| Labour and Social Development: | | | | equal footing, for mutual benefit, growth and |
| Improve Protection of Labouring Communities | | | | development. Tripartism, so conceived, does not |
| By M. Nadarajah | | | | exist in Malaysia. Consider the Employees |
| The Malaysian Trades Union Congress (MTUC) | | | | Provident Fund for instance. The EPF resources |
| organized a national workshop on ‘Taxation | | | | derive from the accumulated contributions of |
| and Social Development’ in Kuala Lumpur, on | | | | employers and workers. The government should |
| 12 - 13 June 2002. The national workshop formed | | | | assume the role of trusteeship and be responsible |
| part of an ICFTU-APRO response to the 1997 | | | | for regulation. In reality, the government enjoys |
| Asian financial crisis which was concerned to | | | | undue privilege in the deployment of EPF money. |
| understand the crisis affected social development | | | | Given the serious lack of transparency, the |
| and the social protection of labour in particular. | | | | government’s interventions in the use of EPF |
| The ICFTU-APRO holds that national governments | | | | money do not really benefit labour. Funds have |
| are responsible for funding the maintenance of | | | | been used to save and salvage bad investments |
| social safety nets and social development through | | | | but not provide for retrenched workers who |
| taxation. Hence, the ICFTU-APRO conducts | | | | need critical support in times of crisis. If the official |
| country case studies to examine taxation and | | | | tax strategy benefits business, the savings of |
| social development and holds national workshops | | | | workers have also been used to benefit business. |
| to discuss such issues with trade unionists. | | | | As yet, there is simply no tripartism as mature, |
| The Kuala Lumpur workshop noted that while | | | | institutionalised, democratic and transparent |
| Malaysia has a reasonably well-developed social | | | | practice. |
| security system for labour, certain critical issues | | | | 10. Unionisation and the Informal Sector |
| call for reflection and closer attention. | | | | The state’s pro-business authoritarian and |
| 1. Caring Society? | | | | paternalistic attitudes contribute to the present |
| The social agenda of Malaysian national policies | | | | low level of unionisation. Malaysia has over 500 |
| since the New Economic Policy bear implicit as well | | | | unions. Yet only about 10 per cent of those |
| as direct references to creating a ‘caring | | | | employed are unionised. Workers in the informal |
| society’. For labour, however, the situation | | | | sector, estimated to be half the employed, have |
| appears to show a movement away from a | | | | have no union protection. Their inability to join |
| caring society to ‘high social risk society’, | | | | unions denies them the social protection that |
| and an unjust one. | | | | comes through collective agreement between |
| 2. Malaysia Incorporated and Social Policy | | | | unions and employers. Generally, such a situation |
| The social development policy is located within the | | | | limits the power of workers to influence social |
| framework of Malaysia Inc. which is itself | | | | development policies. The workers’ influence |
| embedded in a larger ‘economic growth | | | | is diminished by stringent laws which restrict free |
| framework’. This framework is highly | | | | association, vague definitions of “national |
| influenced by neo-liberal ideology, geared towards | | | | security”, prohibition of political party affiliation, |
| capitalist notions of profit-making and wealth | | | | and the absence of systematic representation of |
| creation and characterised by skewed patterns of | | | | workers’ interests in Parliament. Given the |
| income distribution. Thus, the economic security of | | | | real vulnerability of unionists to repressive laws like |
| businesses is more crucial than the social security | | | | the Internal Security Act, not even a token seat |
| of workers. | | | | in the Senate can truly benefit the needs of the |
| 3. Privatisation and Redistribution of Wealth | | | | labour movement. |
| Malaysia basically adopts an economic growth | | | | 11. Contradictory Legislation |
| model that assumes that a dynamic economy will | | | | There is a major contradiction between the |
| benefit all citizens. However, growth and | | | | provisions of the Employment Act and the |
| redistribution are different issues. We require | | | | Company Act. Since the economic and political |
| comprehensive and sustainable wealth | | | | environment privilege employers over workers, |
| redistribution policies to benefit all citizens, and the | | | | the Company Act generally takes precedence |
| ‘losers’ in particular. There was a focus | | | | over the Employment Act. For example, when a |
| on redistribution in the 1970s. The policies of | | | | company enters receivership before closure, the |
| privatization which emerged in the early 1980s, | | | | chances that workers will receive what is due to |
| though, tended not just to reduce governmental | | | | them are rather slim. The occupy the bottom of |
| inefficiency but also the government’s role in | | | | the list of those who are to be paid. Such a |
| wealth redistribution as an important social goal. | | | | situation exposes workers to high levels of |
| Privatisation and economic liberalization assume | | | | insecurity in terms of losing their jobs and their |
| that the market is the most suitable vehicle to | | | | earnings. This basic and unfair contradiction must |
| achieve redistribution. But it is well established that | | | | be resolved to protect the interests of workers. |
| privatisation benefits corporations far more than | | | | 12. Unrealistic Retirement Age |
