Raising productivity growth

I REFER to the report “Malaysians lag in productivity” (see the related posts below). The recent findings by the Malaysian Productivity Corporation (MPC) shows that our worker productivity levels, productivity growth and productivity value are lower than several leading industrialised economies and even some developing countries in our region.

That’s serious and calls for a more specific analysis of the situation to identify the real causes and institute urgent remedial measures involving all factors that influence productivity. MPC is of the view that even with our 2011 productivity growth rate of 4.55%, we are still on track to become a high-income nation by 2020.

It must, however, be understood that when any single factor of productivity or total factor productivity is low, economic growth will not be sustainable over the long-term and will instead decline and with it bring down both employment and incomes.

Some reasons have been cited for our low worker productivity levels, such as workers who prolong working time to perform a job thus increasing costs, poor working conditions, low-level of worker motivation and lack of incentives, among others.

As the Malaysian Trades Union Congress (MTUC) and the SME Corp have pointed out, a major factor that keeps worker productivity levels low is the massive hiring and continuing dependence on low-skilled, especially foreign, workers, who make up a fifth to a third, or even more, of the workforce in various industries.

Also, the use of low, or even medium, level technology and the preponderance of low value-added industries dominating the economy, contribute to low worker productivity levels.

Clearly, in order to boost overall productivity levels, there is an urgent need to pursue quality growth by investing in and providing incentives for:

1. > Upgrading skills;
2. > Increasing local worker employment levels;
3. > Encouraging high value-added industries in all sectors of the economy; and,
4. > Tightening foreign worker policies.

Other measures should include increased partnerships with leading global companies, developing the talents and skills needed to support such businesses, promoting high-end local enterprises and investing in a strong 21st century education system.

While rewarding employees through increases in wages and benefits might please them, it should never be done on an adhoc basis nor as a mere handout exercise for whatever reason.

If rewards are to serve as incentives to increase productivity levels, such benefits must be for better performance that is measurable, and that leads to higher level and quality of output and gains.

Underlying the need to raise productivity growth and worker productivity levels is the importance of cooperation between the management or employers and workers in fostering a conducive working environment and increasing the quantum and value of goods produced or services delivered.

There has to be genuine scope for ongoing mutual dialogue among these “social partners” that promotes consensus-building and the democratic involvement of those with vital stakes in raising performance, productivity, profitability and personal rewards.

RUEBEN DUDLEY Former United Nations / ILO Regional Deputy Director for Asia & the Pacific

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Malaysians lag in productivity

PETALING JAYA: Malaysians work longer hours than their counterparts in many benchmark countries, but produce less than them.

According to the Malaysian Productivity Corporation, our employee productivity levels are a lot lower than those of countries like the United States, Japan, United Kingdom, South Korea and Singapore.

MPC director-general Datuk Mohd Razali Hussain, citing the 2011 Productivity Report, said Malaysian workers had a productivity value of RM43,952 a year.

“But compared with Singapore, Hong Kong, Taiwan, South Korea, Japan and the United States, we are still far behind,” Razali said.

He added that the country was still recording an average productivity growth of 4.5% annually, which was lower than that of Indonesia and India.

Labour productivity levels are measured by the real gross domestic product over the number of workers in the country.

“In other words, it is how many workers it takes to produce a profit,” said Razali.

According to the report, which analyses information from the Department of Statistics, workers in the top benchmark countries outperformed Malaysian workers almost six times over.

American workers topped the list with a productivity level of RM285,558 a year, followed by employees in Japan (RM229,568) and Hong Kong ( RM201,485) (see graphic).

In 2011, Malaysia had a productivity growth rate of 4.55%, which MPC said was on track for the country in becoming a high-income nation by 2020 with a productivity level of RM87,500.

However, Malaysians lost out to several benchmark Asian countries like China, which had a growth rate of 8.7%, Indonesia (5%) and India (4.8%).

“Even though we can see there is growth based on the data we have, Malaysian workers have not been creating enough with the resources that we have,” said Razali.

He clarified that an employee's productivity was not measured by the number of hours clocked in but rather by his or her overall output during working hours.

“Actually, most hours are not spent being productive. We have had foreign agencies complain that their Malaysian staff were taking very long tea breaks,” he said.

Razali said that working long hours could even be counter-productive.

“There is a lot of waste in productivity when you drag the hours ... The company would have to pay more for electricity and overtime,” he added.

Razali said management practices should be reviewed to boost productivity.

He stressed the need to reward employees for better productivity with gain sharing, and suggested project-based incentives, improving workplace conditions and providing more flexible time for employees to rest while on the job.

According to the report, productivity levels grew by 2.82% with improvements in labour efficiency recorded in five key economic sectors.

Productivity levels in the services sector expanded by 4.9% to RM53,938 in 2011.

The agriculture sector grew by 6.23% to RM29,466, while manufacturing increased by 1.97% to RM54,509.

Construction productivity levels went up by 3.09% to RM24,635 in 2011, while the mining sector recorded a negative productivity growth of -6.14% to RM866,246 from RM922,914.

Asked why the mining sector had a negative productivity rate when its turnover was higher than other sectors, Razali said this was because the turnover did not correlate with the large workforce.

By NICHOLAS CHENG The Star/Asia News Network

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