Eyeing a bigger future

The countdown is on for Malaysia’s Vision 2020 ambition of achieving developed economy status. The mission was first voiced over 25 years ago, but – as HRM Asia learns – there are still plenty of skills-related hurdles blocking the path

The Malaysian Government has not been shy about its ambitions to attain high-income status for the country by the end of this decade. This goal, encompassing economic, political, and social development was formalised as “Vision 2020” in 1991 and the 11th Malaysia Plan 2016-2020 represents what current Prime Minister  Datuk Seri Najib Tun Abdul Razak says is the country’s “final leg” of that long race to “enter the arena of developed nations”.

In these last five years, the government hopes to attract a total of MYR 236 billion (S$75.4 billion) of investments, creating 470,000 more jobs.

But even with these targets in place, is Vision 2020 too ambitious?

Najib himself admitted in the same speech in 2015 that two crucial issues have to be addressed before real progress can be made.

Firstly, the ratio of skilled workers needs to be increased to at least 40% of the workforce, as most developed economies’ workforces are made up of roughly 50% higher-value workers.

Next, Malaysia’s gross national income per capita (GNI) needs to increase to US$15,000 (S$21,925) per year. This would require a roughly 30% increase on the US$10,570 (S$ 15,000) GNI recorded in 2015.

Hitting the magic figures

HR Minister Richard Riot Jaem has also noted that the skilled talent shortage in Malaysia is proving a major roadblock to those goals.

He says skilled workers make up only 28% of the country’s workforce, still 12 percentage points lower than the 40% target identified in the latest national plan.

“The percentage of high skilled workers in Malaysia is still low compared to other developed countries,” Riot said last year.

Malaysian Employers Federation executive director Datuk Shamsuddin Bardan expressed similar concern for the low number of skilled workers, which he said was holding back labour productivity. 

The 11th Malaysia Plan calls for a target of 3.7% annual growth in labour productivity, but this would also require a sudden surge. The five years leading to the start of that plan saw average productivity growth of only 1.8% per annum.

Shamsuddin says the small size of the skilled workforce in Malaysia makes it difficult for the economy to attract high-value investments, as hoped for in the plan.

This shortage also saw Malaysia tumble down five places to 19th on last year’s IMD World Talent Report, which assesses and ranks the ability of 61 countries to develop, attract and retain talent within their economies.

A study conducted by JP Morgan and the Singapore Management University late last year aimed to pinpoint the development gaps in the Malaysian workforce. The report authors found that the country faced three key skills challenges: a lack of quality skills-based and job-relevant training; outdated school curricula; and poor soft skills, including declining English language proficiency.

All these challenges, the study revealed, were in turn, largely due to an information gap between educational institutes and industries on the types of soft and technical skills needed.

Education gap

This school-industry gap is particularly obvious in key growth sectors like oil and gas, and electronics and electrical manufacturing, information and communications technology.

Of the 26,900 oil and gas jobs hoped to be created between 2016 and 2020, around 40% will be high-skilled jobs, such as those based in engineering and geology.

Yet, by 2020, research firm Ipsos says there will still be a shortage of at least 300 engineers and 1,500 technicians in the East Malaysia state of Sabah, alone.

But the trend is most pronounced in the information and communications technology (ICT) industry, also the third largest contributor to Malaysia’s services sector. According to the National ICT Association of Malaysia, only 10% of new ICT graduates today are actually employable, with the remaining 90% requiring substantial further training before they become work-ready.

The situation is compounded by the fact that the curriculum offered in local ICT schools is not keeping pace with the rapid growth of the sector.

Building a pipeline

Even more traditional industries, such as the fast-moving consumer goods business, are not being spared the effects of talent scarcity, says Swadheen Sharma, Country Head of snack manufacturer Mondelez Malaysia.

Sharma says skill requirements continue to evolve rapidly, and this is one of the root causes of the imbalance.

“In today’s learning economy, talent needs to upgrade its skills and stay versatile for long term success, and this is a challenge that not everyone can address successfully,” he says. “Those that do are sought after by a number of potential employers, which further enhances this sense of talent scarcity.”

To overcome this problem, Mondelez Malaysia allows younger employees to expand their skill sets by rotating across different job functions.

For example, the iTaste Graduate Trainee initiative involves a custom 12-month programme, designed to develop and nurture selected graduates through experiential, on-the-job learning. This exposes trainees to the company’s various business functions and operations, thus also benefitting the career growth of each individual involved.

Too little, too late?

But Mondelez is one of only a few companies to have found some form of solution. The national government is also struggling to provide economy-wide reforms that could grow the pool of skilled workers.

