Issues and Challenges in Plastic Industry

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    Issues and Challenges Facing

    the Plastics Industry

    Contents Minimum Wage Issues

    MITI Dialogue 2013

    Bank Negara Dialogue 2012

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    Chronology of Events on

    Minimum WageDates Description

    Aug Sep 2011 Survey on the min wage paid by MPMA members was conducted

    Dec 2011 Proposal on min wage was submitted to the National Wages

    Consultative Council (NWCC) through MEF but it was rejected

    MPMAs proposalMin wage ofRM600 forless economically developed areas like

    Kedah, Kelantan, etc and East Malaysia

    Min wage ofRM650 foreconomically developed areas like KL,

    Selangor, Penang and Johor

    9 Feb 2012 MPMA met with MEF and submitted a revised proposal. MPMAs

    proposal was again rejected by NWCC

    MPMAs revised proposal

    Min wage ofRM700 forless economically developed areas

    Min wage ofRM750 foreconomically developed areas

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    Chronology of Events on

    Minimum WageDates Description

    17 Feb 2012 MPMA was concerned when the Government announced that a min

    wage level of between RM800 and RM1,000 would be submitted for

    Cabinets approval early March

    27 Feb 2012 MPMA initiated a meeting with trade organisations

    6 Mac 2012 A Joint Press Conference was held with 16 trade associations and 36representatives from 21 media companies. 43 articles and 12

    mentions on television and radio were published/aired

    Highlights of the Joint Press Conference

    A sudden and substantial increase in wages will result in closure of

    at least 30% of the small and medium sized plastics companies

    10,000-20,000 job losses due to company closures and companies

    adjusting to the high wage bill from the national min wage

    Urged the Government to consider introducing the min wage policy

    in phases over a period of time to give companies and businesses

    time to adjust

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    Chronology of Events on

    Minimum WageDates Description

    12 Mac 2012 MPMA sent a letter to the Prime Minister following the Press

    Conference, proposing the following:

    The definition ofMin Wage should be based on Take

    Home Pay which includes Basic Salary + Overtime +Incentives + Allowances + Bonus

    An increase in wages must commensurate with an

    increase in productivity

    The implementation of min wages should be staggered as

    sufficient time is required to upgrade the skills of the workers

    to improve their productivityMin wage quantum should be differentiated by

    geographical locations as well as between rural and urban

    areas

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    Updates on

    Minimum WageDates Description

    27 Mac 2012 MPMA received a reply from the Secretary-General, MoHR

    stating the following:

    The Government had taken note of MPMAs proposals

    The Government would considerall or part of the cash

    allowances be included into the min wage

    30 Apr 2012 Prime Minister announced that a min wage of RM900 would

    be implemented for Peninsular and RM800 for East Malaysia.

    14 Jun 2012 Government announced that the National Min Wage Act

    would be gazetted on 1 July 2012.

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    Updates on Minimum WageDates Description

    6 Aug 2012 Meeting with the Secretariat of the National Wages Consultative

    Council (NWCC) and submitted a written proposal on 17 August

    2012 based on the following:

    With the current unemployment rate of 3.1%, it is extremely

    difficult to employ local workers (LW). As such, the industry isheavily dependent on foreign workers (FW)

    Employers have to pay additional RM293-343 per month for

    employing every FW, as the costs of levy, amenities and

    insurances have to be borne by the employer

    LWs do not enjoy such benefits, and are therefore discriminated

    Huge outflow of cash being remitted overseasRM 14.4 billion

    Min wage policy would have a severe impact on manufacturing

    cost, if the basic pay of FW increases to RM900

    Closure of companies means that LWs shall be rendered jobless

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    Updates on

    Minimum WageDates Description

    6 Aug 2012 MPMAs appeals

    1.The costs of levy, amenities and insurances to be

    borne by FW

    2.The existing contracts with FW should be allowed tocontinue until the expiry date, the min wage for FW should

    be phased in over two years

    3.Shift allowance and attendance allowance be allowed to

    be computed as part of min wage but the quantum shall not

    be fixed

    4.Transport allowance and housing allowance be part ofthe computation of min wage

    5.Meal allowance should be included in the computation of

    min wage

    6.Different regions within Peninsular Malaysia and

    Sabah/Sarawak be accorded a lower min wage

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    Updates on

    Minimum WageDates Description

    13 Aug 2012 Sent Circular No. 33e/2012

    Template which members can use to request for deferral of

    the implementation of min wage

    15 Aug 2012 MPMA invited various trade associations to brief them on theoutcome of the meeting between MPMA and the NWCC .

    Provided them with soft copy of application for them to also

    submit to the Govt. Several of which were submitted.

    21 Sep 2012 Submitted an appeal to NWCC for a blanket approval to defer

    the implementation of min wage for all the 800+ members fora period of one year from 1 January 2013

    25 Sep 2012 NWCC issued the Guidelines on min wage implementation in

    early September.

