Migrant workers-fuelled economy: The real problem

To the government, importing migrant workers is not so much to support local businesses as it is a business in itself, says Steven Sim.

No, I am not referring to how migrant workers contribute to building our economy, though this should be a matter of study on its own.

Rather, I want to construct a picture of how much money is involved in the lucrative business of importing migrant workers into our country and hence the real problem with the government’s migrant workers policy.

In brief, the reason for the exodus of migrant workers into Malaysia – 2.1m registered ones and another 2-3m unregistered ones with an additional 1.5 million from Bangladesh coming in – is because someone is making money from what I call “migrant workers business”, the business of importing migrant workers into Malaysia.

Here, I attempt to survey the industry and give a rough overview of who are the key players and how much money is involved.

While there are many smaller agencies acting as middlemen and service providers, five major players dominate this lucrative industry.

Government raking in billions of ringgit from migrant workers business

The first major player is the government of Malaysia. With levies ranging from RM410 to RM1,850 annually, it is estimated that the government will be able to collect from anywhere between RM861m to RM1.8bn annually.

This year, the levy will double and Deputy Prime Minister-cum-Home Minister Zahid Hamidi already announced that government’s revenue from the levy will hit RM2.5bn with the new increase.

On top of that, there is a processing fee of RM125 and permit fee of RM60. With these, we are looking at about RM400m, minus visa charges which vary according to the workers’ country of origin. If we take the lowest visa charges at RM13 (for Vietnamese nationals), that will be RM27.3m in total.

As such, being in this migrant workers business brings the federal government about RM2bn in revenue annually and with the levy increase, this is expected to rise to RM3bn.

The Big Four of the migrant workers business

Secondly, there are at least four private companies which have major roles in the business of importing migrant workers. They are NERS Sdn Bhd, MyEg Sdn Bhd, Synerflux Sdn Bhd and Fomema Sdn Bhd.

The first three companies have roles which are often conflicted.

NERS, for example, was awarded a 12-year contract in 2011 to record, monitor the immigration of foreigners to Malaysia as well as to issue the Visit Pass (Temporary Employment) (PLKS). For each PLKS issued, the government will pay NERS RM50. According to the Federal Estimates (i.e. federal budget), the home ministry (immigration department) has to pay NERS the following amounts:

This means, the company will receive an average of RM90m a year from the government between 2013 and 2016. This will go on until 2023.

And then in January 2015, the federal government announced that MyEG was awarded a contract as the sole agent to renew PLKS for migrant workers. For their service, MyEG will collect RM35 from the government for each transaction done. This means the company can potentially draw a revenue of about RM74m a year for doing what NERS was originally paid to do: issuing PLKS.

On top of that, MyEG is expected to pocket nearly RM300m in processing fees before remitting them to the immigration department.

Almost immediately after the appointment, MyEG was investigated by the Malaysia Competition Commission (MyCC) for anti-competition behaviour in relation to the PLKS renewal contract. However, before the end of the investigation by MyCC, MyEG was again awarded a new contract by the federal government: this time to register undocumented foreign workers. Although the exercise only started recently, the contract was awarded way back in September last year.

The MyCC investigation was only completed on 6 October 2015, a month after the new contract was given, and MyEG was found guilty under Section 10 of the Competition Act 2010.

According to one estimate, a conservative assumption of an additional 1m unregistered migrant workers using MyEG’s service will “boost the company’s revenue by RM100m annually or RM47m in net profit”.

However, from MyEG’s website, it was stated that applicants have to pay RM1,134.52 for each registration of undocumented migrant workers. Thus, with a conservative projection of 1m registrations, MyEG is set to rake in RM1.1bn from the exercise.

A third company is set to come into the scene of this lucrative migrant workers business. In a parliamentary reply in October 2015, the Home Minister revealed that Synerflux Sdn Bhd, a company allegedly owned by former home minister Azmi Khalid, will be appointed to manage the incoming 1.5m Bangladeshi workers.

