AT a busy cafe in the suburbs of Petaling Jaya, a customer is hungrily eyeing his steaming plate of mee goreng and tall glass of iced coffee.
But get this, his waiter is not the usual foreign worker that we have all become so accustomed to.
Instead, it is a robot who is serving him. Yes, an actual robot which has been programmed to make its way to customers’ tables with drinks and food placed on trays neatly fitted on its “body”.
Customers only need to take their orders off these robots. And in return, they’ll even get an automatic terima kasih greeting.
Observers say this is one of the ways that food and beverage companies are using to address the current issue of labour shortage, particularly foreign labour, in Malaysia.
Across the country, many other industries like plantation and manufacturing are also facing the issue of lack of workers, no thanks to the Covid-19 pandemic which initiated global border shutdowns in early 2020, stopping fresh arrivals of foreign labour into the country.
Notably, foreign workers in Malaysia are typically brought in for low-wage, low-skill jobs or simply, work that most locals shun.
In fact, it has been reported that Malaysia stands to lose a whopping RM20bil in revenue due purely to the fact that there are just not enough workers to work at our oil palm plantations currently.
In the earlier days of the pandemic, glove manufacturers were crying out for workers to help cope with the surge in demand for its products.
Nevertheless, it is a different scenario today for the industry with demand that has dwindled since countries the world over transitioned into the endemic phase and now require less of personal protective equipment.
Still, with other industries facing a labour crunch, more foreign labour is expected to be brought into the country over the next few months, as the government irons out details and loosens earlier restrictions put in place.
Meanwhile, questions are being raised – have we as a nation become too dependant on foreign workers? And why have we not gone higher up the value chain in terms of labour? Also, whose fault is it that we are in this situation?
Senior fellow at Institute of Democracy and Economic Affairs (Ideas) Carmelo Ferlito for one thinks that we are not alone in this predicament.
“The shortage of foreign labour, which is a consequence of rising waves of nationalism, is affecting many countries. Singapore is experiencing the same.
“In Western countries like the United States where massive fiscal aids have been deployed, they are struggling to get their people back to work,” he tells StarBizWeek.
Sunway University economics professor Yeah Kim Leng says the issue of foreign labour shortage is common among countries which have a high dependency on foreign workers.
“Based on the International Labour Migration Statistics database released this year by the International Labour Organisation, Malaysia has the third highest share of migrant workers in total employment at 15% in 2019. Singapore has the highest share at 38% followed by Brunei at 35%, “ Yeah tells StarBizWeek.
“Unofficial estimates suggest a similar or larger number of unregistered foreign workers in Malaysia.
“Over the two-year long pandemic prior to the transition to endemicity on April 1 this year, new recruitments were halted and many foreign workers that had returned home were unable to return to Malaysia, thereby compounding the foreign labour shortage,“ he adds.
Yeah says while it is encouraging that businesses are experimenting with robotics not only to reduce manpower but also to enhance efficiency, quality and cost-competitiveness, a sustained pace of adoption of mechanisation, robotisation and labour-saving technology in labour-intensive industries is crucial.
This is to reduce the country’s long-standing reliance on unskilled or low-skilled foreign workers.
“More importantly, businesses that rely on cheap foreign labour should upgrade and move up the value chain through deployment of Industry 4.0 technologies, including robotics, artificial intelligence, machine learning and data analytics,” he adds.
Yeah says without continuous upgrading to higher value-added activities and knowledge and technology-intensive products and services, the low value and low skills industries will be outcompeted by other emerging countries that have comparative advantage in low cost labour and raw materials.
Ideas’ Ferlito argues that on one hand, scarcity of labour – which generates a higher cost of labour – is a push toward mechanisation.
“On the other hand, mechanisation is not affordable for everyone. The huge capital investment required for automation may induce some businesses to step up, while others may have to get out of business.
“Also, automation may be possible for certain functions but not for others. Automation can actually be quite anti-economical for very small businesses,” Ferlito adds.
In a nutshell, it is not a black-or-white scenario, as there are a lot of grey areas that blackboard economists, in love with their K versus L dichotomy (capital versus labour), are unable to grasp, he argues.
“An open labour market would allow each business to go towards the direction they prefer and believe will give them the most competitive advantage.
“Forced changes are likely to produce more damages than benefits.”
Each situation, Ferlito adds, is different and competitiveness is the key word.
“Changes are good if they make a business more competitive, otherwise they just fulfill the wish-lists of politicians and intellectuals,” he says.
That said, the issue of labour shortage remains an actual problem, especially so at large plantation companies which are heavily dependent on foreign workers.
