This article first appeared in The Edge Financial Daily on July 17, 2017

KUALA LUMPUR: The cost of doing business is rising for many employers in the country as the ongoing crackdown on illegal foreign workers has resulted in a labour shortage.

The sweep by the immigration department is aimed at foreign workers who do not possess an enforcement card (E-Card), which acts as a temporary validation for them before they obtain legal papers from their respective countries.

After the deadline to get the E-Card closed on June 30, large numbers of illegal workers without the card are not turning up to work on fears of being caught in a raid.

The Malaysian Employers Federation (MEF) said employers resorted to engaging illegal foreign workers instead of legal ones as they would not have to pay a recruitment fee and provide for insurance, housing and other benefits to the worker.

“But now the supply of illegal foreign workers have become lesser as not many of them are willing to come out and work, and this poses a challenge to employers to continue their operations,” MEF executive director, Datuk Shamsuddin Bardan, told The Edge Financial Daily.

To make matters worse, said Shamsuddin, even the supply of legal workers has been affected by the crackdown, as some of them are also staying away from their work place due to fear over the raids.

“Some of the legal foreign workers have also decided to go into hiding, because when the immigration does their mega operations they round up all the foreign workers [both illegal and legal] and bring them to the centres for processing,” he said.

“There has been a lot of complaints from employers on the many hours spent trying to redeem their legal workers from the centres, as many employers keep the original copies of the workers’ documents with the workers only holding copies, and these raids tend to take place at odd hours when employers are not there

“The whole process is time-consuming and unproductive,” he said.

Shamsuddin said although the crackdown seems to affect smaller businesses — as the larger businesses tend to employ only legal and documented foreign workers — it is not an isolated problem as there could be repercussions for the economy at large.

“The smaller businesses are part of the supply chain, and are most of the time supplying to the bigger companies, so I would say that if we are not careful in handling the [foreign worker] situation, the whole economy may suffer,” he said.

SME Association of Malaysia president, Datuk Michael Kang Hua Keong, said that the price of legal foreign workers has gone up following the crackdown on illegals.

“A lot of companies are now short on manpower due to the illegal foreign workers running away, and agents who provide legal workers increasing their prices.

“[For example] if the salary for [a] legal worker was RM50 per day, this has now increased to something like RM150 per day, and some employers, especially those who have contracts to honour, are left with no choice but to engage the legal workers from these agents in order to get the job done,“ Kang told The Edge Financial Daily.

He said another cost factor which impacts small- and medium enterprises is the RM600 upfront charges per worker for the rehiring programme that is collected during the E-Card registration.

“It was a condition by the government that if you have successfully registered your foreign worker for [an] E-Card, you must also register them for rehiring through the three [government appointed] agents. The agent’s fee is RM1,200 for rehiring but you have to pay 50% upfront, which is RM600

“So the worry among SMEs is, what if their foreign worker gets the E-Card, but is not successful in qualifying for the rehiring programme. Then the RM600 is burnt,” he said.

Kang said his association has proposed to Putrajaya that the agents should be directed to refund the money paid if the foreign worker involved fails in the rehiring programme “but we have yet to get a response from the government on this”.

Some 155,000 workers were reported to have registered for the E-Card by the June 30 deadline, and the RM600 upfront payment for each worker would total RM93 million excluding goods and services tax.

The Bursa Malaysia-listed MyEG Services Bhd is one of three government-appointed agents for the rehiring programme.

The 155,000 registered E-Card holders account for less than 40% of the immigration department’s reported target of registering 400,000 illegal workers. Officials estimate that there are 600,000 undocumented foreign workers in the country.

Malaysian Muslim Restaurant Owners Association president, Ayoob Khan Muhamad Yakub, said although most workers in its member restaurants are legal, the restaurants are still experiencing a shortage of workers.

“Some of our member restaurants had to close down to due to [insufficient] workers,” he said when contacted. “The government should [unfreeze] the foreign workers’ intake with proper guidelines [instilled]

“We also propose for the E-Card registration to be extended for another one to two months,” he said.

Malaysian Association of Hotel Owners executive director, Shaharuddin M Saaid, said that the impact from the crackdown has so far been minimal in the hotel sector.

“For hotels, foreign labour is usually hired for limited jobs, like housekeeping, kitchen help and security which are not favoured by locals. This excludes the gazetted island resorts such as Langkawi and Pulau Tioman where they are allowed to hire foreign labour in more job [scopes].

“Most of the hotels go through the immigration department for the hiring of foreign workers and do not go through third parties, so there is no issue of hiring illegal foreign workers,” he added.