Dependency Of Foreign Workers In Malaysia Economics Essay

The term “foreign worker” means a group of people who have obtained the legal rights to work in another country where they have been officially recruited for work (Ahm Zehadul Karim, Moha Asri Abdullah and Mohd Isa Haji Bakar, 1999). The presence of foreign workers in Malaysia is not a new phenomenon as foreign workers are been ported in from China, Indonesia, and India to work in mines and rubber estates long back during colonial period. As the Malaysia economic grow, the demand of workforce in the construction industry increases as well. However due to the construction industry are perceived as dirty, dangerous and difficult (3Ds) and several others barrier that prevented locals from entering the industry thus creating a shortage of labours, foreign workers are then brought into the construction industry and as time passes the dependency on the foreign workers in the construction industry increases.

Industrialised Building System (IBS) were introduced to Malaysia during the sixties, but then became popular only in 1998 when Cabinet of Ministers endorsed IBS Strategic Plan as the blueprint for the total industrialization of the construction industry. The main objectives of introducing IBS back in 1998 were to gradually reduce the dependency on foreign labours and to increase productivity and improving construction quality. Since then, Construction Industry Development Board (CIDB) has been actively promoting the use of Industrialised Building System (IBS) in Malaysian construction industry.

1.3 Problem Statement

Due to the over dependency of foreign labour, there are more than 1.9 million of foreign workers now currently working in the Malaysia with 19% of them are employed in the construction industry. (Abdul Rahim Abdul Hamid, Bachan Singh, Wan Zulkifli Wan Yusof, Aminah Md Yusof and Norzamzila Mustafa, 2011). IBS appears to be a suitable system in overcoming several problems in the construction industry especially the over dependency on foreign labour and low productivity rate. Despite the active promotion by the CIDB since 1998, only 10% of completed construction project uses at least one IBS product in 2006 according to CIDB and the number of foreign labours in the construction increased to a staggering approximate amount of 360 thousands in 2011.

The staggering increase in the number of foreign labours in Malaysia from 1999 to 2008 shows that the construction industry is currently relies heavily on foreign labours as the main workforce. Therefore, it is important to determine the factors that lead to the over reliant of foreign workforce. Moreover, due to the over reliant of foreign workforce, there are a huge amount of foreigners in the country. The massive influx of foreign labours will have its impact on the Malaysian economy and community. Besides, problems arises will not only affect the construction industry but to the whole Malaysia. Therefore, it is important to identify the impact caused by the over reliant of foreign workforce to the country.

IBS was introduced to Malaysia in the sixties and heavily promoted by CIDB in 1998 as a system to gradually reduce the dependency on foreign labours and to increase productivity and improving construction quality. However the issues of over dependency of foreign labours does not subside, therefore it is important to study how IBS assists in reducing the over dependency of foreign labour.

1.4 Aim

The aim of this research is to study on how the Industrialised Building System (IBS) assist in reducing the over dependency of foreign labours in the Malaysian construction industry.

1.5 Objective

To determine the factors leading to the over dependency of foreign labour in the Malaysian construction industry.

To identify the impacts to the country caused by the over dependency of foreign labour.

To study how IBS assists in reducing the over dependency of foreign labour.

1.6 Key Questions

The following key questions are formed in order to achieve the objectives, namely:

What are the factors leading to the over dependency of foreign workforce in the Malaysian construction industry?

What are the impacts to the country caused by the over dependency of foreign workforce?

How will the Industrialised Building System (IBS) reduce the over dependency of foreign workforce?

1.7 Scope of Study

This study will be focused on the factors that lead to over dependency of foreign workforce in the Malaysian construction industry. Other than that, this study also focuses on the impacts of the foreign labours to Malaysia and how the IBS will influence the over reliant of foreign labours as main workforce in the industry.

Due to time constraint, questionnaires will be only sent to construction companies within the Peninsular Malaysia only, the construction companies from Sabah and Sarawak will not be taken into account for this study.

1.8 Research Methodology

The methodology is the significance part of a research where the approach in which research strategy and instruments are been employed and utilized in the pursuit of solutions for research objectives. In this study, data will be collected from two (2) main sources, which is the primary data source and secondary data source.

