Changes to the levy policy, including the immediate doubling of foreign workers levyshould be deferred.

Implementing levy changes in the present already difficult economic conditions and without giving industries sufficient time for adjustment would adversely affect businesses and increase unemployment. The desired impact on local employment is not assured.

The Federation of Malaysian Manufacturers’ (FMM) second survey on the impact of the global economic crisis, conducted from Feb 18 to March 6 has shown that exports, domestic sales, production, new orders, profits, capital investment and expenditure are already badly affected and expected to deteriorate further in the next six to nine months.

Immediate changes to the levy policy would only hasten the deterioration of business operations.

Policy and procedure changes should be pre-announced and implemented on a gradual basis according to a set timeframe and/or in stages (such as beginning with new recruitment and then renewals).

While FMM supports the need to reduce the dependency on foreign workers and to move towards greater automation and modernisation up the value-added chain, businesses must be given adequate time to adjust their manpower requirements and plan their respective operations to phase off foreign workers.

Instead of doubling the levy immediately, the government should consider a gradual increase over time and in proportion to the percentage of foreign workers employed. Levy policy must also be standard across all sectors.

The recent policy proposes to double the levy for all sectors except construction, plantation and domestic maids. Every business sector is facing financial difficulties. Setting different levy rates for different sectors could also be exploited.

Foreign workers brought in officially for the lower levy sector could be deployed illegally as contract/temporary workers to the employers in the higher levy sector.

Policy and procedural changes, in particular those relating to foreign workers should be more comprehensive. The operations of outsourcing companies should be terminated to address indiscriminate recruitment and oversupply.

Levies should be used to help businesses finance their mechanisation efforts such as investments in automation and in the setting up childcare centres to attract a higher female labour force participation.

FMM, therefore, strongly urges the Government to review the recent proposed changes to the levy policy and defer the implementation on the doubling of foreign workers’ levy until economic conditions improve and levy changes can be appropriately planned.

The writer is president, FMM.