Better Workforce Training and Education Leads to Economic Progress

By effectively addressing the skills gaps in a young, undereducated workforce, Malaysia is on course to reach developed nation status by 2020.

In 2009, the Malaysian government had an ambitious vision to transition to a high-income economy by 2020. Compared with its Asian peers, Malaysia’s labor productivity and wage growth were slowing in the face of a tough economic climate, and its status remained suspended somewhere between that of a developing and a developed country. 

Malaysia had the high investment levels needed to achieve its long-term goal, but a low-skilled workforce was holding it back. Although multiple human capital recommendations and programs have been introduced over the years to improve workforce quality, 80 percent of the workforce had only a secondary education or below. What’s more, tertiary education and training institutions were turning out low-quality, often unemployable graduates, and they offered these graduates little opportunity to update their skills after entering the workforce.

A Mind-set of Performance

The Malaysian government turned to BCG as it struggled to create a strategy for transforming its workforce profile. 

Accountability and a performance management culture are critical to driving results at public-funded entities. To that end, Malaysia’s Human Capital Initiative adapted and applied best practices from the private sector to improve workforce quality and tackle labor market efficiency issues. 

Together, the team outlined a set of key reform levers:

  • Improve and sustain performance of the teaching workforce.
  • Improve quality and perception of technical/skills education.
  • Make universities more accountable to improve graduate quality and employability.
  • Enhance foreign workforce policies.
  • Harmonize and update labor laws.
  • Streamline national-level management of human capital.

Recommendations for structural and cultural change have since been incorporated into the government’s midterm to long-term economic agenda. This has ensured that the country’s resources are effectively allocated to education and workforce development programs and initiatives. It has also sown a performance-oriented mind-set within relevant ministries and agencies.

As a result of this initiative, Malaysia is currently on a path to achieve the following:

  • Ensure that an estimated 3.2 million workforce participants entering the labor market over the next decade are skilled.
  • Ensure that at least 50% of the workforce has at least a tertiary education.
  • Upgrade at least 10% of the current semiskilled workforce.
  • Continue initiatives to increase the labor force participation rate.
  • Grow the overall pool of skilled, relevant, and high-quality workers.
  • Increase quality-of-life measures.
  • Create a high-growth economy.
  • Achieve developed nation status by 2020.

Technical and vocational education and training (TVET) suffers from the perception that it is inferior to general academic education, but it has the potential to effectively address two major economic challenges: closing the skills gap and reducing unemployment. 

It does this by creating a high demand for skilled labor to meet growing industry needs, and by recognizing and rewarding productivity gains. Along the way, improved TVET creates a number of clear economic benefits to developing countries.

Increased Enrollment

An improved education system and better student outcomes ensure that graduates can find jobs quickly and earn higher salaries. In turn, prospective students and employers have a better perception of TVET education.

Increased Salaries

Improved training and better use of technology increase productivity levels and result in greater efficiency and quality. Such behaviors are rewarded with higher pay.

Increased Investments

Higher workforce training standards means graduates are ready for immediate employment. As industries begin to recognize the availability of a robust talent pool, they’re more likely to invest in a region.