IMMIGRANT CONSTRUCTION WORKERS’ SPENDING AND

REMITTANCE PATTERN: THE MALAYSIAN PERSPECTIVE

Fara Diva Mustapa
Universiti Teknologi Malaysia, Malaysia
faradiva.m@gmail.com

Christine L Pasquire
Loughborough University, Loughborough, UK
C.L.Pasquire@lboro.ac.uk

The construction industry plays an important role in an economy through its multiplier-
accelerator effects. This is mostly shaped by its unique character and project development. In
addition, the industry relies heavily on immigrant construction workers. A pilot survey was
undertaken to identify the spending and remittance patterns of immigrant construction
workers in Malaysia. The results of the pilot survey showed that these workers spend less
than Malaysian nationals and remit most of their income to their home country. Two factors
driving the high level of remittances are the nature of the construction project and the
immigrant workers’ character and lifestyle. High remittance level is clearly linked to the
transient nature of their lifestyle. This paper concludes with recommendations regarding the
need to improve the construction industry’s image and the economic impacts of the high
remittance level of immigrant workers in the Malaysian construction industry.

KEYWORDS: construction nature, immigrant workers, remittances, spending

patterns.

INTRODUCTION
Every sector in an economy has its own function and unique contribution. The construction
industry shares equal importance as any contributions from other sectors. Its Gross Domestic
Product (GDP) contribution constitutes 3% of Malaysian GDP in 2008 (Malaysian Economic
Reports, 2008) and some 10% of Gross National Product (GNP) in the world (Hillebrandt,
2000). The GDP percentage, although comparatively low, contributes to economic
development from its unique product character (Hillebrandt, 2000). The nature of the
construction output is mostly used as a medium to either produce or transport other economic
activities such as manufacturing and services (Ofori, 1990). Additionally, high reliance on its
human workforce (Ive and Gruneberg, 2000) enables the construction industry to influence
the demand and supply levels of commodities in an economy. That is why the industry is
important to the economy where it performs as the output multiplier (Hillebrandt, 2000,
CIMP,2007). In Malaysia, the industry employs approximately 800,000 employees (CIMP,
2007) which constitutes about 6 -7 per cent of total employments (EPU, 2007).

Its contributions, however, are over shadowed by poor image such as low productivity, high
percentage of accidents, 3‘D’ image (dirty, dangerous difficult), low salary and high
dependency on immigrant construction workers (Narayanan and Lai, 2005, Manning, 2001).
From the Malaysian perspective, the construction industry has been suffering from labour
shortages for decades (Mohd Yusof, 2005). This endless problem emerged from earlier
mentioned as well as the transient project duration and reluctance of the locals to join the
CIB W065/055 Commissions: Transformation through Construction 2

workforce. To overcome this problem, the Malaysian government has chosen to engage
immigrant construction workers mostly from the nearest neighbouring countries. The move
subsequently triggers another problem for the industry. Low quality of construction works,
communication problems and influx of immigrant workers are some of the problems cited by
Narayanan and Lai (2005). In addition, the high percentage of immigrant construction
workers exposes the country and the industry to high remittances made by the immigrant
workers which disturbs the economic cycle flow in the form of leakages (Mustapa and
Pasquire, 2007).

This paper investigates the remittances and spending pattern among the construction
immigrant workers in Malaysia as well as looking at any correlation between the spending
and remittance pattern with the construction project nature. It starts with a brief explanation
of the character of the remittance followed by the character of the construction industry and
immigrant workers. Explanation on the methodology adopted, analysis of the survey,
discussion, future research direction and a conclusion complete the paper.

Remittances and spending pattern: some preliminary observation

The existing literature is ambivalent as to the percentage of remittance made by the

immigrant workers in Malaysia. As reported, Malaysia acts as both immigrant recipient and
labour migrant source country (ADB, 2006). Rosli and Kumar reported in 2006 that the
leakage in the form of remittances made in the Malaysian economy reaches about ₤72M
monthly. The figure is not a surprise as according to the statistics prepared by the Malaysian
Immigration Department in 2006, there were 1,869,209 registered immigrant workers. Of
those, about 14.33% work in the construction sector. The high dependencies on immigrant
workers in the Malaysian construction industry are anticipated due to over reliance of the
industry on traditional construction techniques.

