Transcript Slide 1

Roadshow 2015
Insights of the Plastics Industry
CURRENT PROFILE OF THE
MALAYSIAN PLASTICS
INDUSTRY
Contents

Minimum Wage Issues

Labour and Foreign Workers Issues

Energy cost

Caring for the Environment
Key Data for the Malaysian
Plastics Industry
2010
2011
2012
2013
2014
7.2%
5.1%
5.6%
4.7%
6.0%
1,400
1,400
1,350
1,350
1,300
71,500
74,000
74,000
76,000
82,000
Turnover
RM15.8b
(+8%)
RM16.25b
(+2.1%)
RM17.16b
(+6.5%)
RM17.94b
(+4.5%)
RM19.37
(+7.3%)
Export
RM9.4b
(+14%)
RM10.15b
(+6%)
RM10.05b
(-1%)
RM10.69b
(+6.4%)
RM11.94b
(+11.5%)
59%
62%
59%
60%
62%
1.89m MT
(+11%)
1.98m MT
(+5%)
2.04m MT
(+3%)
2.10m MT
(+3%)
2.15m MT
(2.5%)
67kg
68kg
69kg
70kg
70kg
Malaysia’s gross domestic
product (GDP) growth
Number of plastics
manufacturers
Employment
% of export against turnover
Resin consumption
Per capita consumption of
resin
Export/Sales Turnover Ratio
Turnover
RM billion
E/T
Rati
o
Minimum Wage Issues
Minimum Wage Policy and Shortage
of Workers

Malaysia is technically having “full employment”
as the unemployment rate is only 2.7%

Shortage of workers …. both skilled and
unskilled. High dependency on foreign workers
is due to circumstances, rather than choice.

However, employment of foreign workers is
increasingly difficult to employ due to arbitrary
government policies.
Minimum Wage Policy and
Shortage of Workers

The implementation of MW in 2014 has
resulted in a 30% to 40% wage hike for general
workers, mainly foreign workers.Total cost
impact depends on type of production
processes, size of company and the
dependency on foreign labour.

