A higher levy is vital to compel employers to break away from a low-cost mentality and move towards a transition to a higher value economy, writes Ronald Benjamin.
MCA deputy president Dr Wee Ka Siong recently suggested a return to the RM1,850 levy previously imposed on foreign workers.
This is in contrast to Pakatan Harapan government’s imposition of a levy of RM10,000 on employers of skilled foreign workers who have already stayed ten years and now want a three-year renewal.
Mindset stuck in old way of thinking
Wee’s suggestion reveals a mindset that is stuck in a low-cost model. He assumes that a high levy would encourage employers to send back their skilled foreign workers and rehire them later. This, he probably feels, makes the current policy toothless and unfriendly to business interests unlike the previous policies of the Barisan Nasional government.
Finance Minister Lim Guan Eng has mentioned that the new levy rate would bring in a tax income of RM1bn for the government – but Wee claims this would be at the expense of small and medium-sized enterprises.
Business friendly does not mean nation friendly
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Wee has apparently taken a simplistic and narrow view of this new policy. It is not surprising that the MCA deputy president seems to hold on to an old school of thought that takes cost as a single factor.
Such an assertion is flawed because if an employer believes that a particular foreign worker is skilful and able to increase productivity (even though the ten-year duration should have been used as transition gap to trained local workers), why is it difficult to pay a rate of RM10, 000 for these workers?
Is this not the tired narrative of wanting cheap skill labourers who work long hours without having to take care of their social security?
When would there be a transition towards a higher value chain if we continue to depend on lowly paid foreign workers while depriving Malaysians the opportunity to move up the value chain?
We need policies that are nation friendly instead of narrowly business friendly, which only serve corporate interests besides being out of touch with new technological advancement that requires a fundamental shift in perspective.
Small and medium-sized enterprises must work on a transition mechanism to move up to higher-value chain instead of forever being stuck in the narrow business friendly argument that mires them in a low-cost environment at the expense of innovation and workers’ development .
Analysis by Bank Negara
According to a Bank Negara analysis (March 2018), under a heading about low- skilled foreign workers creating a distortion in the economy, Malaysia would benefit from a clear shift in the economy.
We need to move from a model that is input-based and dependent on cost suppression as a source of competitive strength to one that competes on the quality of its workforce, technical skills and product offerings.
Transition requires a new culture
In a transition to a higher-value economy, we need to have a process, timeframe, and milestones of achievement. We must also build a new culture to support such a transition. In the current global economic context, progressive nations have made the transition towards a higher value chain in automation, digitalisation, and knowledge creation. Research and development, innovation and productivity are the key elements in the competition stakes.
Wee’s argument to go back to the previous model of low-cost labour is therefore not only flawed but regressive in nature. If this is done, Malaysia will continue to be stuck in the middle-income trap and retard the growth of a new culture that would propel the nation forward towards a higher-value chain in automation, digitalisation, innovation and knowledge creation.
This is the reason Human Resources Minister M Kula Segaran has been promoting vocational and technological training as the way to prepare the nation for the fourth industrial revolution.
The RM10,000 levy is vital to compel employers to break away from a low-cost mentality and move towards a transition. The issues at stake go beyond the cost of the levy.