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Thursday, 10 August 2023

TSMC: The global giant it didn’t aspire to be; US hijacks Taiwan's high-tech industries, squeezes island's economic future

 

FILE PHOTO: A smartphone with a displayed TSMC (Taiwan Semiconductor Manufacturing Company) logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

 

Coupled with current plans, TSMC will have factories in five countries spread over three continents, rivalling the sprawl of rivals Intel Corp and Samsung Electronics Co. 

 

A LITTLE over three years ago, Taiwan Semiconductor Manufacturing Co (TSMC) was among the world’s most geographically concentrated technology giants with almost the entirety of its capacity within a 300-mile radius.

Now, it is on the verge of becoming one of the most globally diversified chipmakers. This wasn’t the plan.

A new facility near Dresden, Germany, is set to begin operations in 2027, the Hsinchu-based company said yesterday.

Coupled with current plans, TSMC will have factories in five countries spread over three continents, rivalling the sprawl of rivals Intel Corp and Samsung Electronics Co.

These overseas plants add to the significant operations it has in Taiwan and the two existing sites in China. (For more than 25 years it has also owned a fab near Portland, which though profitable is small and not seen as a company success story.)

Having all its manufacturing close to home has always been an advantage for the made-to-order chip foundry.

The tight relationship between research and development, and factory operations, where engineers can easily shuffle between production lines, helped TSMC become a fast-moving supplier in a high-stakes industry. Dotting the world with fabs risked diluting this advantage.

But then TSMC’s true global expansion kicked off in May 2020 with the announcement of a new facility in Arizona, a project which was enhanced two years later to include a second plant at the site, taking total investment in the Southwestern state to US$40bil.

A venture with Japan’s Sony Group Corp, unveiled in 2021, took TSMC in a new direction. Instead of owning a factory outright, Sony Semiconductor Solutions Corp will take a 20% stake in a factory being built in Kumamoto.

Automotive components supplier Denso Corp later signed on to take a stake of over 10%. That plant is closer to Shanghai than Tokyo.

Dresden is a continuation down that path of working with clients to jointly own facilities, largely to supply the growing demand for components used in automobiles.

TSMC will invest up to €3.5bil for a 70% share of newly formed European Semiconductor Manufacturing Co.

Robert Bosch GmbH, Infineon Technologies AG and NXP Semiconductors NV each take 10%, and total capital expenditure is expected to be around US$11bil, with the money coming from equity, debt and German and European Union funding.

Since its founding by Morris Chang more than three decades ago, TSMC eschewed equity partnerships in favour of maintaining full control over its operations, and thus its destiny.

But the global winds have changed, and its new leaders, chairman Mark Liu and chief executive officer CC Wei, have had little choice but to adapt.

TSMC’s balance sheet is solid, its cash flow is stable, and its credit rating is high. It doesn’t need clients nor governments to hand it money in order to pay for these new facilities.

What it does need, though, is buy-in. These remote factories at locations many time zones from home require firm orders as well as a solid commitment from third parties motivated to ensure the company’s success.

Having the likes of Sony, Infineon and NXP on the ownership list ensures they have skin in the game, while government involvement should help secure political and economic support.

Suddenly, TSMC goes from being an under-the-radar Taiwanese supplier solely focused on a coterie of semiconductor clients, to a global entity with multiple stakeholders across numerous national and local jurisdictions. It’s already proving to be a difficult adjustment.

Liu last month announced the delay of its Arizona opening by about a year. Time spent navigating local regulations and a struggle for talent, including among vendors, means TSMC won’t kick off operations there until 2025.

Last week, the company signed an agreement with Arizona governor Katie Hobbs to follow a worker safety programme that’s stricter than federal rules, a sign that TSMC needs to keep adjusting to a changing regulatory landscape.

Continued concerns about pay and conditions among local workers means a labour dispute could flare up at anytime, a situation uncommon at home in Taiwan.

Also of surprise is the escalating scale of divergence between costs in the United States and Taiwan, which will likely force the chipmaker to charge clients like Apple Inc and Nvidia Corp significantly more for products made in Arizona.

The Japan plan appears to remain on track for production late next year, with a high chance a second fab will be added to the project. Yet despite the US$60bil to be spent in total by all parties, the new facilities will account for no more than 10% of global capacity.

