Data presented in the World Competitiveness Yearbook (WCY) 2021 by the Institute of Management Development (IMD) illustrates a strong correlation between a country’s productivity performance and its global competitiveness.
The top-performing economies in global competitiveness registered higher productivity growth (Exhibit 4.7). As productivity grows, the country’s competitiveness increases.
A country’s global competitiveness matters as it projects its overall standing internationally as a preferred destination for trade, investment, and business, based on WCY’s criteria in Economic Performance, Business Efficiency, Government Efficiency, and Infrastructure.
EXHIBIT 4.7
SELECTED COUNTRIES’ GLOBAL COMPETITIVENESS RANKING (VALUE) AND PRODUCTIVITY GROWTH (PURCHASING POWER PARITIES), 2021
Source: Institute of Management Development (IMD) World Competitiveness Yearbook (WCY) 2021
At 72.5 points, Malaysia ranked 25th among 64 economies in global competitiveness in 2021, an improvement from 27th place in 2020. Malaysia was the second most competitive economy within the ASEAN region, behind Singapore, which holds the topmost position. The data in Exhibit 4.7 correlates with Exhibit 4.6, which indicates the inter-dependency between a country’s productivity and competitiveness.
The close association between productivity and competitiveness calls for Malaysia to improve its productivity performance to enhance competitiveness.
Improving productivity means robust and quality growth. Hence, key productivity drivers, namely talent development, digital technology, and regulatory ecosystems, should work within these parameters.
Talent Development
Talents are a crucial asset for productivity growth.
Malaysia Productivity Corporation (MPC)’s talent development initiative aims to build a productive and ready workforce for the future by reallocating resources from low productivity to high productivity growth. Based on the IMD World Talent Ranking 2021 and IMD WCY 2021 (Exhibit 4.8), economies with high productivity growth recorded commendable positions in the global talent ranking, denoting the significant human resource contribution to productivity performance.
Malaysia’s performance in the World Talent Ranking declined from 25th position in 2020 to 28th position in 2021 (Exhibit 4.9). According to the IMD, Investment and Development in talent recorded a significant drop
in the last five (5) years, from 19th position in 2017, to 33rd position in 2021. This calls for initiatives to improve performance.
EXHIBIT 4.8
TALENT RANKING (VALUE) CORRELATES WITH PRODUCTIVITY GROWTH (PURCHASING POWER PARITIES, USD), SELECTED COUNTRIES, 2021
Source: Institute of Management Development (IMD) World Talent Ranking 2021 and IMD World Competitiveness Yearbook (WCY) 2021
EXHIBIT 4.9
MALAYSIA’S PERFORMANCE IN INSTITUTE OF MANAGEMENT DEVELOPMENT WORLD TALENT RANKING 2021 (OVERALL AND FACTORS)
Source: Institute of Management Development (IMD) World Talent Ranking 2021
The Organisation for Economic Co-operation and Development (OECD) Productivity Working Papers published in December 2021 on “The Human Side of Productivity: Uncovering the Role of Skills and Diversity for Firm Productivity” supports MPC’s talent development programme. The OECD findings indicated various public policy areas that can enhance productivity growth, emphasising on the human side. The report highlighted that successful policy was based on three (3) aspects of Supply Upgrading Matching (SUM): increasing skills Supply, reinforcing Upgrading, and helping better Matching jobs for employees. The OECD added that the education system is the key to sustaining the quality and supply of higher skills, including quality talent.
In this regard, MPC’s talent development initiative addresses the shortage of workers and low performance in the national education attainment performance. It seeks to build a productive workforce of the future. The effort is also expected to contribute to the recognition of non-formal education, as set by the UNESCO Institute of Statistics (UIS) in determining a country’s educational achievement.
In creating a pipeline of skilled workers to cater to the manufacturing sector’s demands, especially the electrical and electronics (E&E) industry, MPC is currently working with relevant authorities, business associations, and industry players to establish the Academy in Factory (AiF). The innovation serves as a two-pronged solution to provide consistent talent supply for the manufacturing industry’s growth and improve Malaysia’s education performance through work-based education. The AiF targets 15,000 enrolments by the end of 2022, and 300,000 by 2025.
The AiF is expected to manage issues such as the increasing mismatch in specific skills, like digital skills, difficulty in finding talents with socio-emotional skills, and inadequacy in compensation schemes and wages.
The intervention creates academic, technical, and vocational streams within the education system that is more responsive to labour market demands.
The initial establishment of the AiF caters to the increasing demand in the semiconductor industry.
World Semiconductor Trade Statistics predicted that the worldwide semiconductor market is projected to grow by 8.8% in 2022, to USD601 billion. Malaysia’s E&E
players have the potential to fulfil the increasing global demands, given the country’s position as the world’s foremost semiconductor manufacturer. According to the Malaysia Semiconductor Industry Association (MSIA), Malaysia’s E&E subsector requires nearly 20,000 workers at various levels. Inability to build the workforce needed is an opportunity lost for the E&E industry players and Malaysia. The AiF is a viable solution to the problem.
