As the global economy transitioned into the Covid-19 endemic phase, Malaysia’s northern powerhouse expected to expand its pivotal role in the global electrical and electronics (E&E) supply chain, with pent-up pandemic demand fuelling an export surge.
However, a prolonged labour crunch has thwarted these hopes.
“We expect the situation to worsen if no action is taken,” chief minister Chow Kon Yeow told FMT.
He said industry players in Penang were hoping that Putrajaya could reach agreements with neighbouring countries as soon as possible to bring in the desperately needed workers.
Chow’s warnings parallel those of former second finance minister Johari Abdul Ghani and former finance minister Lim Guan Eng who, despite opposing political ideologies, have spoken up in response to FMT’s ongoing coverage of this unprecedented labour crisis.
FMT has repeatedly highlighted the E&E sector’s angst at having to reject orders valued at millions of ringgit, and their valiant efforts to operate by substituting executives and senior managers for blue-collar production operatives on the factory floor.
The labour shortage could put pressure on investors to exit Penang for more favourable locations and deter new investments. Being strategically located, Malaysia, and especially Penang, are primed to act as an alternative tech and E&E manufacturing investment destination in Southeast Asia.
There are opportunities for growth as the world seeks to reroute supply chains in the face of increasing geopolitical tensions sparked by the tech war between the US and China. But this labour crunch means that Penang and Malaysia as a whole are at risk of losing out as global supply chains restructure.
Short-term needs
Swift, mitigating action must be taken to support the E&E generator of manufacturing employment, value-added activities, and exports. In 2021, E&E exports were valued at RM456 billion and made up 37% of Malaysia’s total exports.
“Most important right now is for Malaysia to bring in foreign labour, as a stop-gap measure, to support the E&E industry’s urgent needs,” Chow said.
At least 14,000 local and foreign workers are urgently required to meet the sector’s workforce needs. However, there was a 70% drop in new recruitment from August to October 2021 and numbers have yet to pick up significantly.
Long-term needs
While labour shortage is causing short to medium term problems, the lack of industry-ready high-skilled talents hinders Malaysia’s ability to transition to high value-add sectors.
According to Johari, what Malaysia desperately needs is a sustainable talent strategy that is consistent with its vision of becoming a high-skilled high-value economy. This starts with ensuring our graduates are industry ready.
The government must collaborate with employers and advocate for adoption of automation, robotics and IR4.0 technologies that can elevate jobs, while equipping local talents for these roles.
An industry source said what the E&E sector needed now were industry-ready talents to oversee, maintain and upgrade high-tech infrastructures as smart manufacturing picked up.
Taking the initiative, Penang has embarked on education, upskilling and reskilling of locals to help develop a sustainable pipeline of talent for the manufacturing sector.
“The state is working with technical education and vocational training (TVET) institutions to address supply and demand gaps,” said Chow.
The chief minister has high hopes that bridging the gaps could prospectively wean companies from dependence on foreign labour while providing talents to help defend Penang’s hard-won status as the Silicon Valley of the East. While this is a long-term solution, what companies need now is an immediate supply of foreign labour.
But the state can only do so much. The onus is still on the federal government to resolve the labour crisis while expediting an effective long-term solution for talent management.
Otherwise, Malaysia risks being side-lined in the global race for quality foreign direct investment, which is a key engine of the national economy.