Govt urged to give tax breaks

  • Corporate News
  • Friday, 08 Nov 2019

In an exclusive interview with StarBiz, UEM Edgenta Bhd managing director and chief executive officer Datuk Azmir Merican recommended the government to roll out greater incentives for businesses to reduce the reliance on foreign workers through mechanisation and automation.

PETALING JAYA: The influx of foreign workers into Malaysia began in the 1980s as the country embarked on rapid industrialisation. Fast forward three decades later and Malaysia now has nearly 2.2 million foreigners in its workforce, as compared to slightly over 800,000 foreign workers at the beginning of the 21st Century.

As the country continues to find a way out of its foreign worker dilemma, a top Malaysian corporate leader has urged the government to emulate Singapore’s measures to foster automation and hire fewer migrant workers.

In an exclusive interview with StarBiz, UEM EDGENTA BHD managing director and chief executive officer Datuk Azmir Merican recommended the government to roll out greater incentives for businesses to reduce the reliance on foreign workers through mechanisation and automation.

The incentives, which can be in the form of financial assistance or tax breaks, should be made available to all businesses instead of focusing only on certain sectors, he said.

Using Singapore as an example, Azmir said that the government across the Causeway offered financial grants to all companies that mechanised or automated their processes in replacement of low-cost foreign labour.

“The grants are given to ensure that the businesses’ return on investment (ROI) in mechanisation and automation are achieved much faster. We know this because we do work in Singapore.

“Businesses will be encouraged to hire fewer foreign workers by buying machines if they can recover the machine costs faster, given the government incentives.

“But if using foreign workers is so much cheaper and there is no incentive, why would the companies switch to automation?” he asked.

Over the years, while the Malaysian government has introduced several initiatives to encourage automation, Azmir believes that more can be done.

“The government’s incentives, be it in any form, should be sector-agnostic instead of focusing more on the manufacturing sector. One such area is highway maintenance, in which UEM Edgenta is involved in. With mechanisation, you can reduce foreign workers, increase productivity and improve the level of safety.

“As long as we take away the foreign workers, you should give us the grant or the benefits, regardless of the sector we are in, ” he said.

Under Budget 2020 which was tabled a month ago, the government has allocated a total of RM550mil to provide smart automation matching grants to 1,000 manufacturing and 1,000 services companies to automate their business processes.

This grant will be given on a matching basis up to RM2mil per company.

According to a report published by Bank Negara in March 2018, the government has allocated approximately RM8bil since 2008 to assist with technology adoption and commercialisation efforts.

The report pointed out that the readily available pool of cheaper low-skilled foreign workers distorts domestic factor prices, and thus discourages industrial upgrading.

“It makes labour relatively cheap when compared to capital, and thus weakens incentives for firms to substitute labour for technology, or for greater value-adding activities from the employment of higher-skilled labour.

“While grants and incentives for automation and technology adoption are helpful, they are by themselves insufficient to create the necessary push for firms to move up the value chain, ” said Bank Negara.

Echoing a similar stance, Azmir pointed out that the government’s objective to mechanise many of Malaysia’s labour processes would remain difficult to achieve as long as the alternative option or foreign labour continues to be cheaper to obtain.

He also added that the Malaysian labour force and business productivity will always remain at the current level, unless concrete measures are taken to reduce the country’s long-running dependency on foreign workers.

“What we are saying to the government is that if you want to fix this issue, you need to look at how we can work together in terms of mechanising and using automation.

“Any company will be motivated to bring in machines if the ROI is faster. Also, with fewer foreign workers, the amount of money or salaries sent back to their countries will also reduce and we think this is a win-win situation, ” he said.

The concern on Malaysia’s dependency on foreign workers has been ongoing for years and highlighted by many quarters, including Prime Minister Tun Dr Mahathir Mohamad.

Earlier in April this year, Dr Mahathir warned that with two million Bangladeshis taking up jobs in Malaysia, they would soon be the fourth-largest ethnic group after the Malays, Chinese and Indians in the country.

Finance Minister Lim Guan Eng also noted in his Budget 2020 speech that Malaysia remains highly reliant on foreign workers.

He pointed out that there were officially 2.2 million foreign workers in the country as at end-2018, making up 15% of the national labour force of 15 million people.

For context, the share of documented foreign workers to the overall Malaysian labour force has declined from its peak of 18.8% in 2007.

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