Minimum wage rates are subjected to review at
least once every two years. The rates are
currently being reviewed.
Chronology of Events on
Minimum Wage
Dates
Description
21 May 2014
Participated in the Consultative Panel Discussion on "Review
on Minimum Wage Order 2012", organised by SERC Sdn Bhd,
a research arm of the Associated Chinese Chamber of
commerce & Industry Malaysia (ACCCIM). Mr Lim Kok Boon
presented a paper on "A Study on the Impact of the Various
Costs Increase on the Malaysian Plastics Industry".
Chronology of Events on
Minimum Wage
Dates
Description
29 May 2014
Submitted the 10-point proposals on Minimum Wage Order
and other related issues to National Wage Consultation
Council NWCC). The main proposals in the submission
were:
 The minimum wage (MW) of RM900 for Peninsular
Malaysia and RM800 for Sabah/Sarawak be maintained
 The existing 2-tier MW policy, is a too simplistic “a one size
fits all” approach. The MW must be broadened into more
regions and identified into different key industries.
Chronology of Events on
Minimum Wage
Dates
Description
29 May 2014
 The composition of the MW of RM900 MUST be reviewed
to accommodate Attendance and Shift Allowances.
 Employers should be allowed to deduct the levy and cost of
accommodation for foreign workers without having to obtain
prior approval from the authority.
Chronology of Events on
Minimum Wage
Dates
Description
2 June 2014
MPMA issued a press release on the 10-point proposals. It
was widely published in the major local newspapers on the
following day.
Chronology of Events on
Minimum Wage
Dates
Description
20 August 2014
MPMA attended a Focus Group Discussion with the Technical
Committee at NWCC. MPMA presented its views and
proposals on MW.
Chronology of Events on
Minimum Wage
Dates
Description
15 Dec 2014
 The Malaysian Employers Federation (MEF) called for a
meeting to discuss the latest developments and issues
relating to the MW in Malaysia. It was reported that there
were discussions at NWCC that the revised MW is
expected to be raised to RM1,200 and possibly
implemented in 2015/2016.
 MEF had called for the meeting to 'brainstorm' on inputs to
refute the proposal as well as to have evidence that MEF
consulted many associations/chambers, etc, to have the
necessary feedback to NWCC.
Labour and Foreign Workers Issues
Dates
Description
18 July 2014
MITI called a consultation session with the industry sectors to
discuss the proposed amendments on policies on foreign
workers for the manufacturing sector and minimum wage.
23 July 2014
MPMA was invited for a joint meeting organised by ACCCIM.
24 July 2014
MPMA Central Committee called a brainstorming session to
identify possible solutions on these issues.
Labour and Foreign Workers Issues
Description
1.
MPMA’s suggestions are summarised as follows:
MITI’s Proposals, based on Frost MPMA’s Suggestions
& Sullivan's Recommendations
Increase the levy to RM1,750 in The increases should not be more
2015, additional 40% in 2017 than 5% per annum:
(RM2,450), 2019 (RM3,450) and 2015: RM1,300
2020 (RM5,000).
2017: RM1,400
2019: RM1,550
2020: RM1,650
Labour and Foreign Workers Issues
Description
2.
MITI’s Proposals, based on Frost & MPMA’s Suggestions
Sullivan's Recommendations
Cap the number of foreign workers to  Should not have the restriction as the increase
20% of workforce by 2020. For the
in levy will deterrent employers from taking in
four worst affected sectors (wood &
more foreign workers.
furniture, rubber, plastics and textile) it
 Government extends the RA claimable period
will be 2025.
by allowing manufacturing companies to claim
on RA on their reinvestment expenditure with
no time limit. More financial assistance in the
form of grants and soft loans are required.
 Government provides more assistance in
terms
of
foreign
expertise,
syllabus
development and financing to develop higher
skilled workers for the industry.
Labour and Foreign Workers Issues
Description
3.
4.
MITI’s Proposals, based on Frost
& Sullivan's Recommendations
Reduce the eligibility ratio to 4:1 (4
LWs for one FW) by 2020 and
2025 for the four worst affected
sectors.
Increase the minimum wage to
RM1,500 by 2020.
MPMA’s Suggestions
Maintain the existing ratio, review it once
every three years.
Increase by RM100 in every two years:
2014: maintain at RM900
2016: RM1,000
2018: RM1,100
2020: RM1,200
Levy collected should be channeled back to
the industry as incentive for automation and
technology upgrading including training and
development that could reduce dependence
on FW.
Labour and Foreign Workers Issues
Dates
Description
1 August 2014
The above proposals were sent to MITI and copied to other
relevant authorities including MOHR, PEMANDU, EPU and
NWCC.
8 October 2014
MPMA participated a joint meeting organised by the
Federation of Malaysian Manufacturers (FMM) to discuss a
Market Based Levy Mechanism for Foreign Workers. The
discussion focused on the four proposals made by Frost &
Sullivan to MITI.
Labour and Foreign Workers Issues
Dates
Description
10 November
2014
FMM sent the Joint Business Sector Position on Foreign
Workers Levy, Minimum Wage and Employment Insurance to
MITI. The Joint Position Letter was represented by 13 trade
associations, including MPMA. Summary of the Joint Position
Letter is as follows:
 FW - Employment of FWs should be market driven,
transparent and with certainty.
 Levy - Levy should be ploughed back to help industry
automate and upgrade using the HRDF model.
 MW - MW rate should be maintained at RM900 with a
further review of its definition.
 Employment Insurance (EL) Scheme - Instead of
introducing the EL scheme, amend the Companies Act to
give priority of payments to workers over all creditors.
Labour and Foreign Workers Issues
Dates
Description
12 Dec 2014
A meeting with YB Dato’ Lee Chee Leong, Deputy Minister of
MITI was held. Also present at the meeting were senior
officers from MITI, MIDA, Ministry of Labour, Immigration
Department and other relevant agencies. MPMA rebutted on
the findings and proposals by Frost & Sullivan on foreign
labour, associations being inactive, etc. MITI responded that
the relevant Ministries and Committee would study MPMA's
