May 10, 2003

Malaysia: Workers' patience wears thin

By Arun Bhattacharjee

PENANG, Malaysia - The prospect of a wage increase looks bleak for a very large segment of Malaysia's 10.5 million workers in spite of their persistent demand for a minimum wage, or at least a poverty-line wage. The government asserts that any increase in wages would hurt the economy badly.
Malaysia perhaps took too long to work out a compromise between the rising cost of living and its low labor costs. Low wages and steady prices were two fundamentals of its progress toward becoming a First World country among the Third World Asian nations. But these two conditions do not hold good anymore.
Caught between rising prices and the government's determination to keep wages low, trade unions in Malaysia are becoming more and more vocal in spite of the Internal Security Act (ISA) and the continued ban against assemblies. The issue is not confined any more to the poorly paid workers demanding a minimum wage, but involves the comparatively highly paid Bumiputra (Malay) majority civil servants as well, who enjoyed a hefty increase in their pay packets last year.
After a decade's effort demanding higher wages and a guaranteed minimum wage, workers from various disciplines, from farm labor to construction to plantation workers, demonstrated for the first time on May 1, Labor Day, a national holiday for the country. They were supported by 62 non-government organizations (NGOs).
Prime Minister Mahathir Mohamad returned to his office after 60 days of leave to face the demand for higher wages. Considering the adverse impact of the minimum wage of MR900 (US$237) per month being requested by the trade unions for the country's new economic policy, Mahathir rejected the idea. He rejected as well a proposal for a five-day week for 900,000 civil servants in the country, as this would increase costs to the government. Mahathir also told Malaysians that they would have to do the jobs previously performed by immigrant workers.
Senator Zainal Rampak, president of the Malaysian Trade Union Congress, the largest organized labor group within the country, asked for legislation of a minimum wage of MR900 per month and a scaled rate of dividends from employee provident funds for lower-income groups. The unorganized labor groups and NGOs were asking in addition for a poverty-line wage even before a minimum wage for the country is accepted. The poverty-line income requested for peninsular Malaysia is MR509, for Sabah MR684 and MR583 for those living in Sarawak.
The new demands came at a time when the economy was being battered by the impacts of severe acute respiratory syndrome (SARS) on top of slow growth in almost all sectors, from automobiles to construction.
The labor movement in Malaysia has always taken a soft approach to avoid direct confrontation with government or industry. The recent demands for wage increases are the result of rising prices, growing unemployment and stymied industrial growth last year. Unemployment in 2002 was 3.5 percent, according to data released by the central Bank Negara Malaysia, and the projection to bring it down to 3.4 percent is difficult to achieve because of various factors, including the country's over-dependence on industrialization and foreign trade, which suffered because of the global economic slowdown.
As a quick fix for the unemployment problem, and consequent drain on the economy, the government decided to repatriate 2 million foreign workers, 20.4 percent of the country's workforce of 9.8 million in 2002, hoping locals would fill the void. That did not work; rather, there was a further decline in economic growth. The construction industry, which had accounted for 2.3 percent of gross domestic product (GDP), has slipped to 1.9 percent as of this month, while the services sector recorded a decline by 0.1 percent. Real wages per employee have declined since 2000. Many fear a further decline in real wages this year due to rising prices of food and consumables.
In an attempt to convince critics, mostly from the opposition and private economists, about the good health of the economy, the government changed the base year for its consumer price index (CPI) from 1989 to 2000, which lowered the statistical inflation rate from 2.9 percent to 1.8 percent for 2002.
"All types of consumer items recorded price increases, with a significant rise in food prices, which accounts for 63 percent of the increase in CPI," admitted one government economist. Malaysia has realized that one of the major flaws in the planning process was low priority to agriculture, requiring the country to spend $2 billion on food imports, he explained.
On top of this, income from agriculture, forestry and fishery is yet to reach the 2000 figure of 2 percent of GDP.
The construction and housing sector complains about the high price of steel and a shortage of materials and manpower, the latter resulting from the repatriation of foreign workers, mainly Indonesian and Bangladeshis, who provided low-cost labor. Along with other industries, the construction industry is asking for a subsidy to maintain growth. Malaysia pumped $620 million last year into the construction sector, but new houses and condominiums remain unsold in almost every state.
Coupled with unemployment and demands for increased wages, Malaysia is suffering because of non-performing loans, another result of the economic slowdown. Malaysia's debt-recovery agency Danaharta has told the government that in spite of its best effort it could recover only $380 million in 2002 out of $7.5 billion in non-performing loans.
It seems that until the economy takes a turn for the better, workers in Malaysia have no option but to listen to the government and put their hopes for higher wages on hold. But how long such a truce will last remains a big question.