Most of the literature shows the benefit of the remittance to the labour source countries. A
report by the Asean Development Bank in 2006 depicts the importance of remittance in the
global economy. Many of them reveal contribution of remittance as one of the significant
foreign exchange sources for the labour exporting countries. On the other hand, the benefit
received by the host countries is not clear (Glytsos, 2005) apart from filling the labour
shortage.

From the economic point of view, by studying disposable income of the immigrant workers,
an understanding of their remittance pattern, the character and economic background of the
immigrant workers can be justified. Hence, a pilot survey on their personal background,
education background and spending trend could reveal the remittance pattern. The scope of
this paper concentrates only on the construction immigrant workers due to the transient
nature of construction projects.

The characteristic of the construction industry

In many ways, the construction industry is different from all other fields of economic
endeavour. It is different particularly in its activities and its products where it is mainly used
to produce other investment goods (Hillebrandt, 2000). According to Ofori (1990), after
reviewing works of other authors, he was able to list several special characteristics of the
construction industry. The size of the construction outputs is mainly large and immobile.
Hence, the need to plan the investments to ensure investment return is essential. More-over, it
has close links with the government due to the high capital investment required to construct
CIB W065/055 Commissions: Transformation through Construction 3

buildings and infrastructure works. The project installation requires different resources at
different stages of the construction period. The end products are very durable in order to fulfil
the design and authority requirements to ensure safety in occupancy. Additionally, there is no
guarantee to the contractors that they could win the next project bid. In consequence, the
construction firms prefer to employ construction workers through labour supply contractors
and minimise their purchases of plant and machinery to reduce their liability.

The project nature is also synonymous with the ‘3D’ image, namely dirty, dangerous and
difficult. The external work conditions expose the workers to extreme weather conditions and
most of the time; the construction sites are messy, hazardous and untidy. The placement of
building materials, construction plants and machinery exposes the workers to site hazard.
Unlike the manufacturing sector, the industry uses much wider technologies and usually
adapts the new technology to the old. This is a complete contrast with other sectors where
they usually corresponds with the latest technology.

The project nature of the industry is also transient where the workers will move from one site
to another after job completion. This applies to the construction project organisation where
the team will be disbanded at the end of the construction period. Moreover, the industry is
very famous for delay in completion time. This is due to the nature of the construction
components and the process itself. Hence, the production of the output needs to be planned
properly by taking account of the considerations stated earlier.

Additionally, the industry’s role in the economy is crucial. It acts as a multiplier-accelerator

provider (Mustapa and Pasquire, 2007) where its products are mostly used as factors of
production in other economic sectors. Demand in the industry constitutes a combination of
consumer and investment demand. Both respond differently to any economic changes.
However, investment demand changes more proportionately than consumer demand which
makes the demand in the construction industry more sensitive (Ive and Gruneberg, 2000). In
other words, changes in demand for investment product will have a direct effect on the
construction industry. The construction sector output multiplier in Malaysia is at 1.62
indicating that in return to produce an additional MYR 1.00 of output, the sector would affect
production of all industries measuring to MYR 1.68 (CIDB News, 2007). Hence, any
economic disturbance in the production cycle flow will affect the function of the industry in
an economy.

Character of immigrant worker

Human migration to other countries in search of employment is globally not a new scenario
(Wickramasekera, 2006). The motivations behind the migration are mostly derived from a
yearning to receive higher wages and better opportunities. For some, they were forced to
abandon their homes due to poverty, famine, natural disasters, environmental degradation,
violent, persecution and political instability (ILO, 2004).

Normally, migration occurs between neighbouring countries. However, due to the

improvement in global information and cheaper transportation, the geographic boundaries do
not seem to be barriers to migrate (ILO, 2004). Some of the normal pull factors are economic
stability, particularly on the level of national income, low inflation, employment and
exchange currency rates of the host countries. Usually, the importing labour countries are
those which have established themselves both economically and politically.
CIB W065/055 Commissions: Transformation through Construction 4

Methodology

In order to test the degree of the economic leakage created by the immigrant construction
workers, it is best to study their household disposable income. Hence, a pilot study
investigating the remittance and spending patterns among these workers in Malaysia was
conducted from 1April to 22 September 2007. With the help of the Construction Industry
Development Board of Malaysia (CIDB) in providing latest lists of on-going projects in the
country for the year 2007. The choice of a quantitative approach using questionnaire was
made by looking at similar research conducted focusing on immigrant workers. Also, the
approach taken was to test the response rate as well as the limitations of the survey.

