GLOBAL TRENDS ARE pointing towards the use of digital technologies as the new frontier of industry growth, with discourse centred on big buzzwords like artificial intelligence (AI), Industry 4.0, automation and the like. While these are indeed accurate and relevant concepts, success in contextualising them has been less so. For one thing, embarking on a digital journey is likely to mean different things to different actors. To industry players, digital technologies are only attractive insofar as the realisation of profits is guaranteed – possibly in a given financial year even. To a government, digital technologies are often looked at from an ecosystem perspective. This is usually reflected in global rankings, economic statistics and increasingly, global and domestic perceptions. To the working individual, digital technology is simply about how they affect every day work activity, the resulting paycheck and the prospects of better work.
It is easy to see why contextualising the digital economy is a murky business. “The relationship between what the industry is doing internally at the operations level versus the overall digital economy which is conceived at the government level has to be more coherent,” says Muhamed Ali Hajah Mydin, the CEO of Penang Skills Development Centre (PSDC). While industry players have been steadily utilising digital technologies in varying degrees and applications, the lack of a clear direction from the government forgoes synergistic economic and social benefits that can accrue from the industry’s use of them. In some sense, “whatever the industry is doing is disconnected from what the government wants to do,” Muhamed notes.
Muhamed Ali Hajah Mydin, the CEO of PSDC.
One subject that aptly illustrates this is the disconnect between productivity and wages. In its 2018 Annual Report, Bank Negara Malaysia observed that Malaysian workers are paid less than workers in benchmarked economies, even after accounting for productivity levels.1 A Malaysian worker who produces an output worth USD1,000 is paid USD340, while a worker in benchmarked economies is paid USD510 for producing the same output.
Muhamed asserts that the presence of MNCs and the success of local companies that are able to compete globally is a testament to the industry’s digital achievement. These companies are already operating at the optimal combination of technology and labour, despite their business considerations to maximise profits. The implication of this narrative easily eludes many. Given the fact that the differentiation factor at the industry frontier is in the utilisation of digital technology, this indicates that the major players in Penang’s industry are already on a similar playing field.
These productivity gains, however, have not successfully translated into higher wages for workers; this is an important outcome for how governments view digital technologies. To be sure, this issue is not unique to Penang alone. The dynamic interaction between these two fundamental indicators – productivity and wages – is too complex to be simply reduced to a single causal pathway. In fact, this has been a subject of continuous research in the field of economics. Notwithstanding the absence of a silver bullet to this dilemma, the next best option is to distill a solution set that is localised to a collection of similar actors.
Industry 4.0 Federated Lab.
“The measurement of productivity should be distilled to the personnel level – how each individual engineer, technician and operator contributes to productivity – which in turn is reflected in a company’s profitability. In return, these employees must be compensated accordingly.” Put in another way, the conceptualisation of direction in the digital economy by the government has to be built from the bottom up; first from a position of customised conceptualisation at the lowest common denominator, then progressively upwards to a more broadly-encompassing general direction.
The precarious process of contextualising digital buzzwords is also evident within the tertiary education sector – human capital development. While companies grow in their digital journey, a mismatch has been identified between the type of talent they require and those that are being produced by our tertiary education institutions. The data is resounding: nearly 60% of first degree holders and above remain unemployed one year after graduating, according to the Ministry of Education Malaysia’s Graduate Tracer Study for 2018. In response to the statistics, former education minister Dr. Maszlee Malik has urged universities to curate academic programmes around employment and critical industry needs.2
In its 2018 Annual Report, Bank Negara Malaysia observed that Malaysian workers are paid less than workers in benchmarked economies, even after accounting for productivity levels.
The current structure within the tertiary education system is reduced to simply meeting the minimum standards that have been laid out by accreditation bodies, e.g. the Malaysian Qualifications Agency (MQA) and the National Occupational Skills Standard (NOSS). “A mechanism should be developed where a major portion of a programme consists of internally curated electives with minimal MQA involvement, while a few compulsory courses that are accredited by MQA function as the core of the programme. This way, education institutions are better able to adapt and respond to the demands of the industry they serve. This also fits well with the nature of industry growth,” says Muhamed, “because what is the point of producing AI graduates if the industry is not ready? Of course, there are companies who are doing AI, but many others are not. These have to be reflected in the graduates that we produce.”
Muhamed reveals that PSDC is currently undergoing internal restructuring to better position itself in responding to the changing demands of industry players, and to address industry engagements. “PSDC is looking to expedite and increase the amount of time it spends with the industry to better understand their needs and to prepare the right courses.”
He goes on to explain how courses within the education industry are commonly shaped around buzzwords and in some sense, are based on predicting future trends. While this approach may be successful in reaching enrolment targets, they do little in preparing graduates for what is actually required by the industry. On the other hand, curating courses that are aligned with industry needs means smaller and more varied classes, at the risk of decreasing revenue. However, PSDC’s Management Council has assured Muhamed that this is the right direction to take and in doing so, the financial returns will follow in time.
As dust settles around the initial hype of digital buzzwords, it is clear that much has to be done to contextually assimilate them into our current environment. This, after all, is the natural process for new global trends. One common thread that surfaces is the need for more micro-level data; that is, a more accurate understanding at the lowest common denominator in any policy set. It is encouraging that such conversations are already happening at all levels, and perhaps it is even safe to say that we are on a trajectory that is right for this digital journey.
Timothy Choy is a senior analyst at Penang Institute.