Best practices for productivity in Malaysia

Reading Time: 6 minutes
Dato’Mohd Razali Hussin, Director-General of the Malaysia Productivity Corporation

The Malaysia Productivity Corporation (MPC) was established to support the nation’s aspirations to achieve a productivity growth at an average of 4.6 per cent annually until the year 2020. The institution’s strategic initiatives and priorities are in tandem with the Economic Transformation Programme of the Malaysian government. Inside Investor caught up with Dato’Mohd Razali Hussin, MPC’s Director-General, to talk about current and future issues of productivity in the country.

Q: The key productivity statistics of Malaysia 2010-2011 give a very detailed picture of the growing productivity in the country. What have been the challenges you were facing in raising productivity?

A: Over the years, it has been a big challenge for us to raise the country’s productivity. There have been multiple factors contributing to this. The way productivity is measured based on output and that depends on the demand coming from outside as we are a very open market. Domestically, we have started a couple of initiatives that addressed productivity issues and that provide the right environment for business to grow. In the past, there has been a focus on manufacturing, but now we also focus on services. There are a lot of opportunities in this sector in terms of improving productivity and better use of resources. Under the Economic Transformation Programme, we have also given more attention to the high performing sectors, for example electrical and electronic, and palm oil. The Performance Management & Delivery Unit (PEMANDU) is monitoring this. Our target is to raise productivity by 4.6 per cent annually.

Q: And where are you now?

A: In the last two years, we have achieved this productivity growth.

Q: What training programmes and related activities do you offer to companies?

A: Training has always been our traditional core activity. But the way we look at training now is a bit different from our previous approach. We are treating training as a tool now, as part of a bigger picture. There are cases we don’t use training at all and deliver non-training solutions. Last year we have introduced the Enterprise Intervention and Innovation Programme, or EIIP. This involves three phases: we start with determining the innovation mindset in the company, followed by capability building, and connectivity in sharing the result and best practices. It’s a more of integrated programme. With this programme, we are able to measure the impact from the initiatives.

Q: Have you worked with prominent companies here in Malaysia?

A: We work with local companies, such as TNB or Proton, and with their vendors and more importantly, we believe in working with these ”anchor” companies to reach the local   small and medium enterprises.  The measurement we are using is called Business Excellence Framework, a mixture of soft and hard data. It measures the companies’ overall management systems to enhance their competitiveness.

Q: How do you measure productivity in Malaysia and how does the country rank in comparison with other countries?

A: For the purpose of comparison, we use labour productivity. It’s a simple ratio of output generators. In terms of growth of labour productivity in this region, I would say we have the highest. I terms of labour productivity as such, we are second and have to catch up with Singapore.

Q: Which economic sectors in Malaysia are the most productive and which are the ones that still have to catch up?

A: You have these variations in many countries, in the sense that some sectors are doing better than others. In case of Malaysia, the export oriented sectors such as electrical and electronics are more successful and have a higher productivity than the rest, when we talk about manufacturing. Good examples are the high tech companies in Penang such as Motorola and Dell and associated companies that are providing services like design or testing. Also, sectors like mining, oil & gas, and petrochemicals have a higher productivity than others.  In the service sector, banking and finance has always been the leader in productivity. As for those not doing so well, one is agriculture. There are a lot more initiatives necessary in this sector in terms of using innovation and technology for greater connectivity. The reason is that this sector is still very much labour intensive, and much of the work is done by foreign unskilled labour. I won’t say that they are not using automation, especially the bigger corporations, but the use of it has to be increased and this needs heavy investment. To help sectors like these improve, we have different panels here at MPC. For agriculture, we have a panel supported by the ministry and we are working on productive enhancement initiatives together with domestic and international organisations.

Q: Malaysia has recovered quite quickly after the Asian financial crisis and has reached a higher productivity growth than many OECD countries. What were the contributing factors?

A: As mentioned earlier, our productivity growth is higher than other countries in the region, even higher than OECD countries. However, in terms of absolute labour productivity, we are still 2 times lower than the OECD countries. As for the contributing factors, we are an emerging country which naturally has higher growth than the developed countries, and it worked out well in the previous years but now we also need to move to higher level. In order to increase productivity, you need to look at the right management systems and techniques as well as the skills of Lean Management, Total Preventative Maintenance and Quality Management Systems through the people. This is what we are addressing in our programmes. We are talking about ISO certifications, and we also have progress under the Look East Policy management techniques that we started to promote as early as in 1983. Many companies have started using them since then and more recently.

Q: What is your stance on encouraging the private sector to open itself to more domestic and foreign investment?

A: What we are telling the private sector is to keep measuring their productivity, and by doing that they know where they are, know where to go and know if they are ready for more investments. They need to assess themselves if they are competitive enough and if they are innovation-driven using our Productivity and Innovation health check.