The questionnaire were posted at random to the main contractors from the lists provided by
CIDB. The set of questionnaire was prepared in several languages, namely English, Bahasa
Melayu and Bahasa Indonesia. The choice of languages was made according to the minimum
requirements outlined by the Malaysian government for every immigrant workers intending
to work in Malaysia. Each is obliged to undergo an induction course for immigrant workers
to be able to speak Bahasa Malaysia or English before entering Malaysia (Ministry of Human
Resource Malaysia, 2006).

The questionnaires were distributed randomly enclosed with additional envelopes and stamps
administered to the respondents to ease and promote positive response. Out of 132
questionnaires sent which constitutes about 0.05% of the total registered population in the
construction industry, only 27 questionnaires were returned. The response rate was however
considered satisfactory at 20% return. As gathered from the CIDB, the normal response rate
for a Malaysian perspective is usually less then 15%. Most of the contractors took the
initiative in assisting the workers to answer some difficult questions. Hence, the result of the
analysis presented in this paper represents only a snapshot description of a purposive sample.

The questionnaire

Analysis of the completed questionnaire was made by simple frequency analysis by

tabulating answers. The answers were coded numerically to help the frequency analysis.
Thirty eight (38) questions asked in three different sections, namely personal background;
education background and spending trend, were geared to unveil the character, spending and
remittance pattern of the immigrant construction workers. The simple analysis was made
possible due to the small number of responses. However, should the responses received have
been higher, the analysis would have been made using the SPSS software.

The first piece of analysis untangled the immigrant worker’s personal background such as
gender, age, nationality, number of years working in Malaysia, type of trade and current site
location. All of the questions asked were aimed to benchmark the worker’s character.

The second section asked about the respondent’s level of education. Logically, the more
educated the immigrant worker, the higher the wages received. And finally, the third section
asked questions on monthly income, remittance percentage, and type of accommodation as
well as the mode of payments. The immigrant worker’s transport possession as well as the
mode of acquisition and payments were also asked to study their consumption pattern.
Further, the immigrant’s average monthly utility bills were enquired. The immigrant worker’s
dependant will also reflect their spending and remittance pattern. Thus, questions were
included about the number of their dependents in both home and host countries. In respect to
the number of dependents, the immigrants were also asked about any loans made and the
CIB W065/055 Commissions: Transformation through Construction 5

mode of payment in both home and host countries. Further, the respondents were also asked
about their average monthly spending on rations and the frequency of item purchases. And
finally, the availability of personal saving accounts in both home and host countries was
asked about to study the degree of leakage. The mode of remittance made and the intention to
stay were also asked to relate to the immigrant’s spending and remittance pattern.

Analysis

As depicted in Figure 1, Indonesian immigrant worker monopolises the population followed

by the Philippines. Most of the respondents are aged between 35 to 50 years old. This age
could affect their spending pattern and their liability in both Malaysia and home country.

4% 4%

13%

79%

Indones ian Philippine Banglades hi Vietnam es e

Figure 1: Respondent’s Nationalities

From the literature, the more mature the households, the higher will be the liability, the wages
and also the purchasing power. However, the spending habits of the household from this
category will be lesser as they have obtained most of the basic things required for a living.
The duration of stay in Malaysia will affect the immigrant workers’ spending habits. The
longer the work duration should reflect greater spending. However, this depends on the
intention of the immigrants themselves whether or not to stay longer in Malaysia. From the
analysis, most of the respondents have worked in Malaysia for more than three years which
means they have managed to equip themselves with basic necessities.

Respondent’s job type could affect purchasing power due to higher wages received for
professionals and skilled workers. Most of the respondents’ involved in this survey are skilled
workers and professionals. This pattern could be due to the degree of difficulty of the
questionnaires. It is noted that the higher the level of education, the higher will be the wages
and, later the purchasing power. However, this has not always been the case from the pilot
study findings. These showed only 6 professional workers as compared to 17 skilled. Hence it
can be concluded that the immigrant workers, regardless of their job background, remit no
less than 55% of their income to the home countries.

In analysis of the second section, only 10 hold a first degree. This scenario shows that there is
the need to have a different approach in obtaining data from immigrant workers as there are
tendencies for fallacy among the respondents. In the third section for analysis, the
CIB W065/055 Commissions: Transformation through Construction 6

respondents’ average monthly wages were shown to be as depicted in Figure 2. The pattern
matches to the level of education.

