Wednesday, 28 October 2020: The Center for Market Education (CME) is perplexed about the new procedures for hiring foreign talent (expatriates), issued by the ministry of human resources.

According to a recent statement by the Malaysian human resources ministry, all employers who intend to employ foreign workers through a re-hiring program and recruit expatriates are first required to advertise job vacancies on the national portal, MYFutureJobs, effective 1 November 2020.

Vacancy advertisements on MYFutureJobs must not be less than 14 days for the re-hiring program (foreign workers already in the country) and 30 days for the recruitment of expatriates. This will then be followed by a candidate interview session with the employer’s representative and the government agency of the Ministry of Human Resources, which is the Social Security Organization (SOCSO).

Foreign workers or expatriates will only be considered if there are no Malaysians who are interested in applying for the particular position.
While the measure aims to reduce unemployment among Malaysians, it presents important unintended consequences that may lead to reduce FDIs and MNCs presence in Malaysia, therefore increasing unemployment, rather than reducing it.

Dr Carmelo Ferlito, CEO of CME, explained the most critical points in the measure:

  1. It interferes with employers’ decision process, imposing also the presence of government representatives during the hiring process, which poses serious problems in terms of privacy and independency in the business conduct.
  2. It applies not only to new positions but also to the renewal of expatriate positions, making the future of foreigners in Malaysia increasingly uncertain, with the risk that Malaysia will be unable to attract foreign talents.
  3. It applies to business-owners too, which therefore will find themselves in the risk of being replaced in running their own company.
  4. This further element of confusion adds on to an already confused scenario, where the limits on hiring foreign workers, the new CMCO in Selangor and Kuala Lumpur, and the way in which SOPs are determined and communicated, are discouraging business initiatives, putting at risk existing jobs and the creation of new ones.
  5. Malaysia is playing in a global scenario and the attraction of the best talents plays in its favour, not against it.

CME recognizes that in the past decades Malaysia did a wonderful job in attracting Multinational Companies thanks to a business-friendly institutional framework, certainty of the rule of law and attractive packages such as MIDA Principal Hub scheme. However, the most recent policies are putting at serious risk such great achievements.

In commenting the news, Dr Ferlito explained: “If a MNC is hiring 5 expatriate top managers and 200 Malaysians, and it is forced to replace those expatriates with locals, how will we end up? With 5 more Malaysians getting a job or with a MNC leaving Malaysia leaving 200 people unemployed? Policy making cannot be driven only by good intentions, a serious consideration of the negative unintended consequences is a must”.

Dr Ferlito added that this is very much crucial in a moment in which neighbour countries such as Indonesia are developing very attractive policies for FDIs.

CME therefore proposes the following modification to the new policy:

  • Open a discussion table with the relevant stakeholders, and in particular with foreign chambers of commerce, before implementing such measures, rather than after they are in place.
  • Identify a salary threshold, such as RM 15,000/month, above which the new procedure will not be applicable and businesses would be free to hire without using the portal but only with the traditional channels.
  • Exclude work-permit renewals from the scope of the policy.
  • Exclude business-owners from the scope of the policy.

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About CME: The Center for Market Education (CME) is a boutique think-tank based in Kuala Lumpur, Malaysia. As an academic and educational institution, CME aims to promote a more pluralistic and multidisciplinary approach to economics and to spread the knowledge of a sounder economics, grounded in the understanding of market forces. In order to do so, CME is not only involved in academic initiatives, but it organizes seminars, webinars and tailor-made economics classes for students, journalists, businesspeople and professionals who wish to better understand the relevance of economics for their daily lives and activities. Economics matters and needs to be presented in a fashion in which the link with reality is clearly visible. In this sense, we look not only at theoretical economics but also at policy making, with an emphasis on the unintended consequences generated by political actions.