Costs the real problem, not jobs

2009/02/25
Posted by Chea Sophal

Costs the real problem, not jobs

Santha Oorjitham

Labour-intensive industries, like the garment and textile trades, have to move into higher value-added products to survive

The employment scene is not as bleak as some retrenchment figures suggest, Malaysian Industrial Development Authority director-general Datuk Jalilah Baba tells SANTHA OORJITHAM. Companies are re-absorbing and retraining workers and taking the softening in demand as an opportunity to move into higher technology products

Q: Could we have the latest figures on retrenchment and re-employment?

A: We have a good relationship with all the companies to which we've given licences and incentives. They come here to give us the "true picture". Sometimes, the news released is not accurate.For example, Intel closed its operations in Penang and retrenched 1,000 workers but the story that was not picked up or highlighted was that all these workers were given an offer to be absorbed in its Kulim High-Tech Park operations.Another example was that of Hualon Corp. The textile manufacturer retrenched 5,382 staff in its Negri Sembilan operations and 1,789 in Malacca, but when it was acquired by Recron of India's Reliance Group, workers were re-employed.

I would say 70 to 80 per cent of workers are absorbed by the same or different companies. It's not as bad as people think. Last year, 19,000 were retrenched from the manufacturing sector, but you must take into account the re-absorption offered by the same companies, and manufacturers approved by Mida which have commenced operations last year, with 35,000 new jobs (mostly skilled) created.There are more than enough job opportunities, compared with the number of retrenched workers seeking re-employment.

Q: How many retrenched workers are expected to return from abroad?

A: There are an estimated 45,000 Malaysians working in Singapore. The assumption is that half them have been laid off. But through our networking, we have learnt that the Singapore government is giving assistance to those companies to help keep them open during this slowdown.Instead of retrenching workers, they are using the soft period to retrain them with higher skills. The cost is being borne by the government as part of its incentives.We are also thinking of proposing some kind of similar assistance for our industries.

Q: How have unemployment levels been affected?

A: You must remember that before this economic downturn started, the unemployment rate was only 3.4 per cent. This year, it will be almost five per cent. But we have almost full employment. That's good, in the eyes of the workers.However, in our efforts to attract investment, those companies we are negotiating with are alarmed that there's a shortage of skilled manpower here, which is a common issue.So, with the sudden availability of skilled manpower (those being laid off), they don't have to worry because there are projects we are negotiating which are eyeing them.Workers should look for these opportunities.

Q: Which sectors will be retrenching the highest number of workers?

A: Most of the retrenched workers will be in labour-intensive industries, such as garments, textiles, furniture, consumer electronics (memory chips and memory products) and component assembly. They have to move into higher, value-added products and knowledge-driven industries and abandon those which are labour-intensive, or move that section to cheaper destinations. To a certain extent, we shouldn't be too worried about companies, Malaysian or foreign, moving to Vietnam, Thailand, Cambodia and even some African countries. There is no capital outflow and if such companies stayed here, they would die anyway. They bring back their earnings to Malaysia, because there are incentives. When they bring back their profits, the government gives them tax exemption.

Q: Which sectors are still hiring?

A: Companies still hiring and expanding are in electronics, alternative energy, basic metals, transport equipment, food production, chemicals and chemical production and petrol products. This is the transition period we should use to retrain our workers.In order to stay ahead, we have to keep moving up. Other countries are catching up.

Q: What measures are companies taking instead of retrenching, and what would you recommend?

A: A few companies are facing softening demand but they are trying to convince their headquarters not to retrench workers. Retrenchment is in the hundreds, not thousands. Companies are asking for assistance to use this soft period to train them in higher technology, which they hope to bring here.Many companies are sending workers to be trained at their headquarters, with our assistance, and contributing to human capital development. They will come back and train newcomers.

Q: How else is the government assisting? What will be in the second stimulus package?

A: We are looking into it. This assistance could be not only through the stimulus package but also through the committee on high-impact investments, chaired by the deputy prime minister, for which Mida is the secretariat.

We can respond within a month but they (industries) must give us detailed proposals. We will process these applications and bring them to the committee.The major concern of industries is the increased cost of production.

The major contributor to this is the increase in electricity and gas prices. Non-availability of gas for newcomers is also hampering our ability to attract investment and encourage existing companies to expand.

The deputy prime minister has instructed Petronas to look into this problem.

There has been a reduction (in oil and gas prices) but it is not equal to the quantum increased. The companies are still not too happy. Hopefully, the next review will bring good news to industries.Some of them are asking for a second round of incentives. If the proposals benefit the country, we will consider.We are constantly looking for feedback.

The International Trade and Industry Ministry has called all industry associations to ask what else the government can do to assist them during this period. Small and medium industries, for example, have asked for deferment of income tax for a year and a moratorium on payments to banks. These might be in the stimulus package.