Builders Facing Costlier Labour
as ETP Projects Go Full Steam
Ahead of Malaysia's 2013 General Elections, I returned to my hometown to find out which way the voters were likely to swing.
( the malaysian insider — now offline )
KUALA LUMPUR, April 3, 2013 ― Faced with dirty, dangerous and difficult toil, construction w orkers w ho used to earn RM30 a day are now commanding double to triple that price w ith skilled w orkers draw ing RM95 daily and upw ards, say Malaysian property dev elopers as they w arn of an impending economic crisis due to labour shortage.
The government’s RM1.38 trillion economic transformation projects are fuelling stiff competition among builders to net skilled construction workers from a limited pool and will drive up costs due to labour shortage, said the Master Builders Association of Malaysia (MBAM).
“We have had member companies complaining that there is a pulling [sic] of key personnel from their organisations to join companies that are involved in the announced projects,” said Matthew Tee, president of the umbrella organisation representing the country’s construction industry and services sector.
“Too many jobs such as the mass rapid transit, light rail transit extension, East Coast Economic Region, et cetera are all moving at the same time,” he told The Malaysian Insider in a recent interview, referring to the slew of mega infrastructure projects kick-started nationwide in the past four years since Datuk Seri Najib Razak took office, to lift Malaysia out of the middle-income trap.
On Monday, strategic investment agency 1 Malaysia Development Bhd (1MDB) awarded a RM2.1 billion contract to develop eight sites in the relocation of Pangkalan Udara Kuala Lumpur, which will be transformed into Bandar Malaysia.
The country’s construction industry is expected to grow 10 per cent this year with turnover forecasted at RM120 billion, up RM109 billion from last year, according to Datuk Seri Michael Yam, president of the Real Estate and Housing Developers’ Association (REHDA).
A persistent contributor to the labour shortage is the lack of Malaysians willing to work in what Yam described as the three “Ds” plaguing public perception of the construction industry ― dirty, dangerous and difficult.
With locals being more finicky about jobs, builders say they have little choice but to hire foreign workers to meet project deadlines.
Datuk Kenny Tan, chairman of the public-listed KEN Holdings Bhd said his company has been affected though he was quick to add that the developer of luxury condominiums like the KEN Bangsar Penthouses and green towns like KEN Rimba has not seriously felt the labour pinch.
“My contractors have been complaining that they have not enough workers and that we may fall behind schedule. Also, before, very seldom contractors will say they can’t do a project because they don’t have enough workers.
“Now, even after tendering, that can happen,” Tan told The Malaysian Insider.
To avoid any delays in the delivery of a project, he said his contractors had no choice but to fork out extra money for workers.
“Otherwise, the quality of our work will go down, which I cannot allow,” he said.
Contractor Phuah Chong Ehi said the going rate for skilled workers now was RM60 to RM75 on average although he said some could demand as high as RM95 and more, compared to the RM30 a day when Putrajaya enforced its minimum wage policy in January.
“They don’t have much choice,” he said, when asked about contractors who were unable to pay higher wages or were simply unable to find sufficient workers to complete their projects.
“The market still got a lot of illegal workers, they just quickly use them and let them go,” Phuah said, and added, “What to do? Otherwise, they can’t complete the job.”
Contractors were willing to hire illegals because of their immediate availability, MBAM’s Tee said, compared to having to put up with the hassle of applying for permits through official channels that could take between six months and a year before actually being able to put the migrant worker to use.
“Many Indonesian skilled workers have gone back during the 6P programme,” Tee said, referring to the two-year amnesty offered to illegal immigrants by Putrajaya in 2011 that saw about 74,000 Indonesians, many of them construction workers, return to their home country.
Indonesia has been the biggest supplier of labour to Malaysia, and its workers are preferred by employers due to similarities in language and culture.
“If the Indonesian economy or GDP growth continues to be around six per cent, those skilled workers originally trained in Malaysia will never come back,” he said.
However, Abdul Rafik Abdul Rajis, chief executive of the Construction Labour Exchange Centre (CLAB), believed that contractors prefer to hire migrants because locals demanded higher wages ― adding to the industry’s chicken-and-egg dilemma.
“To be honest I don’t foresee any problems. We have a lot of recruiters and workers. Maybe it’s just that people don’t really know about CLAB,” he said.
The CLAB, set up in 2004 to address the building sector’s manpower woes under the industry regulator, Construction Industry Development Board (CIDB), has strived to discourage the unsustainable dependence on foreign workers through recruitment drives and training programmes.
Abdul Rafik told The Malaysian Insider the government has amended its foreign worker policy to ease the industry’s manpower shortage.
He pointed to the Cabinet’s decision in January to reinstate a 21-year-old levy requiring all new foreign workers to each pay a tax set between RM34.16 and RM154.16 a month, even as the government enforces a floor wage plan mooted last year that will see a 30 to 50 per cent increase in their monthly wages, from RM600-RM700 per month to RM900 in Peninsular Malaysia.
The levy was introduced in 1992 and was fully paid by the workers until 2009 when the government decided to shift the burden to employers in a bid to stem the flood of foreign labour pouring into the country then.
“Now contractors can deduct the levy of about RM1,250 a month from their workers’ salary,” Abdul Rafik said.
He said the government has also provided an alternative mechanism to shorten to two months the waiting period for migrant workers to start work.
CLAB has been empowered with bringing new workers into its pilot “transit centre” even before the workers have secured jobs so that contractors will have a ready pool to choose from when the need arises.
“The government has also given us the green light to transfer a worker from project A to project B if the worker still has time left on his permit after completing the job he was originally contracted for,” Rafik said.
But developers want the federal government to expand the labour supply channels to Vietnam, Myanmar and China.
In a joint statement on March 20, the Malaysian Developers’ Council ― comprising REHDA and two other housing developers association across the South China Sea in Sarawak and Sabah ― warned the labour shortage could drive up costs and delay key infrastructure projects that could put a dent in the Najib administration’s US$444 billion (RM1.38 trillion) plans for Malaysia to become a high-income nation by 2020.
“The real estate and property sector will have higher tender prices, which adds up to overall costs that will pass on to the consumer,” REHDA’s Yam said.