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Malaysia has reached a defining moment in its development path. What will Malaysia look like in 2020?

To move the country forward, the government has crafted the New Economic Model (NEM) to be achieved through an Economic Transformation Programme (ETP) which will propel Malaysia to being an advanced nation with inclusiveness and sustainability in line with the goals set forth in Vision 2020.

The old growth model provided three decades of outstanding performance, permitting Malaysia to provide for the health and education of its people, largely eradicate poverty, build a world-class infrastructure and become a major exporter globally.

But the progress we have made over the past half-century has slowed and economic growth prospects have weakened considerably.

Our exports are still strong but not generating enough value added. The economy is highly dependent on external markets, with an export-to-GDP ratio of 1.2 and a trade-to- GDP ratio of 2.2 in 2008.

Malaysia’s export structure has focussed mainly on electrical and electronics (E&E) products and on primary commodities such as petroleum and palm oil.

However, given the large import content in the manufactured exports, the value added to the final product has been low.

In Malaysia, not enough high wage jobs have been created and the share of skilled labour has declined across industries.

Low skills jobs equal low wages. Skilled jobs are most often synonymous with higher wages.

In many instances, employers do not pay for skills, relying instead on a readily available pool of unskilled foreign workers and underpriced resources – made possible by government policies – to generate profits from production of low value added products and services.

Before the Asian financial crisis, Malaysia was leading the region in labour productivity growth. It has since lost the pole position.

The weak productivity growth highlights the stark reality that Malaysia still lacks creativity and innovation – as shown in stagnant contribution by total factor productivity and education to output growth.

Efforts to innovate and create have been insufficient. The weak track record of domestic innovation in Malaysia is reflected by the comparatively low number of researchers.

Low R&D expenditure results in a lack of innovation in the industrial and export sectors.

We are not developing talent and what we have is leaving. The human capital situation in Malaysia is reaching a critical stage. The rate of outward migration of skilled Malaysians is rising rapidly.

Just as serious is the fact that the number of expatriates working in the country has been steadily declining.

At the same time, the education system is not producing the skills demanded by firms.

The Department of Statistics reports that in 2007, 80% of Malaysia’s workforce received education only up to Sijil Pelajaran Malaysia (SPM).

The NEM will create a Malaysia in the future that will be renowned for vibrant transformation arising from the resourcefulness of its people exemplified by its harmonious diversity and rich cultural traditions.

The economy will be market-led, well-governed, regionally integrated, entrepreneurial and innovative.

For that labour markets must work well where jobs and workers must be matched efficiently to increase productivity and thus raise wages for all.

Labour market adjustment must be smooth where the right workers need quickly to find the right jobs; the right jobs must rapidly attract the right workers, including those from abroad.

At the same time, Malaysia’s talent base must improve. A quality education system which nurtures skilled, inquisitive, and innovative workers to continuously drive productivity forward is the foundation of sustained economic growth.

In the 10th Malaysia Plan, the government give special emphasis on skills training to ensure that Malaysia develops the necessary human capital to meet industry’s requirements and drive productivity improvements to move up the value chain.

Technical education and vocational training will be mainstreamed, with a focus towards raising the quality of qualifications.

This is key towards providing a viable alternative to enable individuals to realise their full potential, according to their own inclination and talent.

Under this plan period (10th Malaysia Plan), the government will also expand programmes involving practical on-the-job training through the vocational dual training system and also through graduate internship programmes. Internships, soft-skill training and job placement initiatives will be targeted towards unemployed graduates.

High income emanates from skilled people applying their talents to successfully meet the economic challenges faced by society.

Malaysia cannot miss the opportunity to put its most valuable resource to work.

(this article written for 1BINA.my)