Thursday, June 13, 2013

Malaysia’s Skilled Labour Dilemma: Jobs Aplenty but Few Takers

Datuk Seri Abdul Rahman Maidin
Datuk Seri Abdul Rahman Maidin says most of the 120,000 young people each year who slip through the cracks of Malaysia’s education system are Malays and Indians.
Each year, over 410,000 teenagers sit for the Malaysian equivalent of 0-Levels. Some go on to universities and colleges, some opt for skills training in either private or public institutes.
What happens to the rest – more than 120,000 young people each year – is anyone’s guess. This means each year almost one-third of those who leave school at 17 either get a job, start their own business or sit at home and twiddle their thumbs. There is a big possibility that a big chunk of them are doing the latter.
Datuk Seri Abdul Rahman Maidin says most of the 120,000 young people who slip through the cracks are Malays and Indians. He was president of the National Chambers of Commerce and Industry of Malaysia and member of the government think-tank National Economic Action Council.
“In semi-rural areas like Tasik Gelugor in mainland Penang, most of the Chinese leave the villages in search of jobs in urban areas. If there are no jobs, they go into apprenticeships like working at the local mechanic shops or other skills-based small businesses. As for the Indian and Malay youths, only half of them are employed. This is because of lack of job opportunities and there is no apprenticeship mechanism within the Malay or Indian communities to absorb these young people,” says Datuk Seri Abdul Rahman.
“In rural areas like Pengerang in Johor, most of the students drop out after Year 6 (at the age of 12) because secondary schools are far away and boarding schools are for the smarter kids. Most of the children in rural areas are not academically inclined. Training skills are either not available or are irrelevant to industry needs,” he adds. Datuk Seri Abdul Rahman now runs a non-governmental organisation called Institute of People and Rights which, among others, fights for socio-economic reforms in rural areas.
The official unemployment rate for Malaysia for the last five years has been hovering around 3% which comes up to less than one million of the population. In 2008, the unemployed rate for those aged 15 to 24 was 11% and that came up to 230,000 people. This accounted for 60% of the unemployed, according to the Malaysia Millennium Development Goals 2010 Report.
Those aged 15 to 19 had an unemployment rate of 18% and accounted for more than 20% of the unemployed.

Global and local shortage

International Labour Organisation figures indicate that the number of young unemployed people is growing each year since 2007. About 12.6% of young people the world are expected to be out of work this year.
At the same time, businesses around the world are facing problems sourcing for skilled workers. A survey by international accounting firm Grant Thornton International showing that globally there is an average of 39% shortfall in skilled workers and the figures are higher in Singapore and Malaysia at more than 60%. In fact, the lack of skilled workers is affecting businesses in Asean the most for the year 2013.

The Human Resources Ministry has said that the target is to have 37% skilled workers by 2015, which will ensure Malaysia reaches the goal to be a developed nation by 2020. With the figure at 23% as of 2011, it appears Malaysia may need to revise the target or restrategise.
In a news report dated March 16, 2011, Master Builders Association Malaysia said there is an acute shortage of skilled workers in the construction industry and this could jeopardise government projects under the 10th Malaysia Plan and the Economic Transformation Programme.
In November 2012, Bernama reported 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) says 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. Its president, Datuk Seri Michael KC Yam, said this in a written statement to The Establishment Post.
Rehda represents more than 800 developers across the country who are responsible for some 80% of the total real estate developed.
Malaysia is in an interesting predicament. On one hand 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 became the largest labour-importing country in Southeast Asia in the 1990s. These migrant workers have also represented between 20-25% of the labour force since the 1990s. In 2007 migrant workers comprised about 2.8 million of the 12 million labour force,” said Amarjit Kaur in her research titled International Migration and Governance in Malaysia: Policy and Performance for the University of New England in Australia.
Malaysia is the largest importer of foreign labour in Asia at 1.9 million as of 2011, and that constitutes 21% of the workforce, according to Evelyn Devadason, a visiting fellow at the Australian National university and associate professor at the University of Malaya.

