• Technical and Vocational Education and Training (TVET) has evolved into an integral part of Malaysia's education system, playing a crucial role in driving holistic socioeconomic advancement and promoting inclusivity.

• The decrease in enrolment and the scarcity of highly skilled workers in Science, Technology, Engineering, and Mathematics (STEM) fields has sparked concerns on the readiness of the future workforce to meet industry demands.

• Nevertheless, investments in TVET education, strengthening industry collaborations, and harnessing technological advancements would help to address the changing needs of the global economy.

TVET Building Skills for Tomorrow's Workforce

Technical and Vocational Education and Training (TVET) is no longer a foreign in Malaysia’s education system and syllabus, in fact, it has been standing at the forefront of our educational framework, serving as an indispensable pillar in the nation’s journey towards holistic socioeconomic advancement and fostering an inclusive society. This further align with Sustainable Development Goals (SDGs) targets through quality education (SDG 4) and SDG 8 (decent work and economic growth). Forecasted by the International Labour Organization (ILO), Asia is on track to make up two-thirds of the global workforce by 2030, welcoming around 395mn new entrants into the labor market during this timeframe. To adequately cater to the needs of such a vast workforce, there is a pressing need to prioritize the development and enhancement of Technical and Vocational Education and Training (TVET) programs.

Recently Malaysia Prime Minister has highlighted that, TVET needs to be further enhanced and incorporated strongly in school for our future generations or also known as the alpha generations. These alpha generations are inherently among the digital natives, as they are more adept to leveraging technology for learning and skill development. This enhancement shall extend beyond vocational school students to cater all students in Malaysia, including those enrolled in religious schools, fostering inclusivity across educational sector. Moreover, the initiative shall ensure to not confined its reach solely to urban areas but to be extended its provisions to the rural areas as well, accommodating equitable access and eliminating disparities in educational opportunities.

Overcoming Stigma and the Need to Revitalize

Traditionally, TVET talents in this nation seen a depletion due to several factors, one of it is caused by the stigmatisation that the vocational education and training is meant for those who fail at conventional education. This perception is exacerbated by the belief that graduates of TVET programs are more likely to end up in 3D occupations (dirty, dangerous, and demeaning) rather than higher-paying white-collar jobs. This misconception contributes to the negative perception of TVET as a viable career path and educational avenue.

In addition to that, stemming issue of decreasing talents in Science, Technology, Engineering, and Mathematics (STEM) has become a concern as it leads to the depletion of high-skilled workers in industry involving STEM such as manufacturing. This can be seen in the downward trend of enrolment of STEM Students over the years (Refer Chart 1) and the imbalance intake, enrolment, and output in the field of study, whereby the output numbers are poor compare to the number of enrolments as at 2022 (Refer Chart 2).

Investing in Tomorrow's Workforce

In the efforts of overcoming the issue of talent depletion within TVET talents, collaborative efforts between government bodies and private sectors have been initiated to address this challenge comprehensively. Among the initiatives that have been laid out is the corporation with Government-Linked Companies (GLCs) with contribution of RM6.8bn from the government to revamp TVET education. A significant portion amounting RM1.6bn also, has been designated for the Human Resources Development Berhad (HRP Corp) under purview of the Ministry of Human Resources (MOHR), aiming to facilitates 1.7mn training opportunities nationwide. This collaboration could help in providing better exposure for students in understanding issues, challenges, demands, and be better equip to step into the working industry upon graduating. It would also help in creating a higher quality final-year and research projects made by the students with the equipment that is unavailable in their schools which further could help in abolishing the stigmatisation of TVET is meant for those who fail at conventional education.

Government also has recently announced the interest of Microsoft Corporation's planned investment of RM10.6bn in Malaysia's cloud and artificial intelligence (AI) infrastructure to enhance the nation's economic progress. Envisioning the impact of this investment, we anticipate the creation of an additional 200,000 AI skilling opportunities in Malaysia. We believe that this preparation aligns perfectly with the National TVET Policy which set to be launched in June. This policy lays out a comprehensive roadmap until 2050, aimed at nurturing the skilled labor force of the future. Not only it coordinates 1,345 TVET institutions but also emphasizes the provision and enhancement of hightechnology-based courses to meet the evolving demands of the workforce. Meanwhile, under the New Industrial Master Plan, there is a target to raise the proportion of skilled workforce to 35% by 2030, up from the current 25%, hence the need to accelerating the initiatives on meeting these goals.

In reference to the Malaysia MADANI budget 2024, our Prime Minister highlighted the allocation of RM17mn for the implementation of TVET in religious schools, including Tahfiz institutions. This allocation aims to offer students the chance to broaden their skill set while pursuing their Quran memorization studies. We believe that this initiative will not only positively contribute to the development of Tahfiz education but also enhance efforts to propagate Islamic teachings by producing religious scholars who are also proficient workers, thus fulfilling the current demands of the workforce.

