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Hike on foreign workers’ levy irrational: FSI

4th February, 2016

KOTA KINABALU: The Federation of Sabah Industries (FSI) has called on the government to halt the levy hike for foreign workers which took effect on 1st February 2016.

It described the announcement as abrupt, unreasonable and unilaterally made as there was no prior notice or consultation with the industries and stakeholders.

The statement yesterday said: “The local Sabah business is characterised by high cost of doing business and this has been brought to the attention of the authorities concerned in numerous forums and dialogues.

“FSI members, the majority of whom are manufacturers employing from 5 to 100 foreign workers cannot afford to foot further foreign workers levy hike, let alone by a whopping 147.5per cent hike, especially amid today’s depressed economy attributed to the Ringgit depreciation, minimum wages and GST.”

It provided a comparison chart indicating over 100 per cent increment in levy costs for Sabah industries. This ponders the question: is the government desperate for money to the extent that it is willing to sacrifice industries in today’s challenging environment?

No Description of industry Current Levy/RM New Levy 1/2/16/RM Increment/RM per cent up Pen. Msia Sabah Pen. Msia/Sabah Pen. Msia Sabah Sabah 1 Manufacturing/Perkilangan 1250 1070 2500 1250 1490 147.5 per cent 2 Construction/Pembinaan 1250 1010 2500 1250 1490 147.5 per cent 3 Plantation/Perladangan 590 590 1500 910 910 154 per cent 4 Agriculture/Pertanian 410 410 1500 1090 1090 265.9 per cent 5 Services 1850 1490 2500 650 1010 67.8 per cent 6 Services (Island resorts) 1250 1010 2500 1250 1490 147.5 per cent

“Given the situation, the industries expect the government to be more business-friendly, intervene and play its role to facilitate businesses; sadly, the authorities concerned has bulldosed its way to declare its stance that is not to the best interest of all but spells trouble for the struggling Sabah industries and the people,” stated FSI.

FSI foresees that if the new levy is implemented, manufacturers and other industries will reduce its manpower and production or pass on higher costs of production to consumers.

The move will potentially drive employers to hire illegal/undocumented foreign labour, thus denying the government of the levy income while compounding the problems of illegals and social ills. In other words, the move will backfire on the government.

FSI in echoing the calls of the national trade associations, wants the government to make the illegals/undocumented foreign nationals currently in the State economically useful by legalising them for employment in the sectors that are highly dependent on foreign workers notably the manufacturing, construction, plantation and agriculture sectors which locals shy away from, perceiving the environment as dirty and demanding.

Other sectors employing foreign labour are the service sector (F&B and Hospitality). Combined, the sectors employ 926,400 or 57 per cent of total employment in Sabah.

Sabah has low unemployment rate of 4.7 per cent (79,000 registered), barely enough to fill in the yearly new job vacancies of 141,000 (2014), not to mention replacing the foreigners’ positions as envisaged by the government’s objective.

As much as possible, Sabah employers prefer to employ locals but have resorted to alternative sources of labour which are more expensive, bureaucratic and cumbersome. And, they will have to bear the levies instead of passing on to the foreign labours, thereby increasing their labour costs.

Sabah employers will choose to hire legally if hiring foreign workers were made more efficient and hiring costs more reasonable and affordable.

FSI said this would be a win-win for the industries and the government whereby the industries kept hiring costs down while the government generated levy income from legalising the current illegal foreign labour.

Registered foreigners in Sabah number 900,000 approximately, out of Sabah’s total population of 3.2 million. FSI reckons that to increase the government’s coffer by RM2.5b through levy income is punitive when businesses are grappling with GST, Ringgit devaluation and minimum wage.

The impact on Sabah is dire, given Sabah’s cost-disadvantageous position which warrant help from the government. As with most economies, Sabah SMIs and SMEs form the backbone of the economy.

FSI urges the government to listen to the industry’s plea and not implement the hike. It is preparing to meet with the authorities concerned and submit a joint-memorandum on the matter.

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