Why is there a shortage of skilled labour in Malaysia?

A string of economic policies and plans have been rolled out since 1971 and all of them include strategies for developing industries and along with that come job creation. The development projects came and furious and along with the active participation of the private sector, Malaysia found itself in a situation where job creation had overtaken human resource development. The country was unable to keep up with the demand for skilled labour.
The construction boom in not just Malaysia but also in neighbouring Singapore and the Middle-East made matters worse, according to a study titled Construction skilled labour shortage – The challenges in Malaysian construction sector by Shazwani Ahmad Zaki, Sarajul Fikri Mohamed and Zakaria Mohd Yusof, of Universiti Teknologi Malaysia in July 21, 2012.  The temptation of better wages outside the country made it hard for the skilled Malaysian worker to resist.
It's not easy to retain skilled workers in Malaysia, says Mr Syed Shahir Syed Mohamud, advisor to the National Union of Transport Equipment and Allied Industries Workers.
It’s not easy to retain skilled workers in Malaysia, says Mr Syed Shahir Syed Mohamud, advisor to the National Union of Transport Equipment and Allied Industries Workers.
Syed Shahir Syed Mohamud says retaining skilled workers in Malaysia was not easy because salary packages in Singapore, the Middle-East and other countries were very lucrative.
“If in Malaysia they got RM4,000 (US$1,292) per month, in Singapore they were paid S$4,000 (US$3,165) and in Middle-East they can got US$10,000,” Mr Syed Shahir told The Establishment Post. He is presently the advisor to the National Union of Transport Equipment and Allied Industries Workers and had served as president of Malaysian Trade Union Congress for two terms. MTUC is the umbrella body for Malaysian unions.
Datuk Seri Yam also admits that salaries is a major issue and the lure of much better paychecks from other countries is hard for many skilled and talented workers to resist.
The fact that wages in Malaysia did not increase substantially since 1997 gave many skilled workers the push they needed to work in other countries.

Malaysia’s growth in real wages has not increased substantially post-1997 Asian Financial crisis

