Loss because of Public Holidays? Employers need to Think Out of the Box

PRESS STATEMENT – 30TH SEPT, 2019 – PARTI SOSIALIS MALAYSIA

Free Malaysia Today carried an article today (28/9/2019) that quotes several Employer Association Leaders bemoaning the fact that Public Holidays cuts into their profits. According to Malaysian Employers Federation executive director Shamsuddin Bardan, 17 Public Holidays declared in Malaysia are too many as the loss RM 27 billion for each Public Holiday that they give.

But surely Dato Shamsuddin and his friends know it is not 17 but only 11? Article 60D in the Employment Act requires employers to give a total of 11 Public Holidays per year, five of these are fixed. Apart from 11 Public Holidays, workers are entitled to 8 days of annual leave if they have less than two years of service and 16 days if they have accumulated more than five years of service. Our workers are human beings and not robots. They have family obligations. A total of 26 days off from work per year for all family, social and religious obligations isn’t too much to grant is it? In any case Malaysia workers work 48 hours per week before overtime kicks in. Workers in advanced countries work far shorter hours – the average working week in Germany is 38 hours while it is 35 hours in France now.

Due to low wages most workers will choose to work on a public holiday to get double pay. Already many workers now work on their weekly off days for extra income especially when they have an expected additional expenses at the end of the month like festivals, getting kids to school, weddings etc.,. When workers willingly sacrifice their off days and public holidays to earn extra cash, employers are not complaining are they?

In fact, unlike employers, workers don’t have money to go for holidays. Off days actually incur extra cost for them as they might have to take their children out for leisure. If they do go out, it will be a local trip. Unlike employers whom can afford overseas holidays and spend money overseas, the working class on off day chooses to spend their money domestically, growing local small businesses. Thus public holidays actually spur local economy.

The PSM is not anti-business but we deplore fat cat businesses that only care about maximizing their profits. We know that private businesses provide employment to about 10 million Malaysians and generate about 70% to 75% of the county’s GDP. We need our businesses to do well so that they can generate more capital for further investment while also paying their workers decent wages and the government a fair tax.

But what we find perplexing is that Malaysian businesses which are so sensitive to the “loss” of RM 27 billion from one public holiday seem impervious to the fact that they are being shortchanged on a daily basis by the global chains that they are producing for. On the average our businessmen are selling products at a price of about a sixth to a quarter of an identical product produced by factories in the EU or the USA.

The South East Asia’s model of industrialization was to create export zones and invite factories from advanced countries to outsource to ASEAN where they could benefit from the lower wages here. Many of our local businesses are junior cogs in large global chains and are in a dependent position vis-à-vis the Multinational (MNC) helming that particular chain. As a result, the Malaysian cog may in actual fact be producing 70% of the value of the product but only receives 25% of total value generated by the global chain. If the owner of the Malaysian cog asks for a bit more of the total value, the MNC uses the threat of shifting orders to the more compliant Vietnamese or Thai cog producing the same component. So to keep his profits up, the Malaysian businessman has to squeeze his workers – keep wages down, push the government to bring even poorer workers from Nepal, try and cut down public holidays etc.

The Malaysian businessmen are not the only one befuddled on this point. Most of the Government Planners have been similarly befuddled by the Bretton Wood Institutions – World Bank and the IMF – as well as by the World Trade Organization that have brainwashed our business and political leaders to accept that our countries are poor because of low worker “productivity” (a dodgy concept based on circular reasoning) and not because ASEAN companies are continuously being bullied by the MNCs in the advanced countries.

Our employers need to wake up to the fact that a) we are being grossly shortchanged and b) there are definite steps that can be taken to retain a greater share of the wealth we produce in the ASEAN region. It is not possible to delineate in detail all the steps that could be taken in this press release, but we would suggest;

  1. Study the example of China. China also started by inviting factories from the advanced countries to take advantage of the low wages in China. But China had the foresight as well as the economies of scale to use the inflow of manufacturing capital to build an integrated industrial sector which can now operate independently of the advanced countries. We in ASEAN remain enclaves for the advanced countries. We will flounder if the MNCs pull out. Isn’t it time we start planning on developing ASEAN as an integrated manufacturing hub that is relatively more independent of the MNCs from US, EU, Japan and now China. When we can stand on our own feet, we would be less easy to bully! Of course this cannot be done overnight, but the planning has to start if we want to be there is 20 years from now.
  2. Develop the consumer market within ASEAN. We have to accept that the golden goose – the affluent consumer market in the advanced countries – is ailing. It has been stricken by the outsourcing of well-paying jobs to China, ASEAN and elsewhere. Growth in consumer demand in the advanced countries will not recover to what it was in the 1950s – 1970s. So we in ASEAN need to grow our own aggregate demand – the population of ASEAN is now 650 million – to provide markets and therefore investment opportunities for our businesses. This means you businessmen have to share the wealth that we should help you generate – by gradually increasing wages and tax rates (fiscal spending by governments also pushes up aggregate demand). The principle of “prosper your neighbor” really holds true here!
    In this we might find an ally in China – China needs to grow its own domestic aggregate demand to provide adequate growth of employment. Not only has consumer demand tailed off in the West, there is now a Trade War that further limits US demand for China goods. So China has to find new markets for the goods that it produces – otherwise with the largest industrial working class of the world, “Communist” China might soon face a serious workers’ rebellion! China’s wage rates are already going up. We should increase our wages in ASEAN in tandem with wage increases in China. And use increased aggregate demand in ASEAN to create a regionally integrated manufacturing and R&D hub.
  3. Take seriously the UNCTAD’s Trade and Development Report 2019 (TDR 2019) that was released on 25/9/2019. One of the nine proposal in TDR 2019 is unitary taxation of transnational corporations’ (TNCs) profits with a global minimum effective corporate tax rate on all TNC profits set at 20~25%, i.e., the international average of current nominal rates, to check tax-evading illicit financial flows. Are our Business Leaders aware that many of the MNCs helming the Global Chains use transfer pricing to declare their profits in low tax regimes, including Tax Haven Accounts, thus avoiding taxes in their home countries as well as in the countries where they outsource production. We need to act globally to ensure that fair taxes are paid where value is created. And we will not be alone in this. Even citizens in EU and In the US are pushing for proper collection of taxes from the MNCs.

So in response to your lament in Free Malaysia Today, the PSM would like to say – yes you play a role in wealth creation and we would like you to enhance this capacity. But sustainable wealth
creation requires retention of a greater share of the wealth we are creating, growth of domestic Malaysian and ASEAN aggregate demand and diversification and integration of the ASEAN economies. This is obviously going to take time and effort, but you businessmen have to first climb out of the neoliberal box that the Bretton Wood institutions and the WTO have put you in so that you can contribute more to the development of the Malaysia/ASEAN economy.

Dr.Jeyakumar Devaraj
PSM Chairperson
30th September,2019

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