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Malaysia investing in human capital

Interview - May 26, 2014
TalentCorp was established in 2011 under the Prime Minister’s Department to formulate and facilitate initiatives to address the availability of talent in-line with the needs of the country’s economic transformation. CEO of TalentCorp Johan Mahmood Merican speaks to PM Communications about the development of human capital in Malaysia, bringing more women into the labour market, and how the large presence of UK universities “helps reinforce Malaysia's positioning as a regional hub for education”
Many economic experts are talking about the global division of labour, the new concept according to which regions in the world will specialise according to their competitive advantage. For example, Sub-Saharan Africa is supposed to be specialised in supplying agricultural products, whereas China and India will be the suppliers of mid-value manufacturing for the global market. What do you think the role of Malaysia would be in this scenario?

Malays are ethnically the same as Indonesians and we basically speak the same language. The next major ethnic group is Chinese, which obviously ties us to China, and Indians too are the third ethnic group in Malaysia.  I guess that in this context, the division of labour, we see ourselves as being a place to do business. I think you are familiar with the World Economic Forum’s Global Competiveness Report, as for nation ranking we are in the top 30. We pride ourselves on the fact we have world-class infrastructure, institutions and even a financial market and rule of law. We are a place for leading multinationals; where they can base their regional operations and drive their business. 
Human capital is a key variable in order to attract FDI, many research studies show a very high correlation between economic growth and human capital. I am aware that according to the World Bank ranking Malaysia is not a middle-income country, but many people say human capital is the key to escape this so-called “middle income trap”. Would you agree with this? 

We currently rank as an “upper-middle income” nation and a key part of reaching this current state is not just our physical infrastructure but also our human capital infrastructure. The government has consistently invested in human capital. This is also mirrored in the most recent 2014 budget that the Prime Minister has recently announced. Education and human capital are the largest components of our annual allocation, it is more than 20% of our federal government’s budget and it has been at that level constantly. So the government invests in human capital.

And it is also reflected in the fact that we have the human capital to support the competitiveness of our core sectors, our National Key Economic Areas, like electronics – one of our major exports – and oil and gas. Maybe another area of relevance right now is shared services. It is growing very quickly. A.T. Kearney ranks Malaysia among the top locations in the world for global shared services. Interestingly enough from the UK we recently had BP. BP doesn’t have any oil and gas operations in Malaysia but they have set up their regional shared services operations here
The AEC, the ASEAN Economic Community, will be established next year and will create a single market that, among other things, will also allow the free flow of labour. What do you think will be the impact both on high-skilled and low-skilled labour in Malaysia?

We believe that the opening-up of  AEC will definitely reinforce our position particularly in areas where there are value-added services and activities. I think we are  prime in that sector. We are not low-cost, we have the skills to do high value-added activities but at the same time we will not be as high-cost as some other countries in the region. I think we are somewhat in the perfect competitive position.
How is the political initiative that created TalentCorp different from previous programmes to shape human capital in Malaysia? What is different about TalentCorp compared with the past?

The foundation of TalentCorp started with the Economic Transformation Programme. I think that through PEMANDU and through agencies like TalentCorp a lot of emphasis is given on being much more demand-driven and  an initiative working in close partnership with industry focusing more on where we are competitive. So whatever TalentCorp does, it is very much about building partnerships with leading employers, and how we can best support the high level talent requirements of employers to consequently invest and move up the value chain.
So you first investigate what the demand of the private sector is?

We see ourselves acting as a bridge between talent, industry and government. So in terms of our role, we act as focal point to understand what the issues and demands are in order to move up the value chain and transform our economy. And the government initiatives that we want are in the areas in-between industry and government in terms of how we can better facilitate policy change. For example, industry highlighted the need to facilitate the entry of foreign talent, so we are now engaged with immigration policy, which is driven by the Prime Minister. We need to increasingly recognise foreign talent as complementary rather than substitutional  to our talent. 
I think that one of the current challenges regards the gender divide, in terms of bringing more women into the labour market. What are the main initiatives that you are undertaking to tackle this problem?

It is another [talent] pool that had not been traditionally addressed. The Prime Minister himself has taken direct interest in this. We have introduced some tax incentives for employers that bring women back to employment after a career break. Even the recent 2014 budget gives incentives to Malaysian organisations that introduce flexible work arrangements, which we see as key in helping to retain professional women in the workplace.