The Performance Management and Delivery Unit (Pemandu) has a different take on the issue. Human Capital Development Strategic Reform Initiative director Tengku Nurul Azian Tengku Shariman feels the main reason for the shortage of skilled workers lies with the training.
“There are not enough training providers willing to offer the skills set training required in these sectors,” she says in a written response to The Establishment Post. The sectors referred to are healthcare, agriculture, wholesale and retail and Greater Kuala Lumpur which are the areas classified following Pemandu’s 12 National Key Economic Areas.
Pemandu was set up in 2009 under the Prime Minister’s Department and its main role is to oversee the implementation and assess progress of the Economic Transformation Programme and the Government Transformation Programme.
Tengku Nurul Azian says: “The existing training providers are not willing to venture into these areas as there are risks mainly due to the lack of demand forecast data and coupled with high capital required for these training programmes (curriculum development, facilities upgrade, train the trainers, etc).”
However, private skills training institutes say the accessibility is the issue as most of those opting for the non-academic path or skills training are likely to be from the low-income group and therefore need the finances to pay for their training.
The Federation of JPK Accredited Centers, Malaysia (FeMAC) says they do not have enough students and are on the verge of closing their business due to lack of government support for skills training. They want the government to offer more study grants for skills training. Read: Sun setting on skills training
Tengku Nurul Azian says part of the fault lies with the private sector’s habit of resorting to foreign labour. “Some private sector players who operate on a low cost and labour intensive model still rely heavily on low skilled foreign workers. Malaysian companies must move up the value chain; hence the minimum wage was introduced as a catalyst for companies to reduce reliance on cheap foreign labour and move towards innovation and value-added production,” she adds.
For the construction industry, the short-term solution has been to hire foreign workers. Datuk Seri Yam says the industry has little choice. Foreign workers lack skills but this was augmented with training, he says. “The industry also adopted new technology such as the Indusrialised Building System to reduce dependency on human labour but it requires time and heavy capital investment. There have also been training programmes to attract and train more talent to join the industry.”
However these are short-term solutions and there needs to be long-term ones to address the shortage of skilled workers.
Mr Syed Shahir says the government should have played a bigger role in the matter from the beginning. He means decades ago.
“In 1965, a union was set up for scooter assembly plant workers. This shows that we had had the automotive industry in Malaysia since then. Today, after 48 years, imagine the amount of money that have been pumped into this sector, and we now even have the national car, Proton. But how much has been invested, in terms of material, in the development of human capital? Do our workers possess skills in the true sense? How much has been spent on other sectors and industries? And still we have not moved into high tech country.”
He adds: “With the amount of money, time and effort spent and the supposed transfer of skills from the country of origin, we should be able to move more towards automation with a smaller workforce and be less reliant in other countries on technology and knowledge transfer.”
He blames the government for not being far-sighted in developing the workforce and in formulating policies. He says that there is a surplus of nurses and pilots and at the same time a shortage of workers with other skills. “This is because of mismatch between skills and opportunities. It is the role of the state to monitor the shortage of workers and assess the manpower needs.”
“For the last 100 years we have had palm oil and rubber plantations. Has there been tremendous improvement in bringing down the fruit or tapping the rubber tree? Why didn’t we improve the skills?
“If we have fewer but highly skilled workers and the right machines using new technology a worker can cover a wider area – more efficient, and no need to rely on foreign workers. By including machines, we are not denying the workers jobs but we are making them more efficient and the country less reliant on foreign labour. I have got nothing against migrant workers. But the more you bring, the worse is the skill level for our local workers is going to be.”
“We will not be in the situation (skilled worker shortage) we are in if we improve our skills and technology usage, method of work, system of production and this will lower our dependency on foreign workers. We are in a situation where both foreign workers and local workers are oppressed,” he says.
Looking Ahead
While Malaysia tries to sort out its labour issues, investments keep pouring in and along with that more job creation. In February this year, the International Trade and Industry Ministry announced that private investments worth RM162.4 billion (US$52.5 billion) had poured in and 182,841 jobs were created.
Malaysia is in an enviable position. Countries like India and Egypt are struggling to create jobs for their peoples but Malaysia seems to be able to do it with ease. The issue here is to ensure local labour is put to good use by imparting the right skills so as to fill the hundreds of vacancies.
Pemandu feels that the private sector has to take the ownership of developing the skilled workers. “Most of the time, it is a one sided game. Private sector expects the government to be responsible and to provide grants and incentives to produce the right talent. The private sectors should be the front liners in collaborating with the local institution and increasing their investment on training their potential workers. In the future, there should be more public private partnership where private companies train potential workers,” says Tengku Nurul Azian.
She says a private-public collaboration in information gathering and sharing is also necessary. “The private sectors need to provide support by sharing relevant data. Effective interaction between government and private sectors will then produce robust industries where all relevant skills are utilised.”
Rehda sees skills training and a better education-industry match as some of the main areas to be looked into. Datuk Seri Yam also says there is definitely a need for bigger paychecks for skilled workers. “There should be better pay and benefits for skilled workers, especially those who work hands-on in the manufacturing, engineering, construction and heavy industries,” he says.
Economists would say that with more citizens being part of the country’s workforce, there would be more savings and expenditure out of income, more productivity generated, and the wheels of economy will keep turning.
But for some like Datuk Seri Abdul Rahman, the human factor is equally important. “After a few years of being unemployed, the drive to work or to get a job slowly erodes. The urgency of getting jobs disappears. Most of those not employed after two to three years get into a rut. This is becoming a culture and it is so hard to get these people out in the workforce.”
Whichever way you look at it, Malaysia needs to urgently resolve the shortage of skilled labour problem.


  1. It is superb content I thought and even I was searching similar this subject articles for knowing about it. And I truly enjoyed to read plus collected a tremendous information about it.

  2. Thanks for the article on labour shortage! It'll help me in my research for I gather all the statistics now to get decent results.