22%
31%

4%
4%

9% 9%
9% 4%
4% 4%

1001 - 1500 1501 - 2000 2001 - 2500 2501 - 3000 4001 - 4500

6001 - 6500 6501 - 7000 7001 - 7500 8001 - 8500 More than 8500

Figure 2: Respondent’s Average Monthly Wages in Malaysian Ringgit (MYR)

From the literature, it is noted that job placement or demographics could affect the
immigrant’s remittance percentage. Logically and theoretically, immigrants who work in a
rural area tend to spend less as there are not many shopping attractions. The remittance
pattern shows that immigrant workers send most of their wages to their home country. This
matches to the job demographics explained earlier.

Respondents’ type of accommodation can be reflected in their monthly spending and

remittance. The analysis shows that many of the immigrants are not obliged to pay for their
accommodation. This is mostly due to the nature of Malaysian construction where the
contractor will build temporary accommodation known as ‘kongsi’ to house the immigrant
workers during their stay on site. The immigrants’ transportation ownership will also reflect
their monthly liabilities in Malaysia. The finding shows that most them do not possess any
transportation. This could be due to the availability of transportation by the employer, the
distance of the immigrants’ ‘kongsi’ to the workplace and availability and validity of
immigrants’ driving licence. The survey shows that only one respondent purchased a car by
monthly instalments and two purchased either a motorcycle or a bicycle by cash.

The need to pay utility bills monthly will also affect immigrants’ purchasing and remittance
pattern. From the survey, most of the respondents are not obliged to pay monthly utility bills.
This again might be due the utility services being provided by the employer. Moreover, the
transient nature of the construction hinders monthly bill payments by workers. Additionally,
the presence of their dependants in Malaysia could also affect their willingness to share
accommodation. It is also noted from the literature that a higher number of dependents
implies higher remittance. The survey confirms the theory as shown in Figure 3 on
respondents’ number of dependents in their home country.
CIB W065/055 Commissions: Transformation through Construction 7

4%

30%
30%

36%

1 - 2 people 3 - 4 people 5 or m ore people Nil

Figure 3: Respondents’ Number of Dependents in Home Country

The age of dependants will also affect the percentage of remittance, as the older the
dependents, the more the money required to educate and raise them. The same theory is
applied to the effect of both the number and ages of immigrants’ dependents in their home
country and Malaysia on their spending pattern. The survey shows that most of the
respondents do not have dependants in Malaysia.

Literature on econometric and remittance shows the higher the liabilities held by the
immigrant workers in their home country will reflect higher remittance and lesser expenditure
in Malaysia. Ironically, most of the respondents do not have many liabilities at both home
countries and Malaysia. Their aim to remit was made mostly for their dependence back home.
However, the liabilities in the form of monthly instalments are for those who received higher
wages and considered as expatriate or professional. The monthly instalments made are below
MYR 500 (₤72) monthly. Most of the respondents do not have any mortgages in Malaysia.
This pattern could due to their tendency to return to their home country at the end of their
work contract, difficulty in loans approval, the duration of stay and lifestyle of construction
industry. This scenario contributes to the importance to control the immigrant’s remittance in
return to help sustain the host country economic development especially in the construction
industry.

The findings show that the respondents spend more than MYR 200 (₤29) monthly. This
amount, if compared to a Malaysian’s average monthly expenditure is very low. On average,
the Malaysian locals spend MYR1,943 per month in urban areas and MYR1,270 in rural
areas (Department of Statistics Malaysia, 2004/5). This figure is 83% less than the locals’
spending. The small amount spent by the respondents could be due to the nature of work, site
location and their character. Most of the respondents will spend less during their job
placement in rural areas as compared to those in urban areas. This encourages them to remit
more. Study of shopping frequency will give an insight into spending habits. A higher
frequency of shopping reflects a smaller percentage of remittance. Figure 4 shows the
respondents’ shopping items in Malaysia. Most of the items are groceries, wet and dry foods.
A similar pattern emerged in the ranking of items mostly purchased in a month. It shows that
the respondents spend no more than MYR 500 (₤72) monthly, which is 60% less than the
average Malaysian. This shows that little contribution was made to the Malaysian demand for
commodities.
CIB W065/055 Commissions: Transformation through Construction 8

7% 2%
5%
34%

21%

31%

Groceries Wet foods/dry foods Clothing

Electrical goods Housing appliances Others. Please specify

Figure 4: Respondents’ Average Monthly Shopping Items

Looking at immigrant workers’ saving pattern could reflect the possibilities of the immigrant
workers to stimulate the economy by putting their savings into a proper channel namely
banks. The survey shows that most of the respondents do have saving accounts, mainly in
their home country. This trend does not help the local banks to invest their savings and
multiply the economy.

