Monday, February 19, 2018

Reimagining Malaysia Part 8: Five Ways to Create an Economy that Works for the Youths

In Part 7 of this series, I discussed how Malaysia’s economy structure is failing our youths, resulting in the double whammy of youth unemployment and underemployment. We need to rethink and restructure the economy so to create more jobs for the youths, not only jobs, but good jobs – jobs that give them decent incomes, meet their aspirations and develop them to their full potentials.

Here are the five things the government should do to create an economy that works better for Malaysian youths.

Close the Gap of Labour Supply and Demand

Firstly, the government needs to urgently solve the problem of the mismatch of supply and demand of labour force and skills. The allocation of scholarships as well as the intake for different courses in the universities and vocational schools should reflect the estimation of what the economy needs in the medium term of two to four years. The curriculums of the courses at tertiary institutions should be more industry-driven.

There should be aggressive reskilling programmes to help in reskilling unemployed graduates who are now “stuck” with the consequences of the mismatch between supply and demand. A person needs more valuable skills in order to earn more, hence government upskilling and lifelong learning programmes and incentives must be strategic and aggressive to catalyse upward movement of labour skills and subsequently pay cheques.

In addition, technical and vocational education and training (TVET) should be rebranded to be an attractive pathway for secondary school leavers, just as it is in countries like Germany. It is better to be a TVET graduate armed with skills that are in high demand (and thus is paid as such) by the market, such as an aeronautical mechanic, oil and gas technician or crane operator etc., than to be a university graduate with no job prospects.

Creating more industry-driven TVET placements is a double-edged sword that will not only help students that are not academically inclined to obtain skills that will allow them to get jobs with good salaries, it will also help industries to grow by providing more trained labour.

Improve Youth Soft Skills and Transferable Skills

To narrow the skill gaps of graduates in terms of technical and soft skills deficiencies, it is important for the respective ministries, agencies and academia to collaborate with associations and industry players by way of internship programmes and other collaborations.

In addition, since we are living in a fast-changing world with the job market changing so quickly, our tertiary institutions need to equip its graduates with more transferable skills – skills that can be “transferred” across different industries, such as the ability to learn new things quickly and independently, to adapt to new technologies and environments, and to think analytically, critically and creatively. Other desirable traits include a good working attitude as well as good interpersonal, communication and leadership skills.

The ability to speak English is crucial as it is the business language in the private sector. In addition, it is worth noting that Chinese proficiency will become an increasingly important skill for the workforce as China is taking centre stage as a world economic powerhouse and is making more investments in Malaysia.

Move from a Labour-Intensive to a Knowledge-Driven Economy

Thirdly, it is high time that we move away from being a labour-intensive economy and move towards becoming a knowledge-and skills-intensive economy. The government needs a comprehensive carrot-and-stick system to facilitate the adoption of technology by businesses. They could do this by restricting industries’ reliance on foreign labour gradually while at the same time providing attractive incentives in terms subsidies and grants for the industries to invest in technology.

Transformation of businesses from labour-driven to knowledge-driven can create medium and high-skilled jobs that pay higher wages as well as improve business profitability and long-term competitiveness. The government must create a supporting system that facilitates and catalyses such business transitions without hurting the businesses, especially smaller players.

In addition, to move towards a knowledge-driven economy, we need to increase our spending in research and development (R&D). The table below shows the average spending on R&D as a percentage of GDP according to The World Bank [1] for different income-levels of the countries in question. As of 2015, Malaysia has only spent 1.3 percent of its GDP on R&D – this is even lower than the average R&D spent in low and middle-income countries.

Table 1 Average spending on R&D as a percentage of GDP
Countries Income Level
Average R&D spending as % GDP
Low and Middle
Middle Income
Upper Middle Income Countries
High Income Countries
OECD Countries
North America
Source: The World Bank

In this globalised world, where labour, raw materials and goods move across boundaries with ease, we must make an effort to use knowledge and know-how to ensure our economy stays competitive.

Incentivise Youth Entrepreneurship

Fourthly, youths must be empowered to venture into entrepreneurship. Only two percent of the nation’s graduates are running their own businesses upon graduation, one of the lowest percentages among other countries in the region. Small and medium enterprises create more than 70 percent of the jobs in Malaysia thus more jobs could be created for youths when the young start their own businesses. Therefore, there should be special incentive programmes for youth entrepreneurship.

In fact, because of their exposure to the Internet from a young age, this generation of young Malaysians has a much wider worldview as well as greater creativity and potential to think outside-of-the-box than previous generations. The government must formulate an incentive system that can help youths with extraordinary ideas to turn these ideas into products/services via youth entrepreneurship.

Better Institutions

Finally, Malaysia needs strong institutions to command market confidence for private sector development, so that individuals and firms can plan and invest. There must be prudent economic policies, which encourage strategic investment in infrastructure that stimulates innovation, removes market rigidities and bureaucracy and enhances regional integration such as ASEAN trade, labour and border control, and so on.

There should be an institutionalised accountability structure to ensure that whatever plan we have, which may include those discussed above, is executed properly to improve the job situation for youths. The outcome of such efforts must be measured objectively by job data, such as the number of new jobs created and the worker’s median salaries, and not by what politicians say about it.


With a talented workforce that matches market demand, structural reforms that move towards knowledge, technology, innovation and entrepreneurship and last but not least, strong institutions, Malaysia will be able to compete with our regional competitors such as Singapore, Indonesia, Vietnam and Thailand to attract investment, which in turn will create more value-added jobs. With more and better jobs, the young generation will not only be able to survive but to thrive in the competitive and globalized world today.

Nonetheless, it isn’t enough that our youths thrive today, we must also make sure they thrive in the future. The job landscape is changing very fast in the era of the fourth industrial revolution with the rising of artificial intelligence, machine learning, Internet-of-things and big data technologies. Hence in the next part of this series, I will discuss specifically on how we should respond to the fourth industrial revolution to create more and better jobs for Malaysian youths and enable them to thrive in the future.

This article is extracted from a chapter of my book, "Reimagining Malaysia."

[1] The World Bank. Research and development expenditure (% of GDP). [cited 16 Jan 2018]. Available from