INTRODUCTION

Foreign labor in Malaysia has been recently estimated to range between 2 million to
4 million people and their regional distribution is highly imbalanced, in favor of
Peninsular Malaysia. Recent figures show that there are about 1.8 million registered
or regular foreign workers, and the rest (about one million to two million) are
unregistered (undocumented or irregular) workers. In 2011, about 82 percent of
foreigners were in the Peninsula, and the rest were in Sabah/Labuan and Sarawak.
Foreign workers come to Malaysia mainly from Indonesia, Nepal and Bangladesh;
but in more recent years additional workers from Myanmar and Cambodia have been
arriving in larger numbers. Other countries where workers come from are the
Philippines, India, Vietnam, Pakistan, Thailand, China, and Sri Lanka but their total
numbers are low compared to the other leading groups. The large inflow of foreign
workers into Sabah and Sarawak from neighboring countries is largely due to
political and economic factors in their own countries. Sabahs proximity with the
Southern Philippine islands accounts for the concentration of Filipino foreign workers
in Sabah as opposed to the rest of the country. The shared borders between
Sarawak and Kalimantan in Indonesia continue to facilitate the inflow of many
irregular foreign workers as well as cross- border workers who commute to work
daily.
The utilization of foreign labor in Sabah and Sarawak differs in important respects
from the Peninsula. For instance, in the Peninsula the largest numbers of foreigners
are employed in the manufacturing sector; in Sabah and Sarawak, the plantation
sector takes the lead. In recent years, foreign workers in Sabah have begun to make
inroads into petty trading, domestic services, transportation, construction, and
renovation works. There are some skilled foreign workers in Sabah and Sarawak as
well, but they are generally medical officers, teaching professionals, and expatriates
attached to the larger corporations. Skilled labor in the Peninsula, though small in
proportion to the foreign labor force, is also growing in the skilled services subsectors.
Although the reliance on foreign workers began in the 1970s and through the 1980s
to support Malaysias growth strategy, formal guidelines pertaining to their

employment were only introduced in early 1990s. The official policy stance of the
Government was to permit foreign workers as an interim solution to meet demands
for low- skilled labor in certain sectors of the economy. The Government supported
immigration as part of its high growth strategy while it pursued a longer-term strategy
to upgrade the economy and expand the supply of skilled labor. As a result, the labor
market welcomed immigrants, especially in plantations, construction sector and
domestic employment. In the late 1980s, demand for low skilled foreign workers in
labor- intensive manufacturing sub-sectors (namely electronics, textiles, nonmetallic, and mineral industries) grew. But concerns were raised about foreign
workers employment in the manufacturing sector, since the view was that local labor
is available and could be attracted to the sector.
The main determinants of the continuing inflow of foreigners are a combination of
economic, socio- cultural, and external political factors. Rapid industrialization,
urbanization, strong economic growth (above five percent in the last two decades),
and a relatively small population base created a situation of relatively high
employment and tight labor markets. Movement of people to urban areas led to
acute labor shortages in rural areas and the plantation sectors. Also, Malaysians
rapidly increased their education levels and rejected jobs in agriculture and
construction in favor of formal and better-remunerated employment in the public and
private sectors. Higher educated women joined the labor force and needed the
services of domestic household workers. Political instability in neighboring countries
also created an incentive for people to come to Malaysia as asylum seekers, regular
or irregular workers. Lastly, comparatively slower growth in neighboring countries,
including low wages and high unemployment, makes Malaysia an appealing
destination labor market.
EFFECT OF IMMIGRATION ON THE MALAYSIAN ECONOMY AND SOCIETY
The goal of the analysis undertaken in this part of the report is to identify how
immigration affects various labor market outcomes for Malaysian workers as well as
the productivity of firms in the Malaysian economy, and society as a whole. At the
household level, the analysis focuses on impacts

on employment levels and wages, since these outcomes are directly affected by
immigration. At the firm level, the analysis focuses on estimating the effect of
immigration on firm productivity; the firm level analysis gives some indication of
whether immigration deters technological advancement in Malaysia or not. Social
outcomes are measured through the incidence of criminal activity in the country. This
social dimension is very relevant to Malaysia not only because of the costs crime
imposes to the economy but also because crime rates have been increasing over
time, in parallel to immigration rates, and anecdotal evidence in the country points to
the increasing presence of immigrants as primary culprits.
General economic outcomes, such as economic growth or poverty reduction, are
influenced by many other forces which make direct inference much more
problematic. The focus of the analysis of this report is on: labor market outcomes of
Malaysian workers, firm productivity, and social costs imposed by immigrants. These
three areas of analysis are the most policy relevant given how much attention they
are given by Malaysians, the press and by policymakers.
Impact of foreign labor in Malaysia
There are several factors as a result of the influx of illegal immigrants into the
country. This situation would be worse if not addressed carefully. This paper outlines
the four main causes of the destruction of the state if it is not controlled properly, ie:
(i) political/security threat; (ii) job opportunities; (iii) cultural threat and contribution;
and (iv) social or economic burden.
Political/Security Threat
There are various possibilities why Malaysia to be a premier destination for
immigrants come to Malaysia. The key factor is the political factor Malaysia itself.
Politically stable and peaceful clear signal for immigrants come to Malaysia which
safe for them to stay. If politics is in an unsafe condition certainly illegal immigrants
not come to Malaysia. Although Malaysia has a diversity of political views that form
the basis of national interest in peaceful government, despite political differences.
For examples, in Indonesia and Thailand, factors that causing political instability in
the country and cause their people to go out and become illegal immigrants to other

countries such as Malaysia.

