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Malaysian Service Sector Urged to Use New Tech

Use of Technology in Malaysia Service Sector

Putrajaya is urging companies and individuals in the services sector to focus on the use of high-technology to reach their target of 60% contribution to the national gross domestic product (GDP).

The Minister of Economic Affairs stated that even though the services sector this year and last year had recorded good growth, industry players were still involved in traditional services, such as supplying food.

The aim is for Malaysia to get on to a new level that is more competitive. The country is looking to develop, invest in and implement high-technology services, not just traditional food supply services.

The Minister suggested that the greater use of artificial intelligence (AI) – currently the focus of the government is facing the Fourth Industrial Revolution (IR4.0).

Recently, the Statistics Department said the services sector had failed to reach its target of 60% contribution to GDP as it was currently at about 56%.

Malaysia’s Chief Statistician stated that because of this, the goal to see Malaysia reach developed nation status in 2020 remained unfulfilled. He predicted that Malaysia may only be able to reach developed nation status in another three years.

Meanwhile, on the houses affected by soil movement in the Ukay Perdana area, the Minister said a decision on discussions held by state and federal government agencies will be announced on 8 January 2020.

Many of the affected residents have vacated their houses. It is the duty of the Ampang Jaya Municipal Council (MPAJ) to ensure this area is safe.

The Gombak MP and Bukit Antarabangsa assemblyman stated that he is prepared to meet with the Selangor menteri besar on what needs to be done.

Incentivising the Use of Hi-Tech Across Industries

According to another article, Malaysia needs to confront some old assumptions and intervene with the aim to create a virtuous cycle of higher pay, higher technological adoption and higher productivity.

A sustainable increase in wages has to be achieved through a sustainable increase in productivity. However, the economy is currently overly reliant on cheap foreign labour, the availability of which reduces incentives to invest in labour-saving technologies. Overall, this means that our labour productivity remains depressed.

The government must incentivise investment in automation in all sectors, in a staggered manner.

The increase in productivity for businesses will also enable higher wages to flow to fewer, but higher-skilled workers. This will lead to a virtuous circle, where the availability of skilled labour attracts more complex (and thus, higher-margin) manufacturing and services, generating more demand and more supply for skilled workers, et cetera. For individual households, higher wages will decrease economic insecurity.

To a certain extent, preoccupation with the imperative of providing jobs and preventing youth unemployment in Malaysia and Singapore in the 1960s and 1970s was driven by the same source of concern.

The first wave of foreign direct investments in Malaysia had a very clear policy objective – to provide better-paying jobs for Malaysians than what the domestic sector could provide.

While Malaysia offers tax holidays and incentives for foreign corporations to operate and employ mostly unskilled foreign labour, which adds nicely to the GDP figures, it does not bring many benefits to the average Malaysians.

The Malaysian state can assist Malaysian industries to invest in Bangladesh or Vietnam if the industries are labour intensive.

Experts have urged the government to handhold the industry to reduce the number of unskilled foreign labourers in the country, for example, through automation.

One could turn a task that requires 10 unskilled foreign workers into one skilled position for Malaysians at double or triple the original salary.

The companies will still make huge productivity gains even after the initial technology investment.

The government has also been urged to set a five to a 10-year time frame in consultation with industries to sequence the reduction of foreign labour through a combination of carrots and sticks.

The sequence should start with the services sector, followed by construction and manufacturing, only reaching the plantation and agriculture sectors at the end.

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