1.8.1 Primary Data Source

All of the objectives which are ascertaining the factors leading to the over dependency of foreign workforce in the Malaysian construction industry, impacts of over dependency of foreign workforce to the country and the benefits of Industrialised Building System in overcoming the over dependency of foreign workforce can be attained by conducting questionnaire survey and interviews.

Questionnaire administered via postage and email to 100 construction companies located within Peninsular Malaysia. To encourage respond and to provide a means of reply, a stamped address envelope will be attached to the set of questionnaires. And a total of 3 experienced personnel in the construction industry will be interviewed.

1.8.2 Secondary Date Source

Secondary data is the data collected via desk study approach where data is obtained from other sources such as journal articles, research papers, academic research journals, government publications, publications from corporate body and non-government organization, newspaper, magazine and books. The review from these sources would supplement much of the first objectives, factors leading to over dependency of foreign workforce in Malaysian construction industry and the second objectives, impacts to the country caused by over dependency of foreign workforce.

1.8.3 Result Analysis

On the analysis and presentation of the results, the data collected from the respondents through questionnaire and interviews will be analyzed. Questionnaires were analyzed by descriptive statistics method as it is the best method to analyze closed-ended questions in the percentages. The results of the findings will be presented in the form of tabulation, bar chart, pie chart or graph. Suggestions or opinions by interviewees will be included in the analysis and presented.

Chapter 2.0 Literature Review

2.1 Introduction

This chapter is completed after reviewing works of journal articles, research papers, academic research journals, government publications, publications from corporate body and non-government organizations, newspapers, magazines and books collected. This chapter is divided into four parts; the first part is a brief history of the movement of foreign workers followed by the factors leading to the over-dependency of foreign workers. Next, the impacts caused by the over-dependency of foreign workers towards the country are discussed. Lastly, a brief introduction of the Industrialised Building System and a discussion on how IBS assist in reducing the over-dependency of foreign workers are discussed.

2.2 Brief History of the Foreign Workers’ Movement

In the process of industrialisation and modernization, a large amount of activities is carried out to boost the development process and as these activities are taking places, most countries faces manpower shortage. This is when the process of industrialisation and modernization provides an excellent entry point for foreign workers into the labour market (ILO 2001).

In the nineteenth century during the Industrial Revolution, Britain, Germany and Switzerland experienced an excessive influx of immigrants. This is because the inflow of immigration continued in an uncontrolled and disorganised manner where foreign workers were recruited by private agents to respond to the ever increasing demand of workforce. After the Second World War, a migration trend towards Western Europe was evident as people searched for employment and better economic opportunities. The flow of labour movements in European nations continued until the 1960’s (Ahm Zehadul Karim, Moha Asri Abdullah and Mohd Isa Haji Bakar, 1999). Meanwhile, the United States also started inviting a large number of foreign workers for the reason in developing its national infrastructure. What happened after that was a turning point which can be seen in the flow of labour movements as they are now exploring many Asian countries which are in need of manpower in the chase of modernity (Ahm Zehadul Karim, Moha Asri Abdullah and Mohd Isa Haji Bakar, 1999).

While Malaysia is developing, a huge demand for manpower is required in multiple sectors for the industrialisation and modernization process. However, there is an issue that the supply of local labourers cannot cope with the demand and causes a severe shortage of manpower (Abdul Kadir, M.R., Lee, W.P., Jaafar, M.S., Sapuan, S.M. and Ali, A.A.A., 2006), which resulted in the import of foreign workers into Malaysia to cope with the demand for manpower.

2.3 Factors Leading to the Over-Dependency of Foreign Labour

The factors that cause massive inflow of foreign workers and eventually leading to the over-dependency of foreign labours are stated below:

2.3.1 Economy Growth of Malaysia

During the rapid growth of Malaysian economy back in the 60s, many job opportunities were created in the agricultural and construction industry. As construction industry plays a major role in the national economy, hence the expansion in construction activities is closely related to the blooming of economic (ILO, 2001). Towards the early 90s, Malaysia experienced a shortage of labour in the manufacturing industries, construction sector and domestic services (Shiadri binti Saleh @ Aman, 2008).

As mentioned earlier, the construction industry plays a major role in the national economy; a stagnant construction industry will threaten the national economy. Therefore, this industry must not come to a standstill and must be constantly expanding. This is where the workforce comes into play as the construction industry is a very labour-intensive industry, making labour one of the vital resources to the industry in order for the industry to continue growing and expanding.

