SARAWAK’S labour-dependent industries are seeking a review of Foreign Worker Transformation Approach (FWTA) costs as business margins tighten amid rising operational pressures.
The issue centres on escalating foreign worker-related costs and the implementation of a system introduced to modernise labour management in Sarawak.
The FWTA was introduced in January 2025 to modernise the recruitment and management of foreign workers in Sarawak.
Industry groups said the system replaced the previous Monitoring System On The Employment of Non-Sarawak (MSEN) framework, with the new approach aimed at improving governance, transparency, digitalisation and processing efficiency in the management of nonresident workers.
At the centre of industry concerns is the RM1,854 fee imposed under the FWTA system, alongside the proposed increase in the renewal fee payable upon approval of labour licences for foreign workers.
The renewal fee is expected to rise from RM904 to RM1,484 from June 1, 2026, before increasing further to RM1,854 from Jan 1, 2027.
Major industry groups have called for a review of the fee structure and implementation process, citing rising operating costs, manpower dependence and mounting pressure on business margins.
Deputy Minister in the Premier’s Department for Labour, Immigration and Project Monitoring Datuk Gerawat Gala has said the RM1,854 fee is paid directly to the service provider and fully utilised for the operation, maintenance and enhancement of FWTA.
He has also said the government does not receive any portion of the fee, while the Sarawak government is negotiating with the service provider to extend discounts beyond the current year-end deadline.
Industry groups said concerns on the ground extended beyond the fee itself, involving upfront payments, system stability, processing delays, transition timelines and the cumulative effect of rising operating costs.
Timber group appeals to keep RM904 fee
Sarawak Timber Association (STA) chairman Datuk Henry Lau Lee Kong has appealed to the state authority to maintain the renewal fee payable upon approval of labour licences for foreign workers at RM904.
He said maintaining the current fee would help provide cost stability before the proposed increase to RM1,484 from June 1, 2026, and subsequently to RM1,854 from Jan 1, 2027.
“Any increase would further strain an industry already facing pressure from the ongoing Middle East crisis, volatile global economic conditions and escalating fuel prices.
“These factors had significantly increased operational and transportation costs across the sector, while creating a more unpredictable business environment,” he said.
Lau said the timber industry was also bearing substantial additional costs under FWTA, which was implemented on Jan 15, 2025.
“The cost under FWTA amounts to RM1,854 per worker, or RM2,002.32 inclusive of SST.”
In addition, he said the newly introduced system imposed training costs of about RM2,000 per participant.
“As FWTA is still in its early stage of implementation, continuous improvements are still being made.
“Training and implementation guidance should therefore be provided free of charge to support a smoother transition and ensure effective compliance.”
He said the cumulative burdens were already eroding margins across the sector.
Lau added that any upward revision of the renewal fee at this juncture would affect business sustainability and the competitiveness of Sarawak’s timber industry.
“Maintaining the RM904 fee is necessary to provide cost stability and safeguard the continued viability of the industry.”
Plantation sector flags rising labour pressure
Meanwhile, the Sarawak Oil Palm Plantation Owners Association (SOPPOA) said FWTA had created operational and financial challenges for industries highly dependent on foreign labour. SOPPOA said it supported efforts by the state authority to improve governance, transparency and digitalisation through FWTA.
The association said it also backed efforts to modernise and streamline the recruitment and management of non-resident workers through a more integrated digital ecosystem.
However, it said the additional administrative fee of RM1,854 per worker, excluding SST, had significantly increased employment costs for labourintensive industries.
“Stakeholders noted that the additional charge was unique to Sarawak and was not imposed in Peninsular Malaysia or Sabah.
“This placed Sarawak-based industries at a clear competitive disadvantage, particularly when businesses were already facing rising operating costs on multiple fronts.”
The association said FWTA implementation also coincided with major federal-level cost increases, including the RM1,700 minimum wage policy and the planned mandatory EPF contributions for foreign workers.
Collectively, it said these measures had increased financial pressure on employers and raised concerns over long-term operational sustainability.
SOPPOA sought a review of the FWTA implementation framework, particularly the fee structure imposed on employers.
“The current fee structure has placed excessive strain on industries already operating under mounting cost pressures and volatile market conditions.”
