The most sustainable way to grow an economy is by taking measures to improve every citizen’s productivity level. In the IR4.0 world, the wealth of a nation is no longer determined by natural resource endowment but by the efficiency of labour.
Except for a few resource-rich countries, the wealthiest nations in the world are often the most productive nations. Table 1 below shows the world’s top 10 most productive countries, in terms of GDP per hour of work by their workforce. A cursory look also reveals that these are some of the wealthiest countries in the world. Strikingly, none of the countries could be considered as being resource-rich. They amass their wealth mainly through consistent increases in labour productivity.
Malaysia’s productivity challenge
Labour productivity is a measure of the amount of value added by each employee. Since the mid-1980s, Malaysia has struggled to maintain an inspiring level of labour productivity. As of April 2021, Malaysia’s labour productivity stood at a paltry 1.8%. While this is an improvement over the 2020 figure of – 5.3% (no thanks to the Covid-19 pandemic), Malaysia has, over the years, generally done poorly in labour productivity.
According to Productivity Report 2022 (shown above), throughout the four years of the 11th Malaysia Plan (2017, 2018, 2019 and 2020), the country consistently recorded a drop in labour productivity as shown in figure 1 above.
Again, this ugly phenomenon has been there for decades. When you look at the country’s labour productivity performance across the previous planning circles (as indicated in a snapshot from MPC Productivity Report 2022 below) – all the way from the 1st through the 11th Malaysia Plan, it has been a case of heartbreaking progressive decline year after year. The year was when Malaysian labour productivity was as high as 15%, but today, what we have is a national tragedy.
Malaysia’s uninspiring performance in labour productivity is also responsible for the country’s declining position in global competitiveness. As table 2 below shows, Malaysia has continuously lagged comparable countries in labour productivity.
In the early 1980s, Malaysia was ahead of a country like South Korea in labour productivity. But as the above snapshot from MPC Productivity Report 2022 shows, South Korea leapfrogged Malaysia in 1986 and ever since the gap in labour productivity between the two countries keeps widening against Malaysia. While the Koreans keep getting better in productivity, Malaysia has been faltering, and at best stagnant.
With the consistent decline in labour productivity, it is no surprise that the country’s vision of a high-income economy continues to be elusive. Aside from the inability to attain its development vision, poor labour productivity has other negative consequences for the country.
- Capital flights to other countries with higher labour productivity and better skills
- Inability to attract new foreign investment on account of poor labour productivity
- Declining personal and national wealth with the potential to increase the poverty level which in turn could cause or exacerbate undesirable social problems.
- Declining business and institutional performances with dire negative effects on innovation, business growth and future earnings or goodwill respectively.
- Constraints to the effective execution of bold new development initiatives which then compromise future growth and development of the country.
Previous and ongoing efforts at improving labour productivity
In spite of several years of poor performance, Malaysia has, commendably, always taken labour productivity seriously. As far back as 1962, productivity was an important agenda for the government. The Malaysian Productivity Corporation (MPC), formerly known as the National Productivity Center was established in that year with a mandate to, among others:
- lead in the promotion and dissemination of productivity-related information and issues;
- establish an information and reference centre for productivity indices for the country and for management systems and case studies;
- generate local expertise in the field of productivity, quality, management and entrepreneurship;
- enhance the development of human resource both at the supervisory and management levels in the country;
- advise on and coordinate the implementation of programmes and activities related to productivity and quality. (Please see www.mpc.gov.my/background for details).
As recently as 2016, the country developed a productivity improvement roadmap called Malaysian Productivity Blueprint which was essentially a policy framework and contains strategies, tactics, and action plans for ‘driving the productivity of the nation’. In addition, nearly all the recent national and sectoral development policy documents – Shared Prosperity Vision 2030, 12th Malaysia Plan, National Policy on IR4.0 etc. – identify productivity prominently as a key driver of economic growth, with set targets to be achieved and resources to be committed to achieving them. In fact, a cogent argument was made in the blueprint that it is high time Malaysia moved away from input-driven growth to a more sustainable and inclusive driver of growth like labour productivity.
Why has Malaysia lagged behind?
The question that Malaysian authorities and every concerned citizen have been asking is why has Malaysia been lagging in labour productivity and what could be done to reverse the course. The Malaysian Productivity Blueprint (2016) provided a succinct answer to this question. As could be seen in the figure below, five reasons were advanced for the lack of meaningful progress in Malaysian labour productivity.
These factors are lack of adequate productive talent, non-availability and insufficient adoption of requisite technology by businesses and government, absence of well-aligned incentives for spurring productivity in businesses, uneasy business environment due to regulatory and policy hurdles, and lastly, poor attitude to productivity at the enterprise level and among civil servants.
Way forward: Multi-level multi-modal capacity development for productivity
To address the factors that have been derailing Malaysia’s efforts at enhancing labour productivity, there is a need for a continuous comprehensive, hands-on, technology-infused, multi-modal, and service-wide capacity development for mid to senior officers in the Malaysian public service.
The training must be handled by a carefully selected institution or group of institutions that have or can assemble a team of experts with a track record of ability to build skills, change mindsets and shape attitudes. The traditional one-off, lecture-only, one-office kind of training has not worked well. There is a need for a service-wide training program with well-designed follow-up activities that help participants learn, act, reflect, share productivity best practices, and improve their self-efficacy.
Among other deliverables, including exciting smart ideas for enhancing productivity, the training should be able to introduce participants to new technologies and show them how they could leverage these technologies to raise both personal and team productivity.
In short, the training should be able to address three of the five problems outlined as being responsible for Malaysia’s poor records of labour productivity. The training should address the problem of talent, insufficient technology and more importantly, poor mindset to productivity. In addition, there should be well-designed post-training activities and follow-up engagements to give participants some accountability (and rewards) and spur them to acquire the needed skills and mindset.
Conclusion
In a world where it has become difficult to achieve inclusive and sustainable growth relying on the traditional input-driven approach, the Malaysian government, just like other countries in the world, has recognised the importance of high labour productivity as a driver of sustainable growth. High labour productivity leads to increased individual and national wealth, increased global competitiveness, improved business performance and better attraction to foreign investments.
Despite the government’s efforts to increase labour productivity over the years, including setting up the Malaysian Productivity Corporation (MPC) as far back as 1962, Malaysia has consistently done poorly in labour productivity. Today, not only is Malaysia among the least productive countries in the world, but it continues to lag comparable countries like South Korea which Malaysia used to be ahead in labour productivity in the early 1980s.
Among the factors adduced for Malaysia’s poor performance in labour productivity are lack of talents, inadequate application of technology, poorly aligned incentives, uneasy business environment and lack of productivity mindset.
To address the factors that have been derailing Malaysia’s efforts at enhancing labour productivity, there is a need for a continuous hands-on, technology-infused, multi-modal, and service-wide capacity development program for mid to senior officers in the Malaysian public service. The training should target making participants significantly improve their self-efficacy and work productivity.
The training should be delivered by a carefully selected team of experts (from the industry and the academia) with a track record of ability to build skills, change mindsets and shape attitudes.
To fulfil the need for continuity of such training and long-term impact on the country’s labour productivity, the training should include at least a 1-year post-training engagement program designed to help participants consolidate the new skills acquired, develop their attitudes, and align their mindset toward productivity.
Productivity is indeed the game-changer for getting Malaysia to inclusive and sustainable growth and a high-income economy. Equipping the workforce with smart productivity improvement mindsets and skills, as well as technological tools will fuel the game.
