The Malaysian economy is being adversely affected by the persistent lack of foreign labor.

1.2 million workers are currently needed in Malaysia, according to Malaysian data, with 120,000 needed in the palm oil industry, 600,000 needed in manufacturing, and 550,000 needed in construction.

There is a labor deficit of 15,000 individuals in the manufacturing sector, specifically in the semiconductor manufacturing sector. Despite the fact that there is a “chip shortage” worldwide, semiconductor manufacturing facilities are forced to postpone a significant number of orders. There are already 12,000 unfilled positions in the medical rubber glove manufacturing sector; if this condition persists, the sector could lose $700 million.

The economy of Malaysia is primarily dependent on exports, and many of these businesses are labor-intensive and need a lot of manpower. Due to Malaysia’s labor shortage, foreign workers—including some seasonal ones—have grown to be an essential component of the country’s labor force. The majority of the labor is performed by foreign workers, particularly in those businesses with subpar working conditions and low wages, such the plantation and service sectors.

Malaysia decided to impose an immigration ban on foreign employees in order to stop and contain the new crown plague when it broke out in 2020. To stop the virus from spreading, the Malaysian government has since detained illegal foreign workers there. There were roughly 1.1 million licensed foreign workers in Malaysia in October 2021, down more than one-third from 2018 according to data made public by the Malaysian National Chamber of Commerce.

There is a “labor shortage” in Malaysia’s manufacturing, service, and plantation sectors as a result of the drop in foreign labor. The Malaysian government declared that it will allow foreign employees back in by December 2021. In addition, Malaysia has signed new labor contracts with some of the main nations that export foreign labor, including Bangladesh and Indonesia.

However, as some Malaysian sectors had anticipated, the labor shortage has not been replaced by foreign employees as swiftly. The Malaysian government takes a long time to approve applications for hiring of foreign workers, and Malaysia has had trouble negotiating with nations like Bangladesh and Indonesia, according to media analyses. Better pay and perks are desired by both Bangladesh and Indonesia for their workers departing for Malaysia.

It is clear that the Malaysian government is currently attempting to control the foreign labour market through stringent labor approval procedures, but it is still unclear whether this strategy will effectively reduce the labour pressure on domestic businesses and permanently resolve the foreign labour issue.