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Malaysia is a constitutional monarchy slightly larger than New Mexico. It has a population of over 22.2 million people, of whom 58% are native Malays. There are also sizeable Chinese and Indian minorities in Malaysia. Islam, Buddhism, and Daoism are the three largest religions, featuring a large Islamic majority. Bahasa Melayu or Malay is the official language; however, there are a large number of people who speak one of several Chinese dialects. English is also widely spoken. The head of state is Prime Minister Dr. Mahathir Mohamad, who has governed since July of 1981.

Malaysia has maintained 8% GDP growth since 1988, with the exception of 1998. GDP per capita was $10,300 in 2000, in the mid-range for East Asia. In general, Malaysias economy is larger than those of its Southeast Asian neighbors, but smaller than those of some of the Asian Tigers. Malaysia was among the countries affected by the Asian Financial Crisis, though it has since recovered fully. Malaysia avoided major hardship due to its low external debt, the strong fiscal position of the Malaysian economy, a well-developed regulatory framework, and traditionally low inflation. These institutional factors aided a speedy recovery and in 2000 Malaysias GDP grew by 8.5%.

Table 1: Economic Indicators

	1999	2000
GDP	$79.0 Billion	$89.3 Billion
GDP Growth	5.8%	8.5%
Inflation	-.02%	4.1%

 Source: World Bank

The Labor Pool

Malaysia has a labor force of nearly 9.6 million people. The largest employment sector is trade and tourism, employing 28% of the workers. Manufacturing employs 27% and industrial production contributes 44% of Malaysias GDP. The agricultural (16%) and service (10%) sectors are less significant in terms of GDP contribution and number of employees. Unemployment remains low at 3%.

Approximately 10% of employees in the Malaysian workforce are members of labor unions. The Malaysian Trade Union Congress (MTUC) is an umbrella organization for 230 unions and 500,000 workers. Unions have little power in Malaysia and receive little co-operation from the government during disputes. Laws restrict strikes and the Ministry of Human Resources plays an active role in mediating between unions and management. At no point during the mediation process is a strike legal.

While Malaysia offers a large and talented workforce, there is currently a shortage of skilled workers in some technical fields. Engineers and high tech workers are needed to meet the demand, which has resulted in a labor shortage. The shortage of IT workers ranges between 30,000 and 35,000.

Table 2: Shortage of Technical Employees

Type of Manpower	Demand	Supply	Shortfall
Engineers	30,100	21,000	9,100 (30%)
Engineering Assistants	122,900	84,070	38,830 (31%)
Asst./ Technical Craft Skills	394,000	230,000	164,000 (24%)

In response to the shortage of qualified personnel, many companies have recruited skilled foreign workers. For example, recently Globetronics was unable to find any Malaysians with the skills they needed, and recruited five software engineers from India to fill the void.

In an attempt to decrease dependence on foreign workers, the government started an incentive program in January 2001 to recruit Malaysians living abroad with skills in one of several fields. The government is seeking highly skilled workers in science and technology, finance, accounting, information technology, and healthcare. The incentives include tax breaks and job offers. As of May, less than 200 people had applied, and only 71 had been accepted. Most high skilled workers earn higher wages in Singapore, or the West and are unwilling to return to Malaysia for considerably less pay.

Malaysia in recent years has absorbed large numbers of foreign workers to work in low-paying, low skilled fields. Over 230,000 foreign workers entered the country in 2000, mostly from Indonesia and the Philippines. These workers are employed in jobs critics label the 3 Ds-dirty, dangerous, and demeaning. In general, low-skilled foreign workers are employed in positions that most Malaysians simply refuse to do. During recent economic slowdowns the government has issued warnings to both multinational and local companies to fire foreign workers before Malaysians. Multinational firms employ few foreigners, so the government warning had little effect in the industrial and technological sectors. Many foreign workers were fired from the agricultural sector, and in many cases were replaced by illegal immigrants.

Labor Laws

Basic requirements under Malaysian law are as follows:

Table 3: Basic Requirements and Labor Standards

Minimum Age	14 years
Minimum Wage	None
Maximum Hours per Week	48 hours
Maximum Days per Week	6 days
Overtime Pay	1.5 time normal hourly wage

Source: Ministry of Human Resources

Leave Entitlements. Under Malaysian law, workers are given several different categories of leave and vacation time, in addition to annual leave. The number of days allocated to employees during the respective leave is determined by the amount of time an employee has worked for their present company.

Table 4: Annual Leave Entitlements

Tenure	Days Allotted for Leave
Less than 2 years	8 days
Between 2 and 5 years	12 days
Over 5 years	16 days

Source: Ministry of Human Resources, Social Security Organization

Holiday Leave

Employees are given ten days of paid holiday leave. Of these ten days, four of the days must be National Day, Birthday of Yang di-Pertuan Agong, Birthday of Ruler, and Workers Celebration Day. The other six vacation days are to be selected by the employer. Employees have the right to work on holidays for twice their regular wage.

Maternity Leave

Female workers are permitted a paid maternity leave. This period is to be a minimum of 60 days in length. Employees may not be fired during this period.

Sick Leave

Employees are permitted an allocation of sick days per year, which is based on tenure. Workers that have worked longer with their current company are entitled to additional sick days. Workers must have a certification from a doctor and provide advanced notice when taking sick leave. If these conditions are not met, then the employee is considered absent and the day off counts against annual leave days.

