Published January 6, 2009

Malaysia braces for mounting job losses

Electrical, electronic, automotive sectors likely to be hardest hit, say economists

By PAULINE NG
IN KUALA LUMPUR

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ECONOMISTS are projecting Malaysia's jobless rate to rise to between 4 and 4.5 per cent this year following a third-quarter 2008 spike when lay-offs were four times those in Q2.

Some 11,560 workers were retrenched in Q3. And the rate of job losses is expected to accelerate this year, with estimates that between 200,000 and 400,000 people could be laid off should the global slowdown bite deeper into consumer demand.

For export-reliant Malaysia - the country's external trade to GDP is 172 per cent - manufacturing would be hit hardest. And the electrical and electronic (E&E) and automotive-related sectors would likely be bruised most.

Bank Negara figures show almost 16,800 workers were retrenched in 2008, about two-thirds or more than 11,000 of them from manufacturing. Significantly, almost all of these job losses - more than 10,000 - were in Q3.

Q4 statistics will not be released for a while, but many observers fear a spurt in retrenchments after Chinese New Year.

Ironically, at 3.1 per cent, Malaysia's jobless rate in Q3 was lower than Q2's figure of 3.5 per cent, according to the Statistics Department.

Officially, the government has pegged unemployment at 3.5 to 4.5 per cent in 2009, up from an estimated 3.3 per cent in 2008. It has also played down the prospect of widespread unemployment.

According to Human Resources Minister S Subramaniam, based on feedback from 137 employers, some 4,700 workers - mainly in the electronics sector - are expected to be laid off in Q1 this year.

This is a drop in the bucket compared with a Malaysian Employers Federation (MEF) projection of 200,000 to 400,000 job losses, mainly in the E&E and automotive-related sectors.

An economist described the MEF projection of 400,000 retrenchments as 'probably a bit on the high side.' He reckons the figure will likely be around 200,000-plus, which added to current unemployment of 340,000-plus would result in an unemployment rate of 4.5 per cent - more than twice the 80,000 plus job losses during the 1997-98 Asian financial crisis.

To stave off retrenchments, most employers are cutting shifts, work days and salaries. In drastic cases, employees have been reduced to working eight days in a month, such as at an auto-related business in Johor, according to news reports.

Another report at the weekend said orders for E&E products in the electronics manufacturing hub of Penang have halved - a fate the plastics, textiles and metal industries are also suffering. Even more worrying is a 70 per cent plunge in demand for chemical and steel-related industries.

Still, employers have pledged to lay off workers only as a last resort. And because slightly more than a third of the estimated 2.1 million people in manufacturing are low-skilled foreign workers, the expectation is that they would be the first to be asked to go should the need arise.

On the flip-side, Mr Subramaniam has estimated that 300,000 Malaysians work in Singapore, mostly in manufacturing where wages are higher. These workers could also see their jobs come under pressure should bottom lines buckle.