Factory closures prompt call for stronger social safety nets

Free Malaysia Today

15-05-2025

Economist Yeah Kim Leng says displaced workers from the manufacturing sector must be allowed to attend training and upskilling programmes to improve their employment prospects. (Bernama pic)
PETALING JAYA : An economist warns that inadequate social safety nets for workers displaced by factory closures in Malaysia could lead to grievances over job losses, similar to those seen in the US.
German auto supplier Continental last month announced it will cease production at its tyre manufacturing plant in Alor Setar by the end of the year, the latest in a string of major factory closures which have collectively impacted thousands of workers.
Last year, American tyre company Goodyear announced it was shutting down its factory in Shah Alam after 52 years. Other notable manufacturers which have closed plants in Malaysia in recent years include Sony and Western Digital.
Several Chinese-backed solar panel manufacturers are also reported to have halted or cut back on their operations here as a result of new US tariffs and duties on solar cell imports from Malaysia.
Yeah Kim Leng of Sunway University said Continental's decision reflects shifting regional business dynamics, with Malaysia losing its manufacturing edge to neighbours like Thailand, Vietnam and Indonesia due to higher costs.
He said training and upskilling programmes were needed to help displaced workers secure new employment.
'This is important to prevent social problems. There are winners and losers when manufacturing becomes more globalised, and it's crucial that each country is able to cope with this,' he told FMT.
'The displaced workers must have a strong social safety net which will enable them to find new jobs or sources of income.
'That has to be in place. If not, it will lead to what we are seeing in America, which has accused other countries of stealing their manufacturing jobs. That is the extreme cost of globalisation.'
US president Donald Trump, who first came to power in 2016 on the back of anger over lost manufacturing jobs, marked his second term in office by announcing sweeping global tariffs— partly in a bid to revive his country's domestic manufacturing sector.
Many US towns have suffered factory closures, layoffs and industrial decline over the past few decades, with workers blaming globalisation, free trade agreements and outsourcing for the movement of their jobs to Mexico, China, and other countries.
Trump tapped into these frustrations by campaigning heavily on a 'Make America Great Again' message, promising to bring back manufacturing jobs, renegotiate trade deals, and impose tariffs to protect US industries.
Despite the loss of manufacturing jobs, Yeah said Putrajaya should be encouraged by the rise of investment into electronics and other advanced sectors.
Last November, the government announced that Hyundai Motor would invest RM2.16 billion to assemble and produce six car models, including hybrid electric vehicles, in Malaysia.
One month later, Chinese battery manufacturer EVE Energy inaugurated its first overseas plant in Kulim, Kedah. When fully operational, the facility will be able to produce up to 680 million battery cells annually and will employ 2,000 Malaysians in technical fields.
Economist Geoffrey Williams told FMT Malaysia would need to remove various regulatory barriers, lower taxation and encourage free innovation to sustain manufacturer interest.
'Malaysia remains competitive, but it will always have to compete against regional countries which are larger and have lower costs of doing business,' he noted.