A tight labour market would have devastating effects on the national economy as it affects the construction activities directly. Thus, the need to keep construction activities on-going and sustaining the economic growth rates in Malaysia resulted in the influx of foreign workers to meet the increasing demand in the Malaysian labour market (Namukundam, 2002).

2.3.2 Shortage of Workforce in Construction Industry

Due to the blooming economy of Malaysia which demanded more labour workforce and the reluctance of local workforce in selecting the construction industry which is perceived as Dangerous, Dirty and Difficult (3Ds), a shortage of labour happens as the local labour supply cannot cope with the demand for manpower required in the construction industry. There are plenty local construction projects such as housing development, commercial development and infrastructure development being carried out all year long and a large amount of workforce is required for the successful daily operation of onsite production in these construction projects.

As the local labourers were no longer able to meet the ever increasing demand for workforce in the construction industry to maintain the expansion of the industry, foreign workers become the only alternative solution. Mass amount of foreign workers from Indonesian, Myanmar, Thailand and Bangladesh were then being brought in to meet the demand and as time passed, these foreign workers began to dominate the construction industry, inevitably causing the industry to be heavily dependent on them as a major source of manpower.

2.3.3 Construction Industry Perceived as Dangerous, Dirty and Difficult (3Ds)

Working in the construction industry has always been viewed as dangerous, dirty and difficult. Construction activities are always hazardous and the industry has always been one of the industries that contribute to high accident rates especially fatalities. Construction workers are always exposed to hazardous chemical substances such as paints, thinners, varnishes, asbestos and others. Debris from carpentry work can be easily accumulated and poses fire hazards. Excavation walls might collapse during earthwork activities. While working at height, debris or even workers might fall from height. Machinery such as forklifts and crane are one of the threats on site to the workers. This is worsened when an employer tries to reduce cost by not providing the workers with proper safety equipment and not giving safety briefings to the workers. The hazards present in a construction site are countless and are not limited to areas mentioned above.

Besides being dangerous, construction sites are dirty. Debris is accumulated at every corner of a construction site. Besides that, some materials and waste are being simply thrown around just for the sake of ease and also due to poor housekeeping. Poor housekeeping also causes water to become stagnant which eventually leads to the breeding of mosquitoes. Furthermore, hands-on activities such as cement-mixing, plastering and concreting require workers to come into contact with filthy materials such as cement, varnishes, asbestos and others.

In additional, construction activities are tough. Workers are required to carry out strenuous construction works for long hours, usually from 8.00 a.m. to 5.30 p.m. Besides the long hours, workers are required to work in various dangerous and harsh conditions such as under harsh weather conditions, confined space and work at height.

As works in the construction industry are more labour intensive, more difficult and to some extent more risk-prone than other jobs, these works often fail to attract locals into the industry which leads to the shortage of workforce and eventually, foreign workers have to be brought in to meet the local labour demand. Back in 1992, official estimation estimated that foreign labour accounted for 80 per cent of the entire construction workforce in the industry (Shiadri binti Saleh @ Aman, cited in Abdul Aziz, 2008). This shows that the construction industry have been heavily reliant on foreign labour even back in the 1990s.

2.3.4 Mindset of Local Labour and Foreign Labour

The Malaysian educational standards are improving continuously throughout the years, enabling the generation today to obtain better education. As they become more educated, they tend to perceive that they will be able to obtain lucrative jobs with the qualifications they hold and eventually become choosy and particular in selecting types of work. Construction jobs are often being regarded as a low status job as the term construction worker is being perceived as lack of prestige, class and respectability, thus causing them to shy away from the industry (CREAM, 2011). In Malaysia, young workforce would rather stay unemployed than to work in the construction industry (ILO 2001).

As for the foreign labour, they work based on the necessity that they wish improve the quality of their life and to provide better future for their children (ILO 2001), therefore they are less choosy and demanding as they are willing to work in tough environment and for long hours for rather low wages. Besides that, the local labour is more demanding and is more aware of their rights as they tend to question and challenge their employers for any unfair treatment towards them while the foreign labour tends to be more obedient and accept any jobs assigned to them as long as they get paid. Thus, the foreign workers become a much favourable choice of recruitment over the local workers as they are willing to work in any harsh condition for minimum wages and they tend to be less demanding.

