REGIONAL CONFERENCE ON
INVESTMENT CLIMATE AND
COMPETITIVENESS IN EAST ASIA
SESSION 3:SKILLS FOR COMPETITIVENESS
ADDRESSING SKILLS GAP: MALAYSIAN CASE STUDY
BY:
K.YOGEESVARAN
(yogees@epu.jpm.my)
ECONOMIC PLANNING UNIT
NOVEMBER 2005
ADDRESSING SKILLS GAP :MALAYSIAN
CASE STUDY
OUTLINE
 Background
 Key Findings on Skills and Education
 Measures Introduced and Their
Impact
ADDRESSING SKILLS GAP :MALAYSIAN
CASE STUDY
BACKGROUND
 Productivity and Investment Climate
Survey 2002/2003 was undertaken in
collaboration with the World bnk
 Objective - to identify key constraints to
competitiveness
 Total of 1,151 firms were surveyed
including 902 firms in the manufacturing
sector and 249 firms in the selected
business support services sector
ADDRESSING SKILLS GAP :MALAYSIAN
CASE STUDY
KEY FINDINGS
1. Shortages of skills was reported as a
pervasive problem
 Time taken to fill vacancies;
 Market places a very high premium
on tertiary education;
 Higher education rates are lower
than international norm.
ADDRESSING SKILLS GAP :MALAYSIAN
CASE STUDY
KEY FINDINGS
2. Quality was of some concern
 There was a preference for foreign
trained professionals;
 Main deficiencies were English
Language proficiency, ICT skills &
communication skills
ADDRESSING SKILLS GAP :MALAYSIAN
CASE STUDY
KEY FINDINGS
3. Presence of skills/education
mismatch especially at tertiary level
 Qualifications of unemployed not
relevant to manufacturing sector;
 Results in productivity loss
ADDRESSING SKILLS GAP :MALAYSIAN
CASE STUDY
KEY FINDINGS
4. Improvement in skills can result in
substantial benefits
5. Number of firms using training
facilities are low especially
among SMEs
ADDRESSING SKILLS GAP :MALAYSIAN
CASE STUDY
MEASURES AND IMPACT
 Expanding the supply of educated and
skilled human resource
 Increase in capacity of institutions of
higher education;
 Introduction of double-shift training
facilities;
 Impact
 Increase in labour force with tertiary
education
ADDRESSING SKILLS GAP :MALAYSIAN
CASE STUDY
MEASURES AND IMPACT

Improving the quality of education and training
delivery system
 Review of primary and secondary school
curriculum including use English for Science and
Math;
 Increased collaboration between universities,
industries and research institutions to address
mismatch
 Introduction of the National Dual Training System

Impact
 Duration of unemployed
ADDRESSING SKILLS GAP :MALAYSIAN
CASE STUDY
CONCLUSION

Inadequacy of skilled workforce and mismatch
were identified as the main concerns.

A range of measures have been introduced to
address these concerns and improvement are
already emerging.
THANK YOU
www.epu.jpm.my
Assessing Skills Shortages – Average Time to Fill In
Vacancies
Managers face acute shortages of skilled labour, especially professionals
No. of Weeks to Fill in Vacancies
No. of Weeks to Fill in Vacancies
6
12
5
10
4
8
3
6
2
4
1
2
0
0
Malaysia
Bangladesh
Pakistan
China
Skilled technicians
Unskilled production workers
Manufacturing
Services
Professionals
Skilled technicians
Unskilled production workers
The Premium for Tertiary Education is High in
Malaysia
The premium is high for tertiary
education in Malaysia…
… this premium is even higher than
that in OECD countries
Annual rate of return
to tertiary education (percent)
Mean log hourly wage
2.75
35
2.50
Pakistan
30
Saharan AfricaBrazil
2.25
Sub-
25
Europe/Middle East/North Africa*
2.00
Secondary
Tertiary
Primary
1.75
Australia
Panama
Latin America/Caribbean*
India
Singapore
Asia* MALAYSIA
Korea
2001
(PICS Manufacturing)
20
15
1.50
Canada
ThailandOECD Philippines
New Zealand
High
-Income
10
1.25
0
3
6
9 101112
1516 18
Years of formal education
Source : Malaysia PICS 2002, World Bank
21
0
2
4
6
8
10
12
14
16
Percentage of tertiary education completion in the
total population 25 years old and over
Source : Psacharopolous and Patrinos (2002) and The
World Development Indicators (April 2003, PICS
Manufacturing Data for Malaysia
Malaysia’s Higher Education Stocks Lag Behind Its
Level Development
Malaysia’s higher education rates are lower than the international norms
% of Population > Age 25 with Higher
Education Complete, 2000
20
Korea
18
16
Philippines
14
12
Thailand
Canada
Chile
10
8
6
Malaysia 2000
4
India
China Malaysia 1990
2
0
Malaysia 1980
6
7
8
9
10
Log of Real Per Capita GDP in 2000
11
Benefit from Addressing Skills Constraints
• Econometric estimates suggest that addressing the skills constraints can provide
large benefits to firms, raising the sales of most industries by 11 per cent of sales
on average
Benefit From Reducing
Industry
• Food processing
• Textiles
Skill Shortages (% Sales)
4.0
14.3
• Garments
9.6
• Chemicals
10.9
• Rubber/Plastics
• Machinery/Equipment
9.0
17.7
• Electronics
5.4
• Auto parts
16.0
• Furniture/Others
10.9
• The rate of return on training is also large, 10 per cent in terms of higher wages
for manufacturing workers with any training
Investment climate – Skills Gap
Utilisation of Skills and Technology Development Institutions
Number of firms that uses the skills development institutions is low, especially
among the SMEs
Electronics
% Firms That Report Using The
Institutions
Chemicals
Rubber/Plastic
SMEs
Large
14.7
39.1
• Technology support
institutions
14.5
17.4
• Technology
incentives
11.4
Auto parts
• Skills development
institutions
Food
Machinery
Wood Products
Garments
Textiles
TOTAL
0
10
20
30
40
50
% Firm Using Skills Development Institute
1.2
Output from higher education institutions, especially prublic
institutions increased dramatically after 2002
Number of Persons (‘000)
160
139.2
140
137.0
120.2
120
96.3
100
80
60
135.0
65.7 64.4
70.3 66.9
2000
2001
74.8
40
20
0
Public Institutions
2002
2003
Private Institutions
2004
Output from both public and private training institutions
increased since 2000
Number of Persons (‘000)
40
37.6
34.1
35
31.2
30
25
20
29.3
28.3
23.8
18.7
20.9
23.4
26.1
15
10
5
0
2000
2001
Public Institutions
2002
2003
Private Institutions
2004
The share of labour force with tertiary qualification has
increased since 2000
% of Labour Force
60
55.4
53.8
55.3
54.5
55.1
50
40
30
26.1
24.1
20
10
22.4
5.3
5.1
21.9
17.5
16.7
15.4
13.9
6.2
23.5
4.8
4.7
0
2000
2001
Non Formal Education
2002
Primary
2003
Secondary
2004
Tertiary
18.3
The percentage of graduates who are unemployed for
more than six months has declined since 2000
% of Unemployed Graduates
70
60
61.9
56.7
56.7
55.4
51.8
50
40
30.7
30
23.0
20
10
26.6
25.2
16.7
21.3 22.0
21.3
7.4
0
2000
2001
0 - 3 months
2002
4 - 6 months
2003
> 6 months
2004
23.3