KUALA LUMPUR: The reduction target to below 15 per cent for foreign labour dependency by the government is meaningless and unrealistic, said Centre for Market Education chief executive officer Dr Carmelo Ferlito.
Speaking on the New Straits Times' podcast, Beyond the Headlines, Carmelo argued that unless the nation was faced with a high local unemployment rate, then reducing dependency on foreign labour would not make much sense.
"I think that the target per se is meaningless in the sense that if we were in a period or in an economy characterised by high unemployment I could understand the reasoning, that we should somehow give priority to local workers.
"But we are an economy that at least in the past few decades has never been characterised by heavy unemployment even at the peak of the lockdown.
Now that the economy has normalised we are at a very structural level of unemployment around 3 per cent. So we desperately need to feed our businesses with a workforce that comes from somewhere, at the risk that otherwise, these businesses would close shop," he said.
Carmelo also added that the idea of automation as means to replace foreign labour should be dropped altogether as it does not fit into the landscape of Malaysia's economy, which is largely made up of small businesses.
"97.4 per cent of Malaysian businesses are small and medium enterprises. Of these 97 per cent, 78 per cent are micro businesses.
"So automation; if we look at it from a realistic perspective, requires economies of scale and by definition micro businesses do not have scale because they are micro.
"So let's say you introduce an automatic coffee roaster machine in a small 'kedai kopi' (coffee shop). But they will never use it because they don't have the scale of coffee production and consumption that makes sense to invest in machinery.
Even if we assume that they had the money for that capital expenditure, they don't have the volumes to make that capital expenditure meaningful," he said.
"So, I disagree that the target is a good target in itself. I think that with our level of unemployment and with our structure of capitalism, which is characterised by micro businesses, we should not even discuss this."
Carmelo added that for now, a meaningful discussion would be on how to favour consolidation among businesses to encourage them to scale up production.
"The eventual meaningful discussion would be how we favour consolidation among businesses, so that when we reach scale, we can really look into an economy that produces adoption of innovation, adoption of automation and eventually new innovation.
"But as long as we don't have the scale, as long as we are dominated by small businesses, we will never be there. And therefore, we will be characterised by labour intensive businesses and not having labour locally available," he said.
The government, through the multi-tier levy system (MTLS) is aiming to reduce foreign worker dependency to below 15 per cent.
It was reported that discussions to formulate the framework of the MTLS, which is a component of the 12th Malaysia Plan, are underway.
Industry players are said to be preparing to embrace the MTLS as a means to decrease reliance on foreign workers and advance automation.
Their aspiration, however, is for the government to meticulously plan the MTLS and implement it gradually, ensuring it achieves the goal of creating improved job opportunities for locals and fostering automation and mechanisation.