Malaysia Firms Nix Orders As Migrant Labor Shortage Worsens

Malaysian businesses ranging from palm oil plantations to semiconductor manufacturers are refusing orders and foregoing billions of dollars in sales, hampered by a labor shortage of over a million people, which threatens the country's economic recovery, Liz Lee, Rozanna Latiff, and Mei Mei Chu reported for Reuters.

Photo Insert: The palm oil industry, which accounts for 5% of Malaysia's GDP, has warned that 3 million tons of crop could be lost this year due to unpicked fruit, resulting in losses of more than $4 billion.

Despite lifting a COVID-19 freeze on recruiting foreign workers in February, Malaysia has not seen a significant return of migrant workers. According to industry groups, companies, and diplomats, this is mainly due to slow government approvals and protracted negotiations with Indonesia and Bangladesh over worker protections.

The Southeast Asian nation, an important link in the global supply chain, relies on millions of foreigners for factory, plantation, and service sector jobs that are regarded as dirty, dangerous, and difficult by locals. Manufacturers, who make up nearly one-fourth of the economy, fear losing customers to other countries as growth picks up.

"Despite the greater optimism in outlook and increase in sales, some companies are gravely hampered in their ability to fulfil orders," said Soh Thian Lai, president of the Federation of Malaysian Manufacturers, which represents over 3,500 companies.

Palm oil growers are at breaking point, said Carl Bek-Nielsen, chief executive director of oil palm grower United Plantations. "The situation is dire and very much like having to play a game of football against 11 men but only being allowed to field seven," he said.

The palm oil industry, which accounts for 5% of Malaysia's GDP, has warned that 3 million tons of crop could be lost this year due to unpicked fruit, resulting in losses of more than $4 billion. If the labor scarcity continues, the rubber glove business expects to lose $700 million in revenue this year.

According to industry and government data, Malaysia is short 1.2 million workers across manufacturing, plantation, and construction, with the shortage worsening everyday as demand climbs as the pandemic eases.

Manufacturers require 600,000 workers, construction requires 550,000, the palm oil industry requires 120,000 workers, chipmakers require 15,000 workers and are unable to meet demand despite a global chip shortage, and medical glove manufacturers require 12,000 workers.

According to statistics from S&P Global, Malaysia's manufacturing Purchasing Managers' Index fell to 50.1 in May from 51.6 in April, narrowly remaining in expansion, as the industry shed the most jobs since August 2020.

According to Wong Siew Hai, president of the Malaysia Semiconductor Business, chipmakers are turning away clients, locals are not interested in working in the industry, and many who do join depart in less than six months.

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