Kuala Lumpur - Malaysia's opposition-ruled northern state of Penang announced Monday that builders hiring foreign workers over local applicants would be blacklisted from receiving state contracts.

Contractors and developers awarded contracts would only be allowed to hire foreigners if they are unable to find enough local workers to complete their jobs, said state Chief Minister Lim Guan Eng.

"If they do not follow the directive, in the future they will not get contracts from the state government," Lim was quoted as saying by the official Bernama news agency.

"I know that contractors prefer to take foreign workers as they have to pay less," he said.

Foreign workers in the building sector are paid 70 ringgit (21 dollars) and above - depending on their work experience - for each day of work. Locals typically demand higher wages.

By mid-2008, there were 2 million foreign workers, and about 4 million illegal immigrants in the country, most of whom work in the construction industry, official records show.

Despite its efforts to cut down on foreign labour, Malaysia remains heavily dependent on immigrant workers, especially the agriculture and construction industries.

Last year, the government said it aimed to reduce the number of foreign workers by 500,000 over the next three years. (dpa)