Letter to Editor
MASTERS Builders Association Malaysia (MBAM) opines that the minimum wage and electricity tariff should remain in view of the current economic state and pandemic.
Further cost increase in doing business can severely impact the construction economy. The effect of this will mainly affect the operation of smaller contractors in the G1-G4 category.
In 2013, the minimum wage for Peninsular and East Malaysia were RM900 and RM800 respectively.
Right before the start of the various movement control orders (MCO) in Malaysia, the minimum wage order (MWO) 2020 of RM1,200 came into effect on Feb 1, 2020 for the whole of Malaysia.
In that span of seven years, the minimum wage increased between 33.33% and 50%, with about 4.76% to 7.14% increment yearly.
However, the recent statement made by the Human Resources Ministry that a new minimum wage of around RM1,500 per month is expected to be implemented before the end of this year awaiting cabinet’s approval is unacceptable.
The proposed raise in minimum wage will observe a 25% increment since the last adjustment in 2020, making it a 12.5% increment yearly which is a big jump from the previous yearly range.
For construction workers, besides getting paid for their daily wages, most workers are provided with accommodation.
Since the pandemic hit Malaysia, contractors are required to absorb all the additional COVID-19 related mitigation costs and the adherence to Act 446 in providing a conducive living space for workers.
All these costs were not factored in the project cost which resulted in contractors having to bear the burden.
As for the announcement by Tenaga Nasional Bhd (TNB) that for the period of Feb 1, 2022 to June 30, 2022, non-domestic customers including commercial and industrial are to incur an Imbalance Cost Pass-Through (ICPT) surcharge of 3.7 sen per kWh.
That is a significant increase of 85% from the last electricity tariff. With the ICPT rebate of 2 sen per kWh previously implemented on all customers, TNB still recorded an increase in its revenue and earnings.
Therefore, businesses should not be taken advantage of during such challenging times.
Depending on the size of business and usage of electricity for construction operations, the increase of electricity tariff will greatly impact smaller contractors’ survivability.
Contractors are also facing the increase of construction cost due to the following:
- Instability of building materials prices;
- The need to contribute to Human Resource Development Corporation (HRD Corp) levy starting from Jan 1, 2022;
- Increase in cost of foreign workers hiring with new standard operation procedure (SOP) requirement;
- SOPs compliance for prevention of COVID-19 pandemic;
- Increase in the monthly salary ceiling for Social Security Organisation (SOCSO) and Employment Insurance System (EIS) from RM4,000 to RM5,000, which means employers are required to contribute more to SOCSO and EIS for their employees;
- Implementation of multi-tier construction levy with effective from July 1, 2022; and
- Accreditation cost for all construction workers and staff. We do understand the need to address the increase in cost of living brought about by the pandemic and disruptions in the global supply chain, but the proposal to increase the minimum wage and electricity tariff at this point in time is not well received by the industry.
Construction businesses are focusing on finishing up delayed projects while minimising the impact of thinning profit.
If the Government must increase the minimum wage and electricity tariff, we seek the Government’s consideration to postpone to next two years to accommodate the industry’s stability and capability.
The increase of minimum wage must be based on productivity or output. – Feb 11, 2022
Tan Seri Sufri Haji Md Zin is president of Master Builders Association Malaysia (MBAM).
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
