Malaysia targets 10% cap on foreign workforce by 2030 as government pushes businesses to invest in automation

The foreign worker ceiling has already been cut to 13%, with businesses urged to invest in technology and productivity as Malaysia prepares for a tighter labour market.

Malaysia is targeting a 10% foreign worker portion of the workforce by 2030, as the government pushes businesses to invest in automation and technology rather than rely on cheaper foreign labour.

As cited by The Edge Malaysia, Sim Tze Tzin, Deputy Minister, Investment, Trade and Industry said the government had lowered the foreign worker ceiling to 13% this year, from 15% previously under the 13^th Malaysia Plan (13MP).

A further reduction is planned over the next four years, he told reporters after launching the seventh Asia KLEMS Conference 2026 and Productivity Report 2026 on Thursday (20 August), according to The Edge Malaysia.

Businesses urged to prepare for tighter labour market

DPM Sim urged businesses to start preparing for a tighter labour market by automating their operations and improving efficiency.

He cautioned that relying on cheaper foreign labour could discourage businesses from investing in technology and improving their processes.

“But once you rely on cheaper foreign labour, then you are not investing into technology, you are not investing into process, you are not saving, you are not making important decisions to move up the value chain,” he said.

The government is providing various incentives, including automation grants, to help companies improve their processes and productivity as they reduce their reliance on foreign workers.

The move is part of a broader push to raise Malaysia’s productivity and support a transition towards higher-value economic activities.

MNCs urged to share gains with Malaysian workers

DPM Sim also called on multinational companies (MNCs), particularly those benefiting from strong demand for electrical and electronics products and artificial intelligence-related exports, to share their gains with Malaysian workers through higher wages and bonuses.

“It is time for them to reward our workers,” he was quoted as saying.

Malaysia targets stronger labour productivity

Under the 13MP, Malaysia is targeting average annual labour productivity growth of 3.6% from 2026 to 2030.

This is expected to lift productivity per employee to RM122,745 by 2030, an increase from RM104,556 in 2025, DPM Sim was further quoted as saying.

He added that lasting productivity gains would require more than simply increasing working hours, and that resources would need to be directed towards more productive firms and activities, while greater use of technology and stronger capabilities would be key to generating higher-value output.

Malaysia’s labour productivity per employee grew 4.3% year-on-year to RM26,171 in the first quarter of 2026, while productivity per hour worked rose 4.8% to RM45.50.

According to The Edge Malaysia, DPM Sim said that despite the improvement, Malaysia remains a mid-tier regional performer.

To that point, he highlighted the need for industrial and productivity transformation to progress together, with investment directed towards talent, digitalisation, research and innovation, as well as more efficient work processes.

“Moving forward, we must pursue targeted sectoral strategies that advance sophisticated manufacturing, modernise services and strengthen the productive linkages between them,” he concluded.

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