proposal in detail.
Labour and Foreign Workers Issues
Dates
Description
21 Jan 2015
The Associated Chinese Chambers of Commerce and
Industry of Malaysia (ACCCIM) has invited about 30 trade
and industry associations, including MPMA, for a joint
meeting to discuss on foreign workers and human resources
issues, including the review of minimum wage.
Summary of the meeting is as follows:
 All present at the meeting were against the purported
increase in MW to RM1,200 per month.
 All supported the call to the Government to maintain the
MW status quo, since SMEs had just implemented MW
only a year ago.
New Mandatory Online Renewal Of
Foreign Workers Permit Through MyEG
Dates
Description
5 January 2015
The Immigration Department implemented the following:
 New Mandatory Online Renewal of Foreign Workers’ Work
permits (PLKS) solely through MyEG only.
 MyEG will impose an Online Service Charge of RM38 per
online renewal of PLKS on top of the RM125 processing fee
per worker payable to the Home Ministry of Home Affairs
(KDN) for the renewal of PLKS.
 Closure of public counter service at the Immigration
Department for the renewal of PLKS.
New Mandatory Online Renewal Of
Foreign Workers Permit Through MyEG
Dates
Description
9 January 2015
ACCCIM called for a meeting with trade associations to deliberate on the
issues.
12 January 2015
A Joint Media Conference was organised to present the views and
proposals of the business community across all industries in a Joint
Memorandum summarised per below:
 The business sector is not against online renewal of PLKS but the
online service must not be made mandatory.
 Government should give options to employers to either choose online
renewal or over-the-counter renewal service as:
i.
Some employers may not be computer illiterate and needed overthe-counter-service to help them with the PLKS renewal.
ii.
Multiple renewal over-the counter are processed as consolidated
application process en bloc whereas online renewal requires
individual keying-in one by one.
New Mandatory Online Renewal Of
Foreign Workers Permit Through MyEG
Dates
12 Jan 2015
Description
The requirement to pay additional RM38 for online renewal to
MyEG is unfair as the processing fees was increased from RM50
to RM125 in April 2014, representing a massive increase of
150%. Since KDN (Kementerian Dalam Negeri) has effectively
“outsourced” the renewal to MyEG, it is only equitable that KDN
should pay the RM38 to MyEG for this service from the RM125 it
has collected.
In 2010, the Government introduced the Competition Act 2010 to
prevent a person and/or a group of persons from dominating in
any trade or business. Ironically, the Government now allows
MyEG to monopolise the renewal of PLKS online by making it
mandatory. This has created a bad precedent whereby other
services may similarly be made mandatory with high charges
being imposed to the disadvantage of the public/business
community.
Joint Media Conference at ACCCIM on
12 January 2015
New Mandatory Online Renewal Of
Foreign Workers Permit Through MyEG
Dates
Description
17 January 2015 YB Datuk Ir Dr Wee, a Minister in the Prime Minister's
Department, announced to the press that the Cabinet
would discuss the matter on 21 January 2015.
26 January 2015 The various Associations felt the response from the
Government on the issue is not being addressed
expeditiously. A meeting was arranged to meet with
Datuk Paul Low, Minister in the PM's Department,
responsible for promoting Governance and Integrity.
Mr Lim Kok Boon and a few leaders from
ACCCIM/FMM and the SMI Association attended the
meeting. It was conveyed to Datuk Paul Low that:
New Mandatory Online Renewal Of
Foreign Workers Permit Through MyEG
Dates
Description
26 Jan 2015  Renewal of Foreign Workers Permit (PLKS) using MyEG
Online System and the Foreign Workers Centralized
Management System (FWCMS) by Bestinet Sdn Bhd
must not be mandatory.
 The two systems are still under the "Proof of Concept"
stage. In this regard, it is not equitable to have these
systems being made mandatory without the public being
given the option of using the over-the-counter service
provided by the KDN.
New Mandatory Online Renewal Of
Foreign Workers Permit Through MyEG
Dates
Description
26 Jan 2015  The Associations/Chambers are supportive of migrating
to e-government for greater efficiency, transparency and
accountability. E-government would also lead to a
reduction in cost and an improvement in productivity.
However, whilst the government agencies may outsource
their respective functions to external specialised entities,
the cost arising therefrom must not be passed onto the
consumer/public.
 All matters relating to the employment of foreign workers,
whether online or over-the-counter, to be managed by
the Ministry of Human Resources.
New Mandatory Online Renewal Of
Foreign Workers Permit Through MyEG
Dates
Description
28 Jan 2015
A press conference was held in ACCCIM to express the
above. A joint press statement from 32 trade
associations/chambers was issued in conjunction with the
press conference.
26 Feb 2015
Another press conference was held in ACCCIM, calling on
the Government to continue keeping Immigration
Department counters open for foreign worker permit
renewals after the 28 Feb deadline. Representatives from
34 major business groups urged the authorities to allow
them the option of doing the renewals at counters or
online.
Joint Media Conference at ACCCIM on
28 January 2015
Joint Media Conference at ACCCIM on
26 February 2015
New Mandatory Online Renewal Of
Foreign Workers Permit Through MyEG
Dates
Description
26 Feb 2015
Transport Minister Datuk Seri Liow Tiong Lai announced that the
Cabinet has decided to allow the Immigration Department
counters for foreign workers’ permits to be opened beyond 28
February 2015. The counters will remain open until a more
comprehensive plan to resolve the issue is achieved.
Energy Issue
Rising Energy Cost
Revisions of TNB Average Electricity
Tariff
Source: Energy Commission of Malaysia
Rates are subjected to further increases due to the Government’s subsidy rationalisation programme
Increasing Energy Costs

