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December 1995, Volume 2, Number 12

Malaysia Issues Guidelines on Foreign Workers

The Cabinet Committee on Foreign Workers has completed its proposed law on the recruitment and protection of foreign workers and it has been finalized by the Attorney General. The new guidelines are expected to permit local employers to undertake direct recruitment of foreign workers in Thailand, Bangladesh, Indonesia, the Philippines and Pakistan.

The Malaysian government doubled the levy on foreign workers effective January 1996. The increase in levies--aimed at encouraging Malaysian employers to reduce their dependence on foreign workers-- is expected to generate an additional M$ 215 million--some M$300 million in levies was collected between September 1992 and December 1993. Employers must pay a monthly levy for all foreign workers; the levy ranges from M$100 PTKs to M$200 senior management to M$35 for an unskilled manufacturing and construction workers. The monthly levy on foreign maids is M$30, and for agricultural workers, the levy ranges from M$25 to M$60.

There were 553,658 registered foreign workers in the country in 1995, of whom 252,877 were Indonesians, 82,796 Bangladeshis, 26,602 Filipinos, and 21,965 Thais. However, the number of illegal workers is widely believed to exceed the number of registered workers, bringing the total to over one million.

In June 1995, there were about 81,000 foreign maids in Malaysia, 125,000 foreign farm workers, 123,000 foreign construction workers, 45,000 foreign manufacturing workers, and 10,000 foreigners in other sectors.

The Malaysian Labor Minister warned employers in mid-October that they would not be allowed to recruit foreign workers until after they had made honest efforts to find local workers. The minister urged employers to raise wages, and to establish workplace nurseries, to attract Malaysian women workers.

The Labor Minister said on September 24 that foreign workers are not allowed to join unions because they are living in the country on the temporary basis. He also added that there are sufficient labor laws to protect them from exploitation. He added that if foreign workers were permitted to join unions it might make local workers unhappy.

The Malaysian Electrical Industry Workers Union and the Malaysian Trade Union Congress have said that the immigration department is breaking trade union laws by not allowing foreign workers to join unions.

It has been reported that thousands of Bangladeshis are trying to register themselves to work in Malaysia following a report that the Bangladesh government will punish those who illegally look for work in Malaysia.

Indonesia, which has over 500,000 workers in Malaysia, has announced that in the future it will only allow skilled workers in agriculture, industries, construction, services and transport to work in Malaysia. The two countries have still not signed an agreement on the new procedures for the recruitment of Indonesian workers in Malaysia. The signing of an agreement has been delayed due to an Indonesian demand that maids be paid a minimum wage of M$1,800.

The Sabah state government announced that it is considering an amnesty for the more than 500,000 illegal immigrants in Sabah. Under the proposal, illegal foreign workers would be offered work permits.

Malaysia is in the midst of a debate over whether the unskilled foreign workers who increasingly staff its plantations, construction sites, factories, and homes are an asset or liability. On the one hand, it is clear that the foreigners find jobs, earn incomes, and spend much of what they earn, both on local goods, on transport, banking, and other services, and some of their remittances are spent on imported Malaysian goods.

On the other hand, it is also clear that most of the foreign workers in Malaysia are unskilled workers, and that Malaysia's goal of being an industrialized country by 2020 may be threatened if the presence of many unskilled workers keeps the country on a low-skill, low-tech trajectory.

P. Ramasamy, " Foreign labour: Asset or liability?," The Straits Times (Singapore), November 27, 1995; "Levy hike set to add M$ 215 m to coffers," Business Times, November 7, 1995. Hamisah Hamid, "Higher Levy Reduces Nation's Attractiveness," Business Times, November 2, 1995. Hamisah Hamid, "Employers to Woo Working-Age Mothers," Business Times, October 30, 1995. "Harsher fines for employing illegals," Straits Times (Singapore), October 27, 1995. "Malaysia to Raise Foreign Worker Levy by 100PCT," Reuters, October 27, 1995. "Amnesty call for illegal immigrants in Malaysia's Sabah state ," Deutsche Presse-Agentur, October 12, 1995. "No need for foreign workers to join unions, says minister," The Straits times (Singapore), September 25 1995; Lokman Mansor, "Guidelines on Hiring Foreigners Ready," Business Times, September 22, 1995. "Indonesia to export only skilled workers to Malaysia," The Straits Times (Singapore), September 14, 1995.