FMM sees red over foreign worker levy hike

PETALING JAYA: The Federation of Malaysian Manufacturers (FMM) has called on the government to withdraw a decision to double the foreign worker levy for the manufacturing sector, a move which the deputy prime minister has said will help bring in a much-needed RM2.5 billion boost to the country's coffers.
Datuk Seri Ahmad Zahid Hamidi reportedly said the restructuring of the levy rate system for foreign workers into two categories will bring in an extra income of RM2.5 billion to the country.
Under the new system, foreign workers in the manufacturing, construction and service sector are in one category, for which the levy is RM2,500, while those in the plantation and agriculture are in another, for which the levy is RM1,500.
Previously, different levies were charged for foreign workers in different sectors.
The FMM in a statement released yesterday, lamented the move, which it said would result in the doubling of the foreign workers levy for the manufacturing sector from RM1,250 to RM2,500 per worker a year.
"The government's sudden decision to double the levy for the manufacturing sector with immediate effect is unacceptable. The government has not given due consideration to the significant impact on business sustainability and socio-economic consequences," it said.
FMM said employers had asked that the levy be maintained at the current rate, at least until economic conditions improve, and is disappointed with the "sudden and steep" increase.
It said the doubling of the levy is hefty, as manufacturers already have to contend with the current challenging economic conditions and the rising cost of doing business, namely, the new minimum wage level, higher energy costs, higher costs of raw materials inputs and lower sales revenue arising from the weakening of the ringgit.
"Business sustainability is at stake. Jobs are also at stake, even for local workers when businesses find great difficulty in sustaining their operations. The government should look at business sustainability in totality, considering all relevant factors which would have an impact; and not in isolation of issue by issue.
"All issues put together become an insurmountable economic fire which could overwhelm and consume businesses, employees and suppliers throughout the supply chain," it said.
FMM explained that businesses are aware of the need to reduce dependency on foreign workers. However, any changes should be pre-announced and gradual whether with respect to the quantum as well as timing of the increase, to allow companies adequate time to adjust.
"Changes and especially hefty changes with significant impact on business costs, should not be made overnight," it added.
The federation called on the government to reconsider its decision on the foreign worker levy increase and to implement it in phases when the economic situation improves.
It also called on the government to hold discussions with industry stakeholders and work together on a more acceptable schedule of increase as well as timing.
"In the meantime, the levy rate increase should be withdrawn," it said.