Beyond incentives, we have also initiatives that support Malaysian organisations that want to introduce such flexible work arrangements, such as access to best practices or a repository of resources and toolkits to facilitate the adoption and implementation of work-life initiatives across organisations. We have many resources and knowledge available for them to support female initiatives. 
You’ve been the CEO of TalentCorp since its inception in 2011, so you are the leader who set the vision here. What would you say are the achievements that you have fulfilled so far and what is the direction for the next few years?

With regards to Malaysians abroad, we are active in particular through the Career Fairs that we undertake to engage students. As for our Returning Expert Programme we’ve had already more than 2,500 applicants approved under this programme. Actually this programme has an earlier existence, that is, it started off in 2001, it continued for ten years and then with the establishment of TalentCorp we then took up the programme. So at least in our three years we have done 2,500 applications approvals. In the ten years before our introduction the programme only achieved 1,000 in total.

So we have definitely picked up the pace in terms of real engagement. Yet, TalentCorp can’t take the full credit for it. Reality is, there are real professional opportunities now here, represented by Malaysian organisations going regional or multi-nationals that have set up their regional operations here.

That is really the key attracting factor, the presence of great professional opportunities. We are just doing the work of linking up the professionals to these great opportunities. In addition we have also introduced the initiative called Residence Pass-Talent where top foreign talent can come in, have a visa and the certainty that with the entrance pass they can work here for 10 years. This is a new policy initiative we introduced in April 2011, and up to now we have approved more than 2,000 applications of talent under this category.

Relating to Malaysians in Malaysia, we have again worked very closely with the leading sectors under the Economic Transformation Programme. Annually, we facilitate 10,000 internships in the priority sectors for local university graduates. We have also been bridging the gap between universities and industry requirements.

Last year we trained over 6,000 graduates; this year there will be 7,000 as part of the project of addressing whatever mismatch there could be between our fast transforming sectors and what the industry can produce. We have also started the initiative for the female workforce; which is a relatively new initiative where again we will encourage more Malaysian organisations to embrace flexible work arrangements.

As a direct achievement, we have the Prime Minister that initiated some of these incentives for employers who bring back women after a career break through flexible work-life arrangements. 
How do you think the large presence of UK universities is helping you and the development of human capital?

I think education is also one the core sectors of our Economic Transformation Programme. Having international names is very important, particularly the UK Universities we have in Educity, like the Newcastle Medical Faculty, University of Southampton, and obviously previously we already had Nottingham at Semenyih in the Klang Valley.

This helps reinforce Malaysia's positioning as a regional hub for education and for any service that is needed within the region especially if you consider the countires with very large populations. Indonesia and Vietnam are growing very rapidly and increasing their need for high-quality education together with the emergence of their middle class.

Increasingly, the presence of international education institutions in Malaysia provides a choice for those seeking a high-quality education close to their country. That is definitely a positive move, because I did my A-Level in a Marlborough College in England, which is now also based in Iskandar and again it is providing a strong proposition of very high-quality education. This is interesting, my chemistry teacher in the UK twenty years ago is now master of Marlborough College in Malaysia.
Did you bring him here?

I would gladly have credit for that. But I think this shows the seriousness of the UK investments that are made in Malaysia. It is not some random franchise arrangement which may be done as elsewhere. In the various campuses they have sent over some very experienced teachers. You see a real commitment, it is not just a speculative business opportunity.

Moreover, the British interest extends beyond education: also in shared services we have very large facilities from the UK, like the already mentioned British Petroleum, Shell, and these continue to grow. Even in the electronic sector we have the British company Dyson. It's a great source of pride for us, if you flip them over you'll see “Made in Malaysia”. All the manufacturing of the equipment is really done here. I think we are really appealing for investment and commitment from the UK.
So there is a lot of opportunity for further investment and growth?

For sure! I think that we can call back the natural linkage between Malaysia with India, China and Indonesia. I think, from the perspective of British business, investors would feel much more at home here, because a very large proportion of Malaysia's leaders both in the private and  public sectors studied in the UK. This affinity that makes it easier to do business in Malaysia.
As you mentioned, you studied in the UK. So, can you share your best memories about that period with the readers of The Daily Telegraph?

Johan Merican: When I studied in Cambridge and then worked in London, I would describe it as a very global experience. For example, in Cambridge there are people from all around the world and in London itself you work in such a globalised city. Amalgamating that diversity is really a strength, and in a similar way, Malaysia offers its own cultural diversity and we believe that this is also our strength. That is why we believe that we share something important in common.