Growing gaps in Malaysia’s human capital
by Jonathan Wong. Posted on July 7, 2013, Sunday
Each year, about 400,000 young Malaysians sit for their Sijil Pelajaran Malaysia, the passing of which will lead them down the path of universities and colleges, while some opt for vocational training in either private or public institutions.
Despite all that, more than 25 per cent of these young human capitals do not fall within that category with some opting to pursue their own business ventures, find a job or remaining idle at home.
The official unemployment rate for Malaysia for the last five years has been hovering at circa three per cent, which comes up to less than one million of the current population.
In 2008, the unemployed rate for those aged 15 to 24 was 11 per cent or about 230,000 people. This accounted for 60 per cent of the unemployed, according to the Malaysia Millennium Development Goals 2010 Report.
Those aged 15 to 19 had an unemployment rate of 18 per cent and accounted for more than 20 per cent of the unemployed.
To further highlight the problem, about 62 per cent of businesses in Malaysia are finding it hard to source skilled workers, according to the latest Thornton International Business Report.
“The survey also revealed that in the Asean region, the shortage of specific or technical skills was the most significant factor for businesses in Vietnam (86 per cent), followed by the Philippines (76 per cent) and thirdly in Malaysia (68 per cent),” the group noted. “This was followed closely by Singapore (66 per cent).
“The survey highlighted other factors that hindered recruitment in Malaysia, such as the lack of appropriate work experience (63 per cent) and also shortage of general employability skills, particularly teamwork and communication in English (62 per cent),” the report said.
An important factor
In a nutshell, SJ Grant Thornton country managing partner Datuk NK Jasani underscored the importance of human capital for businesses.
“A business is nothing without its people, just as a strategy is nothing without the people to drive it forward,” he said. “The best people boost productivity, save a business time and money, and ultimately grow the organisation.
“The shortage of skilled workers reported by business leaders should, therefore, provoke real concern, especially at a time when unemployment is running high in many mature markets.”
Jasani said there could be improving dialogue between education institutions and business leaders to embed the necessary skills in students.
“However, this is happening at a less than desired pace,” he said. “In the meantime, the fastest-moving sectors such as technology and clean-tech are reporting the most serious recruitment difficulties.”
The human resources ministry was previously quoted as saying that the target is to have 37 per cent skilled workers by 2015, which will ensure malaysia reaches the goal to be a developed nation by 2020.
With the figure at 23 per cent as of 2011, it appears malaysia may need to revise or restrategise the said target.
One sector of particular highlight is the construction history, with Master Builders Association Malaysia outlining the acute shortage of skilled workers possibly jeopardising government projects under the 10th Malaysia Plan and the Economic Transformation Programme (ETP).
In November last year, it was reported by the media that then Deputy Minister for International Trade and Industry Minister said the oil and gas sector needed over 40,000 skilled workers by 2015.
Oil and gas is a major income earner for Malaysia and any disruption to production can be a costly situation for the country.
The Real Estate and Housing Developers Association Malaysia (Rehda) has also been quoted saying that the construction industry and indirectly the property sector in Malaysia has been experiencing critical shortage of skilled workers such as carpenters, plumbers, electricians, chargemen and tillers.
Malaysia is in an interesting dilemma. There is a haemorrhaging of young manpower on a yearly basis and on the other hand there is an acute shortage of skilled workers in just about every industry. This has been the situation for more than 20 years and the quick and convenient solution has been to import foreign labour.
Malaysia is the largest importer of foreign labour in Asia at 1.9 million as of 2011 , and that constitutes 21 per cent of the workforce, according to Evelyn Devadason, a visiting fellow at the Australian National university and associate professor at the University of Malaya.
Affected Sectors: A Closer Look
Taking a closer look at which sectors in particular that is being affected, Kelly Services (Malaysia) Sdn Bhd (Kelly Services), managing director, Melissa Norman noted that there is great demand for technical skills specifically in the area of engineering, technology and niche functional roles.
“As the country focuses on building a high income economy, the critical factor would be the skilled workforce that would drive the increase in the average income,” she stated in an interview with BizHive Weekly
“Industries that see an impact are particularly in manufacturing, telecommunications, renewable energy, oil & gas as well as information technology,” she added.
Because of this, she said, there was also a fear of using foreign workers are being lured in to fill the gap.