15% increase in electricity tariff beginning
January 2014 (electricity being a major cost
component). Despite the 5.8% reduction
effective March 2015, the new tariff is still about
8% higher than the 2013 tariff rates.
Increasing Energy Costs

In addition, Energy Commission (EC) informed
that the Special Industrial Tariff (SIT) would be
phased out gradually. In fact, in January 2014,
the discount rate of 5% had been reduced to
3% and by January 2017, SIT will be phased
out completely.
Increasing Energy Costs

The ruling that Tariff D users who wish to apply
for incentives/discounts must employ an
Approved Energy Manager as consultant to
monitor usage. The cost of employing an
Energy Manager would outweigh the
incentives/discount received.
Increasing Energy Costs

EC also announced that Enhanced Time of Use
(ETOU) Tariff Scheme, a modification to the
existing Time of Use Scheme, would be
introduced in 2015.

Under the Scheme, the off-peak rates would be
further divided into off-peak (more discount)
and mid off-peak (lesser discount), but it is
limited to Tariff C (Commercial) and Tariff E
(medium to large industrial users).
Increasing Energy Costs

Currently, the Time of Use Scheme with peak
and off-peak tariffs does not cover Tariff D
users. In the ETOU, again, EC has left out the
Tariff D users.

The fact that 90% of MPMA members being
SMEs and classified as Tariff D users, they will
not be eligible for the ETOU discount.
Energy Commission – Electricity Tariff
Issues
Issue
MPMA’s Proposal
9 Oct 2014
Attended the meeting/seminar with the stakeholders on 9
October 2014, organised by the Energy Commission (EC).
Below are the highlights of the meeting:
 Tariff rates: The rates would increase further in view of the
Government’s subsidy rational programme. The average rate
across all the industrial and commercial sectors is expected
to increase from the current rate of 38.53 cents in 2014 to
43.77 cents in July 2017.
Energy Commission – Electricity Tariff
Issues
Issue
MPMA’s Proposal
9 Oct 2014
 Special Industrial Tariff (SIT) for those who qualify: The SIT
would be phased out gradually. In fact, in January 2014, the
discount rate of 5% had been reduced to 3%. By January
2015, more stringent application and approval process would
be introduced. One of the requirements is that applicants must
engage an Approved Energy Manager as consultant. The
new requirements would discourage more qualified companies
from applying for the SIT because additional cost and time
would be incurred for engaging the Energy Manager. The 3%
SIT discount may not even be justifiable for the cost of
engaging an Energy Manager. All applications must be
forwarded to EC for evaluation and approval. This means that
the approval process would take an even longer time and
more cumbersome.
Energy Commission – Electricity Tariff
Issues
Issue
MPMA’s Proposal
9 Oct 2014
 The Enhanced Time of Use (ETOU) Tariff Scheme would be
introduced in 2015. Under the Scheme, the off-peak rates
would be further divided into off-peak (more discount) and
mid off-peak (lesser discount), but it is limited to Tariff C
(Commercial) and Tariff E (medium to large industrial users).
Again, EC had left out the Tariff D users. MPMA had done an
analysis on this and was of the view that if ETOU is extended
to Tariff D users, it would provide a saving of approximately
30% to the users because of the low tariff rates for off-peak
and mid off-peak.
Energy Commission – Electricity Tariff
Issues
Issue
MPMA’s Proposal
19 Dec 2014
Submitted a letter to the Prime Minister, proposing the
following:
 The Enhanced Time of Use (ETOU) Tariff Scheme be
extended to Tariff D users so that they are eligible for offpeak an id off-peak rates.
 Off peak time should also be extended to cover Saturdays,
Sundays and Public Holidays for all categories of users (to
be compatible with Thailand’s energy incentives to
manufacturers).
 The requirement for an Approved Energy Manager for
Special Industrial Tariff application be waived.
Energy Commission – Electricity Tariff
Issues
Issue
MPMA’s Proposal
9 Jan 2015
An acknowledgement from the Prime Minister’s Office was
received informing that the letter had been forwarded to the
Ministry of Energy, Green Technology and Water.
11 Feb 2015
TNB announced that the average electricity tariff rates would be
reduced by about 5.8% from 38.53 cents/kWh to 36.28
cents/kWh effective 1 March 2015. However, compared to the
previous 15% increase in January 2014, the new tariff is still
about 8% higher than the 2013 tariff rates, averaging 33.54
cents/kWh.
Energy Commission – Electricity Tariff
Issues
Issue
MPMA’s Proposal
16 Feb 2015
At the meeting with Bank Negara Malaysia, MPMA requested
the tariff rates be reduced further in the next review in June
2015 through the fuel cost pass-through (FCPT) mechanism.
17 March 2015
EPU informed that:
 The Enhanced Time of Use (ETOU) Tariff Scheme be
extended to Tariff D users including Saturdays, Sundays and
Public Holidays effective from 1 January 2017.
 The gradual phasing out of the Special Industrial Tariff (SIT)
by 2017, has been extended to 2020.
Caring for the Environment
Thank You