MPMA DEVELOPING THE PLASTICS INDUSTRY by Datuk Lim Kok Boon President

1. MPMA ROADSHOW 2017 MPMA DEVELOPING THE PLASTICS INDUSTRYby Datuk Lim Kok BoonPresident

2. Contents • MPMA - 50 years • Performance of the plastics industry 2016 • Labour and Foreign Workers Issues • BNM’s New Measure to Enhance Depth and Liquidity of Onshore Financial Market • National Budget Dialogue 2017

3. MPMA 1967 - 2017 • 10 January 1967: officially registered as “MALAYAN PLASTIC ASSOCIATION” • 3 June 1969: changed to “MALAYSIAN PLASTICSMANUFACTURERS ASSOCIATION” • Highlights of the milestone and achievements of MPMA would be in the Golden Jubilee Coffee Table Book to be launched at the MPMA Golden Jubilee Dinner on 8 July 2017.

4. Key Data for the Malaysian Plastics Industry *Note: Revised basis of data compilation by the DOS

5. Major Market Segments for Plastic Products

6. Export of Plastic Products (2001-2016) RM billion Source: Department of Statistics

7. Export/Sales Turnover Ratio E/T Ratio Turnover RM billion Note: The Department of Statistics has revised the basis of data compilation, resulting in a 27% increase in total sales turnover for 2015 and 10% increase in 2016.

8. Overall Performance • The plastics industry registered an estimated total sales turnover of RM26.26 billionfor2016, representing an increase of 10.6%from RM24.77 billionfor2015. • Export increased by 2.1%from RM12.96 billionfor 2015 to RM13.23 billion for 2016. • The impressive 10.6% growth was due to the revised method of compilation by the Department of Statistics (it may not reflect the true scenario of the industry’s performance).

9. Overall Performance • The weakening of the Malaysian economy due to lower crude oil price affected the consumer sentiment and their spending behaviour. • Domestic growth was affected by the weaker demand from the automotive sector. • However, export sector benefited from the weakening of the ringgit against the USD and Euro but the plastic bag sector is affected by the EU’s policy to curb plastic usage.

10. Outlook for 2017 • Continued weakening of the ringgit may have a cost impact on domestic-oriented manufacturers, particularly, the automotive and construction sub-sectors. • Consumers confidence level may be further impacted. • Prolonged ringgit weakening may hurt the economic growth.

11. Outlook for 2017 • More aggressive export strategies to capitalise the benefits of weakening ringgit. • Export of plastic bags may be further impacted by the EU’s “less single use bag” policy. • Local bans on PS and Bags • (MPMA’s Sustainability Activities)

12. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme Background • 12 March 2016 - The Deputy Prime Minister announced that the Cabinet had frozen the intake of all new foreign workers (FWs). • The DPM also announced that the Rehiring and Relocation Programme, which started on 15 February would end on 30 June instead of 31 December 2016.

13. Labour and Foreign Workers Issues1. Suspension on intake of Foreign Workers and Rehiring Programme Association Joint Meetings • 29 April 2016 – MPMA participated at the Associations Joint Meeting held in ACCCIM, whereby the Meeting decided to submit a joint memorandum to the authorities. • 6 May 2016 – Submitted a joint memorandum to the DPM, highlighting the following:

14. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • Suspension of FWs recruitment – The impact of the suspension on FWs recruitment on businesses and economy was highlighted. The information was compiled through a survey conducted by ACCCIM and several participating associations, including MPMA. The joint memorandum sought to appeal to the Government to immediately lift the suspension because a prolonged suspension would affect the entire spectrum of industries and businesses from the manufacturing, construction, plantation and services sectors.

15. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme 12 May 2016 - the Cabinet announced that the suspension for the manufacturing, construction, plantation and furniture industries would be lifted. • Rehiring programme for illegal FWs - The rehiring programme was limited to those who have entered the country either with valid permits such as PLKS or PLS, and currently have employers. These strict criteria applies only to a very small portion of currently undocumented FWs who were eligible to be legalised and rehired.  Proposal: the rehiring programme should instead be opened to all undocumented FWs (except those with criminal records).

16. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • High cost of the rehiring programme- The processing charges for the rehiring exercise were too costly compared to the past 6Ps programme.  The cost to be incurred included: (a) Registration and administrative charges - RM1,200 (b) Penalties of RM500 and RM300 on employers and workers, respectively (c) Other typical charges for hiring FWs - RM3,000 There had been cases where effective fees could extend to as high as RM6,000, if other miscellaneous charges were factored in.

17. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme Proposal: The existing process be changed to the one previously used in the 6P programme, and to lower the registration and administrative fees imposed by the private firms (IMAN, Bukti Megah and MyEG consortium) that have been tasked to process the rehiring applications. 

18. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • FW levy – Proposal: Anyfuture plans to increase the levies be deferred at least for the next five years to ease the cost of doing business.  • Enforcement and raids – Proposal: The raids on illegal FWs be halted immediately during the period of the rehiring programme. This was to ensure that such raids would not cause any major disruptions to business operations.

19. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme 31 May 2016 - MPMA attended a briefing by the Deputy Minister of Home Affairs on FWs issues. The Deputy Minister announced that the freeze in FWs intake had been partially lifted. More sectors were allowed to bring in new FWs but the details would be announced after the Re-hiring Programme ends on 30 June 2016.

20. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme 15 June 2016 – MPMA participated a joint meeting at ACCCIM to follow up on FW issues. The meeting was concerned about the MIER CEO Confidence survey where only 33% of the CEOs were reported to have been impacted by the freeze. The report had been widely published in the local newspapers. It was believed that most of the CEOs surveyed were from the service sector.

21. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • The joint meeting had decided to send a memorandum to the Deputy Prime Minister cum Minister of Home Affairs highlighting the following: • Majority of the companies across all sectors of the industry and economy had reported severe impacts on their production due to the sudden freeze in the employment of fresh FWs.

22. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • Urging the Minister to immediately lift the freeze and allow employers to directly apply and engage FWs. • Supporting the government's decision to eliminate the need for agents and allow employers to directly engage FWs.

23. The Star, 17 June 2016

24. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme 22 August 2016 – MPMA attended the Town Hall Session with Stakeholders organised by the Ministry of Human Resources (MOHR). Trade associations were invited to comment on the findings and proposals by the Institute of Labour Market Information and Analysis (IlMIA) appointed by MOHR to conduct the study which is summarised as follows:

25. Labour and Foreign Workers Issues1.Suspension on Intake of Foreign Workers and Rehiring Programme • Industry to maintain the percentage of FWs at maximum 15% in terms of total workforce, as stated in RMK11 (currently at about 16%). • Industries to enhance the management of FWs (providing reasonable housing facilities, etc) • To implement “Employers  Mandatory Commitments” (Strict Liability. Employers will have to bear more responsibilities, e.g. to ensure that their FWs will not run-away/jump ship).

26. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • Government would stop labour outsourcing activities. • No more new sectors would be opened for FWs. • Government would implement multi-tier levy. • Government/private sector would train more skilled workers.

27. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme MPMA submitted its feedback directly and through ACCCIM. 9 September 2016 – ACCCIM submitted a comprehensive letter/proposal to MOHR, incorporating MPMA’s inputs. MPMA actively provided inputs at these joint association meetings, meetings with the authorities as well as provided valuable inputs for the letters, memorandum to the Government, press releases, etc.

31. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme The letter emphasized the following: • The goal to maintain the share of the FW at 15% under the 11th Malaysian plan means eliminating millions of FW  will absolutely cause an abrupt disruption of workforce supply, and consequently severely impacted the various industries and businesses. By setting a realistic target of FWs to total employment, the Government can move forward to implement consistent and effective policies to reduce over-reliance on FWs.

32. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • Private sector supports the Government’s policy to reduce over dependency on FW by introducing automation, high value-added and high technology industries but there are some jobs that are unable to be automated. Labour are still needed to ensure the daily operation to run smoothly, particularly on those 3D jobs which are not taken up by the locals.

33. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • To support/facilitate the industry growth, sufficient FWs are available as long as they are proven as genuine businesses need and are capable of paying the FW’s levy.

34. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • “Strict Liability” – Employers are amenable to accept conditional upon several factors: • The application for FWs should be efficiently approved and available. • The Enforcement Agencies must be efficient and effective in apprehending all “run-away” FWs.

35. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • The services of Labour Outsourcing Agents should be terminated. Employers should employ FWs directly from the source countries, and the Government should enable and facilitate the direct employment of FWs.

36. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • Proposed “Multi-Tier Levy” • It would exert pressure on the cost of doing business. • Any recalibration of FWs levy must be justified and based on sound differential cost basis. • All stakeholders should be consulted and any change to the levies should be progressively implemented within adequate time for adjustment on a pre-announced schedule.

37. Labour and Foreign Workers Issues1. Suspension on Intake of Foreign Workers and Rehiring Programme • Issues such as shortage of workers (LWs & FWs), uncertainty in getting FWs, flip-flop of Government policies, outsourcing agents by Government, mismatch of students trained by TVET institutes and industry requirement, etc, must be addressed holistically in order to effectively meet the industries’ labour needs to grow and expand.

38. Labour and Foreign Workers Issues1. Suspension on intake of Foreign Workers and Rehiring Programme 7 October 2016 – MPMA and trade associations attended a meeting with the Director-General of the Ministry of Home Affairs. The private sector were advised to recruit FWs from the Rehiring Programme. The private sector however expressed that it was rather difficult to recruit any FWs due to the rigid conditions of the Rehiring Programme.

39. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer • 31 December 2016 - the Deputy Prime Minister cum Minister of Home Affairs announced that the Employer Mandatory Commitment (EMC) would be implemented effective 1 January 2017 whereby employers are required to pay the levy of the FWs employed. • 3 January 2017 - An emergency meeting was called by ACCCIM which was attended by 159 trade associations.

40. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer • On the same day after the joint meeting, a press conference was held and a joint memorandum by the 159 trade associations was submitted to the Prime Minister, highlighting the following:

41. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer • Trade associations were totally “shocked” and taken aback by the sudden implementation of the EMC and the change of policy pertaining to the FWs levy where the responsibility of paying such levy has been transferred from the FWs to the employers.

42. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer • The industries had not been consulted on the EMC and there was no agreement by the stakeholders. Prior to the 31 December 2016 announcement by the PM on EMC implementation, on behalf of the industry associations, MEF and ACCCIM had submitted memoranda to the Government in March and May 2016 but no response/ meeting had been received/called.

43. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer • The EMC in its present form is totally unfair with the employer being made responsible for things that are totally beyond the employer’s control. Employers have no authority nor enforcement capability to implement the new rules envisaged under the EMC. • Trade associations would like to strenuously appeal to the Government to rescind the EMC.

44. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer • The sudden implementation of the EMC in the current scenario in an already unsetting condition of the FWs employment system as well as the already very challenging economic situation would be detrimental to businesses and ultimately would further worsen the current depressed economy. • The proposed EMC would result in the escalation of costs which would inevitably be passed on to the rakyat.

45. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer • The current legal FWs had been contracted with the mutually agreed condition that the FWs pay the levy for their rights to work in Malaysia. Changing this contract in mid-stream is a one-sided and unnecessary windfall to these contract FWs to the detriment of the employers and also our country as more RM would be remitted by the FWs. The levies that are not paid by FWs amounting to about RM5 billion annually would be remitted to the source countries.

46. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer Trade associations further proposed that the EMC if ever implemented, the following conditions should be met: • All stakeholders are consulted and their views be taken into account. The “Strict Liability” concept can only be accepted if the absconded FWs are made liable for their actions. Employers should not be penalized if the FWs were to abscond.

47. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer • The issue on illegal FWs is resolved and properly managed. • The hiring of requisite FWs should be efficient and not subjected to the ‘whims and fancies’ of the approving authorities as to numbers and source, both as to countries and out-sourcing recruitment agencies. • The enforcement agencies must efficiently apprehend run-away FWs otherwise there is no deterrent for the run-away FWs.

48. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer

49. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer

50. Labour and Foreign Workers Issues2. Employer Mandatory Commitment (EMC) – Levy to be paid by employer