    Briefing by Labour Officer on min wages Implementation at

    MPMA Head Office.

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    Updates on

    Minimum WageDates Description

    10 Nov 2012 Attended a meeting with NWCC, explained the rationale for

    the one year deferral

    20 Dec 2012 Received notification from NWCC, informing MPMAs appeal

    for the one year deferral had been rejected

    31 Dec 2012 MPMA issued a press release, expressed its concerns on the

    impact of min wage:

    Direct labour cost would increase by 30% to 40%

    Appealed for a grace period of at least one year for the

    implementation of min wage

    30 Jan 2013 Cabinet announced that the levy would be borne by the FWs.

    However, the new policy would apply to new FWs or when

    the existing FWs renew their work permits

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    Updates on Minimum WageDates Description

    4 Feb 2013 MPMA participated in a dialogue session between the Ministry of

    Human Resources (MOHR) and coordinated by the Malaysian

    Employers Federation (MEF), together with the SMI Association,

    Furniture Association and a few other associations.

    Employer associations expressed their concerns on the impact

    of min wages on businessesPointed out that there is growing discontentment by LWs

    increase of only 3-6% vs 60-70% for FWs. Strikes and protests,

    with expectation that there could be more protests after CNY

    Requested for the deferral of min wage implementation

    Requested that the cost of levy, amenities and insurance for

    FWs in included as part of the min wage, or borne by FWs

    12 Feb 2013 MPMA sent a proposal comprising the following to NWCC on

    steps and measures to be taken by the Government to assist

    companies adversely affected by the implementation of min

    wage: 10

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    Updates on

    Minimum WageDates Description

    12 Feb 2013 Levy - The Government to consider absorbing the levy

    cost for FWs that are currently paid by the employer before

    the renewal of the permit, in the following manner:

    a)For companies with a low profit margin of less than 3%, the

    Government to absorb the FW levy cost in the form of a

    direct payment to SMEs

    b) For companies with a profit margin of more than 3%, the

    Government to absorb the FW levy cost in the form of acorporate tax relief

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    Updates on Minimum WageDates Description

    12 Feb 2013 The Government to consider providing a tax relief for costs

    incurred on overtime, accommodation and transportation

    for FWs

    HRDF and SOCSO - The Government to consider suspension

    of HRDF contributions and that SOCSO contribution be paid

    for by the Govt. Transport and accommodation - The government to assist

    the industry by requiring that the FWs bear the cost of

    transport and accommodation. To assist the renegotiation of

    this provision, it would be necessary to first nullify the existing

    contract and be replaced by new work contract. Proposal is to

    revoke the work permit with the arrangement that a new workpermit be issued upon a new work contract being signed by

    the FWs. The new work contract would set out the min wage

    and that the FWs would bear the cost of levy, transport and

    accommodation

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    Updates on

    Minimum WageDates Description

    15 Feb 2013 MPMA attended a meeting coordinated by MEF for

    selected industry associations

    After the meeting, MEF submitted recommendations based

    on inputs from MPMA and other associations to theGovernment on strategies to assist companies to mitigate

    the high cost of doing business arising from the

    implementation of min wages. The following is a summary

    of the joint recommendations:

    1) Defer the implementation of national min wages by 12

    months for all employers to allow more time and flexibilityfor employers to plan and restructure their businesses,

    which is necessary given that the current global economic

    situation is challenging.

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    Updates on

    Minimum WageDates Description

    15 Feb 2013 2) Government to allow employers to recover the cost of levy

    that have already been paid by deducting the salaries of the

    foreign workers beginning on 30 January 2013. The term

    levy be replaced by some other appropriate and neutralterm, such as public facilities fees or utilities fees

    3) Employers should be allowed to charge a fee for providing

    amenities such as accommodation, transport, airfare,

    insurance provided to FWs which can be recovered

    through the deduction of wages

    4) Contributions to HRDF and SOCSO be suspended for a

    minimum period ofthree years

    5) Enforcement of min wages by Labour Department be

    deferred for 24 months beginning January 2013 14

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    Updates on

    Minimum WageDates Description

    20 Feb 2013 Cabinet announced measures to assist employers to mitigate

    the impact of minimum wages:

    A.For employers which have not implemented minimumwages forFWs:

    (i)Employers can submit their application for deferment for

    FWs to NWCC Secretariat through association or individually;

    (ii) Evaluation based on individual company basis and ifneed be, officers from JTK (Labour Dept.) would be required to

    verify documents, and interview unions/workers, at workplace;

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    Updates on

    Minimum WageDates Description

    20 Feb 2013 (iii) Employers applying deferment cannot make deduction

    from wages forlevy or accommodation;