Q: Do you charge companies for your consulting services?

A: We mostly provide free services, but in certain areas we do charge. However, we are a government statutory body, and our charges are not at the level of private consulting firms. We charge a nominal fee, which is effective in getting the companies’ commitment.

Q: Economic growth and productivity have played a major role in putting the Southeast Asian countries on the economic world map and in reducing poverty. To what extent is this scenario happening in Malaysia?

A: The improvement of productivity is just one side of the coin. What we also have done is to improve the labour management environment and share our goals with the workers. We are working together with the unions because they a very well organised. The whole idea is about reaching the employees, because they are the generator of productivity and output. The higher the productivity, the higher is the share of the created value. We also look at other factors, the capital, the material, the energy. We are addressing all these and we would say that these practices, awareness and participation across all sectors are continuously increasing.

Q: What is MPC’s outlook for 2012?

A: Putting aside what’s happening in Europe, I would say that – based on all the initiatives by the government, I am sure productivity will be pushed in all areas especially in the key economic areas. Our focus is to reach a higher growth than 4.6 per cent, we are very positive and bullish on that. But, as I said, we have to look at productivity from a fresh perspective, in connection with innovation, transformation, and change. The other mandate that has been given to us is on Modernizing Business Regulation in different sectors. We are looking at the OECD countries to get the benchmarks and best practices which we can implement in Malaysia. To promote that, we have issued a Best Practice Regulation Handbook.  For example, in some sectors there are so many regulations to comply with, and these all cause additional costs. With a good regulatory framework, we can reduce this “waste” and the compliance costs. We set a goal to reduce these costs by RM1 billion a year, and last year we achieved a reduction of RM726 million. This year, we are confident to reach the RM1 billion target. We are reaching out not only to the private sector, but also to leverage other public-private sector, linkages through programme we call “Power of Collaborative Innovation”. With better regulations, our target is to climb up the World Bank’s Ease of Doing Business rating in areas such as starting a business, dealing with construction permits, getting electricity, registering prosperity, paying taxes, trading across boundaries, enforcing contracts and resolving insolvency.

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Reading Time: 6 minutes

Dato’Mohd Razali Hussin, Director-General of the Malaysia Productivity Corporation

The Malaysia Productivity Corporation (MPC) was established to support the nation’s aspirations to achieve a productivity growth at an average of 4.6 per cent annually until the year 2020. The institution’s strategic initiatives and priorities are in tandem with the Economic Transformation Programme of the Malaysian government. Inside Investor caught up with Dato’Mohd Razali Hussin, MPC’s Director-General, to talk about current and future issues of productivity in the country.

Reading Time: 6 minutes

Dato’Mohd Razali Hussin, Director-General of the Malaysia Productivity Corporation

The Malaysia Productivity Corporation (MPC) was established to support the nation’s aspirations to achieve a productivity growth at an average of 4.6 per cent annually until the year 2020. The institution’s strategic initiatives and priorities are in tandem with the Economic Transformation Programme of the Malaysian government. Inside Investor caught up with Dato’Mohd Razali Hussin, MPC’s Director-General, to talk about current and future issues of productivity in the country.

Q: The key productivity statistics of Malaysia 2010-2011 give a very detailed picture of the growing productivity in the country. What have been the challenges you were facing in raising productivity?

A: Over the years, it has been a big challenge for us to raise the country’s productivity. There have been multiple factors contributing to this. The way productivity is measured based on output and that depends on the demand coming from outside as we are a very open market. Domestically, we have started a couple of initiatives that addressed productivity issues and that provide the right environment for business to grow. In the past, there has been a focus on manufacturing, but now we also focus on services. There are a lot of opportunities in this sector in terms of improving productivity and better use of resources. Under the Economic Transformation Programme, we have also given more attention to the high performing sectors, for example electrical and electronic, and palm oil. The Performance Management & Delivery Unit (PEMANDU) is monitoring this. Our target is to raise productivity by 4.6 per cent annually.

Q: And where are you now?

A: In the last two years, we have achieved this productivity growth.

Q: What training programmes and related activities do you offer to companies?

A: Training has always been our traditional core activity. But the way we look at training now is a bit different from our previous approach. We are treating training as a tool now, as part of a bigger picture. There are cases we don’t use training at all and deliver non-training solutions. Last year we have introduced the Enterprise Intervention and Innovation Programme, or EIIP. This involves three phases: we start with determining the innovation mindset in the company, followed by capability building, and connectivity in sharing the result and best practices. It’s a more of integrated programme. With this programme, we are able to measure the impact from the initiatives.

Q: Have you worked with prominent companies here in Malaysia?

