KUALA LUMPUR: The plantation and construction sectors are supportive of the higher minimum wage policy but want the new government to review some of the heavy taxes and foreign worker levies imposed on the industry players.
The Government is set to implement a new sectoral-based minimum wage policy for the private sector, which will replace the current blanket regulation for all the industries, in the coming months.
Human Resources Minister M. Kulasegaran said recently that the Government is expected to fork out RM1bil to subsidise the private sector, bearing half of the wage hike on its pledge to increase the minimum wage to RM1,500 per month
Currently, the minimum wage rate is RM1,000 per month for Peninsular Malaysia and RM920 for Sabah, Sarawak and Labuan.
Despite the Government’s proposal to bear RM250 cost per worker, members from the Malaysian Palm Oil Association (MPOA) and the Master Builders Association Malaysia (MBAM) believed that the review on current high taxes and levies can be considered as “compensation” to absorb the rise in wages.
According to MPOA chief executive officer Datuk Mohamad Nageeb Ahmad Abdul Wahab, the association sees it as a good move by the Government to subsidise the workers but “to implement and the affordability of the Government is another matter”.
“In the long run, we want the Government to review or consider abolishing some of the burdensome taxes, which the oil palm industry had to saddle for quite sometime.
“We simply cannot afford the additional costs without some consideration being given on the sidelines,” stressed Nageeb.
MPOA represents 118 plantation companies, which account for 1.87 million ha or 40% of the total planted oil palm area in Malaysia.
On the impact of the proposed minimim wage of RM1,500 per month, Nageeb said an additional RM500 would cost the plantation industry around RM1.85bil to RM2bil annually. He pointed out that the industry is zero-subsidised and heavily taxed.
Apart from the 24% corporate tax, the industry paid up to 20.5% of the price of CPO in levies, taxes and fees in 2017. It also paid a cess tax to the Malaysian Palm Oil Board, windfall profit tax, foreign workers levy as well as the Sabah and Sarawak CPO taxes.
“Therefore, we want the Government to review some of these taxes. If they are willing to reduce these taxes, then MPOA members can afford to transfer the payment in terms of the wages to the workers,” he added.
Those in the downstream sector also shared similar fate, said Nageeb, who added that the increase in wages could result in local refineries losing their competitive edge with the Indonesian players.
Therefore, Nageeb has appealed to the Primary Industries Ministry to consider RM1,100 as the new minimum wage rate because most planters had to provide additional services and facilities for their estate workers.
“Besides the basic salary, we provide them with housing facilities, cooking oil and other amenities, which could average around RM400 to RM700 per worker monthly.
“If possible, we hope there will be no increase in wages at all as a new adjustment was imposed two years ago,” said Nageeb.
Meanwhile, MBAM president Foo Chek Lee said the rise in minimum wage would indirectly increase construction costs.
“Both the transportation and services sectors are linked to the industry, which in turn can potentially increase the price of houses.”
He noted that the proposed minimum wage would mostly benefit the foreign workers because “the construction jobs are not appealing to the locals”.
Currently, the wages for the locals employed in the construction industry is around RM1,700 to RM2,000 per month, excluding other benefits such as bonus.
This also shows that the salaries paid is much higher than the present minimum wage.
Foo said MBAM is supportive of the gradual increase in the basic pay of workers, should the Government consider reviewing foreign worker levies and help to ease the process of recruitment.
“It is difficult to get approvals for foreign workers, especially to legalise the illegal workers. Previously, it could take up to eight months to obtain the worker’s permit, which resulted in a lot of workers becoming illegals.
“Nobody wants to apply for foreign workers if they can get locals because the cost of employing foreigners is much more expensive at RM6,000 to RM7,000 per person,” he added.
Nageeb of MPOA also shared similar views on putting a stop to third-party agents’ involvement in getting workers’ permit as “it will inflate the cost of hiring foreign workers here.”
An average plantation company employs about 85% foreigners (mostly as estate workers) while the remaining are locals.
AmBank group head of reseach and chief economist Anthony Dass believed that the Government should initially increase the minimum wage to a moderate level of RM1,200 per month, as the higher increase in wages could result in higher rate of unemployment.
He said the Government’s target of minimum wage should then eventually rise to RM1,700 per month, reflecting the median income of the country.
While the increase in wages is done on a gradual basis, Anthony said the efficiency of the Government also played a key role in diminishing corruption to reduce the cost of doing business.
“If the Government can cut corruption, the cost of business becomes cheaper. It will then compensate for the rise in wages,” he added.