29 November, 2008

Job Losses Feared as Recession Bites

PENANG, Nov 26 (IPS) - The global economic slowdown is slowly creeping onto Malaysian shores leaving many worried about the impact it will have on workers.

Although Malaysia's financial institutions and banks are in better shape than they were during the East Asian financial crisis in 1997, the economy is already feeling the effects of the recession in the West.

Economic growth for the country is projected at 3.5 percent for next year but even that could be optimistic. Some analysts are not ruling out an economic contraction and there is growing concern that workers, both Malaysian and migrants, could be vulnerable.

''The recession here next year could be worse than the Asian crisis in 1997,'' warns economist Subramaniam Pillay, an associate professor in international finance at Nottingham University's campus in Malaysia. ''It would be more like 1986, when commodity prices slumped and exports weakened, prompting factories to retrench workers."

Now there are similar fears that as consumer demand in the West falters, exports here could slide and factories could once again shed workers before long.

With the experience of the recession of the mid to late 1980s in mind, activists have been calling for a comprehensive social security plan. Increasingly, calls are being heard for a national retrenchment fund to protect workers in anticipation of possible job losses. The government has said it is considering this ''but even if they start it off now, the fund won't be big enough to handle the recession next year,'' warns opposition parliamentarian Jeyakumar Devaraj.

The Malaysian Trades Union Congress has proposed that employers and employees should each contribute one ringgit per worker to the fund. With around five million salaried workers in the private sector, such a retrenchment fund could collect more than 100 million ringgit (27 million US dollars) in a year.

"But there is no commitment frorm the government up to now," laments Devaraj. "Instead, we see them injecting 5 billion ringgit (1.38 billion dollars) from the (state-managed) Employees Provident Fund (a retirement fund for workers) into the stock market.''

Some have pointed out Malaysians will be cushioned from job losses by the presence of these migrant workers who could be the first to lose their jobs. But that may give a false sense of security as thousands of Malaysians are also employed in free trade zones especially as operators in the electronics multinational corporations.

Subramaniam feels that the government should review its low-wage policy in attracting foreign investors. Local wages are suppressed by the presence of some three million low-wage migrant workers, about a third of them undocumented.

''What's the point of being among the world's top trading nations when your workers are being paid peanuts?'' he asks.

Meanwhile, economic analysts have noted that a revised budget for next year is necessary as the present one tabled earlier this year was calculated based on an assumption of a global oil prices for next year of 125 dollars -- whereas the price now has plummeted to around 50 dollars now.

About 40 per cent of the national budget is traditionally funded from petroleum revenue - Malaysia is a net exporter of oil - with the remainder coming from taxes, observes Subramaniam. A sharp drop in the prices of oil and palm oil products will erode Malaysia's earnings and affect the budget - though the country has ample foreign exchange reserves.

Meanwhile, the government has announced a 5 million ringgit allocation to re-train retrenched workers. Human Resources Minister S. Subramaniam said the government would top up 1 ringgit for every 1 ringgit spent by employers to retrain workers and upgrade their skills. From Nov 1 this year, all skills upgrading retraining programmes would receive full financial aid.

In addition, the government has also announced a 7 billion ringgit (1.93 billion dollars) economic stimulus package of pre-emptive pump priming.

Devaraj says instead of giving out large infrastructure contracts to private contractors who may hire low-wage foreign workers, the Public Works Deparment could hire temporary local workers directly as ''work brigades'', which he says would be a more effective way of creating a multiplier effect for the local economy.

Despite the fall in oil prices, many Malaysians are still finding it hard to cope with the cost of living especially higher food prices, which particularly squeezes the poor.

On Nov.17, the government slashed the pump price of petrol from 2.15 ringgit per litre to 2 ringgit -- the fifth reduction in recent months as global prices sank to 55 dollars per barrel.

But many noticed that the local pump price is now still higher than it was on Jun. 5 when petrol prices were then raised by 41 percent to 2.70 ringgit (75 US cents) at a time when the global oil price was around 125 dollars.

The effect of the Jun. 5 oil price hike is still being felt. Even as the pump prices locally were reduced, food prices -- driven up by commodity speculators and local retailers -- have not fallen correspondingly.

''It may be true that the price of oil has gone down but the prices of rice and other basic necessities are still sky high,'' complained one reader from Sabah in North Borneo of the popular Malaysia Today website.

"I was in Kuching (in neighbouring Sarawak state) a month ago and I noted that the price of Beras Malaysia (local rice) was only 15 ringgit (4.1 dollars). Here in Kota Kinabalu (in Sabah) it is sold at 18 ringgit (4.9 dollars). Why is the difference so big?''

Even the poverty line has come under scrutiny. Though the official threshold for monthly household income was raised a couple of years ago from 588 to 691 ringgit (162 to 190 dollars), many analysts feel that that benchmark for measuring poverty is grossly understated. A more realistic poverty line could be double that figure, putting many more Malaysians -- up to 30 percent in the industrialised state of Selangor -- in the poverty bracket.

Concerned that workers rights could be affected as the economy slides, a coalition of civil society groups, the Oppressed People's Network (JERIT), is organising a nationwide bicycle campaign to highlight their concern about the more difficult conditions for workers.

Scores of cyclists from three main locations in the north, south and east coast of the peninsula will be flagged off simultaneously on Dec. 3 and they will pedal towards the Federal Parliament, converging there on Dec. 18. There they will be present a memorandum to Prime Minister Abdullah Badawi and opposition leader Anwar Ibrahim, highlighting their demands.

Their main demands include the introduction of a minimum wage, decent housing, price controls for essential goods and an end to the privatisation of essential services. They are also linking this to broader civil and political rights including the restoration of local government election and the repeal of the draconian Internal Security Act, which allows indefinite detention without trial.

Along the way, they will also distribute leaflets to the public and present similar memorandums to the chief ministers of the various states.

Devaraj notes that recent global events have proven that the neo-liberal model -- with its accompanying assumptions of deregulation and the unchecked pursuit of wealth -- has had adverse results ranging from climate change to worsening food security to imbalances in the distribution of wealth between and within nations. ''So we need to look at new and alternative paradigms of development,'' he says.

- By Anil Netto. IPS

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