Page 101 - BPAReport

and Australia) in developing the MTLS. After due consideration and taking into account the
situation in Malaysia, a system that combines a standardised quota system together with a
multi-tier pricing mechanism was designed and adopted.

Quota System

5. The centrepiece of the quota system is the development of the Dependency Ratio
Ceiling (DRC). The DRC will take the place of the multiple and disparate system used for
approving the number of foreign workers in the sectors where foreign workers are allowed to
be employed (as described in the “Red Book”).11

6. The dependency ratio was based on evidence from the Labour Force Survey and
information from consultations with concerned stakeholders on the use of foreign workers in
their businesses. In general, where available the DRC is derived from the previous five year
averages in the use of foreign labour within the approved sectors. The following formula was
used in the derivation of the DRC:

FOREIGN WORKERS
DRC =
TOTAL WORKERS

7. This formula meets the objective of having a standardised method for deriving the
DRC and takes the place of the multiple and disparate system underlying the previous “Red
Book” methods. The application of the DRC does away with discretion and inexplicable
decisions in determining approvals for the number of foreign workers allowed to be
employed in business activities. This will assist strongly in reducing the risks for corrupt
practices and preferential treatment.

8. With the DRC, it is anticipated that any registered business in the approved sectors
and subsectors will be able to secure a decision for hiring foreign workers without undue
delays and upon clear and transparent criteria. The criteria in the DRC calls for the registered
business to show formally the total contingent of workers on the firm’s payroll and the total
number of these workers who are documented foreign workers. Each business must make a
Statutory Declaration on the accuracy of the workforce information submitted and that the
business complies with all relevant employment and other applicable laws, regulations,
guidelines and norms or practices, especially those applicable to foreign workers.

9. Due to the different operating environments of the approved sectors, three separate
models for application of the DRC was designed. A summary of the three models is set out in
Tables 1 to 3. Except for the manufacturing sector and a variation applicable to the
construction sector, the DRC contemplates three tiers in the approval of the amount of
foreign workers permitted to be deployed by a business. The manufacturing sector has four
tiers. The construction sector has two subcomponents for foreign workers: those that are

The “Red Book” refers to the criteria and rules summarized in the Buku Panduan Dasar, Prosedur Dan Syarat-Syarat
11
Penggajian Pekerja Asing Di Malaysia, Jabatan Tenaga Kerja Semenanjung Malaysia, 2011.

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