This article first appeared in The Edge Malaysia Weekly on September 4, 2023 - September 10, 2023

IN implementing the New Industrial Master Plan 2030 (NIMP 2030) announced by Prime Minister Datuk Seri Anwar Ibrahim on Sept 1, many micro, small and medium enterprises (MSMEs) will need handholding, say experts, as they may find it difficult to follow the seven-year transformation agenda because much of it will depend on their familiarity with new technology and access to credit. They also point to the continuing skills shortage and mismatch that the education system has failed to address, noting that the defects pose a huge challenge in achieving the goals of the industrial blueprint.

“Two areas are at the heart of NIMP 2030: technology, and the environment and sustainability. Therefore, the industries that are associated with these two crucial elements will be expected to drive the economy,” Malaysian Institute of Economic Research (MIER) senior fellow Dr Shankaran Nambiar tells The Edge.

“Technology, as seen in Malaysia’s New Investment Policy, is going to go beyond the use of capital-intensive production to include all facets of technology, covering everything from artificial intelligence to Industrial Revolution 4.0, from machine learning to robotics and the designing of chips. The emphasis on embracing non-fossil-fuel-generated energy sources is a total break from previous plans.”

He explains that with the net zero emissions policy sweeping across the economy, its implication is that entire industries will have to introduce new levels of compliance and the manufacturing sector will also have to acquire new technologies. “It will demand familiarity with new kinds of technologies and also access to credit. This will be a challenge for SMEs,” he warns.

SME Association of Malaysia president Ding Hong Sing says that many MSMEs are at a level where they do not even understand what environmental, social and corporate governance (ESG) is. Within the next seven years, during which NIMP 2030 seeks to transform the manufacturing industry, the SME community will need more engagement, and to an extent, handholding by the relevant authorities for the next steps towards automation and digitalisation, he adds.

“SMEs need to know what exactly needs to be done, including the extent of worker upskilling,” says Ding, who urges Putrajaya to set aside 50% of the foreign workers levy for the purpose of their upskilling and training. “As SMEs make up 97.4% of registered businesses in this country, we hope the government allocates RM20 billion in Budget 2024 for SMEs to tap green technology and ESG.”

Lee Heng Guie, executive director of the Socio-Economic Research Centre, strongly recommends that Putrajaya come up with an assessment toolkit for SMEs to ease their green transition. “SMEs do not know where to start. With the Malaysian Investment Development Authority and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), for instance, there is more to be done. There should be a toolkit for SMEs interested in exporting their goods. There should be a toolkit where they can quickly find out which free trade agreement to go with for the export of certain products to facilitate their green transition,” he says.

“If we are going to be serious about the two key areas [of technology and sustainability], then the labour market will have to respond accordingly. This will mean coping with the new disruptions that will be created. People will have to learn relevant skills, some will be laid off. There will be a new labour demand curve, leaning towards a different skill set than before,” Nambiar observes.

“The whole supporting ecosystem has to be in place. And that means the right institutional structure, the incentive system, as well as the right training and education,” he stresses.

The shift from sectoral-based approaches in the past to a mission-based approach now under NIMP 2030 will cast a spotlight on domestic industrial transformation, says Professor Niaz Asadullah of Monash University Malaysia’s School of Business, who is also Southeast Asia lead for the Global Labor Organization.

“Compared with previous master plans, NIMP’s mission orientation will certainly help renew the focus on domestic industrial transformation, particularly the 1.1 million SMEs that have been stuck at the bottom of the value chain. [This is the first challenge],” says Niaz who, like other experts who have been watching for the NIMP 2030, emphasises the need for effective implementation and monitoring.

“Second, there is a need to eliminate structural constraints facing businesses as they strive to upgrade to complex economic activities. To tackle the first challenge, a new Delivery Management Unit has been proposed under Miti (Ministry of Investment, Trade and Industry), which will monitor the progress of NIMP 2030. But I worry about the readiness and capability of responsible agencies under the Ministry of Science, Technology and Innovation and Ministry of Investment, Trade and Industry, many of whom lack mission-driven bureaucrats.”

Elaborating on the second and in reference to one of the four enablers of NIMP to “foster talent development and attraction”, where Anwar in his speech talked about “developing high-skilled talent and enhancing TVET programmes, and creating a larger pool of skilled human capital for the nation”, Niaz points to the need for a credible strategy to fix the broken links between education and employment.

He says the proposal for a progressive wage system cannot be the main solution to the skills shortage and mismatch.

“Productivity of our workforce depends equally on factors outside the industry, beyond the control of business owners. In the past, we had a blueprint promising to deliver an education system that would prepare Malaysian graduates for the 21st century economy by 2025. Yet the supply of employable graduates has not increased in proportion to growth in university enrolment. TVET (technical and vocational education and training) continues to remain crippled by governance problems, while the quality of our public schools and universities are on the decline.

“In short, without a mission-driven Ministry of Higher Education and public education system, new industrial master plan documents such as NIMP 2030 are unlikely to make a sustainable impact on our economy.”

Much has been said about TVET being pivotal in providing the skilled workforce required for economic transformation and the next stage of growth.

“One of the critical success factors of the TVET empowerment agenda is to enhance industry-institution cooperation from the aspects of curriculum development, research, resource sharing, technology and expertise,” says Federation of Malaysian Manufacturers (FMM) president Tan Sri Soh Thian Lai, who is also president of the National Chamber of Commerce and Industry of Malaysia. The national chamber comprises the Malay Chamber of Commerce, Associated Chinese Chambers of Commerce and Industry of Malaysia, Federation of Malaysian Manufacturers, Malaysian Associated Indian Chambers of Commerce and Industry, and Malaysian International Chamber of Commerce and Industry.

FMM has also proposed that the foreign worker levy be converted to a TVET Apprenticeship Fund and Automation Fund. More importantly, the TVET Apprenticeship Fund would support employer-led/demand-driven TVET training models such as “Place and Train” and Teaching Factories.

The Malay Chamber of Commerce has pointed to the need for further details and quantitative targets in the NIMP. “For instance on carbon tax, we should already be declaring the carbon price mechanism and the tax rate, instead of just setting mandates and guidelines. On the multi-tier levy system towards rationalising the reliance on a foreign, low-skilled workforce, there should already be the levy amounts and tier thresholds, not just the concept of the MTLS,” its president Norsyahrin Hamidon tells The Edge.

“There should also already be a schedule of the progressive reduction from the current six million to seven million documented and undocumented foreign workers to a number, say one million, by 2030. We also hope the government will implement similarly radical resets in other sectors, particularly agriculture and services,” he says. 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.