Presentation for 'Malaysian Capitalism in Comparative Perspective' : Day 2 Dr. Rafael Munoz Moreno 8 November 2016

1. A Malaysian French International Conference
Malaysian Capitalism, in Comparative Perspective

2. November 8, 2016
Rafael Munoz Moreno, PhD, Senior Economist
French-Malaysia KRI Conference
Migrant Labour

3. Immigrant labour contributes
to Malaysia’s development

4. There are 2.1 million registered immigrants in Malaysia and
likely over 1 million undocumented
Total number of migrants as a share of the total population in East Asia and the Pacific, percent
Source: United Nations, 2013.
0%
10%
20%
30%
40%
50%
60%

5. Income differences with sending countries are large…
Source: World Development Indicator
GDP per capita, PPP (constant 2011 international USD)
0
5,000
10,000
15,000
20,000
25,000
Nepal Bangladesh India Indonesia Malaysia

6. Migrants are a large share of the Malaysian labour market
Source: DoS LFS, 2001 and 2014. World Bank staff calculations.
Left axis: number of workers in the immigrant labour force and local labour force (millions); right axis: immigrant labour as
a share of the total workforce, percent
12.75%
13.25%
13.75%
14.25%
14.75%
-
2
4
6
8
10
12
14
16
2001 2002 2003 2004 2005 2006 2007 2009 2010 2011 2012 2013 2014
Total labor force Immigrant labor force Immigrant labor force as a % of total labor force

7. Migrants come to Malaysia mainly for work reasons
Source: DoS LFS 2001 to 2014, World Bank staff calculations
Labour force participation rate, percent
female Malaysians
male Malaysians
female immigrants
male immigrants
40%
50%
60%
70%
80%
90%
100%

8. …labour market remains tight, with low unemployment and relatively
low labor force participation…
Source: DoS LFS 2001 to 2014, World Bank staff calculations
Unemployment rate, percent
female Malaysians
male Malaysians
female immigrants
male immigrants
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%

9. …and the Malaysian workforce become more educated…
Source: DoS LFS 2014, World Bank staff calculations
Share of workers by schooling level (percent), 2014
0%
10%
20%
30%
40%
50%
60%
70%
80%
Malaysian worker Immigrant worker

10. …seeking less low skilled occupations
in labour-intensive sectors
Source: DoS LFS 2014, WB staff calculation
Immigrant workers as a share of total employment, percent
0% 10% 20% 30% 40% 50%
Clerical support workers
Technicians and associates
Professionals
Managers
Skilled agricultural, forestry and fishery workers
Services and sales workers
Craft and related trades workers
Plant and machine-operators and assemblers
Elementary occupations
2014 2011

11. Malaysians in low and medium skilled occupations
earn more than immigrants
Source: DoS Salary and Wage Survey 2011 to 2014, World Bank staff calculations
Percentage change in hourly wage associated with being a citizen rather than a non-citizen, 2011 to 2014
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Elementary
occupations
Plant &
machine
operators
Craft &
related
trades
workers
Skilled
agricultural
workers
Services &
sales
workers
Clerical
support
workers
Technicians
& associates
Professionals Managers

12. 10% net increase in low-skilled
foreign workers can increase
Malaysia’s GDP by 1.1%

13. 10 new immigrants in a state and sector create
5.2 Malaysian employments in that state and sector…
Source: DoS LFS 1990 to 2014, World Bank staff calculations
Change in Malaysians employed, unemployed, and out of labour force due to 10 additional immigrants
-4
-2
0
2
4
6
8
Overall Male Female Overall Male Female Overall Male Female
Malaysian employment Malaysian unemployment Malaysians out of labor force

14. …specially young and educated
Source: DoS LFS 1990 to 2014, World Bank staff calculations
Change in Malaysians employed due to 10 additional immigrants
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
15-19
20-29
30-49
50-64
Noformal
Primary
Lowersecondary
Uppersecondary
Certificate/diploma
Degreeandabove
Age Education

15. Immigrants negatively affect mainly other
immigrants wages
Source: Özden and Wagner (2014)
Change in wages due to 10 percent increase in immigration
0.14%
-3.94%
-0.35%
-4.00%
-3.50%
-3.00%
-2.50%
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
Malaysian worker Immigrant worker Overall

16. But also wages of unskilled Malaysians
Source: Özden and Wagner (2014)
Change in wages due to 10 percent increase in immigration
-0.71%
0.38%
0.26%
-0.02%
-0.09%
-0.80%
-0.60%
-0.40%
-0.20%
0.00%
0.20%
0.40%
0.60%
No formal/primary Lower secondary Secondary Certificate/Diploma Degree+

17. Fiscal cost concentrated in undocumented immigrants
Documented immigrants
Boost employment and wage of
Malaysians (which pay taxes)
Pay indirect taxes (i.e. GST)
Pay levy for work permits= 1.2% of
federal expenditures
Health insured = limit fiscal cost
Young and active = limited use of
education
Undocumented immigrants
Do not pay for work permits
Likely no health insured = Additional
treatment costs + negative
externalities (i.e. tuberculosis)
Detention and deportation costs =
0.01% of federal expenditures

18. Defining a new immigration
system that leverages
immigrant contributions to
achieve Malaysia’s
development goals

19. Immigration system has challenges
Fragmentation
Bilateral Labour
agreements and MoUs not
linked to labour market
needs
Quotas not linked
to market needs
Arbitrary wages
cut-offs, often
misreported
Third parties
intermediaries
raising costs
Uncoordinated
enforcement
Many of these policies translate into
higher undocumented workers

20. Establishing a market driven immigration system
Immigration
system linked
to HR system
Evidence-base
system
From Quotas to
Levies
From wages to
value added
From third parties
intermediaries to
accountability
Train Malaysians
low skilled
Adopt productivity –
enhancing technology

21. In conclusion
Immigrants contribute to the Malaysian economy
Undocumented immigrants pose a challenge
Revamp immigration system, better linked to labour
market needs

22. Terima kasih!
RAFAEL MUNOZ MORENO
rmunozmoreno@worldbank.org