KUALA LUMPUR: Khazanah Research Institute (KRI) has called for the set up of more companies like Malaysia's first chip maker Silterra Malaysia Sdn Bhd to address the presently high rates of skill-related underemployment.
This time around though it needs more capital and ambition to ensure it meets its objectives.
Silterra was created in 1995 to nudge Malaysia higher up the semiconductor value chain from merely being an assembler of chips.
In 2021, Khazanah Nasional Bhd sold the loss-making Silterra to Dagang NeXchange Bhd (DNeX) and Beijing Integrated Circuit Advanced Manufacturing and High-End Equipment Equity Investment Fund Center (Limited Partnership) for RM273 million.
The report entitled "Building a Sustainable Industrial Base: Malaysia's Green Transition" authored by Azfar Hanif Azizi and Yin Shao Loong, examines the challenges faced by Malaysia's industries, such as electric and electronic (E&E), solar photovoltaic (PV) and resource-based sectors, in upgrading technologically and economically.
Among its key recommendations is to modernise state-owned enterprises or incentivise firms to transition into tech-centric sectors to create skilled jobs.
KRI said to address the shortage of talent for high-value, knowledge-intensive jobs and the current underemployment of STEM graduates, Malaysia needs to create companies that can employ these graduates.
"If current prospects for employment are dim, students will avoid studying STEM in university, shrinking the talent supply. This can be addressed through state-owned firms, which have been tried before in the electrical and electronics (E&E) industry (Silterra)."
"However, it failed to expand and upgrade due to a lack of capital and ambition and thus could not continuously absorb talent. Any future attempts at such a venture require a greater willingness by the state to take risks," it said in its report.
KRI suggested that to tackle potential competition issues, companies should be given conditions to meet and follow merit-based standards when hiring and firing, particularly for top executives.
Another way to boost firm creation is by encouraging local businesses to enter the market through trade and industrial policies, such as subsidies, procurement, and managed competition, especially for those already in related industries with relevant skills.
This method encourages multiple entries in the sector and avoids problems of a lack of competition, a common problem when relying on a single state-owned enterprise to drive the industry.
Other key recommendations to upgrade Malaysia's capabilities in E&E and solar include reorienting research and development (R&D) policies to encourage innovation within firms, supported by universities and government research institutions for technology transfer.
It also calls for green policies to be balanced with climate adaptation strategies to ensure industries are resilient to climate impacts.
KRI's other recommendations include exploring new tax measures and using monetary financing to overcome fiscal constraints and implementing affirmative actions to support marginalised groups, including the Orang Asli, in accessing green job opportunities.
These strategies aim to build a sustainable, innovation-driven economy and ensure equitable participation in Malaysia's green industrialisation.