While the locals demand for white collar jobs and shy away from the blue collar jobs, the foreign workers become the only available source of manpower. The construction industry has to then depend on them as the main source of manpower which causes the over-reliance of foreign workers in Malaysia.

2.4 Impact of Foreign Workers

The inflow of foreign labour into Malaysia served to overcome the shortage of labour (Ahm Zehadul Karim, Moha Asri Abdullah and Mohd Isa Haji Bakar, 1999). This continued inflow of foreign workers, either legally or illegally has numerous impacts on Malaysia, generally negative impacts. However, we must not disregard the positive impacts the foreign workers have provided to the country.

2.4.1 Negative Impact

2.4.1.1 Economical Impact

The growing presence of foreign workers has sparked a continuing debate in labour importing countries on economic consequences of labour inflow (Athukorala and Devadas, 2012). No doubt that the influx of foreign labour is rather beneficial, as the use of foreign labour enables the rapid expansion of Malaysian economic as they fulfil the needs for manpower. However, there are several negative impacts of having a large presence of foreign labours in the country which diminishes the competition between local labours and the outflow of money from Malaysia.

The uncontrolled presence of foreign workers in the country has undermined the wage structure of the country as many of them are willing to work in any harsh condition for minimum wages. Hence, the presence of foreign labour threatens the local labour market and reduces the bargaining power of the locals (Ahm Zehadul Karim, Moha Asri Abdullah and Mohd Isa Haji Bakar, 1999). The willingness to accept relatively lower wages enabled them to be the more preferred group of people to be employed by employers. Moreover, by hiring foreign labour, a number of legal requirements and other employee benefits by the employers such as the Employees Provident Fund (EPF), Social Security Organisation (SOCSO), medical and social benefits are relieved (Ahm Zehadul Karim, Moha Asri Abdullah and Mohd Isa Haji Bakar, 1999). Jobs available for local workers especially in the lower status jobs are diminishing as they are unable to compete with the foreign workers (Siti Nabilah, 2010).

The large presence of foreign workers has also resulted in the outflow of money from the country (Ahm Zehadul Karim, Moha Asri Abdullah and Mohd Isa Haji Bakar, 1999). As the foreign worker usually sent home a large portion of the salary they have obtained, the amount of money which goes out of the country is difficult to be estimated as it usually involves a large sum of transactions. This causes an unhealthy financial drain towards the Malaysian economy and causes the value of Ringgit to depreciate.

2.4.1.2 Social Impact

In most cases, the concern over foreign worker is usually linked to the anxieties over the negative impacts towards the public safety and security, particularly perceived to be posed by the illegal foreign workers. Fingers have been pointed at illegal foreign workers for the soaring of crime rate in Malaysia (Lau, 2004). However, according to Pak Bui (2010), a 2005 paper in the Journal of the Kuala Lumpur Police College examined the statistics between 1992 and 2002 and found that the foreigners have only committed 3% of the total index crimes in Malaysia. Publics would argue and dispute the figure but there is no doubt that the foreigners are contributing to the increasing number of crime rates.

Besides committing crimes ranging from burglary, murder, assault, robbery to smuggling, some illegal and legal female foreign workers are also involved in vice activities which cause various social problems and raises serious concern about issues pertaining to health (Ahm Zehadul Karim, Moha Asri Abdullah and Mohd Isa Haji Bakar, 1999). According to Lau (2004), nine Indonesian women were arrested on 11 August 2004 and sentenced to 15 months’ jail each in Ipoh for overstaying. The nine Indonesian women also admitted to be working as prostitutes and possessing forged documents. Besides causing various social problems, the continuing arrival of migrants especially illegal ones has serious impact on issues pertaining to health. This is because they might be carrying dangerous or transmittable diseases such as tuberculosis, malaria, leprosy, sexually transmitted diseases (STD) and AIDS.

In addition, the large amount of foreign workers in Malaysia also poses negative impacts on the quality of life among Malaysians especially in urban areas. This is because the foreign workers live in squatters as they cannot afford to have proper housing. Squatters are built without the approval of local authority, thus they do not have proper access to electricity and water supply. Eventually, they have to illegally tap these sources, causing problems to the locals such as fire hazards and inaccurate utility bills.

