Malaysia will stop taking in foreign workers for the manufacturing and services sectors to force employers to hire more locals as the economic crisis deepens.

Human Resources Minister S Subramaniam said the Cabinet decided on the freeze to look after the welfare of locals who could be laid off.

This came after the ministry found that about 45,000 workers, mostly Malaysians, could be retrenched over the Chinese New Year season, according to one of the leading English newspapers of Malaysia.

Most of those likely to lose their jobs would be factory workers as the manufacturing sector scales down production.

On Wednesday, United States computer chipmaker Intel Corporation announced that it is planning to close two of its assembly test facilities in Penang but gave the assurance that the affected employees would not be retrenched.

The government is under pressure from the labour unions to act quickly as bad news begins to mount and job losses seem imminent. It has already announced several other measures such as retraining funds to help retrenched workers.

Malaysia has 2.1 million foreign workers, out of a workforce of 10 million. About one million foreigners work in factories and the services sector such as restaurants and hotels.

Subramaniam said those with existing work permits can continue until these expire, and exemptions would be given if employer showed an urgent need.

Foreigners can still be hired for the plantation and construction sectors where very few Malaysians are willing to work.

Most of the foreign workers in Malaysia are hired from Indonesia, the Philippines, Sri Lanka and India.

The Associated Press quoted a Human Resources Ministry source as saying that the government had instructed companies to lay off foreign workers first if they needed to reduce operations.

Deputy Prime Minister Najib Razak yesterday (January 22) said the retrenchment of foreign workers would be done in stages to avoid disrupting any sector of the economy.

Malaysia has tried repeatedly to wean itself from its dependence on foreign labour. It has even offered amnesty to those working illegally so that they can be repatriated. But it has not been successful, largely because Malaysians shun work regarded as dirty, dangerous and demeaning.

Malaysian Employers Federation executive director Shamsuddin Bardan told The Straits Times that employers would have to consider the type of job first before retrenching foreign workers.

"Yes, we have to lay off foreign workers first, but we have to see whether the nature of their jobs was the same as the local employees'," he said.

He said it was timely for the government to restructure the labour market.

In October last year, Najib said the government will reduce the number of foreign workers by 400,000 by 2010.

He said the workers remitted 9.12 billion ringgit (US$2.52 billion) overseas from January to June last year.