Addressing Youth Unemployment In Malaysia: Turning Informal Sector Into An Idea Economy – OpEd

Unemployment, particularly among graduates is rapidly increasing in Malaysia. According to a Minister in the Prime Minister’s Department, Abdul Wahid Omar, graduates aged between 20-24 number around 161,000 out of the 400,000 unemployed within the country.

Up to 40% of the total unemployed in Malaysia are university graduates, while close to half the graduates of public universities are working in mismatched occupations, totally unrelated to their formal training.

A Finance Ministry report states that over 90% of those unemployed are aged between 15-29 years old.

While aggregate unemployment in Malaysia stands at 4%, youth unemployment is around 10%.

Much of this unemployment is in the rural areas, where there is an increasing incidence in drug taking and crime. Farming, forestry, and fishing are hard jobs that most young people aren’t willing to take up, so they are left to foreign guest workers.

However as an Asia Foundation youth survey found, part of the problem is not getting a job, but the youth are very discerning about what type of job they will accept and do. Due to there being over 2 million foreign workers doing manual jobs in Malaysia today, such jobs are not appealing to Malaysian youth. A JobStreet survey found that young graduates today are extremely choosy about jobs and expect salaries much higher than market rates.

However, that same JobStreet survey also found that 70% of the employers surveyed believed the standard of graduates from local universities were just average, while 24% believed that they were ‘bad’, and only 6% believed they were ‘good’. The main complaints were about attitude towards work and the lack of communication skills.

Thus, new paradigms are needed to absorb the youth into economically and socially productive roles within the country. Firstly, the concept of traditional employment needs to be challenged, and secondly, the informal economy must be reframed to provide both a ‘safety net’ and platform for nurturing innovative idea based enterprises.

This presents two challenges. One of relooking at education and training from the bottom up so that young people can reach their creative potential and develop new micro-enterprises based on ideas that they have. Two, relooking at the informal sector of the economy in new ways; a means to insulate society from deepening hard economic times ahead, and as a field or platform where creativity can be allowed to nurture into viable micro-enterprises, where ideas are the drivers.

This means abandoning the baggage in subscribing to factor driven economics, technology driven economics, and the big enterprise syndrome. There has to be a belief that the future innovation of the country will come from the youth, rather than from FDI, GLCs, or even university research.

This also means a complete change in the way we think about economic development through innovation, and a need to change the way knowledge and empowerment is disseminated through education.

The informal economy as an idea economy

As a country develops, the informal economy is seen as a mark of development, which has no place within a fully developed economy, and should be eliminated. Governments also adopt this attitude because it is also difficult to collect revenue from the informal economy because most transactions are in cash.

However, the informal economy needs to be rediscovered as an integral part of a nation with an important role to play.
Currently the informal economy consists of hundreds of thousands of micro-enterprises which tend to copy upon each other. Most are orientated towards food or supplying simple services utilizing business models which are copied through observation. The only creativity within the informal economy today is ‘copycat’ innovation. We see burger and nasi lemak stalls, dobies, kedai runcit, and other micro enterprises, all within the same mould.

This is where the concept of innovation has to be demystified to become the catalyst in creating an exciting new economy within Malaysia. The concept of ‘technology & innovation’ needs reframing to simply mean something new; a new idea, a new way of doing things, a new location, and a new business model for that activity.

When young people are taught to see the world asking questions like ‘can this idea work?’, and answering ‘why not’, we will start seeing variety and more diversity in business activities.

Increasing diversity with new activities adds value to the economy. Adding value at a micro level is the key to solving the problem of a new generation not engaging in economic activity through traditional employment.

The key to Malaysia’s economic and social enhancement is through infusing new ideas into the informal sector of the economy. This is where variety of product, diversity, and new innovation is most likely to come from should it be should it be supported at both policy and implementation levels.

The Malaysian Government has already defined the informal sector boundary by exempting enterprises with sales under RM500,000 per annum from GST. This is a great incentive for a new breed of young micro-entrepreneurs to take advantage of.

An entrepreneurial pedagogy

Then we come to the means to ‘kickstart’ the idea economy through entrepreneurial education. However we find a problem here.

University entrepreneurship courses are too academically orientated around exams. The goal within this type of education is just to regurgitate what was taught in class and in the textbook during the exam.

The above view was supported by a Talent Corporation and Chartered Institute of Management Accountants (CIMA) report on bridging the employability gap. The report went on further to say that Malaysian university instruction fundamentally lacked any approach to develop critical thinking and problem solving skills. Knowledge was just absorbed by students without question for the purpose of passing exams rather than developing well-rounded graduates. Employers felt that students should spend much more time in industry getting real world experience before graduating.

