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Flextronics layoffs latest blow to Malaysia

Posted on: March 6, 2009


Reuters – Thursday, March 5

By Razak Ahmad

KUALA LUMPUR, March 4 – Malaysia, once viewed as one of the more secure economies in Asia, suffered a new blow on Wednesday as Flextronics International <FLEX.O> readied nearly 1,400 layoffs from a plant in the Southeast Asian country.

Demand for technology exports of the kind made by Flextronics, a contract manufacturer, has plunged due to the global economic slowdown and Malaysia has also been squeezed by countries with lower labour costs.

“The company reported that it was laying off the employees as it was ceasing operations at its facility in Shah Alam,” a spokeswoman for Malaysia’s Ministry of Human Resources told Reuters.

Companies laying off workers here need to inform the ministry and the spokeswoman said that Flextronics had notified it that it intends to lay off 1,382 workers from its assembly plant in Shah Alam, a suburb of the capital Kuala Lumpur.

Flextronics declined to comment. The Singapore-based company signalled in January it could cut jobs, hit by the global economic slowdown.

The planned layoffs come hard on the heels of redundancies in Malaysia at Western Digital <WDC.N>, Intel Corp <INTC.O> and Japanese electronics company Panasonic Corp <6752.T>.

Although Malaysia’s official unemployment rate is just 3.3 percent, the spate of layoffs and the prospect of more as exports plunge has rattled the government here as it readies a multibillion package of spending to stem the effect of declining demand for exports.

Electronics <MYEXP=ECI> account for close on 40 percent of Malaysia’s exports, which are forecast to fall 24.8 percent in January from a year earlier, according to a Reuters poll released ahead of data due on Friday. [ID:nKLR232641]

According to a ministry official, around 45,000 workers have been laid off in the electronics industry since the start of the year.

Malaysia’s economy is teetering on the brink of recession after data last week showed that the economy <MYGDP=ECI> grew at is slowest pace in eight years in the fourth quarter, just 0.1 percent year-on-year. [ID:nKLR464120]

In order to preserve Malaysia jobs, the government is toughening restrictions on hiring foreign labour, although an outright ban has not been imposed on the estimated 2 million legal migrant workers.

However kicking out legal and millions of illegal workers may not be the answer, economists say, as Malaysians would be unwilling to do low-paid jobs and do not have the skills needed for higher value-added industries.

“It’s one thing trying to just basically kick out foreign labour from the country, but another issue is do we have the incentives, do we have the right measures in place to attract higher value-added investment that would employ locals or have a preference for locals?” said Maybank Investment economist Suhaimi Ilias.

(Additional Reporting by Varsha Tickoo; Writing by David Chance; Editing by Muralikumar Anantharaman)

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