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Malaysia’s immigration policy: Can protectionism be a solution?

By Claire McNear, on 13 March 2014

By Chloe Lin

The Petronas Towers in Kuala Lumpur.

The Petronas Towers in Kuala Lumpur.

Malaysia’s economy has long relied on its abundant foreign labour. Every year, tens of thousands of migrants from countries such as Indonesia, India, Nepal, Pakistan and Cambodia arrive in Malaysia, eager to take up jobs that many locals shun. They are jobs that require long working hours and plenty of hard work but with less pay, mostly in the restaurant, construction, garbage collection and gardening sectors.

In January, the Malaysian government announced a ban on foreign workers in the fast food industry, meaning that fast food outlets will no longer be able to hire foreign workers, and that the visas of foreigners employed by those outlets will not be renewed when they expire.

The new labour law, aimed primarily at giving priority to Malaysians for such jobs, is not only a part of the government’s bid to reverse decades of dependence on cheap labour, but also a prescription for the relatively high unemployment rate among young Malaysian graduates. Indeed, the official statement released by the government about the ban noted that “fast food restaurants are still popular as a source of employment among young people such as school-leavers and university students.”

Malaysia’s reliance on foreign workers began in the 1970s and carried on through the 1980s to support the nation’s high growth strategy. The government welcomed immigrants to domestic employment as an interim solution to meet demand for low-skilled labourers in certain sectors of the economy, while it pursued a long-term strategy to upgrade the country’s economy and expand the supply of skilled workers.

According to the local figures, there are approximately 2.8 million legal foreign workers in Malaysia, representing 30% of the total workforce. Worrying about the damaging impact the huge number and continuous influx of migrants may have on the economy, civil organizations such as the Malaysian Trades Union Congress and the Federation of Malaysian Consumers Associations have expressed support for the new policy, claiming that such a move will open up wider opportunities for young Malaysians to gain work experience and earn money, and that it will also encourage a rise in the average wage in the industries in order to attract local people. Nevertheless, there is still skepticism about the extent to which locals might actually benefit from such restrictions on foreign workers.

A shift toward a more economically and culturally protectionist disposition is not an unusual plot in the globalizing world, nor is it a distinctive experience in developing countries. Those who advocate strict border control of migrants might echo Paul Collier, the former World Bank economist, who has contended that the imposition of quotas is often a forethoughtful policy that serves in the “enlightened self-interest” of the host countries. As he argues, the inbuilt inclination of immigration to speed up will begin to harm both host and origin countries at a certain point, and thus some preventative measures must be taken.

However, the exact point beyond which immigration will impede countries’ economic and social development is difficult, if not impossible, to determine, and immigration policy more often than not turns out to be a political battle in which short-term political calculation, not economic analysis, dominates the policy-making process. After all, it is often easier for governments to blame immigrants for rising unemployment rates and economic stagnation than to take aggressive measures such as industrial structure adjustment, improvement of the education system and vocational training as well as a fair increase in the minimum wage of both foreign and local workers.

Collier is certainly right about one thing: immigration will only continue to grow as support from communities formed by previous immigrants ease the journeys and resettled lives of future migrants. But if protectionism is not a permanent solution, comprehensive consideration of the rights and welfare of immigrants and the provision of resources to encourage cultural integration are bound to be the chief challenges for migrant-dependent countries like Malaysia.