| individual citizens with the result that in Malaysia, | | | | Generally there is little appreciation of labour’s |
| the income share of the lowest 40% of | | | | contribution to improvements in the quality of life |
| households was only 12.9 per cent, according to a | | | | that Malaysia has achieved. There is also little |
| 1996 income distribution report. | | | | sensitivity to how changes in the quality of life |
| 4. 'Culture of Privatisation' and Social Protection | | | | may adversely affect workers and their families. |
| The culture of privatisation, as mentality and | | | | Life expectancy has increased so that it now |
| institutionalised practice, has spread from the | | | | exceeds 70 years (with women living slightly |
| economy to the social sectors. The government | | | | longer than men). Even so, the retirement age is |
| has increasingly reduced its provision of social | | | | still fixed at the outdated level of 55 years, with |
| protection and shifted its responsibility to the | | | | the private sector following the public sector in |
| individual and the family. This is in fact a central | | | | this matter. With longer life expectancy, there is |
| part of Vision 2020 and the caring society, and a | | | | an urgent need to avoid an early retirement which |
| tendency towards the privatization — rather | | | | exposes workers to greater insecurity and |
| than the socialisation — of social protection. | | | | psychological stress in the post-retirement period. |
| Some support this shift on grounds that the | | | | Retiring people early to absorb younger workers, |
| government cannot indefinitely support social | | | | and thereafter claiming low unemployment rates |
| safety net programmes. Yet a culture of | | | | only manipulates numbers without addressing the |
| privatization upsets priorities and introduces a | | | | unemployment problem of early retirees. |
| careless, high-risk society. For instance, if health | | | | It is also necessary to reconsider the retirement |
| services are privatized, the best health care would | | | | age because of the increase in the average age |
| be available only to those who can afford it, not | | | | at marriage. from 20 years to 30 years. |
| necessarily to those who need it. Privatisation | | | | Consequently more and more workers retire |
| displaces real ‘need’ with market | | | | while thei children are still at school. Workers are |
| ‘demand’. | | | | increasingly burdened with providing education to |
| 5. The Family | | | | their young and completing payments for houses |
| Existing family-centred action programmes are | | | | and/or vehicles out of their pension or EPF |
| hardly commensurate with the stresses to which | | | | payments. Often many families are thereby |
| the family is exposed today. While housing for the | | | | placed at great social risk owing to inadequate or |
| poor is much too politicised, housing for poor | | | | rapidly depleted funds. |
| labour is not a priority. Studies confirm the | | | | 13. Post-retirement Poverty |
| government’s poor performance in this area. | | | | Post-retirement poverty is becoming a serious, if |
| In addition, existing low cost housing does not | | | | neglected, social issue. Malaysia’s first |
| provide comfortable living space for an extended | | | | generation of industrial workers — those |
| family, which indirectly neglects the older | | | | started work in the late 1960s or the early 1970s |
| generation and children, especially in families where | | | | — have either retired or are close to |
| both husband and wife are working. | | | | retirement. Many among them are floor level |
| Long working hours deprive breadwinners of the | | | | workers who will retire with EPF sums of |
| opportunity to spend quality time at home. The | | | | RM70,000 or less. Amounts of this size will be |
| family is all too often subjected to stresses arising | | | | exhausted in about four years of retirement. |
| from a poorly protected post-retirement period, | | | | Thus, on average, 60-year retirees will find their |
| poorly regulated retrenchment, involuntary | | | | financial resources exhausted and be forced to |
| unemployment, lack of labour protection in the | | | | spend their remaining years being dependent on |
| informal sector, absence of unemployment | | | | others. This is symptomatic of the emergence of |
| benefits, and the need for double jobs to make | | | | a new category of disguised poverty and high |
| ends meet. | | | | insecurity. |
| Decision-making power over the use of communal | | | | 14. Problems of EPF |
| or collective resources, including financial and | | | | Embodying a compulsory savings strategy, the |
| productive resources, along with changing | | | | EPF offers social protection to individual workers |
| ownership patterns, has not shifted towards | | | | through their own savings, supplemented by |
| individual workers or their families. Processes and | | | | employer’s contributions. However, EPF faces |
| policies to shape and strengthen a self-conscious | | | | a number of problems. One critical problem is |
| civil society in which the family plays an important | | | | related to the use of EPF money and its |
| comprehensive role are almost non-existent. In | | | | investments. EPF’s Investments are not |
| effect, indiscriminate privatisation and | | | | subject to established principles of transparency. |
| marketisation — of health care services, for | | | | Nor are they decided according to a stringent and |
| example — expose the family to high levels of | | | | fair practice of tripartism. |
| social risks. | | | | There are also problems with EPF’s various |
| 6. A Vulnerable Economic System | | | | pre-retirement withdrawal schemes. Schemes |