Table 5: Sick Leave Entitlement

Tenure	Number of Allowed Sick Days
Less than 2 years	14 days
Between 2 and 5 years	18 days
Over 5 years	22 days

 Source: Ministry of Human Resources

Anti-Discrimination. In 1969, widespread rioting broke out between native Malays and ethnic Chinese. The rioting was attributed to Malay resentment at the success and wealth of the Chinese minority. Since this time a form of affirmative action has been in place with the aim of helping the Malay majority gain parity with the Chinese minority. Malays are given preferences in hiring.

Harassment against women is not tolerated, and strong anti-harassment laws have been enacted.

Labor Organization. Union membership is open to all employees with the exception of police officers, military personnel, and members of sensitive sectors critical to national security. The government maintains considerable oversight over union activities, and seeks to limit their power. Collective bargaining rights are restricted and strikes are rare. Strikes are not permitted when the government is involved in resolving disputes and if mediation fails, a 2/3 vote by union members is required by law before a strike can begin.

Termination. According to Malaysian law, employees are entitled to advanced notice prior to termination. Failure to provide an adequate notice results in wage payment for the notice period. Employers do have the right to immediately fire an employee for misconduct.

Table 6: Termination Period

Tenure	Length of Notice
Less than 2 years	4 weeks
Between 2 and 5 years	6 weeks
Over 5 years	8 weeks

Source: Ministry of Human Resources

Benefits

The main source of worker benefits in Malaysia is the Social Security Organization (SOCSCO). SOCSCO was established in 1971 to provide protection to workers in the event of injury, invalidity, or death. Enrollment in this program is mandatory for all workers earning less than RM 2000 (about US$525) per month. For those making more than RM 2000 per month, enrollment is optional. Each employee contributes 0.5% of his or her monthly salary and employers contribute 1.77% of the monthly salary value to SOCSCO. Those enrolled in SOCSCO are eligible for treatment at any SOCSCO panel clinic or government hospital.

Disability Benefits. Benefits to those disabled on the job are available from SOCSCO in the form of either a single lump sum payment or a minimum of RM 9 (US$2.34) per day if the worker is permanently disabled. Vocational and physical rehabilitation is free to those disabled and in the process of recovering from injuries. To aid the families of the injured worker, educational loans are made available to children wishing to attend college. These loans can become scholarships for those who perform exceptionally well in school.

 

Table 7: Dependents Benefits

Dependents	Share of Full Daily Rate	Conditions
Widow	3/5	Receive benefits for life, or until future marriage.
Children	2/5 (3/5) if there isnt a widow	Receive benefits till age 21, or marriage, whichever comes first.
Widower	3/5	Receives benefits if unable to support self.
Parents	4/10	Payment for life.
Grandparents	4/10	Payment for life.
Brothers and Sisters	3/10	Till 21 or marriage, whichever occurs first.

 Source: Social Security Organization

 

Wages

Wages in Malaysia are considerably lower than those in the United States and are lower than other neighboring Southeast Asian countries. There is no set minimum wage, which keeps wages in low skill sectors very low.

A recent survey by Watson Wyatt Malaysia anticipated executive salaries will increase by 6% next year as compared to 7% this year. Non-executive salaries are expected to increase 7%; slightly less than the 7.2% increase this year.

Table 8: Comparison of Average Wages for White Collar Workers in Malaysia and Other Southeast Asian States  

Position	Monthly Salary (in US$)
	Hong Kong	Singapore	Malaysia	Thailand	Philippines
CEO	15,975	11,131	7,127	5,075	5,916
Factory/Plant Manager	7,044	4,639	2,033	1,931	1,623
Sales Manager	6,628	3,962	1,945	1,699	1,465
Lawyer	7,712	4,053	1,579	530	979
Systems Engineer	3,774	2,290	1,171	927	547
Software Developer	3,774	2,792	864	927	547
Secretary	1,781	1,326	366	446	309

Source: Asiaweek

These statistics are based on individuals, ages 30-45 with at least five years experience with the same company. These individuals had at least a bachelors degree from a university.

Fringe Benefits. Higher-level employees generally receive fringe benefits in addition to their base salaries. These benefits increase the value of the payment package and may include housing, a travel allowance, and education grants for children. Some companies, mainly technology companies, are now offering stock options in an attempt to recruit top candidates and prevent top employees from being recruited by rival companies.

Cultural Considerations

In Malaysia there are several cultural factors of which employers should be aware. Ethnic Malays outnumber the Chinese minority by a 2:1 ratio. However, the Chinese run approximately 85% of the companies in Malaysia. As mentioned above, in an effort to promote equality, the government has created affirmative action programs that give priority to ethnic Malays in employment. Malaysia is a predominantly Muslim country, but Buddhism, Taoism, Christianity, and other faiths are represented in the population. Special needs of Muslims need to be accounted for, as some Muslims may wish to pray five times a day and meals must be prepared in accordance with Islamic law. Additionally, special consideration must be taken during the fasting months of Ramadan.

Conclusion

Malaysia is a diverse, multicultural society with a growing economy. Multinational firms who establish operations in Malaysia may encounter some difficulty in finding qualified professionals to staff their operations. It may be necessary to import staff from elsewhere. However, government efforts are in place to increase the availability of highly skilled human resources in the country, and educational efforts continue to increase skill levels. With average salary levels in the middle of the pack of Asias emerging economies, Malaysia can represent an intriguing base of operations for multinational firms.

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