And not all fabs are created equal; the best stuff will remain in Taiwan for the foreseeable future, with Dresden and Kumamoto both deploying much older production technology – which is fine because automotive chips don’t need anything more modern.

Still, these foreign partners have no reason to complain. Clients are getting a stake in, and access to, precisely the factories and know-how they need.

Governments, meanwhile, can tell their constituents that they’ve been successful in luring the world’s most important technology company to their shores.

TSMC is also a winner. Just five years ago, the company warned investors that the European Commission was looking into concerns about “alleged anti-competitive practices” in relation to semiconductor sales.

The US Fair Trade Commission was also showing interest, it was reported at the time. Nothing came of these probes, but it would be particularly awkward for regulators in either jurisdiction to now accuse TSMC of being a predatory tech giant when its management has bent over backwards (and spent billions of dollars) to set up shop on their turf.

These overseas plants also dampen the constant drumbeat among rivals that TSMC is overly concentrated in one place, and that governments and chip customers need to look elsewhere.

Now, the company is giving them that “elsewhere.” Half the world gets a piece of TSMC, and in return all the chipmaker had to do was lean into globalisation. — Bloomberg

Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. The views expressed here are the writer’s own. 

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RR 

 

US hijacks Taiwan's high-tech industries, squeezes island's economic future

Washington has firmly taken grip over the Democratic Progress Party (DPP) authorities' mind when it comes to “relying on the US to seek secession,” while at the same time hollowing out Taiwan region's economy, and making the island a complete ...

 

Restricting investments in China, US is creating a 'dammed lake' for itself: Global Times editorial

The high-tech field is crucial for a country's future development prospects, but it also naturally possesses the new characteristic of interconnectedness in this era. It is unrealistic for any country to isolate itself and strive for research dominance in the field of technology. The future of the technology field belongs to countries that embrace the world with open arms. If the US fails to understand this, it will only get further away from its goal to “outcompete” China.

 

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US pushes chip bill to encircle China, but ‘unable to lure firms to decouple with mainland’

 

 


 

 

 

 

Come back and vote, urge Penang state election candidates to vote on Aug 12.2023

 

DAP revealed its 19 candidates for the Penang state election yesterday. Ten out of the 19 are incumbents – including party chairperson Lim Guan Eng and caretaker Penang chief minister Chow Kon Yeow – while seven are fresh faces. The party has dropped caretaker deputy chief minister II and incumbent Perai assemblyperson P Ramasamy, 74, as well as women’s wing chief and Padang Lalang incumbent Chong Eng, 66.

Attendees greeting Kit Siang (centre) and other DAP leaders and candidates at the start of the ceramah at the Chinese Town Hall in Jalan Masjid Kapitan Keling, Penang. — Photos: LIM BENG TATT/The Star



PAKATAN Harapan’s unity candidates are hoping for a higher voter turnout for the state election and are urging Penangites to return to vote on Aug 12.

Penang Pakatan chairman Chow Kon Yeow said local voters working in other states or even overseas should come back, and give the caretaker unity government an overwhelming mandate.

“We are a state government with a proven track record since 2008. We managed to fulfil 93% of our 2018 manifesto promises, and we are also on track to becoming a family-centric and green state by 2030,” he said.

He was speaking to more than 500 supporters at the Chinese Town Hall in Jalan Masjid Kapitan Keling during the inaugural ceramah for the state election.

Also present was DAP’s Air Itam candidate Joseph Ng Soon Siang who urged Penangites not to gamble with their future by not coming back to vote, as “there is no sure thing” in this state election.

“It is not good to assume that Pakatan candidates are a ‘shoo-in’, as anything can happen. So, Penangites must tell their friends, relatives and colleagues to come back and come out to vote,” said Ng.


Chow: We managed to fulfil 93% of our 2018 manifesto promises.

Datok Keramat candidate and incumbent Jagdeep Singh Deo, who was one of the ceramah speakers, said that under the state government’s Green Agenda launched in 2021, Penang aimed to plant 500,000 trees by 2030.

“The good news is that we are already very far ahead of schedule as to date, some 470,000 trees have been planted all over the state.

“Also, since I became the state housing and local government committee chairman, about 76,000 units of affordable housing costing between RM150,000 to RM300,000 have been built statewide,” he said.