The association also raised concerns over the pace of implementation and the limited transition period provided for businesses to adjust workforce planning and operational budgets.
“Many employers have been required to absorb substantial additional costs within a short timeframe without sufficient adjustment mechanisms or phased implementation.
“Despite ongoing improvements, employers continued to experience technical disruptions and system instability involving the digital platform.”
It said compliance costs of this magnitude must be supported by a system that is fully stable, efficient, reliable and operationally seamless.
The association added that employers continued to face coordination challenges arising from overlapping federal and state procedures involving multiple agencies.
While official statistics indicated improvements in processing timelines, SOPPOA said experiences on the ground continued to reflect procedural bottlenecks and inter agency coordination issues affecting approval efficiency and operational planning.
“For the oil palm industry, foreign labour remains an operational necessity rather than a matter of preference,” it said.
It noted that Sarawak currently has about 1.67 million hectares of oil palm plantations.
Although the industry had invested heavily in mechanisation and productivity improvements, SOPPOA said the most critical harvesting activity, fresh fruit bunch cutting, remained heavily dependent on manual labour.
“Sarawak’s unique topography, including steep terrain and peat soil conditions, continue to limit the use of commercially viable mechanised harvesting technologies capable of fully replacing skilled harvesters in the field.
“As a result, plantations remained heavily dependent on trained foreign workers to sustain productivity, maintain harvesting standards and ensure operational continuity.”
The association said any substantial increase in labourrelated costs would directly affect productivity efficiency, operational sustainability and overall industry competitiveness.
It stressed that the palm oil industry remained one of the largest contributors to Malaysia’s economy and government revenue, while continuing to play a critical role in employment generation, rural development, downstream industrialisation and export growth.
“In 2025, Malaysia’s palm oil industry generated about RM112.51 billion in export earnings, in addition to contributing substantially through corporate taxation and various industry-specific levies.
“In Sarawak alone, the industry contributed about RM78.3 million through the Malaysian Palm Oil Board cess and RM88 million under the Windfall Profit Levy.
“The industry also remained a major contributor to Sarawak’s State Sales Tax revenue, with about RM673 million contributed in 2025 through the 5 per cent SST imposed on crude palm oil and crude palm kernel oil.”
Given the sector’s substantial economic and fiscal contributions, SOPPOA said greater consideration must be given to balancing regulatory objectives with operational realities and the escalating cost pressures faced by labourintensive industries.
Construction costs squeeze housing affordability
The housing and construction sector has also warned that FWTA-related costs could eventually affect homebuyers.
Sarawak Housing and Real Estate Developers’ Association (SHEDA) Institute said housing prices in Sarawak may rise as new foreign worker charges add pressure to construction costs.
It said the housing development and construction industry in Sarawak was increasingly concerned over rising compliance and labour costs following FWTA implementation.
SHEDA Institute said the system required employers to bear additional administrative and processing charges amounting to approximately RM1,854 per worker, excluding SST.
It noted that such charges were unique to Sarawak and were not imposed in Peninsular Malaysia or Sabah, placing Sarawak’s construction and housing sector at a competitive disadvantage.
“The added cost has placed further financial pressure on an already challenging operating environment for developers and contractors across the state.
“The pressure is greater because housing and construction remain highly labour-intensive, particularly in civil works, infrastructure, formwork, bricklaying, plastering, roofing, tiling and general construction activities.”
Despite ongoing efforts to encourage mechanisation and Industrialised Building System adoption, SHEDA Institute said the sector continued to depend heavily on foreign labour to sustain project timelines and operational efficiency.
It said FWTA also came at a time when businesses were facing several other rising costs, including the RM1,700 minimum wage policy, increasing building material prices, higher utility charges, transportation costs and the proposed mandatory Employees Provident Fund contributions for foreign workers.
“Collectively, these measures have substantially increased development costs and placed tremendous financial strain on developers and contractors, especially those involved in affordable and mid-range housing projects.”
SHEDA Institute said the cost concern now extended to buyers.
Citing data from the National Property Information Centre, it said approximately 10,050 housing units worth about RM3.6 billion were transacted in Sarawak in 2025, with the median transacted house price standing at approximately RM390,000.
“About 68 per cent of the transacted housing units were priced below RM400,000, indicating that most homebuyers in Sarawak remain highly dependent on housing products within this price range.”