“It is an undoubted fact that this would continue as Malaysia develops and acquire talent that can fulfill the immediate need within the industry.
Source: Jobstreet
“In curbing this, Talent Corporation has been on the look-out for bringing Malaysian talent home. Although there is progress, this initiative would require more time before there is evident numbers to support the growing demands of skilled talent in Malaysia.
“Until that happens, organizations will have no alternative but to bring in foreign talent, and as we’ve seen many organization run programs that are related to transfer knowledge to ensure eventual transition does take place across to our local talents.”
Meanwhole, Jobstreet’s country manager, Chook Yuh Yng, when contacted by BizHive Weekly noted otherwise, stating that, “Safe to say, employers in Malaysia typically prefer to hire locals, unless there are specific skillsets that can only be fulfilled by non-locals or foreigners such as management or finance, which require international expertise or experiences.
“Typically, companies in Malaysia are only allowed to hire foreigners when they can prove that Malaysians aren’t able or willing to do that job.”
Women in the Workforce
A recent business report (IBR) released by Grant Thornton International indicated that Malaysia has the highest number of women in the workforce at 40 per cent in comparison to other countries in Asean.
This promising data is testament that there more women are encouraged to join the workforce.
“In the course of our work, we have seen women dive into roles that are fairly specialised, such as engineering. This trend will continue as women are more bold today in advancing themselves in careers that are beyond the norm,” noted Norman from Kelly Services.
Despite the high number of women in the workforce, Jobstreet’s Chook highlighted that according to World Bank research, the participation rate of Malaysian women in the workforce however, stands at 46 per cent, considerably lower compared to Asean peers and other countries with similar development and income levels.
“While qualified women may join the workforce in larger numbers in the beginning of their careers, their numbers begin to decline as they quit formal employment.
“Also in our latest survey, majority of respondents believe their workplace practices gender equality when it comes to delegating job assignments and salary distribution. Sixty-one per cent of respondents feel there is no salary gap among the same position level for male and female staff in their organisation,” Chook explained.
Supply or Demand issue?
Since 1971, a multitude of policies and government projects have been rolled out to include ways for improving the development of industries and job creation.
These projects came with much support from both public and private sector and Malaysia job creation had overtaken human resource development. The country was unable to keep up with the demand for skilled labour.
Add this with the temptation of better wages outside the country made it hard for the skilled Malaysian worker to resist.
Looking at Malaysia’s closest neighbor, Singapore, a skilled worker earning RM3,500 could be earning S$3,500 with the cost of living within the same range.
Due to that, the argument that was brought up was that the jobs were not attractive enough for the locals to engage.
Norman of Kelly Services enthused that Malaysia’s success in transforming itself into an upper middle-income nation is the result of consistent and substantial investments in human capital development.
However, in aspiring to further transform into a high income, advanced nation by the end of the decade, the country’s requirements for top talent are urgent and immediate.
“Malaysia needs to raise its benchmark for human capital management in order to secure the needed talent,” she highlighted.
“If at all we see locals struggle to appreciate the roles available in the market, it would most likely be due to the fact that the non-skilled roles are limited to specific areas that may not be lucrative or exciting.
“As such, Malaysians would need to improve in skills such as spoken and written English, as this basic requirement is somehow lacking in many Malaysians today. Besides that, there is definitely more opportunities in niche, skilled roles to which much up-skilling and experience is required amongst keen job seekers,” she noted.
Jobstreet’s Chook however gave a different angle at this by noting that generally, many people mistakenly believe that making a lot of money will make them happy in their chosen field.
“In reality, high salary is not the only factor relating to job attraction and talent retention. We can say for sure that Malaysian workers are looking for a lot more than a salary boost.
“Among the top factors include employer’s branding, work challenge, work life balance, and career advancement.”
Chook elaborated that employer branding was due to the fact that top performers want to work for a winning team. Organisational success, growth, reputation, and innovation and stable organisations all contribute to attracting talent.
When an organisation commit to building a trustworthy employer branding as mentioned above, she said they tend to attract more top talent.
On work challenge, Chook stated, “From our Job Satisfaction survey conducted late last year, the no.1 reason people are unhappy at work is tackling their job scope. Challenge is typically the most important attribute sought after by talent.