In the last quarter of financial result reporting, several local companies cited shortage of labour as among the reasons why they did not perform well.
VS Industry Bhd
, a manufacturer of electronic and electrical components was one of these, recording a 30% drop in its net profit amid the delivery of less orders.
It has since said it has received a new batch of foreign workers with more to come in the near future.
Plantation company United Malacca Bhd, meanwhile, has cautioned that while it expects its fresh fruit bunch production to increase in its current financial year ending April 30, 2023, first-quarter production may have been impacted by labour shortage due to earlier labour recruitment restrictions.
Ian Yoong Kah Yin, a private investor who studies public-listed firms and takes up substantial stakes in those he thinks have value, says that he views the current foreign worker shortage positively.
“This great dependency on foreign labour and therefore inexpensive labour input is untenable in the long term. Manufacturing, construction and plantation companies should collectively reduce this addiction to cheap labour,” Yoong says.
More than just hiring, automating
Apart from bringing in more foreign workers and automating processes, can more actually be done?
A long-time industry observer believes that hiring local workers to do the jobs that most foreigners are now doing could turn out to be a better bet in the long run.
“It’s not entirely true that locals will not do these jobs. If you pay them well enough, incentivise them to perform well and provide them with proper housing and other benefits, I think some will want to work.
“After all, there are a few big companies in Malaysia already doing this, hiring up to 90% local people. The corporates here need to change their mindsets,” he says.
“Yes, the costs may be higher but that can be passed on to consumers. In the long-run, this could work in their favour.”
While this certainly could be a solution of sorts to the current predicament, Malaysia, according to reports, faces another issue at the same time – that of highly skilled individuals continuing to leave the country for our more prosperous neighbour, Singapore, no doubt – lured by better prospects.
“It’s kind of like a double blow. We are experiencing a lack of foreign workers and now that borders have reopened, our highly-skilled people are starting to leave for greener pastures again.
“In fact, Singapore is not only able to attract our highly-skilled but also people who want to work in sectors like hospitality simply because of its stronger currency.
“Malaysia has to reset and now is a good time. We cannot be forever stuck in the middle-income trap or associated with low-skills,” the observer adds.
Iconic Worldwide Bhd group executive director James Tan says many companies which have plans to recommence business in a big way post-Covid-19 are finding that their current workforce does not support their plans.
“Companies are struggling to hire new people across industries and are aggressively sourcing for new local workers to replace foreign workers due to the limited number of foreigners available in the market,“ he tells StarBizWeek.
He, however, stops short of saying whether or not Iconic, which is involved in the production of face masks, gloves and property development, is facing this problem at the moment.
Tan says as global standards of living increase, companies are being increasingly audited and it has become a must for them to comply with Environmental Social and Governance policies.
“With this, companies cannot hire cheap and illegal foreign workers.
“This has limited the pool of workforce available and the cost of hiring and recruiting has also risen. It is a problem for businesses which now have to look for a better solution instead of just relying on cheap foreign labour,” Tan adds.
Government role
Sunway’s Yeah says the continuing reliance of cheap foreign labour can be attributed to a host of factors that include myopic vision or short-termism, policy slippages and lack of focus, business lobby power, poor governance and corruption.
“Apart from the intractable inadequate technological innovation and breakthrough in mechanisation or automating menial tasks such as harvesting oil palm or laying constructing bricks and plastering walls in construction, the blame can be apportioned to government failure, business failure and human failure. “
He recognises that the government has had automation and digitalisation funds disbursed as grants or loans over the years and these have helped the recipients to upgrade and reduce the number of foreign workers.
“But the funds need to be scaled up across all industries to achieve the desired impact at the national level. The private sector also needs to be incentivised either directly via technology upgrading funds or indirectly through rising wage and competition pressures.”
Iconic’s Tan says while the government encourages automation to improve operation efficiency, its funds attract a long list of applicants and companies will have to go through a long process to obtain the funds or grants.
“Most of the grants will be in the form of tax incentives whereby they cannot be utilised immediately to invest in automation, “ Tan points out.
“Companies can only enjoy the incentives when they grow and turn profitable, so it is difficult for newly set up companies to gain immediate benefits.”
Ideas’ Ferlito says: “Governments operate outside of the market. It is not enough to have the availability of capital to invest.
“Profit expectations are key. Why did quantitative easing in the West not work? Because profit expectations were not there, and therefore no matter how much capital is available, that capital will not be turned into an investment.”
He warns that government funds are “dangerous”, as they may induce investments that do not make economic sense, and therefore create “artificial businesses”, which will collapse together with the spillover they created as soon as government support is over.
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