It said any substantial increase in labour and regulatory compliance costs would place pressure on overall construction and development costs, which would ultimately be reflected in the pricing of new housing supply.
“If housing prices are pushed beyond the current market concentration range, it said this may reduce accessibility for aspiring homebuyers, particularly first-time purchasers.”
SHEDA Institute said this was particularly worrying at a time when the public was already facing increasing living costs.
“Higher housing prices will place a heavier financial burden on homebuyers, especially young families and first-time purchasers who are already struggling with affordability challenges.”
It said housing is a basic necessity and an important component of economic and social stability.
The institute added that any policy implementation that significantly increased development costs should carefully balance regulatory objectives with economic realities and long-term housing affordability.
While the industry supports efforts by the state authority to improve governance, transparency and digitalisation in foreign worker management, SHEDA Institute said FWTA implementation had resulted in significant costs and procedural challenges for developers and contractors.
“The objective of streamlining labour management is commendable, but a more practical and phased implementation approach is needed to allow businesses sufficient time to adjust operational planning, manpower requirements and project costing.
“The housing and construction sector remains committed to working closely with the state authority and relevant agencies to improve labour governance and compliance standards.”
However, SHEDA Institute said the industry hoped the relevant authority would review the current FWTA structure, administrative charges and implementation process.
“This is to ensure policies remain practical, sustainable and supportive of Sarawak’s economic development and housing affordability goals.”
Problems extend beyond fee increases
Industry concerns are not limited to the fee amount alone.
Industry documents shared with Sarawak Tribune stated that FWTA was introduced to modernise recruitment processes and reduce processing time to within 61 days.
However, the documents stated that the current implementation had created uncertainty, added complexity and increased financial and administrative burdens on employers.
The documents also highlighted the absence of a mechanism for employers to verify whether prospective workers had been blacklisted or had overstayed before applications were submitted.
They stated that priority should be given to the reliability and stability of the FWTA web-based system, processing timelines, fee transparency and advance communication on changes to the framework.
The documents also referred to an engagement with Gerawat and the Immigration and Labour Management Unit, during which industry representatives raised several implementation concerns.
These included the reclassification of FWTA charges by stages into lump-sum upfront charges, delays in foreign worker approvals, inconsistencies in medical screening outcomes and the absence of a reliable pre-verification mechanism for worker eligibility.
Industry representatives also raised concerns over policy and system changes introduced without prior notice, including the reclassification of charges and the introduction of upfront payment requirements.
According to industry feedback shared on condition of anonymity, Sarawak and Non-Sarawakian Online Labour System (SANSOLS) officers informed members on Jan 21, 2026 that full upfront payment of RM904 per worker for new foreign workers, payable upon issuance of the labour licence, would take effect the following day without written notification.
A flow chart shared for reference outlined several stages and payment points under the FWTA process, including job advertisement, Approved Permit (AP) application, labour licence, Electronic Visa with Reference (eVDR), medical booking through Sarawak Foreigners Health Information System (SAFHIS), Foreign Worker Identity Card (FWID) and levy payment at the Immigration Department of Malaysia (JIM).
Under the process, payments include RM950 per worker for AP, RM335 per worker for labour licence, RM215 per worker for eVDR, RM30 per worker for medical booking and RM324 per worker for FWID.
The documents stated that the current worker replacement mechanism posed practical difficulties for employers because they were limited to a one-time replacement within 60 days from the Labour Licence approval date.
They said this failed to account for rejections that might occur at later stages, including during the eVDR process or medical examinations, which were beyond employers’ control.
Industry representatives requested that the 60-day period commence from the date of rejection, regardless of the stage at which it occurred, and that multiple replacements be permitted in the absence of a preverification mechanism.
Following the engagement, the Immigration and Labour Management Unit agreed to study the requests.
The unit also agreed to provide a list of 25 medical conditions to facilitate pre-departure screening in source countries, which is intended to minimise discrepancies between medical examination requirements in source countries and those in Sarawak.
The documents stated that several key improvements were agreed following the engagement.
The 61-day processing timeline was reaffirmed, while the unit indicated that any future changes to SANSOLS would only be implemented with formal written notification.
While these developments were welcomed, the documents stated that consistent implementation, clear communication and practical system improvements remained critical.
