Malaysia – Productivity and Competitiveness

Self-Driven To Achieve Success

PRODUCTIVITY BOOST: Private sector participation is vital in implementing measures

THE private sector has a crucial role to play in increasing the produc­tivity level of the country.

A suggestion to reduce dependence on foreign workers in the construction industry is to provide locals with information on wages and benefits.

Malaysia Automotive Institute chair­man Datuk Muhamad Noor Yacob said efforts by industry players to increase productivity at firm-level would sig­nificantly affect the country’s economy as a whole.

"Under the 11th Malaysia Plan, the government wants to achieve produc- tivity-driven growth. We can't continue on the input-driven path of increasing labour and capital to boost output.

"In Malaysia, the unemployment lev­el is low. But at the same time, there is heavy reliance on foreign workers.

"If we were to benchmark against developed countries, such as Japan, Switzerland and South Korea, these countries are not employing many for­eign workers."

Noor said dependency on foreign labour could give rise to infrastructure and healthcare issues.

One suggestion to reduce this de­pendence is to provide locals with in­formation on wages and benefits, for example, in the construction industry.

At the same time, industry players have to improve the working environ­ment to make it comparable with those in developed countries, so that it be­comes less dirty and dangerous.

He said parents can pique their chil­dren's interest in the industry by en­couraging them to explore career paths.

"Many parents like to see their children obtain degrees and become engineers, or join other professions.

The fact is that there are individual working as sub-professionals to assist engineers like technicians, who also play a crucial role in the construction sector as well as in other industries."

The country itself is facing stiff com­petition in attracting investments. In recent years, it has become a net ex­porter of capital.

"To achieve higher productivity, we need to employ high technology in our economy, including shifting to value- added industries.

"At the same time, better manage­ment methods, as well as increasing the skill of our workers through train­ing, will be important. When it comes to adopting technology, most firms are concerned with the immediate cost.

"To invest in new technology, com­panies have to purchase new machines and employ skilled employees, which will affect cash flow," he said.

"These firms already have to deal with day-to-day issues to ensure that they meet consumer demands on time. This leaves them with very limited re­sources to deal with other issues."

Noor said addressing productivity is­sues and improving competitiveness could benefit industry players in the long run.

He said the private sector could seek assistance in improving productivity by participating in the "Reducing Unnec­essary Regulatory Burden" (RURB) ini­tiatives by the Malaysia Productivity Corporation (MPC).

"Last year, MPCs Regulatory Impact Analysis initiatives had generated com­pliance cost savings and other benefits worth RM263.85million. Similarly, RURB had led to RM139billion in savings.

"This positively impacts the private sector, given that these cost savings are meant to recur annually."

Noor said MPC had been doing a good job, with a lot of progress at the federal level. However, more can be done at the state level.

“This involves doing away with re­dundant regulations, reducing the time of issuing licences and using informa­tion technology in their administration.

"There is also a proposal for greater transparency in creating new regula­tions, which requires direct involve­ment with stakeholders."

Boston Consulting Croup principal Nurlin Mohd Salleh said the private sector stakeholders needed to drive productivity actively.

"Productivity initiatives need to be driven at national, industry, enterprise and individual levels. Industry players typically do not see the importance of productivity, and are concerned only about the impact on their businesses and the bottom line.

"It is, therefore, important for them to understand that productivity can have an important influence on these.

"We need their support in gathering input on ways to improve productivity.

"They need to be involved in various initiatives, including the National Productivity Council to help oversee the implementation and to drive the initiatives themselves.

Some feedback from industry players

evealed that earlier government ini­tiatives did not place a strong emphasis on consulting and engaging with them beyond the initial phase.

"They don't see the change hap­pening and have not been kept abreast on the progress. They very much like to participate in the initiatives all the way to see the impact."

Industries face five cross-cutting challenges that affect their productivity — workforce, technology, industry structure, business environment as well as culture and mindset.

"In regard to workforce, the challenge is in having access to a highly skilled workforce, as well as the in­vestments required to develop and re­tain them, which remains an issue.

"In technology, our country is be­coming digitised and this requires an investment outlay. There will be a lot of up-front costs involved, and the issue of getting over this initial concern needs to be addressed. '

"For industry structure, high market fragmentation, lack of competitiveness and reliance on subsidies and protec­tionist measures are common issues."

"On business environment, the chal­lenges include having cumbersome regulations with insufficient govern­ment and industry discourse."

When it comes to mindset, the issue is predominantly about what produc­tivity means to an individual and how its benefit is perceived. In Malaysia, businesses are generally content with the status quo, making it challenging to drive productivity initiatives.

Emphasising that these challenges cut across industries, Nurlin said the extent of each challenge differs from one sector to another.

"For example, in the construction sector, the challenge is much more on costs associated with the adoption of technology (eg. Industrialised building system) and modern construction methods.

"For retail services, industry structure is a significant issue, as the market is fragmented with many small and medium enterprises (SMEs). This is par­ticularly challenging, given that issues faced by SMEs are different from large companies.

"To illustrate this, many SMEs do not want to invest in technology or training high-skilled workers because of cash flow restriction making it difficult to elevate their respective businesses.

'On private healthcare, most of the challenge is related to business en­vironment, where regulatory require­ments must be considered.

Nurlin lauded the move by the gov­ernment to facilitate doing business in the country, especially measures that provide time-saving benefits.

She said the facilitating role of the government is the right first step.

Nurlin was one of the panelists at the discussion themed "Productivity and Competitiveness Forum 2016: Chal­lenging the Frontier, Empowering Peo­ple" in Kuala Lumpur, which was mod­erated by Noor.

Other panelists were Construction Industry Development Board (CIDB) Malaysia senior general manager Mohd Nazli Ahmad Mahyadin and Sime Darby Bhd Croup sustainability and quality management operational excellence head Azman Shah Mohamed Noor.

The forum was held just prior to the launch of the Productivity Report 2015/2016 by International Trade and Industry Minister Datuk Seri Mustapa Mohamed. 
Adapted from NST/June 28, 2016/Tuesday