First-time Pengkalan Kota candidate Wong Yuee Harng, 35, who was one of the speakers, said if elected, he would do his best to improve the lives of the people as what he had been doing since getting involved in politics 11 years ago.

“I started from the bottom as an assistant to a DAP member of Parliament and also an assemblyman, to later become Penang Island City Council (MBPP) councillor for the past eight years.


Wong: I may be short like a cili padi but I am very spicy, and I will fight for the rights of my constituents.

“I may be short like a cili padi but I am very spicy, and I will fight for the rights of my constituents while improving their socio-economic status,” he said.

Another first-timer is Seri Delima candidate Connie Tan, 33, who said she joined DAP in 2012 upon returning to Penang from the United Kingdom after she graduated with a law degree.

“I joined the party with the intention of making my voice heard, as I just wanted to help Penang prosper. I had no lofty ambition whatsoever then and never thought that I would ever be selected to be a state election candidate,” said Tan.

For Datuk Seri S. Sundarajoo, 61, being the oldest candidate with no political experience is not a deterrent as he feels his experience as a developer will help to solve the housing woes in the Perai constituency.

“I can also help to solve the squatter and flood problems in Perai. My life in the corporate world has been good, and now is the time for me to give back to society.


Sundarajoo says his experience as a developer comes in handy in solving housing woes in Perai.

“I consider my candidacy to be a form of ‘national service’ for Penang over the next five years,” said the former chief operations officer of developer Ecoworld Development Group Bhd.

Other candidates who spoke at the event were Lim Guan Eng (Air Putih), Ong Ah Teong (Batu Lancang), Kumaran Krishnan (Bagan Dalam), H’ng Mooi Lye (Jawi), Daniel Gooi (Padang Lalang), Phee Syn Tze (Sungai Puyu), Chee Yeeh Keen (Bagan Jermal) and Joshua Woo Sze Zeng (Pulau Tikus).

Veteran DAP politician Tan Sri Lim Kit Siang and Bukit Bendera MP Syerleena Abdul Rashid also spoke at the three-hour ceramah which started at about 8pm.

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2023 Malaysian state elections, Saturday, 12 August 2023


I

It’s almost always flu season

PETALING JAYA: Although there is a sharp drop in reported influenza cases this year, the highly contagious respiratory illness occurs all year round, says the Health Ministry, while reminding the public to take safety measures against it.

From January to July this year, the ministry logged 158 influenza clusters – compared with 255 clusters during the same period last year.

Of the 158 clusters reported this year, 54% were in schools, followed by kindergartens at 20%.

Health Minister Dr Zaliha Mustafa said the total number of cases reported from the 158 clusters was 4,606, whereas in 2022 the cases were three times higher or 12,876 cases from 255 clusters.

“The ministry still monitors influenza outbreaks and clusters that occur, although individual cases are not required to be notified by clinics and hospitals,” she said in an interview.

This is because influenza, or the flu, is not subject to mandatory notifications under the Prevention and Control of Infectious Diseases Act 1988 (Act 342).

Dr Zaliha said influenza tends to occur all year round and has the potential to attack all ages.

While most people recover within a week without requiring medical attention, some may require admission for close monitoring, she said.

Influenza and the common cold are both contagious respiratory illnesses but caused by different viruses, she added.

“The flu is caused by influenza viruses only whereas the common cold can be caused by a number of different viruses, including rhinoviruses and (human) parainfluenza (viruses),” she said.

Dr Zaliha said the best way to avoid infection is to get the influenza vaccine every year.

She also advised those with symptoms to avoid close contact with others and keep a distance to protect other people from getting sick too.

“Stay home when you are sick. Cover your mouth and nose with a tissue when coughing or sneezing. It may prevent those around you from getting sick,” she said.

Flu viruses, she noted, spread mainly by droplets made when people cough, sneeze or talk.

Dr Zaliha said practising good hand hygiene is also important to curb the spread of the flu.

Germs can also be spread when a person touches something that is contaminated with germs and then touches their eyes, nose or mouth, she said.

Other good health habits – such as cleaning and disinfecting frequently touched surfaces at home, work or school, especially when someone is ill – should also be practised, she added.