“A good organisation should always challenge their employees to motivate them to produce meaningful contributions which allows them to refine and develop new skills, and ultimately to be more competitive at their workplace.”
On work life balance, she also explained flexible working arrangement wherever possible is something that many young employees want employers to incorporate in their offering.
In the long run, this aspect is important for employee engagement, as individuals who do not manage this balance are at risk of burnout or demotivation.
For employees, career advancement is no doubt an important aspect of the perception they have toward their job is based on their opportunity for promotion and career advancement.
Even if the salary offered may be higher in the beginning, it does not mean that the opportunity for career growth is visible in the company. The ability to advance one’s career is significantly important to top performer.
“At the end of the day, people will make decisions based on what is best for their long term career satisfaction. If these issues aren’t being addressed in an organization’s recruitment process or if an organisation is just attracting talent based on attractive salary package alone, it’s time to start over and re-strategise.
“Employer’s branding is very important and human resource should come in to play build, attract and retain more local talent.”
“There could be improving dialogue between education institutions and business leaders to impart the necessary skills in students. However, this is happening at a less than desired pace. In the meantime, the fastest-moving sectors such as technology and clean-tech are reporting the most serious recruitment difficulties,” Chook highlighted.
Deterrent for investments
While the country tries to address these labour issues, foreign investments keep coming in and along with it, more jobs. The International Trade and Industry Ministry announced that investments worth RM162.4 billion (US$52.5 billion) had poured in and 182,841 jobs were created. However, due to the lack of skilled labour that is available locally, this could well lead to becoming a deterrent for foreign investors to invest into Malaysia.
The Jobstreet country manager acknowledges this and opined that, “ Sure, it correlated. But we do not foresee any huge decrease in foreign investment as Malaysia has the best conditions to lure investors with its central and strategic location and many companies do focus on small and medium entrepreneurs as well.
But Norman however does not share this similar sentiment. Norman felt that Malaysia’s lack of skilled workers is the country’s biggest impediment in attracting investors; the lack of skilled workers in Malaysia does effect investor’s decision on Malaysia as being the country of choice.
This is mainly due to the concern of establishing a business with higher business cost, as there may be a need to acquire skilled workers out of the country.
Training versus Salary
Some parties argue that the reason for the shortage was also due to the lack of training while others say it was due to the lack of growth in real wages in Malaysia, skilled labour prefer to migrate for greener pastures.
Chook slated that there is never a one view fits all answer to this issue. The labour shortage issue cannot be addressed without understanding some of its root causes, and these problems are deep rooted.
“There are essentially two reasons for Malaysians migrating. The first is the push factor such as the lack of fair and just treatment irrespective of race and religion, diminishing quality of education, the increasing lack of creative, common and human liberties, and the overall quality of life. The second is a lack of attractive and enticing pull factors.
“Also, simply increasing wages to lure and capture the necessary skills and talent is no longer valid as people are looking at a higher quality of life. In line with the country’s ambition to become a developed nation, we need to benchmark our talent situation to begin assessing our issues.
“Some of the benchmark we can look at is quality of education, graduate employability, workforce productivity and livability. TalentCorp Malaysia, an agency set up by the Government in 2011, had been designed to streamline the performance of the local labour market and attract Malaysians working abroad to return home,” she stated.
Chook further added that, “I believe various measures have been taken at the national, regional and sector level to improve these areas, like MOHR Strategic plan 2011-2015, Pemandu’s National Talent Enrichment Programme (NTEP) and the ETP through Greater Kuala Lumpur to transform the city.”
Kelly Services’ Norman concurred with, this noting that both views are of equal merit, as it was a combination of many factors that has lead the talent challenges for skilled talent to continue.
“In the effort to build skilled talent within the country, there have been organizations who have failed to ensure that the relevant training were conducted to guarantee the transfer of knowledge and business continuity.
“Whilst that remains true, many Malaysians have also chosen to migrate for the sheer fact of a better income and a quality lifestyle. We will see this trend continue as the market as we see it today has limited boundaries for talent mobility,” she opined.
On a general note, Chook believed that the first step into getting the right talent was by attracting and give them a good impression of the company while Norman enthused that there would have to be consistent efforts in bringing Malaysians back whilst the nation continues to build a talent pipelines in sectors that would drive the focus on creating a high income economy.
“No doubt that it would be to churn skilled talent with the relevant experience,” said Norman.
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