The current inflexible approach to formal education is at the cost of experiential learning and taking ‘hands on’ practical approaches to enterprise creation and development. Business schools are usually the faculties responsible for business and entrepreneurial education within higher education, but suffer from the disability that technical knowledge needed in enterprise creation are not interwoven within curriculum. For example, the bachelor degree of Engineering Entrepreneurship taught at Universiti Malaysia Perlis has very little engineering incorporated into the curriculum.

Students have no engineering competence upon graduation. It’s a failure of aspiration to deliver the goods and lessons need to be learned.

Tertiary students only get 50% of the knowledge they need to start a business. The basic business knowledge maybe there, but technical, and ‘street-smart’ knowledge is lacking. Many business faculties are still grappling with what the concept of entrepreneurship really is. Many courses taught today in Malaysia are more about small business management rather than innovation based enterprise that is based upon ideas.

Entrepreneurship training consultants are also at fault here. Many are ex-academics, civil servants, or people whose only experience in business is the consulting firm they are operating. Many who have previous experience, have this experience in the ‘old’ paradigm of doing business as a contractor, relying on personal contacts and ‘throwbacks’. This is not the type of innovative business that should be taught to the younger generation we want to be independent of the old ways of doing business with government. No more crony contracts where people must pay kickbacks to the contract providers. This is not entrepreneurship, this is rent-seeking exploitation. We want the youth of Malaysia to build enterprises that can stand on their own feet without reliance on a government contracts, gained by paying these kickbacks.

This is where the paradigm needs to shift.

The status of vocational education needs to be elevated. This is where tomorrows successful youth entrepreneurs are more likely to come from. Courses need to be short and to the point. They need to be interesting, informative, and semi-tailored to the requirements of the students. Teaching needs to be in the field rather than in the classroom, and by practademics who have entrepreneurial experience rather than academics from the traditional back ground.

The silver bullet here is ‘one to one’ mentorship. Utilize the large pool of retired businesspeople in Malaysia to help with mentoring the young generation. This army is ready, willing and able to assist the country in its need to create an idea economy.

Within this paradigm we need to learn that ‘small capital is beautiful’, rather than consider the traditional concepts of SME financing. Not many micro-entrepreneurs actually receive grants or loans, so it’s necessary to show people how to start an enterprise for under RM1,000.

This is a true challenge for the creative. Most bureaucrats and academics would laugh off this concept. But this is what has to be, if new innovative micro-enterprises are to be created. This requires a complete paradigm change in entrepreneurial creativity that few are equipped to understand, let along instruct and mentor others.
Mentorship under this philosophy will create thousands of new entrepreneurs within Malaysia within a short period of six months.

The writer doesn’t know of any government entrepreneurship development programs that could deliver such results within this timeframe. Hundreds of Millions of Ringgit have been poured into entrepreneurship initiatives with lacklustre results.

Towards an Idea Economy

The informal economy is the key to developing an idea economy within Malaysia. Micro-entrepreneurs are the future of the Malaysian economy as the Palm oil, oil and gas industries, construction, and large scale manufacturing stall with a slowing world economy.

Domestic economic growth comes from increasing the velocity of money around villages and urban neighbourhoods. Developing simple new sources of value that consumers need and want will help to develop economic buoyancy that will partly insulate the country from external economic slowdown. It could be something as simple as an urban organic garden and doing home deliveries, selling sushi at the pasar malam, baking and distributing pies, or introducing Bahn Mi to Malaysian consumers at street level. Ideas create value and diversity in the local economy. Innovation is not a ‘dirty word’.

Being innovative is as simple as generating a simple and new idea. This must be the new driver of the Malaysian economy.
Thailand was successful with its OTOP program last decade and is relooking at reviving the program to increase domestic economic activity, once again.

As graduates today are choosy about the work they do, they are perfect candidates for pioneering the idea economy. There is an army of retired people who can play the role of mentors for this demographic in ‘no frills’ and more informal programs than have been tried in the past.

This requires empowering mentors to empower potential micro-entrepreneurs all around the country in both urban and rural environments. Once some success occurs, natural champions will rise as role models for others to follow.

The old paradigm of ‘innovation’ needs to be replaced with the new, with focus on new ideas and new business models, based upon meagre resources.

These are the types of enterprises that will save Malaysia, and rebuild the country bottom up.