Economy

SHOCKING NEWS: Government Wants All But Highest-Paid Expats to Leave

expats stress

We have previously voiced our concerns about the new government’s apparent indifference to foreigners and their potential contributions to Malaysia. For instance, the Malaysia My Second Home programme is having some serious problems, which not only has resulted in fewer people relocating here, but has also given a rather negative impression of the country. Equally, the decision not to give Tourism Malaysia some serious advertising money to promote Visit Malaysia Year 2020 means the country will, most likely, not get a major lift in tourist arrivals next year. Both these groups can make a material contribution to the economy through their spending in Malaysia, but it seems that this value is not appreciated.

Now the government is going a step further and saying it only wants senior level foreign staff working here and would like to kick out all those earning less than RM10,000 a month.

Currently, work permits for expatriates and skilled workers are issued in one of three tiers, determined almost solely by monthly salary. The government, according to an article in Free Malaysia Today, is considering eliminating the lower two tiers, therefore only approving work permits for those earning RM10,000 or more each month, which is currently the highest tier, Category I. Another article in New Straits Times suggests that only the lowest tier is under review for elimination.

airport light expats
Image credit: Bethany Legg

The lowest tier, Category III, currently applies to skilled workers earning RM3,000 to RM4,999 a month, but approval for this category is very difficult as employers must apply for a special exemption for salary under RM5,000, in addition to the regular approval process. As of 2018, only a tiny fraction of expats working in Malaysia (~1.8%) fall under this category, and its elimination would not be very keenly felt by skilled foreign workers overall. It is Category II, with a monthly salary between RM5,000 and RM9,999, that would cause the greatest impact if it is eliminated.

On the surface, it may like a reasonable decision, simply because Malaysia has quite a high number of unemployed people (over 500,000), especially among new graduates. However, the decision assumes that new graduates and other unemployed workers could quickly fill the jobs vacated by departing expats. We feel this logic is seriously flawed.

Here at TEG Media, a company which was established 23 years ago in order to promote Malaysia to the international community, we have always hired Malaysians if we can, but we have also found it very valuable to have a few expats on board, simply because of the very nature of our business. Experience has shown us that promoting Malaysia and interacting with foreigners is often more effective when we have one or two foreigners on the payroll. These tend to be talented individuals who are not looking for highly paid expat packages, but want to live and work in Malaysia because they love it here and feel they can contribute in some way. This is true for not only our company, but for many others who hire expats for some skilled work positions. More and more, expats in Malaysia are taking more local pay packages rather than the lucrative expat pay packages of old, which frequently included housing and car allowances, and even tuition fees for expat children. Those days are largely gone, except perhaps for very senior positions in multinational companies, so expats are content to be paid comfortably, but more in line with local pay grades, despite their experience and qualifications. They feel that the lifestyle and opportunities Malaysia offers more than make up for the big salary, and they’re keen to contribute to a dynamic and growing country.

It’s important to note here, too, that the immigration department is currently quite strict in approving work permits, and if an employer cannot convince them they are necessary, then it is unlikely the permits will be granted.

As a result, we seriously question whether keeping out lower-paid expats will help the unemployment rate and believe it could, in fact, have a negative impact. Certainly some international schools pay their teachers, particularly senior-level ones, more than RM10,000 a month, but many schools hire expat teachers on lower pay packages. It is unquestionable that Malaysia’s strength in international education has been a substantial benefit to the country, bolstering both its economy and its reputation. It’s equally certain that the success of this important sector is in no small part due to the contribution of many well-qualified and committed expats working alongside talented Malaysians. This ruling could potentially throw all of that into disarray.

expats empty office
Image credit: Kate Sade

There are indeed several factors which we wonder if the government has really thought through.

As we explained earlier, some expats love Malaysia, feel they can contribute, and are not looking for extremely high paid jobs. They are willing to be hired on local terms and often have unique skills which are valuable to the country. These could include foreign language skills, useful overseas contacts, or significant experience working in other overseas markets. These are not the expats working with large multinationals who have the attractive compensation packages, but qualified people who want to work overseas and gain some experience. Because they are not looking for highly paid jobs, they can be an invaluable resource to smaller Malaysian companies.

