Close structural gaps to achieve economic goals, govt told

Malaysia has become the world’s 23rd most competitive economy, according to an international ranking, rising 11 places from last year. (Envato Elements pic)

PETALING JAYA: For businesses and employers, addressing structural problems and inadequacies must be front and centre in any effort to take the Malaysian economy to the next level.

As the Malaysian Employers Federation (MEF) and Small and Medium Enterprises Association of Malaysia (Samenta) pointed out, challenges such as the shortage of talent and too much red tape must be sorted out before the country can achieve its goal to be among the world’s top 12 economies by 2033.

Syed Hussain Syed Husman.

MEF president Syed Hussain Syed Husman said Malaysia continues to face structural gaps in multiple areas.

“We are weak in innovation, the talent pool in artificial intelligence (AI) and data analytics is shallow, and we are slow in adopting automation and cybersecurity,” he told FMT.

He also pointed out that there is a persistent mismatch between the skills that graduates have acquired at university and what industry actually needs.

“We must tackle these issues now if we are serious about competing with the world’s best,” he said.

In its World Competitiveness Ranking 2025 list released this week, the International Institute for Management Development (IMD) has placed Malaysia at number 23, up 11 places from the previous year.

The 69 countries covered in the IMD survey were evaluated in five key strategic focus areas, namely workforce development, digital and AI adoption, private sector-led research and development (R&D), regulatory reforms, and supply chain resilience.

Switzerland tops the list, followed by Singapore, with Hong Kong rounding off the top three.

Elaborating on the failure of the education system to produce graduates who can meet industry needs, Syed Hussain said many training modules are now outdated, having failed to keep up with the demands of fast-evolving sectors.

He singled out fast-moving sectors such as AI, cybersecurity, fintech, renewable energy and e-commerce as those sectors that are affected.

He attributed this to “insufficient employer involvement” in technical and vocational education and training as well as the Human Resource Development Corporation training programmes.

“The skills development ecosystem is also fragmented across ministries and agencies,” he added.

As a result, he said, small and medium enterprises (SMEs) continue to struggle with automation due to high upfront costs and limited awareness of return on investment.

On digital transformation, Syed Hussain said businesses outside urban centres still face barriers such as poor access to high-speed internet and 5G networks. At the same time, the talent pool in AI, data analytics, and cybersecurity remains limited.

“Malaysia faces a persistent gap in high-demand tech areas, leading to a dependence on foreign expertise,” he said.

He said R&D in Malaysia is also largely driven by the government, with low commercial returns posing a deterrent to private sector involvement.

Syed Hussain added that Malaysia’s reliance on low-margin manufacturing makes it vulnerable to global trade shocks.

“Many local firms lack the scale, certification or access to financing needed to break into foreign markets,” he said, adding that a logistics infrastructure was needed to diversify trade.

Reforms working but must be sustained

Samenta chairman William Ng said that while he welcomed the country’s improved standing in the IMD ranking, he also stressed that this is not the time to be complacent.

William Ng.

He said consistent policies, improved R&D support, and greater private sector participation are needed for Malaysia to break into the ranks of the world’s top 12 economies by 2033.

Ng credited recent initiatives such as the Reformasi Kerenah Birokrasi (RKB) and the creation of the Business Efficiency Task Force for contributing to the positive momentum.

However, he warned that longstanding challenges remain, especially on ensuring that national policies are not frequently changed and reducing red tape for firms to do business.

Ng said Malaysia’s improved position ahead of Thailand, Indonesia, and the Philippines signals that reforms are working, but they must be sustained and supported through a whole-of-nation approach.

“The government alone cannot effect these reforms. Businesses, including our SMEs, must move up the value chain for Malaysia to become even more competitive and to future-proof our economy for generations to come,” he added.