Automation key to Malaysia’s Digital Transformation

Photo by Paweł Szymankiewicz on Unsplash

The success of Malaysia’s digital transformation will depend on strong political leadership, consistent government support, buy-in from key stakeholders like the business community and educators, and re-skilling of the country’s workers.

Automation is set to become a critical component in Asia’s productivity, and workers — particularly in low-skilled fields — are vulnerable to job displacement. The World Economic Forum predicts that 65% of children entering primary school today will ultimately end up working in completely new job types that don’t exist today.

Deloitte assesses that the empowered employee of the future will create value by identifying salient problems from the front lines of their program or project, working with a suite of technologies. Employees of tomorrow will have to shift their mindsets from task execution and process management to lifelong learning and identifying, defining and helping to solve problems.

This inexorable trend is not lost on planners and decision makers in Malaysia. In the past half century, Malaysia has shifted from a predominantly agriculture-based economy to one dominated by manufacturing and services. It has registered impressive gains in income, literacy and education, and enjoys the highest per capita gross domestic product in ASEAN, aside from the tech-savvy financial centre of Singapore and oil-rich Brunei.

To keep pace with rapid technological change, Malaysia will have to provide its current and future workers with the skills to succeed in an economy where artificial intelligence, robots and algorithms are performing more of the tasks previously done by humans. That will be a daunting challenge.

Of the 8.5 million people employed in Malaysia’s private sector in the fourth quarter of 2020, only 24% were classified as skilled. This share will have to rise substantially for the country to enhance productivity, ensure global competitiveness and provide suitable employment opportunities.

Malaysia has a plan

Recognising the need to modernise the economy, and equip it with a skilled workforce, the Malaysian government has introduced MyDIGITAL, a national initiative symbolising the aspiration to transform the country into a digitally enabled, technology-driven high-income nation.

The blueprint for delivering on this initiative calls for integrating digital skills into education from elementary to high school, and reskilling the workforce with digital skills needed to remain relevant. Objectives include automating tasks via digital workflows, and promoting the use of cloud services.

According to Malaysia’s Department of Statistics, the number of jobs in registered private sector companies declined 2.4% between December 2019 and December 2020, and the economy contracted 3.4% in the fourth quarter of last year. During the crisis, many businesses have re-examined their business models, increased digitalisation and adopted more flexible working arrangements.

Prime Minister Tan Sri Muhyiddin Yassin has recently stated that developing talent and accelerating the adoption of the latest technology and innovation will be important catalysts for Malaysia over the coming five years. The government’s proposal for the 12th Malaysia Plan (2021–2025) puts a stress on high value-added and high-tech industries.

Automation is key

One Malaysian company that has been successful globally is Top Glove, which in its 30 years has become the world’s largest maker of disposable gloves. Inside a decade, it expanded automation at its production facilities, while at the same time reducing its low-skilled labour force. When the coronavirus pandemic struck in 2020, it had the ability to ramp up production quickly due to its robotic equipment.

Top Glove Executive Director Lim Cheong Guan explains that automation is necessary for its long-term growth and the company has been investing in research and development. He says that 10 years ago it needed 15 workers for every million gloves produced, but now the ratio is just 2.5 — or lower.

One metric of automation, a salient feature of the modern economy, is robot density in manufacturing. By this measure, Malaysia has work to do to catch up to its more economically advanced Asian neighbours, Singapore and South Korea. According to the latest data compiled by the International Federation of Robotics (IFR), Singapore had 918 robots installed per 10,000 employees in 2019, compared with 868 in South Korea. Malaysia appears to be far behind: based on the same IFR survey for 2016, its robot density was 34.

Requisites for a digital future

Much is riding on the success of the MyDIGITAL initiative. If Malaysia achieves a digital transformation within the current decade, while undertaking other key actions — like boosting women’s participation in the labour force and modernising institutions — it can traverse a path from upper-middle-income status to high-income status. Those who lose job opportunities due to automation and a restructuring of the economy must be provided with opportunities to secure gainful employment.

Strong political leadership and consistent government support, together with buy-in from key stakeholders like the business community and educators will be essential to achieving targets. At the same time, it will be important for the government to take determined steps to reduce poverty and socio-economic inequality as called for in the 12th Malaysia Plan.

Training (and retraining) workers to generate a highly skilled workforce cannot be accomplished overnight. Innovative economies around the world tend to feature a regular injection of external talent. Thus, if Malaysia is serious about achieving substantial digital transformation, it may soon face the need to scale up immigration of foreign talent, as witnessed in many other developed economies.

This post was co-authored with Dominic Diongson, CEO, 100 Joules, and originally published by Unravel on 16 March 2021.

Author of Learning from Tomorrow: Using Strategic Foresight to Prepare for the Next Big Disruption

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