“Get plenty of sleep, be physically active, manage your stress, drink plenty of fluids and eat nutritious food. Also seek immediate treatment if symptoms worsen,” she said.

Federation of Private Medical Practitioners’ Associations Malaysia president Dr Shanmuganathan TV Ganeson said the flu season peaks in May to July and November to January.“For the first 24 weeks of 2023 in Malaysia, there was 18.45% positivity for influenza of the specimens sent. The figures for Singapore were quite similar at 20%,” he said.

Dr Shanmuganathan said that as there are pockets of spread, the prevalence would vary from area to area and from time to time.

For example, he said that in May, Klang doctors commented on increased influenza A and B cases, but doctors in Kuala Lumpur did not seem to corroborate that increase.

Symptoms of influenza are fever, flu, cough and chest discomfort, sore throat, lethargy, headache and body aches, respiratory distress, and even vomiting and diarrhoea.

Meanwhile, the symptoms of the common cold are sneezing, stuffy nose, runny nose, sore throat, coughing, mucus dripping down your throat (post-nasal drip), watery eyes and fever.

“However, most people with colds do not have fever,” said Dr Shanmuganathan.

The at-risk groups include children below five years old, the elderly above 65 years old, those with chronic conditions like asthma, diabetes, heart disease or chronic bronchitis, persons with poor immunity like HIV, cancer and chemotherapy patients, healthcare workers and caregivers, he added.

Association of Private Hospitals Malaysia president Datuk Dr Kuljit Singh said Covid-19 has taught the world how to curb the spread of upper respiratory infections, and that the same principles could be applied to flu infections.

“The precautions are pretty similar to Covid-19, such as masking up, social distancing and hand washing – as well as isolation for those infected to control the spread,” he said.

Dr Kuljit also said that in July, private hospitals saw a rise in bed occupancy due to many factors, most notably influenza.

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Monday, 7 August 2023

2023 Malaysian state elections, Saturday, 12 August 2023

Malaysian State Elections 2023


State elections in 2023 will be held in Selangor, Kelantan, Terengganu, Negeri Sembilan, Kedah and Penang.

During General Election 15 (GE15) last November, the Kedah, Penang, Kelantan, Terengganu, Selangor, and Negeri Sembilan state governments decided not to dissolve their state government; hence state elections will have to be held now before the state parliament automatically dissolves after the deadline.

All the states have agreed to dissolve their state government around the same time to allow elections to be held simultaneously in these states. The following are important dates of the 2023 State Elections:

Candidate’s nomination – 29 July 2023, Saturday

Early Voting Day – 8 August 2023, Tuesday

Voting Day – 12 August 2023, Saturday

Voters in the states of Selangor, Negeri Sembilan, Penang, Kedah, Kelantan, and Terengganu will head to the polls on Aug 12, the Election Commission (EC) announced today.

Nomination will be held on July 29, while early voting will take place on Aug 8. 

EC chairman Abdul Ghani Salleh said a total of 9.7 million individuals are eligible to vote in the state polls.

"The EC has decided that the state elections will be held to fill 36 state legislative assembly seats in Kedah, 45 in Kelantan, 32 in Terengganu, 40 in Penang, 56 in Selangor and 36 in Negeri Sembilan," he said at a press conference after chairing a special meeting on the state polls at Menara SPR today.

Kelantan was the first to dissolve its state assembly on June 22, followed by Selangor on June 23. Penang, Kedah and Terengganu state legislative assemblies were dissolved on June 28, while Negeri Sembilan was the last to dissolve its state assembly on July 1.

A total of 245 state assembly seats will be contested in the six states.

2023 Penang state election


Electoral map of Penang. showing all 40 constituencies
Penang State Legislative Assembly Map, Penang, Malaysia

Breakdown of 2022 Malaysian general election result by state constituency in 2022, where PH in   Red, PN in   Blue-green and BN in   blue  
Results of the 2022 Malaysian general election in Penang



MySPR Semak

Semakan Daftar Pemilih

https://mysprsemak.spr.gov.my/semakan/daftarPemilihPapar


A plea to Malaysians to come out and vote on August 12. Please share it with your friends and family.


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Sunday, 6 August 2023

Is progressive wage model the solution?

 



Malaysia is set to announce a progressive wage model. What will this mean for the future of employee wages in the country?