| The prevailing economic strategy of ‘growth | | | | which are linked to education, house payment or |
| with redistribution’ stresses ‘growth’ | | | | computer purchase defeat EPF’s fundamental |
| in the belief that a high performing economy will | | | | purpose which is ensure workers an acceptable |
| enable social development to take care of itself. | | | | degree of post-retirement security. Moreover, |
| However, the long-term sustainability of our | | | | such schemes effectively transfer the |
| economy in its present shape is questionable. Prior | | | | government’s role in social protection to |
| to 1997, the economy seemingly did well with | | | | individual workers. |
| approximately 8 % growth. But the 1997 financial | | | | A third major problem arises after a |
| crisis exposed many weaknesses inherent in the | | | | worker’s entire EPF contribution is withdrawn. |
| economy, such as a serious lack of mechanisms | | | | The total withdrawal of a worker’s EPF |
| for effective development of technology, a lack | | | | contribution in the form of a lump-sum payment |
| of ransparency and good corporate governance, | | | | assumes that the money can then be invested in |
| and pervasive cronyism). Our system registers | | | | productive economic activity. Retirees are |
| 5.6 in a ‘Corruption Perception Index’ | | | | somehow expected to turn into businesspeople or |
| (‘0’ for highly corrupt and ‘10’ | | | | investors who can provide for themselves. This is |
| for highly clean) and is placed 36th in the | | | | a spurious assumption. It is highly unlikely that |
| Transparency International’s list. | | | | most retirees can afford major investments. |
| 7. Regressive Taxation System | | | | Especially for lower-level workers in a turbulent |
| The Malaysian tax system hardly helps workers | | | | economic environment, the investment of funds |
| and their families. The tax system virtually | | | | withdrawn from EPF rarely provides a secure |
| institutionalises an indirect tax regime. A projection | | | | post-retirement income. |
| of tax revenues from 2000 to 2005 indicates | | | | By now it is well known that the insurance |
| that personal income tax will drop by about 0.5% | | | | industry has long had its eye on EPF’s |
| while sales tax will increase by about 10%. Instead | | | | enormous resources. The insurance industry |
| of being premised on progressive redistribution, | | | | knows it can harvest huge profits if EPF money is |
| the Malaysian tax structure is fast becoming | | | | made available to the industry. Already the |
| regressive, pro-business and pro-rich. Indirect | | | | industry has offered some ill-conceived pension |
| taxation in a highly unequal society results in | | | | schemes which are not advantageous to |
| regressive distribution where the tax burden shifts | | | | workers’ interests. Unlike the attractive |
| to and hurts the poor. | | | | government pension scheme, private-sector |
| To increase its tax revenues, the government | | | | profit-driven schemes must be very carefully and |
| should expand the ‘net’ of taxation to | | | | strictly regulated to prevent workers from losing |
| levy taxes on currency transaction (‘Tobin | | | | instead of gaining from those schemes. |
| Tax’), foreign direct investment, transfer | | | | 15. Minimum Wage And Unemployment Benefits |
| pricing, internet commerce (‘bit tax’), and | | | | Malaysia has no statutory provision for either |
| the environment (‘green’). It goes | | | | minimum wage or unemployment benefit. The |
| without saying that a fairer tax system based on | | | | MTUC has proposed a minimum wage of RM900 |
| increased revenues will contribute immensely to | | | | that guarantees the basic needs of the labouring |
| social development. | | | | community. The MTUC’s proposal would also |
| 8. Crisis Management | | | | be dynamic, that is, adjusted with changing times. |
| Labouring communities need support during crises | | | | The government has not accepted the proposal. |
| not of their own making but which result from | | | | Both the government and business take a |
| economy’s underlying growth model. Malaysia | | | | negative attitude towards unemployment benefits. |
| has some social protection programmes but it has | | | | In particular, business considers that a society that |
| neither institutionalised the social protection of | | | | provides institutionalised support for unemployed |
| labour nor established an ongoing crisis response | | | | workers will place an extra financial burden on |
| mechanism. The National Economic Recovery Plan, | | | | business sector and encourage a ‘dole |
| designed by the National Economic Action Council | | | | mentality’. |
| (NEAC) to manage the impact of the 1997 | | | | 16. Targeting |
| financial crisis, should be amenable to long term | | | | There is clearly a need for a proper strategy of |
| applicability, given the vulnerability of the growth | | | | targeting to realise social protection for labour. In |
| model to periodic crisis. As it is, any social | | | | Malaysia, the only well developed strategy of |
| protection in times of crisis is provided ad hoc and | | | | targeting is linked to the government’s |
| amounts to little more than a ‘one-time | | | | affirmative action policy. This policy is itself based |
| dispensation’. | | | | on exclusive ethnic principles rather than inclusive |
| 9. Tripartism | | | | economic principles. In the long run, such policies |
| Tripartism presupposes a process by which | | | | and their politically motivated targeting strategies |
| workers, employers and the government resolve | | | | are harmful to the overall social security of |
| their differences and promote cooperation, on an | | | | workers regardless of ethnicity. |