Foreign atmosphere: A file photo of businesses run by foreigners in Jalan Silang, Kuala Lumpur. The area was raided by authorities recently.
PETALING JAYA: The high cost of doing business and less attractive salary packages for locals are among the reasons Malaysian traders turn to the “Ali Baba” way by sub-letting their businesses to foreigners, say business chambers.
Malay Economic Action Council’s (MTEM) Ahmad Yazid Othman said the Ali Baba culture that initially involved rent-seeking only among local communities for projects had evolved to a plague benefitting foreigners.
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He also agreed that the cause of this kind of transaction flourishing is due to the constant rise in the cost of doing business and higher salaries offered to locals are not attractive enough.
“These factors caused local businesses, which include bumiputra-owned, to concede that it was better to outsource to non-locals to get quick profits,” he said.
While the council is supportive of the proposed anti-Ali Baba law, Ahmad Yazid said the new legislation needs to encompass all forms of rent-seeking.
“We’re fully aware that this culture is also practised in government procurements that were designed to support and empower local bumiputra players.
“Instead, it has gone to other people who are not supposed to receive the support,” he added.
Ahmad Yazid also said that while Malaysia should still allow certain sectors to recruit foreign labour, non-locals should not be allowed to run businesses illegally.
“If they are supposed to be foreign investors, they should do it in a proper way. But we see that some foreign workers are starting their own businesses and impacting the locals,” he said.
Economy Minister Rafizi Ramli on Monday said the government is considering drafting a law against the “Ali Baba” business practice.
This is also to take action against Malaysians who illegally rent out licences to foreign workers without meeting certain conditions.
Associated Chinese Chambers of Commerce and Industry of Malaysia’s (ACCCIM) SMEs committee chairman Datuk Koong Lin Loong said the issue of overdependence on foreigners has been revolving for a long time and needs to be addressed urgently.
“Issues about overdependence on foreign labour have been around for a long time and have been discussed many times.
“This problem can automatically be solved if the government is able to address the root cause which includes reducing the cost of doing business and bureaucracies,” he said.
“The government is currently on track, especially through the Economy Ministry which has been encouraging domestic direct investment and reducing the cost of doing business.”
Koong said these efforts would help operators, mainly small and medium enterprises (SMEs), increase their profit margins and therefore have the ability to compensate local workers with higher wages.
Kuala Lumpur and Selangor Indian Chamber of Commerce and Industry president Nivas Ragavan said some SME operators are leveraging the good business acumen of foreigners to “run their business”.
He said there were cases where certain sub-sectors such as textiles, barbershops and construction have been controlled by foreigners through rent-seeking.
He said a law against this culture is crucial if it can eradicate it through proper enforcement.
“The government also needs to educate business owners that if they breach the law, they will face heavy consequences,” he added.
Meanwhile, National Association of Human Resources Malaysia (Pusma) president Zarina Ismail said the influx of foreign labour whether involved in rent-seeking or not, took place due to poor enforcement.
“It’s not that we don’t have the laws to curb the problems, it’s just that the enforcement could be stricter.
“For example, it is too easy for employers to request for foreign labour which only take a few days.
“This period is too short for the authorities to screen through the actual needs of the company requesting it,” she said, adding that foreigners who overstayed their permit could potentially start small businesses in Malaysia.
Foreign nationals are prohibited from operating 20 types of businesses that include sundry shops, petrol stations and laundry services, according to Section 101(1)(v), Local Government Act 1976 ruling.
In the Dewan Rakyat in October, Local Government Development Minister Nga Kor Ming explained that the local councils have never allowed foreigners to own a business licence for all premises, including retail shops, eateries, car workshops and markets.He said stern action will be taken against business licence holders who lease out their premises to foreigners without valid work permits.
