By Peter Chow*

A study by consulting firm AT Kearney indicated that Malaysia had fallen out of the top 25 destinations for FDI, after having been ranked 22 for the past two years.

Among the reasons mentioned are the shortage of high-skilled labour and rising labour costs, both of which form a major component of the cost of doing business in Malaysia. This encompasses not only salary costs but also compulsory payments to the Employees Provident Fund as well as high training costs.  

To ensure that Malaysia remains competitive, we must move towards developing a highly skilled and adequately trained workforce. Over the years, as the youths enter the job market, the question remains: are they indeed suitably prepared for the job market? 

Based on data from the Ministry of Education, as at June 30, 2000, Malaysia had 8,966 primary and secondary schools. Of the secondary schools, 1,561 are academic schools, 80 technical schools and four vocational schools. As the country moves to become an industrialised nation, the need for technically skilled workers has multiplied significantly.  

Nevertheless, the existing education system continues to emphasise on academic ability. The universities and private colleges set up have not been able to match the skilled training provided by polytechnics and vocational schools. The number of technical cum vocational schools had only increased from 78 (in 1996) to 84 (in 2000). In the same period, the number of polytechnics increased from seven to 12, colleges from two to five and universities from nine to 11. 

There is a need to ensure that Malaysian youths are adequately skilled and trained to meet the demands of the job-market. This will not only provide employers with a pool of skilled and trained labour, thus reducing the hidden costs of doing business in Malaysia, but also move towards ensuring employment opportunities for our youths.

Graduates should not only have the relevant paper qualifications but should be sufficiently skilled in the practical and commercial aspects of the business. A possible solution is to have more polytechnics that provide more vocation/practical-based training required by the country. 

There are many areas where the private sector can partner the Government in ensuring that the final objective of creating a skilled labour force – fully trained and equipped to face the challenges in a business environment.  

Currently, companies in the business of providing technical and vocational training may apply for the 100 percent investment tax allowance under the Promotion of Investment Act 1986.

However, the question that needs to be asked is why notwithstanding the fact that the incentive has been available since 1997, the number of technical and vocational schools has only increased by about 7.6 percent. While we can debate on the various reasons, the fact remains that our people are schooled into ways of an academicians in a country crying out for technical expertise!  

Malaysians, in particular the business community, await the forthcoming Budget 2004 on Sept 12 with an expectation that measures are introduced to address the stiff competition from our Asean partners as well as China in the quest to attract foreign investments in Malaysia. 

Some additional incentives should be considered to spur the development of technical and vocational school and to create a trained workforce for the next decade. Among the possible incentives would be to allow for a double deduction in respect of contributions made by companies to the technical/vocational institutes.  

The contributing companies can give employment to the students. This will provide a further plus to the prospective employers where they may have a hand in the training of the prospective staff and the knowledge that job-hopping would be kept to the minimum, thus reducing overall costs and increasing productivity.  

Companies that undertake such training in-house should also be eligible for double deductions. 

Finally to encourage parents to send their children to these technical and vocational schools, consideration should be given to provide the tax deductions or rebates for the tuition fees paid. 
Malaysians in general have to adopt a mindset change to recognise that skilled workers are equally important in contributing to national development and that a proliferation of graduates in the country with no practical working skills is not the answer to our ambition for 2020.  

*Peter Chow is an Executive Director (tax services) at PricewaterhouseCoopers Malaysia

This article first appeared in The Star daily newspap