This article first appeared in The Edge Financial Daily, on February 3, 2016.

SHAH ALAM: Top Glove Corp Bhd, which has already trimmed the number of foreign workers employed by some 1,000, intends to further cut 5% of its foreign workforce this year amid higher minimum wage hike and the sudden surge on levy, said its executive chairman Tan Sri Lim Wee Chai.

Lim is dissatisfied with the sudden increase on annual levy for foreign workers without proper communication with the private sector.

“Most of the companies or associations will object and complain as the government did not do things in a better manner,” he told the media after the company’s signing ceremony with Standard Financial Adviser Sdn Bhd, iFAST Capital Sdn Bhd, Kenanga Investors Bhd on private pension schemes.

Lim pointed out that the government’s decision was made without consultation or any dialogue with the industry on the decision and the quantum of increase.

To recap, the government decided to raise the annual levy for foreign workers from RM1,250 to RM2,500 each effective Feb 1.

Bernama quoted Deputy Prime  Minister Datuk Seri Dr Ahmad Zahid Hamidi as saying the government’s decision to restructure the levy rate system for foreign workers into two categories was expected to bring an extra income of RM2.5 billion to the country.

Ahmad Zahid said the first category, which involves foreign workers in the manufacturing, construction and service sectors, would now see a levy of RM2,500 for each worker.

The second category involves the plantation and agriculture industries, where a levy of RM1,500 would be charged for each foreign employee.

In view of the increase in labour costs when revised minimum wage takes effect in July, Lim said Top Glove targets to cut about 300 foreign workers this year.

Over the past two to three years, the glove maker has saved 1,000 workers through automation. It currently hires 6,000 to 7,000 foreign workers.

He noted that there is still room for more automation in its 27 factories and will continue to invest in technology, mitigating the increase in labour costs.

The glove manufacturing industry is facing rising operating costs due to gas price hike and higher minimum wage.

Peninsular Malaysia’s minimum wage will rise to RM1,000 from RM900, while Sabah, Sarawak and Labuan’s minimum wage will rise to RM920 from RM800 effective July 1 this year.

Lim foresaw 2016 to be a “very challenging” year, due to the capacity increase in the glove industry, which will increase the supply of the gloves.

Top Glove closed 6.27% or 34 sen higher at RM5.76 yesterday, with a market capitalisation of RM7.22 billion.