In the Parliament, a Member of Parliament was concerned with the outflow of money due to foreign workers sending part of their wages back home. Finance Minister Najib Razak, in answering the MP, gave a piece of statistics which highlights the benefit of foreign workers.

PARLIAMENT, Oct 22 – Malaysia’s 2.1 million foreign workers repatriated RM9.11 billion for the first half of 2008 and Deputy Prime Minister Datuk Seri Najib Abdul Razak said the government expects it will total RM18.1 billion for the entire year.

“This averages out to RM720 per month sent home by each worker. However, the strong national reserve can withstand this as it amounts to just 4.7 per cent of our current reserve,” the Finance Minister told Parliament today.

He added that for every one per cent increase in foreign labour, Malaysia’s real Gross Domestic Product (GDP) grew by 0.19 per cent.

Datuk Halimah Sadique (BN-Tenggara) had asked if any action would be taken to address the outflow and whether the government intends to impose any levy or tax on it. [Foreign workers repatriate RM9 billion until June 2008. The Malaysian Insider. October 22 2008]

Let us see. It says 1.00% increase of foreign workers leads to 0.19% increase in GDP. With nominal GDP of Malaysia being approximately RM505 billion in 2007, that means an additional 21,000 foreign workers add almost RM1 billion to the GDP. Now, assuming there is a linear correlation, 2.1 million foreign workers add RM100 billion to the economy. That is about 1/5 of the GDP of Malaysia. Granted, a linear relationship is unlikely and I can begin to criticize myself for the careless use of statistics but it does give us an estimated benefit ceiling.

A slightly more accurate estimate which circumvents the validity of linear assumption is this: 21,000 foreign workers lead to an outflow of about RM180 million (RM720 per capita per month; 12 months; 21,000 workers). In comparison, these workers add roughly RM1,000 million (that is RM1 billion) to the GDP at this particular point of time.

So, what is RM180 million to RM1,000 million? What is RM18 billion compared to RM100 billion?

Assuming that outflow is a loss to the local economy, returns from wealth generation is, at most, 400% larger than the outflow.

As we all can see, support for the continuing usage of foreign workers is grounded on empirical data.

One Response to “[1813] Of what is RM18 billion compared to RM100 billion?”

  1. on 25 Oct 2008 at 08:42 oster

    Not to rehash any of the common xenophobic arguments against foreign residency, but there can be indirect costs from factors such as wage deprecation and any strain on state-provided service.

    Ask any nativist Sabahan (as most of them are and I were) and they would tell you about the common perception that illegal immigrants, due to their electoral utility, have access to the numerous state welfare programmes and the like but can be beyond the tax net.

    If any thing, I would like to have more independent studies giving their numbers, and for the government to be more upfront about how they derive theirs.

    cheers

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