' employment opportunities are generally encouraging with both total employment and labour force growing at a rate of 3.2%/ As a result unemployment as a percentage of labour force is envisaged to remain low at 3.55% for the year, the 14th consecutive year of full employment for Malaysia.

'The overall labour force participation rate is expected to remain relatively high at 66% in 2005 (2004: 65.5%). Participation from the younger work force, particularly those in the 15-24 years age group, has shown an increasing trend. In terms of gender, both male and female participation rate increased marginally to 85.2% (2004: 85.1%) and at 45.8% (2004: 45.7%), respectively. Although female participation rate is lower, Malaysia has one of the highest female participation rates among developing countries. The proportion of labour force with tertiary education is projected to increase from 18.1% in 2004 to 19% in 2005, reflecting higher enrolment of students in institutions of higher learning, as well as expanding tertiary education and training facilities."

The above was taken from the Ministry of Finance's Economic Report for 2005/06. As expected, the report is highly biased towards the 'feel good' stories.

But, if we analyse the labour market indicators we'll se that in 2004, the total labour force was 10,587.7 million with total employed 10,222 million and total unemployed at 365,700. In 2005, the total labour force was 10,926.6 million with total employed at 10,547.5 million and total unemployed at 379,100. This means the total changes (2004 to 2005) of labour force was 3.2%, total employment was 3.18% and total unemployment was 3.66%. It shows that the incremental rate of total unemployment surpassed that of total labour force and total employment. This was not highlighted in the report.

Someone wrote in 2004 that one in every five graduates in Malaysia could not find jobs within his or her first three months of graduating. Government statistics show that there were 80,000 unemployed graduates in the country in 2004. There are many factors contributing to these - in summary (and among others):

  • Between 1995 to 2001, Malaysia managed to bring in FDI to the quantum of RM127.6 billion and this has created significant number of jobs per year during that period. However, intense competition for FDI and mobile capital as well as slow growth in other parts of the world has significantly reduced the figure to just RM1.7 billion in 2003.

  • The VSS or MSS exercises that took place as a result of privatisation, mergers and acquisitions as well as corporate restructuring contributed to the rise of unemployment level.

  • The emergence of China as the world's biggest supplier of cheap labour. The Economist highlighted that, on average, Malaysian labour is three times more expensive than the Chinese.

  • Poor command of the English language which employers have stressed as a major requisite in their criteria of selection.

  • The net population addition ratio (ie, birth rate minus death rate) of Malaysia, if I am not mistaken, is the highest in South East Asia. Whether we like it or not, that contributes to unemployment too.

  • The flip-flop decisions on the duration of undergraduate degrees from four years to three years and then back to four years.

  • The balanced-budget targeting has curtailed government spending and hence reduced opportunities for indirect job creations.

    • Create love for learning

    As a start, I agree with Tun Dr Mahathir Mohamd's comments that the government should not just concentrate on developing human capital. A balance and a hand-in-hand emphasis should also be given to job creation. There is no point in having people with PhDs when there are no jobs that can absorb them or no opportunities for them to put their knowledge to use. I also agree with Prime Minister Abdullah Ahmad Badawi's view that human capital development is not just about paper qualifications but encompasses values, character-building and other core soft- elements.

    The Human Resources Minister Dr Fong Chan Onn observed that the blame for unemployed graduates somehow recently shifted to the universities with some saying that they are not producing the 'right' graduates to meet the needs of employers. Debating as to whether this criticism is valid or otherwise, we, for one, know that the primary function of universities is to educate young minds in selected areas of discipline, create a love for learning and develop skills of critical thinking.

    By providing a solid education, universities produce graduates who are trainable for specific roles and functions in society. Fong argued that it is not the universities that create jobs but the economy (agreed!). When the economy is dynamic and growing there are more jobs around and vice versa.I think, we should also note that policies to curb unemployment consist of both direct job creation measures for the unemployed and indirect job creation via public works. Some suggestions:

    • A comprehensive economic masterplan that sets job creation as one of its main criteria. The 9MP should state how many jobs it shall create for the economy and distinguish job creation on sectoral and regional basis.

  • Move very strongly in building Malaysia as a key business process outsourcing destination. Let us admit that we cannot compete on every level with India. Hence let us identify our niche areas and then progressively build our strength step-by-step.

  • Further diversify our economy. Malaysia successfully developed from a commodity-based economy to one focused on manufacturing. However, at present, the Malaysian economy is a bit risky. The major part of its output is electronic products and the major export country is US. A slowdown in demand for electronic products or a recession in the US will independently or jointly affect Malaysia's economy. Hence it is very very important for Malaysia to move away from a highly-sensitive cyclical economic activities towards an anti-cyclical or counter cyclical economy whereby a downturn in one sector is offset by the increase of the other. It is also important that we move very quickly towards high margin economy ie, the service sector. The strategic move from hardware economy to software economy.

  • Incentives war for FDI or mobile capital is getting more and more intense. It is high time that we think hard on ways to creatively bring in the investors for a 'win-win' venture. Having said that the government should be mindful that not all the said benefits of globalisation are true.

  • Government should spend and the private sector should also spend in order to stimulate the economy.

