Carmelo Ferlito, CEO of the Center for Market Education, said policy decisions that are important and costly to businesses should not be done without engagement with the relevant stakeholders.
“Otherwise, it gives the impression that the government feels it is legitimate to change business rules as they please, and this is never good for investors,” he told FMT.
He said the clear consequence of this is that investors would not be keen to invest in a place where the government can so rapidly change the regulatory framework without consultation with stakeholders.
Ferlito was commenting on the Federation of Malaysian Manufacturers’ (FMM) expression of shock over the government’s “unexpected” announcement that all foreign workers would be required to contribute to EPF from 2025.
FMM president Soh Thian Lai on last Monday said it was caught off guard by the announcement when the 2025 budget was tabled, saying the government did not engage stakeholders prior to this.
Soh also lamented the lack of clarity on the plan, saying this has caused great concern within the business community.
Asked what the government’s move signalled to investors, Ferlito said: “It shows what has been shown so far; the government has the tendency to interfere with the economy, a desire to control it.
“We have seen this with price controls, as an example,” he said.
Ferlito said Malaysia must lead the charge with the Asean chairmanship by pushing for free circulation of labour and standardised employment rules for nationals and foreigners, adding that “if obligations should be extended, rights should be too”.
“But I am definitely not optimistic about this,” he added.
The Malaysian International Chamber of Commerce and Industry (MICCI) said the lack of consultation undermines Malaysia’s reputation as a stable and business-friendly destination, casting doubt on the predictability of future policies.
“The absence of consultation with industry players highlights a deeper governance issue.
“This is not the first time a major policy has been introduced without proper engagement or a clear understanding of the implications for those directly affected,” MICCI president Christina Tee said.
She stressed that for policies to be effective and sustainable, they must be developed with input from all stakeholders, including employers, worker representatives and industry leaders.
Tee called for the government, its agencies and the business community to immediately hold consultations to create a better framework that meets international standards without adding financial strain on businesses, which could harm the country’s economic growth.
Defending the decision to extend mandatory coverage to foreign workers, EPF CEO Ahmad Zulqarnain said that the move aligns with the retirement fund’s goal of providing social protection for all employees.
Mandatory EPF contributions will burden foreign workers
Commenting on the merits of the new rule, Tee said introducing EPF deductions for foreign workers will significantly reduce their disposable income, placing an immediate financial burden on them and making it harder to cover basic living expenses in Malaysia.
“Accessing and withdrawing EPF funds at the end of employment is fraught with administrative challenges, potentially delaying or limiting their ability to retrieve these savings too,” she added.