Asia's migrant workers first to lose jobs as factories shut

Business Standard, Bloomberg / Kuala Lumpur January 25, 2009

Nadya Rahmayanti left Indonesia 18 months ago to earn money for her daughter's education. After being fired by a Texas Instruments Inc plant near Kuala Lumpur, she dreads telling the 12-year-old she must leave school.

"She cried so hard when I left, but I told her I had to go so she and her brothers could stay in school," said Rahmayanti, 28, at the Indonesian embassy in Kuala Lumpur, where she came for help to get more compensation. "Now I lost my job, I don't have money and I can't go home. The worst is, my daughter has to quit school."

As many as 400,000 Indonesians — about a 10th of those working in plantations, manufacturing and as domestic helpers in Malaysia, Singapore, Hong Kong and the Middle East — may be sent home this year as companies such as Intel Corp and Western Digital Corp cut production. The exodus could slash annual remittances to Indonesia by as much as $3 billion, according to Fauzi Ichsan, an economist at Standard Chartered Plc.

"Money sent by these workers helps increase spending in the rural areas," said Anton Gunawan, chief economist at PT Bank Danamon Indonesia. "It is used to build houses, or buy motorcycles." He forecast Indonesia's economy will expand 4.3 per cent this year, lower than the government estimate of 5 per cent, which would be the slowest since 2003.

Repatriation of overseas workers may boost unemployment in Indonesia to almost 10 per cent, Gunawan said. About 9.4 million people of the country's 112 million labour force are unemployed, according to data published by Statistics Indonesia on January 14.

Intel Corp announced on January 21 it will close five factories, including two plants in the Malaysian state of Penang, by the end of 2009, as the world's largest chipmaker copes with a worldwide recession. The move will affect as many as 6,000 employees, it said.

Texas Instruments' spokeswoman Kimberly Morgan confirmed in an email that the company released workers hired through outsourcing agents throughout 2008, but declined to disclose the number. It declined to say how many more might be released or if it plans to close any plant in Malaysia.

"We did idle several of our plants near the year end holidays," the company said without providing details. The company declined to comment on compensation.

Malaysia's cabinet decided this week to freeze recruitment of foreign workers in manufacturing and services industries and offer the jobs to locals instead, the New Straits Times reported on January 22, citing Human Resources Minister S. Subramaniam. The government will make a further study on how it can implement the decision, Deputy Prime Minister Najib Razak said on January 22.

"When companies cut jobs, foreign workers will go first," Mohamed Ariff Kareem, executive director of the Malaysian Institute of Economic Research said.

"Some employers hire these workers through outsourcing agents and when they terminate their contract, the workers, who typically borrow a large sum of money to secure a job through the agents, will have no choice but to take another job that pays less," said Alex Ong, a labor activist at Migrant Care in Kuala Lumpur. "They are left at the mercy of the agents."

Rahmayanti said she couldn't go home until she pays her agent the remainder of a government levy for working in the country. The agent holds her passport, a common practice in Malaysia.

Malaysia employs about 2 million legal workers from countries such as Indonesia, Myanmar and India, or about a fifth of the total workforce, government data shows. Most perform low- skilled jobs such as domestic service, shunned by locals. There are probably more than half a million illegal, or undocumented, foreign workers, according to the immigration department.

"They may refuse to go back without a job," said Mohamed Ariff from Kuala Lumpur, who predicts as many as 40,000 job cuts in Malaysia this year, more than the number in 2008. "This situation could prompt an increase in crime rates, worsening social problems."

Migrant workers across the region are suffering the same fate. About 300,000 jobs may be lost in Singapore by 2010, two- thirds of which are held by foreigners and permanent residents, economists Cem Karacadag and Kun Lung Wu wrote in a Credit Suisse Group report on January 20.

Growth in remittances to the Philippines, which account for about a 10th of the nation's $144 billion economy, may stall this year, according to the country's central bank. That compares with a 15 per cent increase in the first 11 months of 2008. Philippine economic growth will probably be 3.7 per cent this year, the slowest since 2001, the government said in November.

At the Indonesian embassy in Kuala Lumpur, official Teguh Hendra Cahyono scratched his head as he walked into a room where Rahmayanti was sitting together with about 20 other women.

"These are Indonesian factory workers whose contracts have been terminated early as their employer cut production," said Cahyono. "They want us to help negotiate for a better compensation. We have to be prepared. Many more will come."