Malaysian employers need to pay better wages in order to attract and retain high-value workers.

Keys to transforming economy

Sunday August 28, 2011

Keys to transforming economy

By AMY CHEW

sunday@thestar.com.my

Malaysian employers need to pay better wages in order to attract and retain high-value workers.

BUSINESSMAN David owns an auto workshop and spare parts shop. In a sector which largely employs foreign workers, David has been able to staff his business with local workers by paying them higher salaries.

“I pay my mechanics from RM3,000 to almost RM6,000,” says David whose workshop deals with European cars including BMWs.

“In Malaysia, we can still get local workers if we pay them good salaries and they will stay with you for many years,” he says.

“It is not enough that you treat them well, you have to pay them well. Otherwise they will not stay as it will be hard for them to survive,” he adds.

There are over a million blue collar job vacancies in Malaysia, a huge number for any country, but there are few takers as low salaries and poor perks deter locals from entering this segment of the job market.

The 1,051,427 job vacancies are mainly in manufacturing, plantation, agriculture, construction and production, according to official figures.

The lack of local interest combined with labour shortage means Malaysia will continue to be dependent on foreign workers to move the wheels of the country’s economy. Last Friday, the Home Ministry reported that there were 2.23 million legal and illegal workers who were registered under the biometric registration.

“We need to have an economic system that gives all incentives for employers to employ locals on the basis of fair wages,” says former Human Resources Minister Tan Sri Dr Fong Chan Onn.

“We need to raise wages and encourage vocational education,” adds Dr Fong who is also the MCA’s MP for Alor Gajah, Malacca.

Oil palm plantation workers, for example, are set to receive a guaranteed minimum earnings of RM850 per month starting in September after the Malaysian Agricultural Producers Association (Mapa) agreed to increase wages.

But according to Dr Fong, plantation companies can afford to pay much higher wages without reducing profitability.

“Oil palm plantations can actually afford to pay each harvester RM3,000 a month and still make big profits,” he says.

“If you pay a high wage of RM3,000, there will be local workers, definitely.”

Lack of skilled workers

Managing human capital, both skilled and unskilled, is crucial for the next development phase of Malaysia as it strives to become a high income economy by 2020.

However, it is faced with stiff challenges, one of which is low wages, which is making it difficult to attract skilled workers into the country as well as retaining local talents.

Human capital, according to the World Bank, is the bedrock of a high income economy.

“We don’t have enough skilled labour. Most of them have gone to Singapore,” says Dr Fong.

The World Bank estimates that one million Malaysians live abroad, with Singapore absorbing 57% of the entire diaspora.

“We have to adopt policies of allowing the inflow of foreign skilled workers and specialists and make it more difficult to import unskilled general workers. Singapore’s policies are a good example,” says Dr Fong.

Further, he says, easing the flow of talented workers can be part of the government’s investment incentives.

“FDI who bring in high value projects should be allowed to bring in their own talents, including professionals. Hong Kong, China, etc follow this practice,” he adds.

Economists say there is also a need to speed up the establishment of Malaysia as a hub for various economic activities to attract talents and move up the value added chain.

Economic hubs have well-developed infrastructure which facilitates travel and business transactions, access to capital, new technology, skilled workers and other activities.

“If you don’t have hubs, your people (skilled workers) will leave,” warns Dr Fong.

“For example, if I’m a finance man, it’s so much easier to work out of Singapore because of its hubbing. The infrastructure for a financial hub means you have big banks, big reserves, wealth managers, expertise and so on.”

Malaysia is currently an international and regional hub for Islamic finance and is aspiring to develop the country’s infrastructure to become an oil, medical and tourism hub.

Just 10 years ago, Malaysia was a global electronics hub until the advent of smartphones, which saw China overtaking the country in the manufacturing of new IT applications.

“We were banking very much on Nokia and Motorola and missed out on the new wave, but we can always come back,” says Fong.

Top Glove, the world’s largest rubber glove manufacturer, employs over 10,000 people and knows too well the importance of human capital.

As a global player, the company is constantly looking into ways on how to reduce its labour intensive industry to remain competitive and move up to the next level.

“The private sector must also play its part. We must think more about how to automate further,” says its managing director, K. M. Lee.

Malaysia’s new economy will be one driven by innovation, creativity and entrepreneurship.

“It will not just be confined to producing goods and services. It is the elevation of the quality of life,” says Dr Yeah Kim Leng, chief economist of Ram Holdings Ltd.

The private and public sector have jointly identified 12 National Key Economic Areas (NKEAs) to kickstart the Government’s Economic Transformation Programme (ETP).

The NKEAs cover 11 industries and one geographical territory: oil, gas and energy; palm oil; financial services; tourism; business services; electronics and electrical; wholesale and retail; education; healthcare; communications content and infrastructure; agriculture; and the Greater Kuala Lumpur/Klang Valley.

“The 3.3 million jobs expected to be created in the NKEA sectors by 2020 will require a range of qualifications, from unskilled labour to vocational certificates and diploma holders to advanced professional degree graduates,” says the Performance Management and Delivery Unit (Pemandu) in an e-mail reply to questions.

Pemandu oversees implementation and assesses progress of the ETP.

“Both local and foreign human capital is critical to the success of the ETP. Significant improvements are required in the size and quality of the talent pool in Malaysia in order to deliver the required GNI (Gross National Income) growth in the NKEAs (National Key Economic Areas),” says Pemandu

“To address the human capital needs of the EPPs (entry point projects) and business opportunities, the Government is taking action to build the capabilities of existing talent in Malaysia, attract foreign talent to work in Malaysia and ease immigration rules to facilitate the entry of talent,” says Pemandu.

Based on the NKEA and EPP projects that will be coming on-stream in the next five years, Pemandu says the country has enough workers to carry out most of the projects.

“For mega projects such as the MRT, oil and gas and large industrial parks, we may need to increase foreign labour during the construction phase,” adds Pemandu.

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