    (iv) Min wage must be implemented forLWs beginning1 January 2013

    B. For employers already implementing min wages forFWs:

    (i) Employers can apply to JTK fordeduction of levy and

    cost of accommodation for FWs (appropr iate amoun tto be determined by JTK); and

    (ii) No further deferment for employers already implementing

    min wage

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    Updates on

    Minimum WageDates Description

    22 Feb 2013 MPMA attended a briefing by MOHR on the new measures.

    MOHR further informed that the Ministry is working with

    relevant Ministries on other incentives package such as:

    GrantsDouble tax deduction for extra cost of labour

    MPMA expressed our views as follows:

    (i)It is unfair for those employers already implementing min

    wage be prohibited to apply deferral;

    (ii)The deferral, which means only some employers would be

    granted, would create issues including strikes, job hopping andunhappiness amongst the FWs and LWs;

    (iii)Grants are not suitable as past results had shown that very

    few applicants were successful; proposed for the extension

    Reinvestment Allowance instead;

    (iv)Appealed for a deferment across the board for one year.

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    Updates on

    Minimum Wage

    Dates Description

    27 Feb 2013 MPMA and about 20 representatives from various trade

    associations were invited for a meeting with the NWCC to

    discuss the implementation of min wage.

    During the discussion, some NWCC members requested trade

    associations to accept the latest decision made by the Cabinet

    on 20 Feb 2013. However, associations were of the view that

    the deferment must be across the board for all employers.

    NWCC emphasized that the above had been made into a law

    by the Cabinet, employers must accept it. Trade associationsfelt that since there is no further room for discussion, they

    decided not to participate the meeting.

    Association representatives had a post-discussion amongst

    themselves and decided that the last option is to write an

    appeal letter to the Prime Minister to express the difficulties forSMEs to implement min wage for foreign workers. 18

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    Updates on

    Minimum WageDates Description

    28 Feb 2013 The Minimum Wage Implementation Steering Committee

    of SMI Association prepared a joint letter to the Prime

    Minster requesting for a review on the implementation of

    Minimum Wage Policy on Foreign Workers in Malaysiato lessen the burden on the small and medium sized

    companies. The Steering Committee was looking

    towards collecting 10,000 or more signatures from both

    associations and individual companies for support.

    MPMA had circulated the letter to all members, about

    110 companies had signed the joint letter.

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    8 March 2013 - Meeting with MITI Minister

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    8 March 2013 - Meeting with Health Minister

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    MITI Dialogue, 7 Jan 2013

    Issue MPMAs Proposal

    1. National

    Minimum

    wages

    1) The costs of levy, amenities and insurances to be borne

    by FW

    2) The existing contracts with FW should be allowed to

    continue until the expiry date, the min wage for FW

    should be phased in over two years

    MPMA attended the Annual Industry Dialogue with MITI on 7

    January 2013 together with 5 other associations from the

    chemical and petrochemicals industry. MPMA was the only

    association which raised the issue on min wage

    Immediately after the dialogue, the MITI Minister called a press

    conference and announced that MITI would assist the

    employers to reduce the burden arising from the

    implementation of min wages, by proposing to the Ministry

    of Labour to allow the levy for foreign workers be

    included into min wage 22

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    MITI Dialogue, 7 Jan 2013Issue MPMAs Proposal

    2. Reinvest-

    ment

    Allowance

    The Government to relax the RA claimableperiod by

    allowing manufacturing companies to claim on RA on their

    reinvestment expenditure with no time limit

    3. Electricity

    Tariff

    1) TNB should extend its off-peak rates to all the plastics

    manufacturing companies which are low-voltage users.

    MPMA proposed that a 40% discount to be given for off-

    peak rate under Tariff D (low-voltage)

    2) Off-peak electricity tariffbe extended to coverall day ( ie

    including day time) of Saturdays and Sundays forall

    categories of TNB users, both in the Tariff D and Tariff E

    4. EUs GSP Effective 1 January 2014, Malaysia will no longer be a

    beneficiary under the European Commission (EC)s

    Generalised Scheme of Preferences (GSP). MPMA suggested

    that MITI expedites the Malaysia-EU FTA negotiation process

    in order for Malaysia to become competitive in the EU market.23

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    Bank Negara Industry Dialogue,

    14 June 2012Issue MPMAs Proposal

    1. Min Wage Briefed BNM on the various proposals submitted by MPMA

    to the Government on min wage issues

    Re-emphasised MPMAs stand on min wage issues as per

    the letter sent to the PM on 12 March 2012

    Explained the possible impact of min wage on SMEs andbusinesses

    Expressed MPMAs concerns on the impact of the min wage

    2. Reinvest-

    mentAllowance

    The Government to relax the RA claimableperiod by

    allowing manufacturing companies to claim on RA on theirreinvestment expenditure with no time limit

    3. MPMAs

    TDP

    Briefed BNM on MPMAs Talent Development Programme

    (TDP), as a long term strategy to increase the productivity of

    the workers and hence less dependent on FWs

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