  • Clear knowledge transfer policies. In any strategic venture driven by GLCs or other local companies, the terms of the joint venture agreement should have a specific clause on knowledge transfer. The clause will try to set a requirement for knowledge mapping that requires the outlining and breaking of the knowledge into core and peripherals as well as a specific requirement for the institutionalisation of the contents. Many MNCs are only willing to share and transfer the peripheral parts.

  • Prof Amartya Sen, the Nobel Laureate, said China was more successful than India in curbing poverty as the former's policies were geared towards building mass knowledge and skills (lower and medium skills) whereas India's focus was more on developing high-end knowledge. Malaysia can choose either way or the better still, blend of the two.

  • Another point is on free trade and globalisation. We should take heed on the analysis of George Monbiot, in our trade negotiations. He explained that the West became rich by ignoring patent rules and protecting its industries. He argued that poor countries should be allowed to do the same.

  • Underline the importance of English language.

    • We're being conned

    The founding myth of the dominant nations is that they achieved their industrial and technological superiority through free trade. Nations that are poor today are told that if they want to follow our path to riches they must open their economies to foreign competition. They are being conned.

    Almost every rich nation has industrialised with the help of one of two mechanisms now prohibited by the rules of global trade. The first is 'infant industry protection' which defends new industries from foreign competition until they are big enough to compete on equal terms. The second is the theft of intellectual property.

    History suggests that technological development may be impossible without one or both. Opening of free trade may impact the ability our local corporations to provide jobs. Some suggestions (specifics):

    • Create a Graduates Unemployment Alleviation Action Plan.

  • Create a high-level cabinet committee on this, chaired by the deputy prime minister. The secretariat should be the Human Resources Ministry.

  • Immigrant workers. Aim to reduce the numbers of illegal immigrant workers as well as set a standard of competency for immigrant workers. Moving forward, we will only bring in skilled and highly competent foreign labour into key niche areas.

  • Incentives for job enrichment and job enlargement training. Singapore has experienced good results from this.

  • Set up a Young Entrepreneurs Fund (this is a good initiative. If I may, and to be brief, studies show that the present low economic growth in Japan was due to the absence of the entrepreneurship drive and spirit among Japanese youth that once propelled the emergence of Honda, Sony, Mitsubishi and other Japanese giants)

  • Rural employment creation measures. Each government agency has to apply a labour- intensive approach for projects under their annual budget. These projects include the development of tourist places, cultural conservation and natural resources rehabilitation.

  • Allow and promote the young to work overseas. This measure aims at increasing foreign earning and promoting Malaysian youngsters working overseas. The activities include adjusting the conditions and procedures for applications and facilitating and helping Malaysian workers in each foreign country. India for example has gained the fruits of this whereby many of its overseas rich and successful professionals are making homecomings and that helps the economy to accelerate.

  • The New Agriculture. The principle is to introduce a new agricultural system as a means for living and as a source for absorbing unemployed workers who return to their rural homeland areas. The activities include a supporting of operational capital, advising on agricultural technique and marketing and public or private land leasing for those landless unemployed, etc.

  • Allowing a smooth and efficient work-search process. This measure aims at promoting employment for unemployed graduates. The activities include a dissemination of employment information, an expanding of postgraduate/higher certificate programmes and a promotion of voluntary graduate programme for rural development, etc.

  • Establish a Program Rakan Siswa. Here, the GLCs, MNCs and other big corporations are asked to commit themselves to taking in an 'X' number of young graduates as contract staff for a period of say one year, on yearly basis or for a set period of years. To make it easy for them, the government will set a salary benchmark of 'Y' amount per month. The unemployed graduates will register themselves with the government and the intake shall be based on this register.

    • Contractors for government projects are also tasked to commit the same. It is a 'win-win' proposition. The corporations will benefit from this programme as they are able to select permanent employees at the end of the project whilst getting human input at a slightly low cost rate. As expected, the graduates will benefit from the exposure and the opportunities.

  • Establish a more industrial-friendly curriculum at the universities. Invite people from the industries when developing the syllabus

  • Promote private-sector-led-initiatives such as Finance Graduates Schemes (by the banking sector or the audit firms), Engineering Schemes (by the telcos, TNB and IPPs, construction companies), etc. Allow tax rebates for these kind of programmes.

  • Provide special funds (for study loans) for graduates who cannot find jobs based on the discipline of their degrees. This is a re-tooling method. The funds will be utilised for the financing of professional studies leading to the awards of the Institute of Chartered Secretaries and Administrators, ICSA (for chartered company secretaries), the Association of Chartered and Certified Accountants (ACCA), the Chartered Institute of Management Accountants, (CIMA), the Institute of Chartered Accountants in England & Wales, ICAEW (for chartered accountants) and the Chartered Institute of Marketing CIM (for marketers).

    • Why study?

    Unemployment is a common feature in any economy. A manageable rate is what policy makers should strive to achieve. Graduates unemployment is a key concern. The government should work hard to address it. Otherwise, there would be less and less motivation for secondary school students to study hard in order to earn entries at universities.

    They might say, 'Why should I study hard when my brothers and sisters who graduated from universities are still loafing around in the house and are asking for the same allowance that I got from my parents?'

    It all goes back to basics , the demand and supply of jobs. The task is to manage the determinants of each side.

    HASBULLAH HASSIN holds an MBA and a masters degree in Economics. He is heading to Manchester Business School this September for his third masters degree as a British Chevening Scholar.