Other black economy components

Illegal foreign workers

ACCORDING to a study by Dr Jeyapalan Kasipillai, who is chair of the Malaysian Business Unit at Monash University Sunway Campus’ School of Business, construction is likely to be the sector in Malaysia that generates the highest hidden income.

Others on the list are the professionals, cuts and kickbacks from contracts, multinational companies, and smuggling and under-invoicing.

The building industry’s No.1 position may be partly due to its heavy reliance on foreign labour. The legal process of recruiting foreigners can be time-consuming and costly. As such, hiring illegal foreign workers is yet another unlawful cost advantage.

Other sectors with large numbers of foreign workers include plantations, manufacturing and services.

News reports say there are 2.1 million registered foreign workers in Malaysia and they make up 20% of the Malaysian workforce. It is anybody’s guess how many more foreigners are employed here without going through the official channel.

An indication of the extent of the problem is the fact that whenever there is an exodus of illegal foreign workers, either due to intense crackdowns or amnesties – certain businesses suffer.

This extends beyond the employers. For example, food companies and gaming operators have been known to blame the decline in the foreign worker population for slower sales.

Malaysia has thrice offered amnesty to illegal foreign workers in recent years. Some 140,000 foreigners went home in 1998, 290,000 in 2002 and 1.2 million in 2004.

Unlicensed moneylending

EVERYBODY knows about the Ah Longs, the loan sharks who charge excessive interest rates and who are not shy to use strong-arm tactics to get back their money.

Following a spate of cases of family tragedies and acts of intimidation linked to Ah Longs, illegal moneylending has been highlighted in the media last year and there were plenty of discussions about their role, the factors that encourage the business, and the ways to reduce their activities.

In 2007, the MCA Public Service and Complaints Department handled 520 cases of entanglements with unlicensed moneylenders. The figure would have climbed closer to 600 last year.

It has been argued that borrowers are forced to turn to loan sharks because the banking system cannot or will not help them. However, most people agree that unlicensed moneylending is a problem because of the lopsided repayment terms and the sometimes shocking loan recovery methods.

The lean economic times may dampen the moneylending business. Just like the bankers, the loan sharks will rather not lend if the risk of default goes up.

Prostitution

DESPERATION may see a rise in sex services industry. As it is, it is common to hear complaints about an increasing number of foreign women who come here to offer sexual favours, massage centres and karaoke lounges that offer extra services, and lively Internet discussions on the prostitution scene.

The perception is that if the economy worsens, livelihoods will be threatened and people may turn to offering sex for money.

Prostitution in Malaysia is not confined to seedy joints and back alleys. For one thing, mobile phones have made it easy for freelancers to operate without pimps and being tied to a place of business. The mushrooming of massage outlets has created another avenue.

The Internet has become a rich source of information, and knowingly or otherwise, the sex workers have expanded their reach because customers exchange details of the workers in online forums.