Malaysia's decision to stop recruiting foreign workers will have adverse impacts on Nepal's labour migration, as the Southeast Asian nation serves as a significant overseas job market for low-skilled Nepali workers.
In a significant blow to aspiring Nepali migrant workers, Malaysia has decided to halt the recruitment of foreign workers in the formal sector starting June 1. The Malaysian government declared in March 2023 that foreign workers would only be permitted to enter Malaysia until the end of May 2024. The visa application deadline was set for April 21. Malaysian media outlets, quoting Malaysian Human Resources Minister Steven Sim, said the freeze on the hiring quota for foreign workers will continue, given that the number of migrant workers has nearly reached the target outlined in the 12th Malaysia Plan.
"The government has determined that the foreign worker quota must not surpass 15% of the total workforce by 2025," Sim told the Malaysian parliament on March 26. There are 2.17 million foreign workers in Malaysia, according to the Malaysian Immigration Department. The decision to lift the freeze on the foreign worker quota will hinge on the results of the second labour recalibration program, which serves as an amnesty initiative aimed at legalising undocumented workers. Sim said that any decision regarding the reinstatement of the foreign workers' quota will be made after the government obtains comprehensive data on the number of workers yet to enter the country by May 31, 2024, and the conclusion of the labour recalibration process, scheduled to wrap up entirely by June 30, 2024.
Over 70% of Malaysia's migrant labour is composed of workers from Indonesia, Bangladesh and Nepal, while the rest originates from countries such as India, Vietnam, Pakistan and Thailand. Malaysia's decision to stop recruiting foreign workers will have adverse impacts on Nepal's labour migration, as the Southeast Asian nation serves as a significant overseas job market for low-skilled Nepali workers. As per the Labor Migration Report 2022, Malaysia along with the six Gulf Cooperation Council (GCC) countries - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates - remain the most popular destination for Nepali workers. Since 2013/14, these seven countries have consistently accounted for over 80% of employment opportunities for outbound Nepali workers.
Malaysia hosts foreign workers from 15 countries, including Nepal. Government statistics show that the majority of Nepalis seeking labour permits to work abroad in the previous fiscal year chose Malaysia as their destination. According to the Department of Foreign Employment (DoFE), a total of 259,596 Nepali workers received labour permits to work in Malaysia in 2022/23. In the current fiscal year, however, there has been a decline in the number of Nepalis travelling to Malaysia for work compared to the previous fiscal year. As of mid-March this year, 63,976 Nepalis have left for Malaysia for employment. Malaysia has traditionally been a crucial labour destination for Nepali workers. The DoFE estimates that there are over 500,000 Nepali workers in Malaysia who have legally entered the country by obtaining work permits from the government.
According to a senior official from the DoFE, about 44% of Nepali workers who sought employment abroad during the last fiscal year opted for Malaysia. Malaysia suspended hiring foreign workers for two years amid the Covid-19 pandemic. Last May, the government identified certain organisations involved in facilitating the migration of Nepali workers to Malaysia as illegal and consequently shut down their operations. This intensified the challenges for Nepali workers seeking opportunities in Malaysia.
Foreign employment experts warn that Malaysia's new policy regarding migrant workers could directly affect Nepal. Ganesh Gurung, a prominent figure in this field, said that Nepali workers stand to lose significant job opportunities in a key labour destination due to the recent policy shift in Malaysia. According to government estimates, Nepal sees over 500,000 new entrants to the labour force each year. Almost all of these additions to the labour market seek opportunities abroad for employment. Data compiled by the DoFE shows 497,704 new Nepali workers ventured abroad for employment last year. Additionally, 277,272 individuals returned to foreign job destinations after getting re-entry approval permits from the government. This put the total number of workers leaving for foreign job destinations at approximately 800,000.
Nepal is facing a daunting challenge in providing adequate job opportunities for its citizens which is further compounded by the fragile state of the economy. A recent World Bank report titled 'South Asia Development Update' shows Nepal's employment ratio (employment as a percentage of the working-age population) has declined by a staggering 11% over the past 23 years. With a burgeoning working-age population, the lack of job creation within the country has fueled a surge in the trend of seeking employment opportunities overseas.
If Malaysia halts the recruitment of foreign workers, it will likely lead to a decrease in remittances from that source in the future. According to the World Bank, Nepal receives the highest remittances compared to its gross domestic product among South Asian countries. "If the number of workers going to Malaysia decreases, remittances from that country will decline, potentially impacting the economy," said Gurung. Dilliram Pokharel, deputy spokesperson for the Nepal Rastra Bank (NRB).
Rajendra Bhandari, president of the Nepal Foreign Employment Professionals Association, said that Malaysia's policy of not hiring foreign workers has triggered a significant crisis in foreign employment. He added that the demand for workers is also declining in Gulf countries. "With the suspension of recruitment in Malaysia, the government must expedite the process of sending workers to other countries, particularly in Europe, where there is a demand for Nepali workers," he said.
According to the Nepal Labor Migration Report 2022, Nepali migrant workers, lately, are increasingly favouring destinations such as the United Kingdom, Albania, Croatia, Poland, Romania, Cyprus, Turkey in West Asia and the Maldives for employment opportunities. Due to better wages and facilities, Nepali workers are increasingly opting for European countries over GCC countries. While Nepali workers in Gulf countries typically earn an average monthly income of Rs 30,000-40,000, those working in European countries can earn substantially higher, ranging from Rs 100,000-150,000.
However, Gurung believes maintaining employment opportunities in the Gulf and Malaysia holds significant importance for the country as Nepali workers working there send remittance back home. "Workers who migrate to the Gulf and Malaysia send remittances back home and eventually return to work within the country. However, those who migrate to developed countries typically do not return and tend to accumulate wealth abroad. Therefore, safeguarding employment opportunities in the Gulf and Malaysia remains crucial for Nepal," Gurung explained.
Stakeholders also warn that the closure of traditional destination countries for Nepali workers may drive them to seek employment in precarious locations. "Currently, there is a surge in the illegal migration trend to various countries," Bhandari said. "Nepalis are even willing to risk their lives in places like Russia and Ukraine." Joint Secretary of the Ministry of Labor, Employment and Social Security, Govinda Prasad Rijal, said that while the government has yet to receive official confirmation from Malaysia regarding the decision to halt worker recruitment, the ministry is seeking information through diplomatic channels. "We are prepared to make necessary decisions based on the information we receive," he assured.
