The Federation of Malaysian Manufacturing (FMM) has welcomed the government’s move to reopen foreign worker quota applications for three main sectors and ten sub-sectors but cautioned that excluding existing manufacturers risks undermining Malaysia’s economic momentum.
While the manufacturing, construction, and plantation sectors remain the most reliant on foreign labour, FMM surveys show that shortages extend across nearly all industries. Within manufacturing, subsectors such as furniture, rubber products, food processing, and electrical & electronics (E&E) support services face especially urgent manpower challenges.
Labour Shortages Threaten Growth
FMM highlighted that many existing manufacturers are struggling with labour gaps caused by expiring worker contracts, difficulties in hiring replacements, and surging domestic and export orders. Without timely approvals, production continuity, reinvestments, and Malaysia’s competitiveness in global supply chains could be at risk.
According to Bank Negara Malaysia, the manufacturing sector grew 3.7% in Q2 2025, while exports rose 5.2% in the first half of the year to RM656.56 billion. This growth, driven by both new and existing manufacturers, could stall if labour bottlenecks persist.
Balancing Policy with Industry Needs
The government’s aim under the 13th Malaysia Plan (RMK-13) is to reduce reliance on foreign workers from 15% to 10% starting 2026. FMM supports this direction but emphasises the need for a phased transition. Drawing comparisons to Singapore’s gradual, sectoral approach, FMM urged Malaysia to adopt similar strategies, including automation incentives, reskilling programmes, and levy reforms.
The planned Multi-Tier Levy Mechanism (MTLM) in 2026 could help businesses reduce dependency while maintaining flexibility. FMM proposed that levy collections be channelled into a National TVET Apprenticeship Fund and a National Automation and Industry 4.0 Fund, strengthening long-term productivity.
Call for Transparent and Efficient Approvals
FMM expressed concern over the proposed case-by-case approval process for foreign workers, warning of potential delays and uncertainty. It recommended a centralised digital system for applications to ensure transparency, accountability, and faster processing while eliminating reliance on third-party agents.
Protecting Local Jobs While Ensuring Competitiveness
FMM reiterated that employers prioritise hiring Malaysians. Many companies have raised wages, enhanced benefits, and offered recruitment incentives, yet locals remain reluctant to take on labour-intensive jobs due to wage expectations and job preferences. Employing foreign workers is also costly, with rising recruitment expenses and compliance requirements.
The balance is crucial. Protecting local employment is important, but industries must also have timely access to foreign workers in jobs where locals are unwilling.
FMM affirmed its commitment to work with the government on a gradual reduction of dependency while supporting automation, reskilling, and productivity initiatives.
