THE temporary freeze on Indonesian workers to Malaysia is very likely to worsen the acute manpower crunch faced by all economic sectors in Malaysia while delaying the recovery of their operations to pre-pandemic levels.
CGS-CIMB Research expects the plantation sector to be the worst affected by the freeze order as it is more reliant on Indonesian workers for harvesting activities which can be critical during the upcoming peak production months.
“The delay could lead to palm oil production for 2H 2022F falling below the level from a year ago,” projected head of research Ivy Ng Lee Fang and analyst Nagulan Ravi in a Malaysian strategy note.
“The worker shortage, combined with rising costs (minimum wage and fertilisers) and falling CPO (crude palm oi) prices will pose downside risks to Malaysian planters’ 2H 2022 earnings.”
This will be further compounded by the Malaysian Anti-Corruption Commission’s (MACC) raid of Bestinet Sdn Bhd on July 5 over allegations of irregularities in the selection of 25 Bangladeshi recruitment firms given the on-going probe may cause a “slight delay” in processing applications.
“Bestinet supplies the Foreign Worker Centralised Management System (FWCMS) used for processing the recruitment of workers from all source countries. Overall, we are negative on this news as it poses downside risks to corporate earnings,” insisted CGS-CIMB Research.
For the record, Indonesia’s Ambassador to Malaysia Hermono said the freeze was imposed after Malaysia’s immigration authorities continued using the Maid Online System (MOS) for recruiting domestic workers instead of the One Channel System (OCS) as agreed upon under the memorandum of understanding (MOU) inked between both countries on April 1.
Malaysian companies have submitted around 20,000 applications for workers, about half of which were for jobs in the plantation and manufacturing sectors, according to Hermono.
Confirming receiving a letter from Indonesian authorities informing him of the freeze, Human Resources Minister Datuk Seri M. Saravanan said he would discuss the matter with the Home Minister Datuk Hamzah Zainudin who oversees the Immigration Department.
However, Hamzah has played down Indonesia’s decision to temporarily freeze the sending of its citizens to work in Malaysia by saying the country can recruit foreign workers from other countries, including Bangladesh.
Stating that his ministry was serious about ensuring that migrant workers entered Malaysia legally, he noted that the usage of the MOS to recruit domestic workers was not only for Indonesia but for 15 other source countries as well.
According to the Malaysian Employers Federation (MEF) president Datuk Dr Syed Hussain Syed Husman, Indonesia is an important source country for the supply of foreign workers, contributing 35% of foreign workers and 70% of maids in Malaysia.
It was reported that Malaysia currently lacks at least 1.2 million workers in the manufacturing (627,000), plantation (120,000) and construction (550,000) industries. – July 14, 2022