Dissecting the practicality of the progressive wage model and its potential impact on Malaysian's welfare


AS the Unity Government continues apace on its attempt to uplift the livelihood of Malaysians, as announced at the launch of the Madani Economy by Prime Minister Datuk Seri Anwar Ibrahim last week, the debate on the best wage structure for the country rages on.

Especially pertinent after a number of announcements by Economy Minister Rafizi Ramli regarding the government’s consideration and proposed implementation of the Progressive Wage Model (PWM), which could be modelled after neighbouring Singapore’s version, wage experts and economists are offering varying opinions on the subject.

To be clear, Singapore unveiled its own PWM since 2012, and according to its National Trades Union Congress, the PWM is based on the key objectives of helping Singaporean workers climb the four ladders of skills upgrading, productivity improvement, career advancement and wage progression, on top of helping companies make better use of and retain their workforce.

Notably, the island nation does not have an official blanket minimum wage structure, except for two sectors, namely for cleaners, where the minimum wage is S$1,000 (RM3,390) per month; and for security guards, who are required by law to be paid S$1,100 (RM3,729) monthly.

However, its Manpower Ministry has outlined the progressive wages (PWS) Singaporean workers are to be paid in a number of sectors, including the landscaping, food services and retail industries.

For example, a local Singaporean working as a cashier has to be paid a minimum of S$1,850 (RM6,277) monthly from Sept 1, 2022, which would increase to S$1,975 (RM6,701) from Sept 1 this year; while a landscape worker would be required to be paid S$1,650 (RM5,599) per month.

Singapore also has a Local Qualifying Salary (LQS) – S$1,400 (RM4,746) – which its Manpower Ministry describes as a determinant for the number of local employees who can be used to calculate a firm’s work permit and S Pass quota entitlement.

Since September last year, firms employing foreign workers who require work permits, S Passes or employment pass holders are mandated to pay PW salaries to local workers covered by the relevant Sectoral or Occupational PWS in the aforementioned cleaning, security, landscape maintenance, and retail sectors as well as in-house workers covered by the PWM, while also remunerating at least the LQS to all other local workers.

Can the PWM be successful here? 

The discussion naturally hinges on whether what Singapore is doing can be implemented here, and what are the benefits of a blanket minimum wage structure as compared to a PWM.

Aside from that, the (business) man on the street could also be concerned as to whether the government has set its sights on making the PWM a mandatory initiative, or would this be optional, perhaps at its nascent stage at least.

As argued by Socio-economic Research Centre (SERC) executive director and economist Lee Heng Guie, the PWM offers more of a winwin solution for both employees and employers, if compared to a blanket minimum wage structure.

By looking deeper into the numbers since Malaysia’s Minimum Wage Order (MWO) was first enforced in 2013, he observes that 2022 marks the fifth time of implementation as the minimum wage rate was reviewed at least once every two years.

“The new minimum wage of RM1,500 per month was fully enforced on July 1, an increase of between 25% and 36.3% compared to the RM1,100 to RM1,200 monthly wage in 2019.

“Over the period from 2013 to 2023, minimum wage has increased by 5.8% per annum from RM900 per month for Peninsular Malaysia and 6.5% per annum from RM800 per month for Sabah and Sarawak on Jan 1, 2013, respectively. However, overall labour productivity increased by only 2.3% per annum for the same period,” he reveals.

As such, Lee says the government is looking into the appropriateness of other wage models to benefit both employees and employers, and he believes the PWM may be an appropriate and feasible substitute wage model to improve the income of low-skilled workers to have a living wage.

Theoretically, a living wage differs from a minimum wage because the former refers not just to the existence of a minimum level of remuneration, but also to a minimum acceptable standard of living, according to the International Labour Organisation.

Therefore, living wage rates are usually higher than the minimum wage rate, especially when the latter has been less frequently updated in line with living cost increases.

While concurring that employees should be compensated according to their skillset, efficiency and education levels, Juwai IQI global chief economist Shan Saeed says the issue of increasing wages and productivity would be best based on a market-driven approach.

He tells Starbizweek this would be best achieved if all stakeholders were to get involved to enhance workers’ productivity to ultimately buttress economic outcomes at the macro level.

