Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on October 22, 2018 - October 28, 2018

IMPROVING productivity is one of the key highlights of the mid-term review of the 11th Malaysia Plan. The goal is to improve multifactor productivity (MFP) by 2% per annum during the remaining plan period — 2018 to 2020 — and to contribute 40.9% to gross domestic product growth.

The government hopes to achieve this through a targeted increase in the number of skilled and knowledge workers in the labour force as well as wider adoption of advanced technologies and automation.

A Maybank Investment Bank Research report notes that the MFP target is little changed from the original 11MP target of 2.3% growth per year and 40% share of GDP.

The Pakatan Harapan government also set a target for overall labour productivity to expand at an average annual rate of 2.9% to reach RM88,450 per worker by 2020, from RM81,268 last year.

Improving labour productivity will be good for the country not only in terms of economic growth but also for its citizens as it will result in salary and wage increases. This could help reduce poverty and potentially nudge the bottom 40% (B40) income earners up a rung to the middle 40 (M40) band.

Currently, the B40 group comprises 2.78 million households that earn less than RM4,360 per month. Most — 1.68 million — belong in the sub-category of lower-middle income with a monthly income from RM2,614 to RM4,360.

The poor — those who earn less than RM980 per month — comprise 0.9% of the overall B40 group. There are about 24,700 such households in the country.

The government recognises that the employability of B40 wage earners in high-paying jobs can be enhanced through education and skills training, and it plans to provide students in the B40 group access to a quality education at all levels.

In addition, it intends to promote the adoption of technology and best practices by this income group to boost their productivity. Households, particularly those involved in agriculture and fishery, will be encouraged to use technology, while rubber and oil palm smallholders will be encouraged to merge their activities through community-based arrangements in order to secure bulk sales, which would create economies of scale.

The bigger picture focus will be on labour market reform to produce a competent and skilled workforce to support economic growth, which many economists have emphasised is essential.

There will be four key strategies in the reform process: (i) generating skilled jobs; (ii) raising salaries and wages; (iii) enhancing the management of foreign workers; and (iv) improving labour market conditions.

To encourage automation and innovation in order to create skilled jobs with higher salaries and wages, priority will be given to high-quality investments. To that end, the list of industries that qualify for incentives under the Promotion of Investments Act 1986 will be revised.

Also on the agenda is the establishment of a National Wage Index by next year, which will serve as a guide and benchmark for employers to determine the correct wage level for employees in accordance with their qualifications and skills.

“The NWI will be developed by consolidating wages data from multiple sources for better representation,” says the report.

The mid-term review also touches on the overwhelming dependency on low-skilled foreign labour in sectors such as agriculture, construction and manufacturing and the introduction of measures to address this.

Besides encouraging automation and mechanisation, there is a proposal to impose a progressive multi-tier levy system based on the proportion of foreign workers employed, in order to reduce and regulate their number.

The strategy to improve labour productivity and efficiency includes strengthening the rights of workers to improve their well-being.

The review notes that compensation of employees (CE) is low, which reflects incommensurable employee compensation compared to labour productivity gains. From 2013 to 2017, CE to GDP increased from 33.6% to 35.2%.

“The lower level of CE in Malaysia has been partly attributed to the weaker bargaining position of employees,” says the review.

To that end, the labour laws will be reviewed and the Employment Insurance System will be comprehensively implemented.

Having laid out the agenda, many hope it progresses as planned by end-2020, or at least a substantial portion of it.

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