2.4.1.3 Political Impact

Even tension can be felt by the public in political areas due to the abundance of legal and illegal workers in the country. Indonesian workers are said to be similar to Malays, Philippines workers are said to be similar to Chinese while those from India, Pakistan and Bangladesh are said to be similar to the local Indians. This causes insecurity to the political stability as Malaysia is a multi-racial country and political parties are fearful of manipulation of these foreign workers.

There are incidences that illegal immigrants are found to have identity cards, suggesting that the documents may be forged or fake (Ahm Zehadul Karim, Moha Asri Abdullah and Mohd Isa Haji Bakar, 1999). One could speculate that there are syndicates running the falsification of documents or identification cards hand-in-hand with the smuggling of illegal foreign workers. These foreign workers are then being looked at with suspicion by political parties, speculating that they might be manipulated into unfair elections using their forged citizenship to cast votes. According to Tay (2012), PAS Pokok Sena MP Mahfuz Omar said that there is an existence of an elaborate scam under the code name of “Task Force MyKad” which is in cahoots with the National Registration Department (NRD), where instant citizenship are given to both legal and illegal foreign workers with the purpose of putting their names into the voters roll so as to enable them to vote.

2.4.1.4 Cultural Impact

Religion too has become an issue due to the massive inflow of foreign workers. As Islam is the official religion in Malaysia and under the Malaysian Constitution, nevertheless, other religions are guaranteed freedom of practice. The presence of both illegal and legal foreign workers has cause anxieties towards the Malays as there are several cases where Indonesians have been seen or accused of preaching to Malays and trying to convert them to Christianity (Ahm Zehadul Karim, cited in Dorall, 1999). According Ahm Zehadul Karim, Moha Asri Abdullah and Mohd Isa Haji Bakar (cited in New Straits Times, 1999), back in 1995, a total of 190 illegal foreign workers were arrested for the involvement in cult activities. These issues threatened the inter-religious understanding between Malaysian and also the uproar of the Malays and local Muslim religious bodies.

2.4.2 Positive Impact

It is unquestionable that foreign workers have brought numerous negative impacts economically, socially, politically and culturally. However, the fact that the influx of foreign worker also has its positive impact and that the negative impacts often overshadow the positive impacts cannot be denied.

The massive influx of foreign workers has fulfilled the urgent demand for labour in Malaysia especially during the economic blooming where the tremendous amount of manpower is required. Foreign labours assisted in maintaining and expanding the Malaysian economic growth by its low cost and constant supply which is particularly true in the manufacturing and construction sectors.

More importantly, the foreign workers accepted the 3Ds jobs which many of the local workers are unwilling to accept. They kept Malaysia running; without them who is going to run the construction sites, who is going to run the machines in the factory and who is going to work at the oil palm or forestry (Pak Bui, 2010).

In fact, they played a significant role in maintaining sustainable economic development. Besides ensuring the growth of economy, foreign workers also helped to keep Malaysian economy at a competitive level. The use of foreign labour in labour-intensive industries has helped to overcome the shortage of labour in Malaysia, reduce labour costs and maintain Malaysia’s competitiveness at the international level (Rudnick, 1996). This is because the uncontrolled inflow of foreign workers, who are willing to work for lower wages, played a significant role in maintaining lower wage levels which indirectly helped to decrease production cost; hence products can be kept at a lower price (Ahm Zehadul Karim, Moha Asri Abdullah and Mohd Isa Haji Bakar, 1999).

2.5 Industrialised Building System (IBS)

2.5.1 Definition

There is no definite definition of Industrialised Building System because different people with different backgrounds have their own perceptions towards the definition of IBS. Junid (1986) as one of the earliest authors to describe IBS as a process where components of a building are being conceived, planned and fabricated at factory, transported and assemble on site.

In United Kingdom, IBS is defined as a technology which provides an efficient process involving prefabrication, offsite production and offsite manufacturing to provide more construction elements for better quality in less time (Kamarul Anuar Mohamad Kamar, Mustafa Alshawi, Zuhairi Abd. Hamid, Mohd Nasrun Mohd Nawi, Ahmad Tarmidzi Haron and Mohd Rofdzi Abdullah, 2009).

