NST Leader: Of migrant businesses and shadow economy

Migrant workers in Malaysia, whether documented or not, face exploitation, violence, and death to survive in the country. They not only take jobs that Malaysians may not prefer but also establish small businesses, often in cash-heavy, low-entry sectors that make up the shadow economy. Everyday, there are 25,124 foreigners detained for illegally running between 20 to 23 different businesses, including grocery and convenience stores, night markets, coffee shops, hair salons, automotive maintenance, laundromats, and cleaning services.

They utilize unlicensed cloud kitchens and even dubious clinics to cater to the needs of fellow migrants, avoiding exposure in public hospitals.

The Malaysian government loses an estimated RM70 billion in annual tax revenue due to the shadow economy. However, the businesses that operate in this illicit environment generate substantial profits, often reaching 60 percent margins, which far exceeds the tight 20 percent profit margin of legitimate Malaysian businesses. The migrant businesses can evade the RM1,850 annual levy, statutory worker contributions, and recruitment fees while paying salaries significantly lower than the minimum wage.

These profits are quickly sent abroad through informal and unmonitored channels, bypassing the domestic banking system. The Malaysian Employers Federation estimates that RM32.6 billion is remitted annually, while Bank Negara Malaysia believes the figure to be closer to RM70 billion.

Despite active enforcement, raids, and arrests, these migrant businesses continue to thrive. Authorities struggle to police each known business premise, but face a major obstacle in the form of non-deterrent penalties that allow migrants to re-open under different names. As long as Malaysians are unwilling to take up dirty, dangerous, and demeaning jobs, migrants will fill the void, creating a customer base for their businesses. The shadow economy persists because Malaysians are complicit in it.