A: We work with local companies, such as TNB or Proton, and with their vendors and more importantly, we believe in working with these ”anchor” companies to reach the local   small and medium enterprises.  The measurement we are using is called Business Excellence Framework, a mixture of soft and hard data. It measures the companies’ overall management systems to enhance their competitiveness.

Q: How do you measure productivity in Malaysia and how does the country rank in comparison with other countries?

A: For the purpose of comparison, we use labour productivity. It’s a simple ratio of output generators. In terms of growth of labour productivity in this region, I would say we have the highest. I terms of labour productivity as such, we are second and have to catch up with Singapore.

Q: Which economic sectors in Malaysia are the most productive and which are the ones that still have to catch up?

A: You have these variations in many countries, in the sense that some sectors are doing better than others. In case of Malaysia, the export oriented sectors such as electrical and electronics are more successful and have a higher productivity than the rest, when we talk about manufacturing. Good examples are the high tech companies in Penang such as Motorola and Dell and associated companies that are providing services like design or testing. Also, sectors like mining, oil & gas, and petrochemicals have a higher productivity than others.  In the service sector, banking and finance has always been the leader in productivity. As for those not doing so well, one is agriculture. There are a lot more initiatives necessary in this sector in terms of using innovation and technology for greater connectivity. The reason is that this sector is still very much labour intensive, and much of the work is done by foreign unskilled labour. I won’t say that they are not using automation, especially the bigger corporations, but the use of it has to be increased and this needs heavy investment. To help sectors like these improve, we have different panels here at MPC. For agriculture, we have a panel supported by the ministry and we are working on productive enhancement initiatives together with domestic and international organisations.

Q: Malaysia has recovered quite quickly after the Asian financial crisis and has reached a higher productivity growth than many OECD countries. What were the contributing factors?

A: As mentioned earlier, our productivity growth is higher than other countries in the region, even higher than OECD countries. However, in terms of absolute labour productivity, we are still 2 times lower than the OECD countries. As for the contributing factors, we are an emerging country which naturally has higher growth than the developed countries, and it worked out well in the previous years but now we also need to move to higher level. In order to increase productivity, you need to look at the right management systems and techniques as well as the skills of Lean Management, Total Preventative Maintenance and Quality Management Systems through the people. This is what we are addressing in our programmes. We are talking about ISO certifications, and we also have progress under the Look East Policy management techniques that we started to promote as early as in 1983. Many companies have started using them since then and more recently.

Q: What is your stance on encouraging the private sector to open itself to more domestic and foreign investment?

A: What we are telling the private sector is to keep measuring their productivity, and by doing that they know where they are, know where to go and know if they are ready for more investments. They need to assess themselves if they are competitive enough and if they are innovation-driven using our Productivity and Innovation health check.

Q: Do you charge companies for your consulting services?

A: We mostly provide free services, but in certain areas we do charge. However, we are a government statutory body, and our charges are not at the level of private consulting firms. We charge a nominal fee, which is effective in getting the companies’ commitment.

Q: Economic growth and productivity have played a major role in putting the Southeast Asian countries on the economic world map and in reducing poverty. To what extent is this scenario happening in Malaysia?

A: The improvement of productivity is just one side of the coin. What we also have done is to improve the labour management environment and share our goals with the workers. We are working together with the unions because they a very well organised. The whole idea is about reaching the employees, because they are the generator of productivity and output. The higher the productivity, the higher is the share of the created value. We also look at other factors, the capital, the material, the energy. We are addressing all these and we would say that these practices, awareness and participation across all sectors are continuously increasing.

Q: What is MPC’s outlook for 2012?

A: Putting aside what’s happening in Europe, I would say that – based on all the initiatives by the government, I am sure productivity will be pushed in all areas especially in the key economic areas. Our focus is to reach a higher growth than 4.6 per cent, we are very positive and bullish on that. But, as I said, we have to look at productivity from a fresh perspective, in connection with innovation, transformation, and change. The other mandate that has been given to us is on Modernizing Business Regulation in different sectors. We are looking at the OECD countries to get the benchmarks and best practices which we can implement in Malaysia. To promote that, we have issued a Best Practice Regulation Handbook.  For example, in some sectors there are so many regulations to comply with, and these all cause additional costs. With a good regulatory framework, we can reduce this “waste” and the compliance costs. We set a goal to reduce these costs by RM1 billion a year, and last year we achieved a reduction of RM726 million. This year, we are confident to reach the RM1 billion target. We are reaching out not only to the private sector, but also to leverage other public-private sector, linkages through programme we call “Power of Collaborative Innovation”. With better regulations, our target is to climb up the World Bank’s Ease of Doing Business rating in areas such as starting a business, dealing with construction permits, getting electricity, registering prosperity, paying taxes, trading across boundaries, enforcing contracts and resolving insolvency.

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