The 11th Malaysia Plan identifies the national Technical and Vocational Education and Training (TVET) sector as the main vehicle to develop skills for higher value industries. It expects 60% of the 1.5 million jobs it hopes to create before 2020 will require TVET-developed skills.

The strategy has also seen the government allocate MYR 1 billion (S$317 million) to the Skills Development Fund, up from half of that in the plan covering 2011 to 2015. Through this programme, local TVET graduates have greater opportunity to secure high paying jobs in the oil and gas, aviation engineering, shipping and automotive sectors, among other industries.

But according to the JP Morgan-SMU study, TVET institutions have not been able to produce graduates with the right skill sets to meet the requirements in those parts of the economy.

Shamsuddin says results after one year into the current plan also indicate that the government still has some ground to cover in terms of training take-up rates. He notes that many lower-skilled workers are more concerned about keeping their current jobs than looking to upskill.

They are under both real and perceived pressure from immigrant labour, who are willing and able to work for lower wages. There are currently about 3.6 million foreign workers in Malaysia, significantly more than in previous decades.

The brain drain

This skills conundrum is further complicated by a series of other deep-rooted problems.

Data from the government-owned TalentCorp agency, for example, indicates a persistent movement of skills away from Malaysia. Some 2% of tertiary-educated aged 25 and above are now living and working outside of the country, generally because of higher salaries and improved career prospects. In 2010, there were over 310,000 Malaysians living in OECD countries, of which some 55% held higher learning certificates.

Mondelez Malaysia’s Sharma says the private sector has the biggest role to play in reversing this damaging trend. “What are companies doing to ensure they retain these talents and they continue to work in Malaysia?”, he asks.

As part of the Mondelez International Group, Sharma says Mondelez Malaysia’s strategy is to provide its local employees with development opportunities to work in other Southeast Asian offices and hold regional roles.

But most home-grown companies do not have as great a regional presence outside Malaysia, and the government is now looking to do its part to attract educated Malaysians back home.

Through TalentCorp, which was set up in 2011, the government has revamped the Returning Expert Programmes. This provides tax incentives and exemptions for high-skilled workers returning to Malaysia for permanent work, and also allows foreign spouses and any children to become permanent residents.

Over 3,000 returning experts have been approved by the programme since it was revamped in 2011.

But few local stakeholders think that is enough to have any impact on the Government’s targets.  They are finding it difficult to attract people back on wage terms only, given that most will be earning higher after-tax incomes elsewhere, even when the potential incentives in Malaysia are factored in.

Exclusivity issues

Prime Minister Najib’s speech at the 11th Malaysia Plan’s launch also revealed another potential conundrum. The government’s targets and skills development priorities are operating in tandem with its Bumiputera (Malay race) Economic Empowerment Agenda.

Introduced in 2013, this aims to ensure the local Malay population has strong access to economic opportunities, including jobs. Prime Minister Najib said the Bumiputera agenda was both important and relevant, because the number of local Malays was growing. Today, they comprise 68% of the national population, up from 62% in 1992.

“Initiatives for the Bumiputera are not only necessary but must be implemented. The Government will definitely continue to champion Bumiputera policies, but they will be based on meritocracy among the Bumiputeras,” said Najib.

“Furthermore… we are fully committed and determined to achieve 30% Bumiputera equity ownership (of locally-listed companies) by 2020.”

Some have warned that this policy of protecting the indigenous workforce may be counterproductive to the Malaysia Plan’s other intentions.

Local observers say the Bumiputera policy has not yet filtered into the private sector. Laurence Yap, Head of HR at Dexon Electrical Engineering, tells HRM Asia, that local businesses cannot afford to be too choosy.

“In the private sector, the Bumiputra policy does not hinder the companies to hire skilled talent,” says Yap. “There is no limit as who we want to hire in the private sector, and meritocracy is the key thing here.

“The Bumiputra policy is more prevalent in government-linked companies.”

But that influence in public services is strong and growing.

One employment area where Malay Malaysians do have greater job security is in the civil service, where they form 85% of the total workforce.  As The Economist reported in 2013, government contracts were likely to favour Bumiputera-owned firms, further stacking the odds against other social groups.

Dr Ong Kian Ming, Minister of Parliament for Serdang in Selangor state at the time, was adamant the policy would do more harm than good.

“The Bumiputera Agenda...is divisive, unnecessary and in the long-run damaging to the economic and social cohesion of the country,” he told Free Malaysia Today newspaper in 2013.

“(Prime Minister) Najib should… carry out a serious audit of all of the existing government programmes which are targeted at the Bumiputeras to find out their weaknesses, to plug the leakages and to improve on their performance.”

From South Korea to Australia, HRM Asia delves into the specific issues keeping HR awake at night in key Asia-Pacific markets. Check out all the other HR country reports here.


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