“Workers’ efficiency, solid skills and education are major variables in influencing economic growth. In turn, economic expansion and innovation have a direct correlation with strong deliverable outcomes benefiting the masses in improving their living standards and purchasing power,” he points out.

Citing the late Gary Becker, former professor at the University of Chicago Booth School and Nobel Laureate, he says Becker believed that investment in an individual’s education and training is like a business investing into equipment, being the epitome of applying economic analysis to human behaviour.

In addition, he says higher wages allow firms to attract and retain better employees – assuming competitors don’t follow suit and raise their wages as well.

“But there is an important – and often overlooked – second effect. Paying wages that are above the market rate, known within economics as efficiency wages, can also be an important motivating force for a company’s existing employee base.

“The intuition is straightforward: higher wages make a job more desirable. This leads to a larger applicant pool waiting to take over when openings occur and makes it easier to replace another employee. Malaysian companies can follow the similar footprints to achieve desirable outcomes,” says Shan.

Handling a chronic situation

While one can understand the perspective of the SERC when it compares the PWM with the MWO, there are parties who are arguing for the benefits of the MWO before embarking on any “progressive” initiatives.

Even Rafizi has reiterated this week that it is his “job”, through government policy, to prioritise increasing the wages of Malaysians, for them to better cope with rising living expenses.

He emphasised that instead of embarking on new billion-ringgit projects, the unity government has fixed its focus on improving the incomes of Malaysians, echoing Anwar’s warning that the country has been caught in a vicious cycle of high costs, low wages and low profits.

In fact, the argument can be made by looking at Malaysia’s gross domestic product (GDP) per capita over the past 50 years, especially against economies that were considered inferior to it but have since made significant progress, advancing beyond Malaysia’s growth. Two good examples of this, of course, are Singapore itself and South Korea.

For starters, the GDP per capita breaks down a country’s economic output per person, calculated by dividing the GDP of a nation by its population. It is a metric often used by economists to analyse the overall prosperity of a country based on its economic growth.

In an article for Taiwan’s The New Lens, Singaporean writer Roy Ngerng observes: “Up until the late-1970s, Malaysia’s total wages per capita were actually higher than South Korea, and were in fact over three times higher in the early-1970s.

“Today, however, the tables have turned and South Korea’s total wages per capita are about four times higher than Malaysia. The total wages per capita of Czechia and Estonia were also similar to Malaysia’s at one point, but have grown to be about 3.5 times that of Malaysia, while Poland is twice as high.”

On top of that, up until the mid 1980s, Malaysia’s GDP per capita – in US dollar terms – was higher or on par with South Korea, while in the early-1990s, Malaysia’s GDP per capita was also similar to that of the Eastern European countries like Czechia, Estonia and Poland.

“In other words, Malaysia’s economy used to be larger than those countries. However, while the economies of those countries have since expanded rapidly, Malaysia’s GDP per capita stagnated in contrast. Today, South Korea’s economy has grown to three times larger than Malaysia,” says Ngerng.

He says the reason is because Malaysia’s wages have stagnated relative to these other countries, and consequently it has hurt the growth of domestic consumption.

In contrast to many economists, Ngerng believes it is not necessary at this point in time for Malaysia to adopt Singapore’s PWM, but rather it should focus on increasing minimum wage more rapidly.

Wages at other levels in Malaysia are not growing faster because Malaysia’s minimum wage is rising too slowly, and with wage increase at other levels being dependent on the growth rate of minimum wage, the stagnant minimum wage therefore prevents wages from rising across the board.

As a result of Malaysia’s wages stagnating, this has resulted in its economy stagnating as well, he says.

A cursory look at the GDP per capita numbers taken in December 2022 on CEIC Data sees Malaysia posting a figure of US$12,472 (RM56,828). In comparison, Singapore is way ahead at US$82,794 (RM377,000), with South Korea also almost three times ahead of Malaysia at US$32,236 (RM146,883).

Notably, Czechia registered a GDP per capita of US$27,566 (RM126,000), while Estonia and Poland both posted respective figures of US$28,568 (RM130.165) and US$18,222 (RM83,000).

Is a Pwm-tiered subsidy the way to begin?

Perhaps a move that could also be given some thought would be to make the PWM optional to businesses, with the government at the ready-to-subsidise progressive and productivity-linked wage increases, tied in with certain key performance indicators that could be seen to contribute to the country’s GDP growth, of course.