Ministry of Human Resources (MOHR) has also established the Skill Development Fund Corporation (PTPK) to support individuals seeking skill development. The PTPK primarily offers loans to individuals participating in skill training programs conducted by both Government Training Providers (PLA) and Private Training Providers (PLS) certified by the Department of Development Fund (JPK). The training programmes cater to various levels of proficiency, including Malaysia Skills Certificate (SKM), Diploma Malaysia Skills (DKM) and Higher Diploma of Malaysia Skills (DLKM), thereby providing a comprehensive framework for skills enhancement across nation.

Private Sectors Coming Together Hand in Hand

The proposition to empower industries with a greater influence in shaping the national TVET agenda is seen as having a profound impact on talent development and facilitating suitable career pathways. This involves cultivating deeper partnerships with industries that transcend conventional student internships and expanding the breadth of the TVET curriculum. Furthermore, it is essential to integrate innovative strategies like student mentorship, project-based learning, and guest lectures to propel this endeavor forward.

A notable example carried by Mercedes-Benz Malaysia (MBM), which has been running its Advanced Modern Apprentice (AMA) program since 1984. This program caters to students interested in the automotive industry, requiring a minimum of 3 credits in the Sijil Pelajaran Malaysia (SPM) for eligibility. Throughout the three-year program, students receive a monthly allowance of up to RM800, alleviating financial burdens for those from less privileged backgrounds. Importantly, students earn globally-recognized certifications. Upon completion, they are guaranteed job placements within MBM's service network for four years, under a mutual agreement of RM100,000.

Meanwhile, under our coverage, we note that Gamuda has entered into a memorandum of understanding (MoU) with VTAR Institute, a private vocational training institution, in July 2023. This collaboration aimed to introduce a groundbreaking TVET course on the next-generation Digital Industrialised Building System, marking a first for Malaysia. Additionally, Top Glove signed an MoU with the Ministry of Education (MOE) in 2021, spanning a five-year period, to foster collaboration in supporting the development of local TVET students and graduates across 84 vocational colleges under the ministry's jurisdiction. As part of this agreement, the company offers opportunities for internships, gainful employment, and scholarships. These initiatives highlight the commitment of private entities to nurturing skilled professionals. We have "Best" ESG Rating with an ESG Score of 4.33 for Gamuda, while Top Glove holds an "Excellent" ESG Rating with an ESG Score of 4.55.

Competitive Pay for TVET Graduates

The government has announced its consideration of a proposal to provide TVET graduates with a salary exceeding RM4,000. This proposal is one of several initiatives aimed at fortifying the TVET sector, with the ultimate goal of attracting more students to enrol in TVET institutions. It is suggested that TVET graduates should be remunerated with higher salaries commensurate with their training category, as opposed to the current minimum wage of RM1,500. Based on our findings from the job seeking portals, a significant proportion of skilled and semi-skilled workers from Malaysia residing in Singapore earn gross salaries ranging from SGD1,500 to SGD3,599 per month. Although the salary range is comparable, we believe the weaker Malaysian ringgit has influenced many skilled workers to seek employment in the neighbouring country. To counteract this trend and retain talent, it is imperative to offer competitive compensation packages that match the value offered across the border.

Although providing attractive salaries for TVET graduates is important, it is also crucial to consider raising rates for diploma and university degree holders. This helps maintain a balance of incentives and ensures that graduates are not discouraged from pursuing higher education. Careful planning is necessary to address concerns on the potential impact on higher education enrolment. Additionally, it is vital to base high salaries on factors such as performance, experience, and the actual contributions individuals make to the workplace, as we believe that fair and transparent salary practices are essential principles of effective human resource management.

Our Thoughts

With the rapid advancement of technology and the increasing demand for skilled workers, TVET holds promising prospects in nurturing unique skills that have better potential for securing jobs, offering significant opportunities in the job market. For instance, individuals who undergo welding and metal fabrication courses possess promising prospects, as welding certificates are not only needed in the shipbuilding sector but also in various existing factories. TVET graduates with sought-after skills often command competitive salaries, particularly in industries such as engineering, information technology, healthcare, and manufacturing, where companies are willing to offer attractive remuneration to workers with the requisite technical skills and knowledge. Additionally, in promoting equality for all, it is imperative to encourage more involvement of Orang Asli communities in TVET, prioritizing fields that interest them and are suitable, as part of efforts to enhance the socio-economic status of these communities.

However, despite the presence of over 1,400 TVET institutions in Malaysia offering approximately 6,000 programs across 12 ministries, sustaining quality remains a challenge. We believe that implementing a robust quality assurance system can enhance the quality of TVET graduates and mainstream TVET pathways. Furthermore, it is vital to revise the existing compensation structure and offer training opportunities to attract and retain highly qualified individuals as TVET trainers. This is essential to ensure the sustainability of providing a robust platform for nurturing talent. Furthermore, we also believe that government funding should be performance-based to stimulate more resultdriven and collaborative actions among TVET providers, local communities, and industries. Ultimately, these efforts and initiatives could advance the overarching goal of Greening TVET by integrating sustainability principles into educational and training programs. This holistic approach is poised to instigate a systematic transformation, influencing practices, culture, and mindset within the TVET landscape.

Source: BIMB Securities Research - 15 May 2024