The conflict and security dilemma that may result from illegal immigration in Malaysia
could upset the social order and lead to political instability. Political instability is an
important variable that has been widely shown to hamper economic growth (Alesina
et al., 1992; Barro, 1991; 1996). Instability engenders uncertainty about future
policies thereby discouraging investment and leading to capital flight. It also
adversely affects the quantity and quality of labor available for production as the
most skilled and educated workers in the economy flee to avoid persecution (in the
wake of political upheaval) or leave in search of better economic opportunities (Fosu,
1992). Consequently, the level of output would decline and the economy would not
be on an optimal growth trajectory. This underscores the importance of political
stability and the need to investigate the channels through which different factors may
upset the political balance.
The second category that identified is perception of migrants as a political threat or
security threat to the regime of the host country. This was exemplified in the bombing
on our neighbourhood countries. Immigrant groups also may pose a security threat
to host countries by smuggling arms or people, forming alliances with domestic
opposition groups, or participating in drug trafficking.
Influx of migrants resulting factor of safety because they have a representative of the
country's ambassador to Malaysia and the High Commissioner to Malaysia. If their
security is threatened, they can report to the ambassadors of their respective
countries. This can make them work without discrimination by employers. Security
interests that are of concern to the Government of Malaysia be a major factor influx
of foreigners.
Malaysias law does not provide any protection to assure the safety of the offender
immigrants guaranteed in Malaysia. The strength of national security at likely rope by
the Royal Malaysian Police (RMP), Imigration Department of Malaysia, Ministry of
Human Resources, Ministry of Home Affairs as well as other security personnel. For
example, the safety of foreigners who work in Malaysia will be defended, accordingly
as an event that shook Malaysia a long time ago, a case worker from Indonesia,

Nirmala Bonat punish by her Malaysian employers. Employers Nirmala was

sentenced by the court due to abuse done to the employees. These factors make
immigrants flooded Malaysia for their welfare will be protected and secured.
Job Opportunities
Job opportunities are too many possible why foreigners came to Malaysia. High
requirements in various sectors of employment resulted in increased employee and
this necessarily requires a lot of human resources. Labor shortages and prompted
foreign labor is required. High demand of human resources of foreign workers
resulted some of the employers taking advantage of employing illegal workers to
reduce their production costs and increase their margins. For example, in the
construction and manufacturing, domestic energy is scarce and needs the support of
foreign labor. Like the Sony factory in Prai, Penang, foreign workers equal to the
local workers as well as in the construction sector.
Cultural Threat or Contribution
Malaysia has a population of multi-racial, religious and customs, comprising Malays,
Chinese, Indians and indigenous people; it shows the coloring peace since
independence. A violation of the norms of the host country may be regarded as a
threat to basic values and a threat to national security. How a host community
defines itself and how they decide who can be admitted into the community will
determine the rights and privileges of those permitted to enter and whether the host
culture regards a migrant community as potential citizens.
However, there is a view that the impact of illegal immigrants into the country without
control, will result in the leakage of a new generation of Malaysian culture, and the
worst scenario it can be a cultural threat. The perception of cultural threat to national
security has led to the realization of the importance of a culture of Malaysia's which
have unique multi-racial and religous that live in peaceful and united.

The contributions of immigrants to various aspects of Malaysian culture are too

numerous to mention. In painting, sculpture, music, dance, scholarship, fashion,
popular entertainment, and sports, immigrants have brought elements of their own
culture and have embraced, reinterpreted, and reinvigorated Malaysian culture to
produce a product, which although uniquely Malaysian in its formation, has near
universal appeal. Malaysian music, film, and fashion have become increasingly
popular throughout the world as they exalt Malaysian values in a context readily
understandable to people all over the planet. Alternatively, aspects of culture brought
by immigrant groups survive intact. Residents of the Malaysia can listen to music
such as Dondang Sayang, Dikir Barat and Zapin and enjoy scores of different
traditional cuisines. The presence of the culture of immigrants expands the
recreational and leisure activities available to Malaysian and enhances our
knowledge and appreciation of other cultures and peoples. Ultimately, this enhances
the ability of Malaysian to communicate, travel, and conduct business abroad,
enriching us socially and economically.
Social or Economic Burden
Migrants may be perceived as a social or economic burden because of the fiscal
costs they impose or because of their purported social behavior, such as criminality
or welfare dependency. Societies may fear that the numbers of people entering are
so numerous that they will create a substantial economic burden by straining
housing, education, and transportation facilities. In advanced industrial societies,
services provided by the welfare state to newcomers may generate resentment. The
perception that immigrants receive social welfare benefits for which they are
ineligible or manipulate the asylum process to delay their removal from the Malaysia
results in laws designed to stop these perceived abuses.
In fact, that immigration produces net economic gains for domestic residents.
Immigrants increase the supply of labor and help produce new goods and services.
However, as they are paid less than the total value of these new goods and services,
domestic workers as a group gain. However, there may be losers as well as gainers
among different groups of Malaysia residents. Along with immigrants, the gainers are
owners of productive factors that are complementary with the labor of immigrants

whose incomes will rise. Consumers who buy goods and services produced by
immigrant labor also benefit. The losers may be less-skilled domestic workers who
compete with immigrants and whose wages will fall.
The evidence points to the conclusion that immigration has had a relatively small
adverse impact on the wage and employment opportunities of competing native
groups. This effect does not appear to be concentrated in the local areas where
immigrants live, but instead is dispersed across the Malaysia. This dispersal comes
about in part because competing native workers migrate out of the areas to which
immigrants move.