On a larger scale, MPC’s talent development initiative will improve Malaysia’s education attainment performance through mean years of schooling and school life expectancy indicators. According to the International Standard Classification of Education (ISCED) and findings by UIS 2018, 72.1% of the Malaysian population have a secondary level education, and only 22.1% of Malaysians have higher level education, while 5.8% are categorised as being out of the school system. MPC aims to contribute towards 52% of the population in Malaysia achieving a higher education level in 2026.
The effort to elevate Malaysia’s education attainment performance comprises improving data collection by including non-formal education; benchmarking ISCED 2011 in the Labour Force Survey in determining national educational attainment; recognising non-formal education, strengthening MPC’s role as the recognition authority for non-formal education; applying Behavioural Insights (BI) approach to promote learning in tertiary education; and mainstreaming technical and vocational education and training (TVET). These initiatives are aligned with the 12MP and aim to improve the TVET ecosystem to produce future-ready talent and workforce.
EXHIBIT 4.11
MALAYSIA’S PERFORMANCE IN DIGITAL TECHNOLOGY ADOPTION 2020 AND 2021
Source: Institute of Management Development (IMD) World Competitiveness Yearbook (WCY)*
Digital Technology
In the age of digital disruption, technology is at the core of business and societal transformation. The pandemic has provided numerous wake-up calls since the first MCO in 2020, indicating that changes through greater application of digital technology is essential in moving forward.
Based on the international data from the competitiveness reports (Exhibit 4.10), there is a strong correlation between technology and productivity. Top performing countries in productivity performance scored high in the Digital Competitiveness ranking. Productivity enables businesses to prosper, creates more jobs and provides higher wages.
Malaysia’s performance in digital competitiveness fluctuated but improved in the last two (2) years. In recent years, the country recorded improvements based on several international technology-related indicators, such as digital transformation, digital tools
and technology, and big data and analytics (Exhibit 4.11).
This demonstrated that technology-related government initiatives and policy actions were effective. However, there remains vast room for improvement as Malaysia has yet to break into the top 20 positions.
EXHIBIT 4.10
DIGITAL COMPETITIVENESS RANKING (VALUE) CORRELATES WITH PRODUCTIVITY GROWTH (PURCHASING POWER PARITIES, USD), SELECTED COUNTRIES, 2020
Source: Institute of Management Development (IMD) World Talent Ranking 2021 and IMD World Competitiveness Yearbook (WCY) 2021
Based on two (2) MPC flagship digitalisation programmes, namely Productivity1010 and Industry4WRD Readiness Assessment (RA), 80% of Malaysian companies are still at Level 1 and Level 2 of Technology Adoption (Exhibit 4.12). Level 1 and Level 2 refer to the most basic level
in technology adoption, which is equivalent to Beginner and Observer in Productivity1010, and Newcomer and Conventional in Industry4WRD RA (Exhibit 4.12, 4.13 and 4.14).
EXHIBIT 4.12
80% OF MALAYSIAN COMPANIES ARE AT LEVEL 1 AND 2 IN TECHNOLOGY ADOPTION
EXHIBIT 4.13
69% OF MALAYSIAN COMPANIES ARE AT BEGINNER AND
OBSERVER LEVEL (P1010)
EXHIBIT 4.14
90% OF MALAYSIAN COMPANIES ARE AT THE BASIC LEVEL OF INDUSTRY4WRD READINESS ASSESSMENT
Source: Malaysia Productivity Corporation (MPC)’s analysis based on Productivity1010 and Industry4WRD Readiness Assessment (RA) database, December 2021
Thus, the Government is committed to accelerating technology adoption among Malaysian companies. With the establishment of the Malaysia Digital Economy and the Fourth Industrial Revolution Council, the Government is providing a clear and coherent policy on digitalisation and technology to scale up capabilities in technological advancements and power the growth of the digital economy. The aspiration is to be among the Top 10 in all international technology-related indicators and achieve 50% of technology adoption at Level 3 to 5, by 2025.
In supporting the Government’s plan, MPC’s ‘Go B.I.G.
with Digital’ focuses on catalysing productivity growth through technology adoption. Businesses are expected to increase productivity growth incrementally from 10X to 100X through the initiative. ‘Go B.I.G. with Digital’
advocates the need for mindset transformation among
leaders to unleash the industry’s potential. Strong leadership paves the way into knowing precisely what needs to be done when businesses digitalise. The initiative emphasises three (3) key strategies to promote and boost the adoption of digital technology: Nudging the Chief Executive Officer, Advisory Programme, and Experiential Learning.
In addition to the flagship ‘Go B.I.G. with Digital’
initiative, MPC is strengthening the Industry4WRD RA, a comprehensive programme for enterprises to assess their capacities, potential, and competencies to adopt Industry 4.0. Government funding and intervention of up to RM500,000 and tax deduction incentives are available to firms participating in Industry4WRD RA.