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Foreign labor in Malaysia has been recently estimated to range between 2 million to
4 million people and their regional distribution is highly imbalanced, in favor of
Peninsular Malaysia. Recent figures show that there are about 1.8 million registered
or regular foreign workers, and the rest (about one million to two million) are
unregistered (undocumented or irregular) workers. In 2011, about 82 percent of
foreigners were in the Peninsula, and the rest were in Sabah/Labuan and Sarawak.
Foreign workers come to Malaysia mainly from Indonesia, Nepal and Bangladesh;
but in more recent years additional workers from Myanmar and Cambodia have been
arriving in larger numbers. Other countries where workers come from are the
Philippines, India, Vietnam, Pakistan, Thailand, China, and Sri Lanka but their total
numbers are low compared to the other leading groups. The large inflow of foreign
workers into Sabah and Sarawak from neighboring countries is largely due to
political and economic factors in their own countries. Sabahs proximity with the
Southern Philippine islands accounts for the concentration of Filipino foreign workers
in Sabah as opposed to the rest of the country. The shared borders between
Sarawak and Kalimantan in Indonesia continue to facilitate the inflow of many
irregular foreign workers as well as cross- border workers who commute to work
daily.
The utilization of foreign labor in Sabah and Sarawak differs in important respects
from the Peninsula. For instance, in the Peninsula the largest numbers of foreigners
are employed in the manufacturing sector; in Sabah and Sarawak, the plantation
sector takes the lead. In recent years, foreign workers in Sabah have begun to make
inroads into petty trading, domestic services, transportation, construction, and
renovation works. There are some skilled foreign workers in Sabah and Sarawak as
well, but they are generally medical officers, teaching professionals, and expatriates
attached to the larger corporations. Skilled labor in the Peninsula, though small in
proportion to the foreign labor force, is also growing in the skilled services subsectors.
Although the reliance on foreign workers began in the 1970s and through the 1980s
to support Malaysias growth strategy, formal guidelines pertaining to their
employment were only introduced in early 1990s. The official policy stance of the
Government was to permit foreign workers as an interim solution to meet demands
for low- skilled labor in certain sectors of the economy. The Government supported
immigration as part of its high growth strategy while it pursued a longer-term strategy
to upgrade the economy and expand the supply of skilled labor. As a result, the labor
market welcomed immigrants, especially in plantations, construction sector and
domestic employment. In the late 1980s, demand for low skilled foreign workers in
labor- intensive manufacturing sub-sectors (namely electronics, textiles, nonmetallic, and mineral industries) grew. But concerns were raised about foreign
workers employment in the manufacturing sector, since the view was that local labor
is available and could be attracted to the sector.
The main determinants of the continuing inflow of foreigners are a combination of
economic, socio- cultural, and external political factors. Rapid industrialization,
urbanization, strong economic growth (above five percent in the last two decades),
and a relatively small population base created a situation of relatively high
employment and tight labor markets. Movement of people to urban areas led to
acute labor shortages in rural areas and the plantation sectors. Also, Malaysians
rapidly increased their education levels and rejected jobs in agriculture and
construction in favor of formal and better-remunerated employment in the public and
private sectors. Higher educated women joined the labor force and needed the
services of domestic household workers. Political instability in neighboring countries
also created an incentive for people to come to Malaysia as asylum seekers, regular
or irregular workers. Lastly, comparatively slower growth in neighboring countries,
including low wages and high unemployment, makes Malaysia an appealing
destination labor market.
EFFECT OF IMMIGRATION ON THE MALAYSIAN ECONOMY AND SOCIETY
The goal of the analysis undertaken in this part of the report is to identify how
immigration affects various labor market outcomes for Malaysian workers as well as
the productivity of firms in the Malaysian economy, and society as a whole. At the
household level, the analysis focuses on impacts
on employment levels and wages, since these outcomes are directly affected by
immigration. At the firm level, the analysis focuses on estimating the effect of
immigration on firm productivity; the firm level analysis gives some indication of
whether immigration deters technological advancement in Malaysia or not. Social
outcomes are measured through the incidence of criminal activity in the country. This
social dimension is very relevant to Malaysia not only because of the costs crime
imposes to the economy but also because crime rates have been increasing over
time, in parallel to immigration rates, and anecdotal evidence in the country points to
the increasing presence of immigrants as primary culprits.
General economic outcomes, such as economic growth or poverty reduction, are
influenced by many other forces which make direct inference much more
problematic. The focus of the analysis of this report is on: labor market outcomes of
Malaysian workers, firm productivity, and social costs imposed by immigrants. These
three areas of analysis are the most policy relevant given how much attention they
are given by Malaysians, the press and by policymakers.
Impact of foreign labor in Malaysia
There are several factors as a result of the influx of illegal immigrants into the
country. This situation would be worse if not addressed carefully. This paper outlines
the four main causes of the destruction of the state if it is not controlled properly, ie:
(i) political/security threat; (ii) job opportunities; (iii) cultural threat and contribution;
and (iv) social or economic burden.
Political/Security Threat
There are various possibilities why Malaysia to be a premier destination for
immigrants come to Malaysia. The key factor is the political factor Malaysia itself.
Politically stable and peaceful clear signal for immigrants come to Malaysia which
safe for them to stay. If politics is in an unsafe condition certainly illegal immigrants
not come to Malaysia. Although Malaysia has a diversity of political views that form
the basis of national interest in peaceful government, despite political differences.
For examples, in Indonesia and Thailand, factors that causing political instability in
the country and cause their people to go out and become illegal immigrants to other
whose incomes will rise. Consumers who buy goods and services produced by
immigrant labor also benefit. The losers may be less-skilled domestic workers who
compete with immigrants and whose wages will fall.
The evidence points to the conclusion that immigration has had a relatively small
adverse impact on the wage and employment opportunities of competing native
groups. This effect does not appear to be concentrated in the local areas where
immigrants live, but instead is dispersed across the Malaysia. This dispersal comes
about in part because competing native workers migrate out of the areas to which
immigrants move.