In Malaysia, the term Industrialised Building System is widely associated by the practitioners as a prefabricated system. The government then defined IBS as a construction technique in which components are manufactured in a controlled environment, transported, positioned and assemble into a structure with minimal additional site works (CIDB, 2003).

IBS is defined by Trikha and Abang Abdullah Abang Ali (2004) as a building system which involves industrialised production of building elements or components which are precast or prefabricated either in an off-site factory or in an on-site casting yard, as well as the erection and assembly process of these elements on site into a desired building structure through mechanical means using minimum in-situ construction.

Regardless whether IBS is defined as a process, a building system or a construction technique, it can be summarised and concluded that IBS is an alternative approach in the construction industry in providing shorter construction period, better quality control, minimise construction cost and waste, maximise productivity and more importantly is to reduce the dependency of foreign workers in construction industry.

2.5.2 Brief Historical Background of IBS

Industrialised Building System has been introduced to Malaysia back in the 60’s by the use of pre-cast concrete beam-column element and panelised system (CIDB, 2003) when the Ministry of Housing and Local Government of Malaysia visited several European countries and evaluated their housing development program. The main purpose back then was to address the acute shortage of houses. Then, in 1964, the government took a brave decision to try two pilot projects using IBS concept (Thanoon, W.A., Lee, W.P., Mohd Razali Abdul Kadir, Mohd Saleh Jaafar and Mohd Sapuan Salit, 2003). However, the introduction of IBS was never able to be sustained due to the failure of these 2 projects in Jalan Pekeliling, Kuala Lumpur and Rifle Range, Penang, where the IBS does not perform as expected (Kamarul et al, 2009). In the end, a bad impression on IBS was left in the construction industry (Zuhairi Abd Hamid, Kamarul Anuar Mohamad Kamar, Mohd Khairolden Ghani, Maria Zura Mohd Zain and Ahmad Hazim Abdul Rahim, 2011).

Back in the 90’s, there was a massive and uncontrolled influx foreign workers to meet the demand for manpower in several sectors especially in the construction industry to take up the employment on site to conduct manual jobs. When this influx of foreign workers become an issue for the country, it has then reignited the interest of various parties especially government bodies on IBS as a method to reduce the over-dependency of foreign workers and to achieve industrialisation of the construction industry. Therefore in 1998, Cabinet of Ministers endorsed IBS Strategic Plan as the blueprint for the total industrialisation of construction industry and active promotion activities has been done by the Construction Industry Development Board (CIDB) to promote the use of IBS in the Malaysian construction industry (Mohamad Ibrahim Mohamad, Mardhiah Zawawi and Nekooie, M.A., 2009). The main objectives of introducing IBS at that time were to gradually reduce the dependency on foreign labours and to increase productivity and improving construction quality.

In 1999, the IBS Strategic Plan was launched to promote the usage of IBS in the industry. This was followed by the IBS Roadmap 2003-2010 and IBS Roadmap 2011-2015, as the blueprints to industrialise the construction industry by 2015. Both of the roadmaps are developed to chart and guide the awareness programmes, incentives, vendor scheme developments, training, quality control and research and development programmes (Zuhairi Abd Hamid et al, 2011). In 2008, the government took the lead by mandating all public sector projects must attain no less than 70% IBS content as an effort to build a momentum and to establish the demand for IBS components. As in September 2010, there are 129 IBS manufacturers in Malaysia producing 305 types of IBS products, about 217 IBS consultants and 678 contractors registered with CIDB (CIDB, 2010).

2.5.3 Attributes of Industrialised Building System (IBS)

According to Trikha and Abang Abdullah Abang Ali (2004), a building system which has the following attributes can be classified as Industrialised Building System.

2.5.3.1 Prefabricated Elements or Components

A building system is recognised as an IBS when its primary load bearing elements are prefabricated either completely or partially through mechanised processes. It is possible that particular IBS elements or components may not have the automated facility required for prefabrication. However, advanced manufacturing processes using computer numerically controlled machines can be incorporated in automated production of the prefabricated elements (Trikha and Abang Abdullah Abang Ali, 2004).

2.5.3.2 Minimal In-Situ Constructions

Prefabricated elements and components have to be connected together on site using embedded inserts and bonded plates to build the structural envelope so that some construction work such as concreting or welding that ha