of the Malaysian economy that needs to be critically redefined, and their
contribution to economic welfare broadly understood, to maximise the benefits of tem-
porary migration and reduce exploitation.

Notes
1
It should be borne in mind at this stage that undocumented (undocumented or irregular anyone who does not
hold a proper travel document or valid visa to work in the country, including refugees, asylum seekers and
trafficked persons) migrants constitute an important part of the migration stream, comprising approximately
40% of the total number of migrant workers in Malaysia.
2
The Employment Act covers a person who is employed to do manual labour (semi-skilled or unskilled
worker). It does not differentiate between the nationalities of the workers. Migrant workers, who come under
this Act, are supposed to be accorded similar rights in wages, leave, working hours and layoff notice as that of
locals.
3
Contract workers are not given the same provisions as expatriates, such as to stay on upon completion of their
tenure and to be accompanied by their respective family members (dependants) while working in Malaysia.
4
Their willingness to work overtime specifically provides management flexibility, as needed by most employers
in modern manufacturing.
5
The laws of Malaysia do not discriminate against migrant workers, in practice, but the rights of migrant
workers are not fully protected. This gap between policy and practice is widely acknowledged in the current
discourse on international migration (Wickramasekara 2008).
6
If the migrant worker has reached 18 years of age, he/she will receive a lump sum of 60 months of wages. For
a worker between 16 and 18 years, entitlement is 84 months and for a worker below 16 years old, the
entitlement is 108 months.
7
The Wage Council Act of 1947 authorises the Ministry of Human Resource to gazette minimum wages for
jobs where it is deemed appropriate. The Act was repealed by the National Consultative Council Act 2011
which came into force on September 23, 2011.

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