Malaysia Faces Severe Labour Shortage

Malaysian companies, limited by a nationwide shortage of workers, have canceled billions of dollars in sales amidst a labour crisis that threatens to disrupt Malaysia’s post-pandemic recovery. The paucity of labour has been attributed to slow government approvals and stalling negotiations with Bangladesh and Indonesia over worker protections.

The Malaysian economy relies upon millions of foreign workers for manufacturing, service, and agricultural jobs that have become unattractive to Malaysian citizens. Malaysian industry and government data reveal that Malaysia currently lacks at least 1.2 million workers across manufacturing, plantation, and construction industries.

Due to the labour shortage’s constraints on production capabilities, Malaysian chipmakers are turning away customers and furthering the global computer chip shortage, according to the president of the Malaysia Semiconductor Industry Association. The palm oil industry claims that millions of tonnes of crop, a loss totaling $4 billion, could be lost without additional labour to harvest their products. The rubber glove industry warns of $700 million in lost revenue without additional workers to fill their 12,000 vacant positions.

Diplomats from Indonesia and Bangladesh, two of Malaysia’s largest suppliers of foreign workers, claim that disagreements over workers’ protections are at the center of Malaysia’s labour crunch. Although Bangladesh agreed to send workers in December, Bangladeshi leaders later delayed the process due to fears of debt bondage and exorbitant costs for workers. Bangladeshi welfare and overseas employment minister Imran Ahmed told Reuters, “Our main focus is our workers’ welfare and rights. We’re making sure they get standard wages, they have proper accommodation, they spend minimum cost for migration and they get all other social security.” Ahmed added that Bangladesh did not “want workers to end up falling into a cycle of debt trap” that has been documented in the past several years.

Since 2020, Malaysia has come under intense international scrutiny over its harsh labour conditions, with accompanying import bans threatening Malaysia’s export-driven economy. As of January 2021, the United States held six Withhold Release Orders against Malaysian companies over allegations of forced labour. In November of 2021, Dyson separated itself from its Malaysian supplier after an audit revealed continued labour abuse. Malaysian officials have openly acknowledged the prevalence of unpaid wages, lack of rest days, and unhygienic employee living quarters, each a condition that indicates forced labour under the International Labour Organization. Although Malaysia announced a 2021 plan to eliminate these conditions by 2030, international labour rights pressures threaten to undermine immediate investor and worker confidence in Malaysian industries.

Labour blockages from Bangladesh and Indonesia place additional pressure upon Malaysia to improve labour conditions. Their pressure may destroy Malaysian companies entirely. With tight, post-pandemic balance sheets, Malaysian companies may not have the resilience to survive a severe labour crisis.