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Additionally, expats who start up new businesses in Malaysia – which of course ultimately benefits the country – often choose not to pay themselves high salaries while they are building up the business. They may now be forced to pay themselves an uneconomic wage just in order get the work permit. Alternatively, they may choose to exit the country and invest elsewhere.

Also worth noting is that some expats in senior positions, or those who have settled here long-term, have children who have not yet decided to leave home or who would prefer to live closer to their parents. We know some who have a lot of talent and had to search very hard for a company willing to go through the process of getting them a work permit – an onerous exercise. However, now the door is potentially being shut to them, and they would be forced to leave the country – and their family.

The fact is that, even now, it is not easy to get a work permit. You have to justify why you need a foreigner to fill the job. The requirements are quite comprehensive, as well, and only by satisfactorily convincing authorities about the need for a foreigner to fill the role, obtaining recommendation and endorsement from the relevant regulatory bodies (for the given industry) in Malaysia, and then producing all the necessary documents and meeting all the requirements, will the immigration department give its approval. So even now, it’s a rather involved process, and indeed one that should demonstrate that these are not jobs which could be easily filled by local workers. Now it seems the government is saying, “Even if you can convince us that the company needs your talent, we don’t want you working here.”

withering plant
Image credit: Sam X

As a company which has been endorsing and promoting Malaysia for over 20 years, TEG Media have definitely benefited from having foreigners on board. For example, we arranged for a group of journalists from the UK to come and visit so they could promote the Malaysia My Second Home programme. That was only possible for a small company like ours because a British expat we employed had the relevant contacts in the UK. There are many other examples.

As mentioned, our company employs Malaysians for the most part, and Malaysians always comprise the strong majority of our workforce. However, we require a very high standard of written English to promote Malaysia to English-speaking foreigners. That is hard to find in Malaysia, and so we have hired foreigners at times when we could not find a local with the requisite skills. Companies wanting skills in other languages may find it even harder for find them. As for us, we currently only have three expat staff on work permits, but they each play a critical role in our company’s operation.

Finally, the new rules risk forcing companies to pay a substantially higher wage to some foreigners than they otherwise would wish to, with the inevitable negative impact on Malaysian staff. For example, if you employ a young German, partly because of his native language skills which are important to your business, perhaps previously he was paid RM5,000 or RM6,000, which is certainly an attractive enough wage in Malaysia, but not outrageously so. Under the new rules, you will have to pay him over RM10,000 a month or let him go. Obviously, the Malaysian staff will not be happy that the foreigner is now receiving a significantly higher salary than they are, simply because he is a foreigner.

Although we hire mostly Malaysians, we feel it is important to have a few foreigners because of the nature of our business. Nearly all the foreigners we have hired in the last 23 years have been here because they loved Malaysia and they possessed valuable skills we could not find in the local labour market. If we are no longer permitted to hire such expats, it puts into question the future of our company. It would indeed be ironic that a policy ostensibly aimed at helping create more jobs for Malaysians would cause Malaysians to become unemployed. We do not feel we are alone in this situation, either.

Singapore has achieved a very high level of economic success by welcoming foreigners to come and work there. They still have appropriate restrictions on expats working there, but do not limit it to only highly paid expats because they do not feel that the monthly salary is the right benchmark – and certainly not the sole one – for determining who can add value to the country’s economy. We strongly hope Malaysia can come to the same conclusion. 

We like to feel our efforts to promote Malaysia have added some value to the country over the years. Previously, that view seems to have been shared. Our CEO and company founder, for example, was given unsolicited Permanent Residency by the last government because they valued the contribution to Malaysia that the company had made. The new government, by contrast, seems to feel foreigners are not a valuable or desirable part of their economic growth plans, and much as we welcomed and celebrated their historic win at the last election, we cannot help feeling this is a disappointing outcome.

Kuala Lumpur Malaysia capital city
Image credit: Pawel Szymankiewicz

Foreigners on both ends of the economic spectrum – from skilled, professional expats to hardworking foreign workers from neighbouring countries – have played a critical role in Malaysia’s remarkable growth and economic successes over the years. We feel this is a rather poor way to repay their contributions, and it continues to suggest to foreigners that they are increasingly unwelcome in Malaysia. It is our sincere hope that the government reconsiders implementing this policy and continues to allow talented foreigners to work here, with an appropriate approval process, and contribute to the betterment of a country that we all enjoy and appreciate.

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