Studying the channels used by the immigrant construction workers to remit will give an
insight into whether there is a certain percentage or currency exchange rate involved during
the remittance process. From the survey, most of the respondents send their wages by bank
and Western Union. This reflects that most of the respondents have the privilege to send their
wages to their home county and little contribution is made to the Malaysian economy.
Finally, the intention to remain longer in Malaysia was asked about to reveal further their
spending and remittance pattern. Most of them prefer to return to their home countries at the
end of their employment contract which explains their minimal expenditure during their
employment in Malaysia.

DISCUSSION AND FUTURE RESEARCH DIRECTIONS

The paper’s findings open up to two possible realms of discussion. The first relates to the
appropriateness of the methodological approach in conducting survey by questionnaires to
tackle the issue. It shows that there is a gap in two types of immigrant workers based on their
level of qualifications. The designed questionnaire was best distributed among the
professional immigrant workers known as expatriates but a special type of questionnaire
needed to be distributed to the non-professional immigrant construction workers. Hence a
different approach needs to be considered in pursuing the next level of survey with regard to
the issue mentioned.

The characteristics of both the nature of Malaysian construction projects and of the
immigrant construction workers come second. Transient nature of projects duration and the
management of immigrants’ working place on site coupled with the immigrant workers’ aims
to save and remit their wages makes the industry exposed to the high degree of economic
leakages. Furthermore, the current practice of the Malaysian construction industry should be
revisited. Appropriate economic tools designed specifically for immigrant construction
workers should be pondered to balance the inflow and outflow in the Malaysian economy.
CIB W065/055 Commissions: Transformation through Construction 9

Some of the steps towards balancing the economic leakage can be materialised by providing
them proper rented housing where they can spend their income on basic necessities such as
food, clothing, house rental, furnishing and household equipment to multiply the local
economy. Another economic management viable to balance the leakage is by imposing
immigrant construction workers to a work pension scheme. The accumulated pension
deducted from their monthly wages can be claimed at the end of their employment before
returning to their home countries. This is to reduce their purchasing power which later
implies different spending pattern. Another approach is to encourage the immigrant workers
to obtain local bank account to multiply their savings and later the local economy.

The way forward is by addressing three aspects namely the lifestyle, the current practice of
managing construction projects and appropriate economic tools to control and balance the
economy. Limitations from the use of questionnaire to delve into the immigrant construction
workers’ actual lifestyle and the identified degree of difficulty of questions, suggests that to
overcome the problem is by conducting a semi-structured interview with the workers.

The appropriate methodology adopted for this research should be a combination of

quantitative and qualitative approaches. Questionnaires can only provide some of the data
while interviewing using semi-structures questions could delve into perceptions and opinions
of the immigrant construction workers on the appropriate economic tools to be adopted.
Consideration of the most suitable economic measures for the workers should take into
account their character as well as maintaining the function of the construction industry in the
Malaysian economy.

CONCLUSIONS
This paper has been able to give a snapshot of the current remittance and spending pattern
among the immigrant construction workers in Malaysia. It unveils findings from a pilot study
conducted by questionnaires. It also draws attention to re-visiting the current system of
organising the construction immigrants’ lifestyle in Malaysia. The construction immigrants’
character as well as the nature of transient projects contributes to the economic leakage in the
output multiplier of the Malaysian construction industry. The data presented reflect both the
professional and non-professional immigrant workers in the Malaysian construction industry.
In a nutshell, most of the immigrant construction workers spend less locally and remit most
of their wages. This calls for drastic measures to balance the inflow and outflow of cash in
the Malaysian economic cycles particularly in the construction sector. It deals with issues to
improve the lifestyle and management of immigrant construction workers as well as finding
the best applicable economic tools to balance the outflow. In addition, there is also the need
to find solutions to attract the immigrant workers to spend locally and at the same time to
help them in fulfilling their aims to remit their wages to their home country.

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