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KUALA LUMPUR: Malaysia’s steady economic growth trajectory puts it in a good position to entice investment prospects into the country and spur its labour market, say economists.
Bank Islam Malaysia Bhd chief economist Firdaos Rosli said there was a need to improve investment predictability and transparency.
“The government could make the investment environment more transparent by streamlining the overlapping roles of various investment authorities and departments at all levels of the public sector.
“A single investment approval authority would help in a big way, but this is not easy to implement in reality as it may involve legislative amendments,” he told StarBiz.
Firdaos added that the current foreign exchange environment is positive in attracting foreign direct investment (FDI) into Malaysia.
“We need to be more aggressive in export promotion and inward investment activities during the period of the cheap ringgit, because it may not last long.”
Malaysia University of Science and Technology economics professor Geoffrey Williams said Malaysia offered a nice set of options for employers, as there are a high number of well-qualified people.
“There are roughly four million graduates but only two million graduate-level jobs.
“There are almost 900,000 graduates outside of the labour force so there is a strong pool of talent here.”
Williams noted that there were oversupply issues in many sectors including doctors, lawyers and accountants, as well as other professional jobs.
“Salaries are competitive and graduates are eager to learn and work, so this is a set of opportunities for potential employers.”
Williams said the single most challenging issue for foreign investors is immigration.
“This includes access to visas, slow processing, foreign worker restrictions, human rights issues in the labour market and a general anti-foreigner attitude that has crept into the business and policy environment.”
Malaysia’s economy grew 5.6% in the first quarter of this year, outperforming economists’ expectations where a median forecast of 21 economists polled by Reuters had pointed to growth of 4.8%, down from a revised 7.1% in the fourth quarter of 2022.
Centre for Market Education chief executive officer Carmelo Ferlito explained that Malaysia’s economy is being sustained by consumption, while the share of investments over gross domestic product is in decline.
“In order to attract more FDI, we need to improve banking regulations and the labour market in the direction of giving access to investors to unskilled workers, removing all the local workers quota in the manufacturing sector,” he said.
According to the Statistics Department, the number of unemployed persons decreased in April by 0.3% to 586,900 persons, compared to 588,700 in the previous month.
As for the unemployment rate in April, it stood at 3.5%, unchanged from March.
Going forward, Firdaos said Malaysia’s labour market is expected to trend rather flat this year, amid the lack of a growth catalyst.
Much of the present growth-led policies, such as infrastructure development, wage growth or technical upskilling initiatives, are mostly a continuation of past policies.
“Having said that, implementation is another consideration because I suspect that wage growth may not be compelling this year without a tighter approach to implementing the statutory minimum wage.
“This is Malaysia’s low-hanging fruit in spurring the labour market this year.”
Firdaos expects Malaysia’s unemployment rate to average at 3.5% this year.
“But (this is) with a downside bias, should the services sector grow further with higher tourist arrivals,” he said.
Looking at the labour market across multiple indicators, Williams expects employment to rise as more people are forced into jobs due to the higher cost of living.
“Unemployment is likely to remain low because people cannot afford to be unemployed.
“Underemployment will persist as people take jobs below their qualifications and wages will continue to be stagnant because of structural imbalances in the labour market.”
Ferlito said the employment market has been picking up steadily due to the “post pandemic rebound” and “artificial effects” created by inflation.
“Monetary expansion, like the one produced during the pandemic, directs demand towards sectors that, without exogenous stimulation, would not have been favoured.
“When such expansion comes to an end, probably because inflation has reached an unsustainable level, demand will be forced to return in the direction expressed by the temporal preferences in existence, prior to monetary manipulations.”
As such, Ferlito said employment has been created “artificially.”
“In all probability, it will not be permanent,” he said.
Meanwhile, Williams said Malaysia’s latest employment statistics must be viewed “in context and with caution.”
“They do not signal good news on face value alone.
“It must be remembered that people out of work get very little welfare support, so they really have no choice but to work at any wage.”
As an example, Williams said the rising cost of living and tight wage environment means that many households are struggling.
“This means that people who stayed at home before, are now coming into the labour force often part-time to boost household income.
“Similarly, many school leavers are entering the labour force directly in low-paid jobs because the salaries after graduation are not so good. They postpone study and it appears as higher employment but on low-pay.”
He added that not only does this signal higher employment as a sign of stress, but it also raises the number of people available for work and pushes down wages.
“There is also a persistent problem of underemployment with people doing jobs below their qualification level or on short-time.
“This is the real way to look at the labour market across employment, unemployment, underemployment and wages, not just on the increase in the labour force.”
Source: https://www.thestar.com.my/business/business-news/2023/06/19/job-market-set-to-grow