Again, Singapore has put in place a similar structure, a fiveyear plan to subsidise wage increases, so as to provide support for businesses to pay higher wages.

Malaysia could copy such a programme where the government subsidies wage increases but on an annually decreasing scale, so that as companies grow more financially sound, they would be taken off the subsidy programme after a number of years to manage their own wage growth measures.

Sunway University professor of economics Dr Yeah Kim Leng is striking a more balanced view when he says the PWM is definitely worth experimenting here – given the decades-old problem of depressed skilled and unskilled wages, with the exception of chief executives and senior management.

“To be sustainable, wages need to be linked to increases in efficiency, productivity and competitiveness.

“Where there are wage rigidities and labour market failures due to weak bargaining power of employees, inefficient labour market information systems and lack of skills recognition and certification, the government has strong grounds to adopt more interventionist policies such as minimum wage regulations and progressive wage models,” he tells Starbizweek.

Suggesting a way for implementation, Yeah says the government would need to bring industry players together with workers’ unions or representatives to determine basic wages, skills grading or levels and wage ranges for each skill level.

The wage ladders for each industry will enable employees to upgrade their skills and earn correspondingly higher wages along with greater responsibilities, says Yeah, with the other challenge being to link higher skills with higher productivity that enables the company to be more productive and generate better profits for the sustainability of wage growth.

He opines: “A minimum wage will ensure that no worker is paid below a decent living wage thereby enabling the country to eradicate hardcore poverty, while a progressive wage model has the advantage of ensuring that workers are paid productivity-linked wages and to earn progressively higher wages that commensurate with ‘middle-class’ status.

“A well-designed PWM will contribute eventually towards achieving what we see in advanced economies where blue collar workers earn as much or higher than white collar workers.”

Cultural attitudes: A road block to growth?

However, there also exists the viewpoint where Malaysians on average are culturally less inclined to acquire knowledge and new skills or upgrade themselves, something perhaps anyone with recruiting experience would understand well.

If such is the case, how would the government go about justifying increasing the minimum wage more quickly in this catch22 situation?

This has led Joey Gan, market lead for Singapore-based regional corporate consultancy firm Precious Communications Pte Ltd, to remark that even for the citystate, one of the primary challenges in implementing PWM is that many training programmes require a certain level of literacy, basic education, or even certifications, but unfortunately, a significant proportion of workers do not meet these requirements.

“I believe Malaysia may also face a similar challenge, on top of the obvious cost factor for many companies. Moreover, the readiness of workers to upskill and adapt to new opportunities is also a key obstacle.

“Personal development through training largely depends on an individual’s internal motivation. Therefore, for this initiative to succeed, employees would need to undergo a radical change in attitude towards training for upward social mobility,” she says.

While a beneficial step would be to prioritise employees’ welfare by implementing some form of PWM, she believes that replicating Singapore’s approach might not be feasible without comparable government incentives – such as subsidies for training and wage increments – especially for Malaysian businesses already burdened with rising operational costs.

Ergo, Gan says employers might prefer the reverse income tax model, while employees may appreciate a reasonable wage increase that keeps pace with inflation.

Resonating with SERC’S Lee, she notes: “The PWM is a more holistic approach to help our low-wage earners enhance their skills and, in turn, their productivity, so increased wages are the ultimate result of this progression.

“While PWM is not without its challenges, it offers employers better productivity from their workforce, considering the cost, and employees benefit from developing and evolving skill sets over time. In the end, it’s a win-win situation where both employers and employees gain from this approach.”

More crucially, however, she points out that the high productivity and standards in Singapore are a result of both the young and the elderly realising that there is no guaranteed help or support as they age.

This awareness, says Gan, is the major reason that has motivated Singaporeans to work harder and longer to secure a better future, despite the role that the PWM may have played.

“It is essential for our entire workforce, regardless of our wage band, to embrace a growth mindset. Increasing wages goes hand in hand with continuous learning, skill development and improvement.

“To facilitate this growth, it is essential for the government and companies to collaborate and propose people-centric policies that support the development of a highly skilled workforce,” she says.

The Star - StarBiz
By keith Hiew keith.hsk@thestar.com.my

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