The Home Minister later said that Synerflux was only shortlisted but not yet appointed. Bangladeshi media however reported warnings from the country’s High Commission in KL to Dhaka against the “online system supervised by a [Malaysian] company…” with the media report naming Synerflux as the said company.

We do not know its fees structure as yet, but based on the two companies above, we can estimate that the potential revenue for this third company will be at minimum in the region of RM50-100m per annum. It is also highly possible that the company will take advantage of its monopolistic position and impose a high processing fee of up to RM1,000 per migrant worker. We are looking at potential revenue of RM1.5bn.

The fourth private company with a major stake in this migrant workers business is Fomema Sdn Bhd. Previously known as the Foreign Workers’ Medical Examination Monitoring Agency (Fomema), it was set up in 1996 as part of the government’s programme to ensure independent and credible health screening of incoming migrant workers. However, the agency was later privatised and is now owned by Unitab Sdn Bhd. The company screens 1.2m migrant workers every year. Each screening is charged RM180 and RM190 for males and females respectively. This brings Fomema’s income to about RM216m annually.

Hence, just amongst the Big Four, importing migrant workers is already a whopping RM3bn-business.

The Big Four are profiting merely by being officially appointed middlemen

As mentioned in the beginning, there are many smaller agencies and service providers in this multi-billion ringgit industry but the above four companies are the biggest private sector players, each having the juiciest pieces cut out for them by the federal government.

All four companies were or will be awarded their respective contracts via direct negotiation. At least three of them have direct connection to Umno leaders.

It is obvious that NERS, MyEG and Synerflux are being paid big money for almost duplicating each other’s jobs. Why are these companies allowed to pocket hundreds of millions for doing essentially the same thing which one entity can sufficiently do? If the government is already paying hundreds of millions to NERS, for example, to issue PLKS, why should MyEG be given another hundreds of millions to do the renewal when NERS can be tasked to do the same thing?

Or why should these companies even be appointed as mega middlemen to earn easy money when the immigration department itself can actually perform the tasks.

In fact, during the April 2015 parliament sitting, former deputy home minister Wan Junaidi Tuanku Jaafar pledged that the government would set up an agency under the Modernisation and Management Planning Unit (Mampu) to manage foreign workers permit.

As it is, the immigration department is already providing online application services including for professional visit pass (PVP), foreign maids, student pass, residence pass and others.

Hence, the Big Four are making money off services which government departments should and can easily provide. This is classic rent-seeking at its best.

Migrant workers: A means or an end?

I believe no thinking person will say that Malaysia does not need migrant workers. Malaysia must position itself to tap into global human resources and talents, which includes low or semi-skilled workers.

However it is clear that our current situation is not right. The intake of migrant workers is disorganised, haphazard, random and senseless.

But after surveying the industry above, I think it is also obvious why the situation is as such.

To the government, importing migrant workers is not so much to support local businesses as it is a business in itself.

Thus, if the government and its cronies are making billions of ringgit from this business, it make sense for them to keep on introducing policy to sustain the industry – new contractors, new intakes, new tariffs and new laws to milk the cash cow – whatever the effect will be on our society and economy.

We cannot continue in this direction, but to call for the banning of migrant workers is also irrational.

What we desperately need is a thoroughly planned-out national human resources blueprint. One which maps out our own talents, recognises the needs of the industry, identifies gaps and then lays out a strategic plan to maximise our workforce, both Malaysians and migrant workers. The blueprint must be able to deal with the various issues in employment including the high unemployment and underemployment of young Malaysians, the low rate of women’s participation in the labour force, post-retirement workers as well as a strategy to best tap into the global talent pool.

Without such a route map, we are merely shooting in the dark. We will end up with the current situation where the government claims, on the one hand, that they are bringing in more migrant workers due to demand from employers, and the industry responding, on the other hand, that the government must ensure there are enough jobs available for these incoming workers. Again, this is caused by a situation where the interest is not exactly to match human resources to local businesses but rather to do business out of human resources.

Steven Sim is the member of parliament for Bukit Mertajam.

The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.

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