Published March 5, 2009

Flextronics to shut down Shah Alam plant

It will lay off 1,382 workers at the end of the month

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(KUALA LUMPUR) Flextronics International, one of the world's largest contract manufacturers, is shutting an assembly plant in Malaysia and laying off 1,382 workers at the end of the month.

Demand for technology exports of the kind made by Flextronics, a contract manufacturer, has plunged due to the global economic slowdown and Malaysia has also been squeezed by countries with lower labour costs.

'The company reported that it was laying off the employees as it was ceasing operations at its facility in Shah Alam,' a spokeswoman for Malaysia's Ministry of Human Resources told Reuters.

Companies laying off workers here need to inform the ministry and the spokeswoman said that Flextronics had notified it that it intends to lay off 1,382 workers from its assembly plant in Shah Alam, a suburb of the capital Kuala Lumpur.

Flextronics declined to comment. The Singapore- based company signalled in January that it could cut jobs, hit by the global economic slowdown.

The planned layoffs come hard on the heels of redundancies in Malaysia at Western Digital, Intel Corp and Japanese electronics company Panasonic Corp.

Although Malaysia's official unemployment rate is just 3.3 per cent, the spate of layoffs and the prospect of more as exports plunge has rattled the government as it readies a multibillion package of spending to stem the effect of declining demand for exports.

Electronics account for close to 40 per cent of Malaysia's exports, which are forecast to fall 24.8 per cent in January from a year earlier, according to a Reuters poll released ahead of data due tomorrow.

According to a ministry official, around 45,000 workers have been laid off in the electronics industry since the start of the year.

Malaysia's economy is teetering on the brink of recession after data last week showed that the economy grew at is slowest pace in eight years in the fourth quarter, just 0.1 per cent year-on-year.

In order to preserve Malaysian jobs, the government is toughening restrictions on hiring foreign labour, although an outright ban has not been imposed on the estimated two million legal migrant workers.

However, kicking out legal and millions of illegal workers may not be the answer, economists said, as Malaysians would be unwilling to do low-paid jobs and do not have the skills needed for higher value-added industries. -- Reuters