KUALA LUMPUR: Malaysia needs to accelerate the upskilling and digitalisation of micro, small and medium enterprises (MSMEs) to strengthen their contribution to economic growth and ensure workers benefit more from rising productivity, said Nottingham University Malaysia economist Dr Tan Shih-Ming.
He said MSMEs account for about 91 per cent of businesses in Malaysia, employ about 50 per cent of the workforce, and contribute around 40 per cent of gross domestic product (GDP), making them a significant part of the economy.
"So Malaysia has to find ways of upskilling and digitalising MSMEs moving forward so that they could actually contribute to larger economic growth for the country as a result," he said in an interview on Bernama World's programme, "Budget 2027: Malaysia's Growth and Global Competitiveness".
Tan said Malaysia's economic growth was expected to moderate after this year's strong export performance, particularly in artificial intelligence (AI), semiconductors and electrical and electronics (E&E), which contributed to a 30 per cent increase in exports.
He said geopolitical uncertainties, shipping and insurance costs, and potential changes to United States tariffs could affect Malaysia's exports and growth prospects, while a slowdown in the AI sector could also weigh on the country's semiconductor and E&E industries.
He added that Malaysia needed to strengthen its capabilities in semiconductor testing, assembly, design and innovation, as its reliance on external technology could leave the economy vulnerable to international developments.
On wages, Tan said productivity among firms had increased substantially, but workers were not necessarily paid commensurately, with some holding qualifications higher than those required for their jobs.
"The government's minimum wage policy and efforts to raise wages for semi-skilled workers are positive steps, saying workers should receive better pay as their productivity improves," he said.
However, Tan cautioned that wage increases needed to be balanced against the risk of higher prices and inflation, requiring careful implementation of minimum wage policies.
"Economic growth was also uneven across sectors, with AI and semiconductors driving expansion while other industries grew more slowly, meaning workers did not benefit equally from rising economic activity.
"As a result, workers outside high-productivity sectors might not experience comparable wage increases, underscoring the importance of upskilling and aligning the education system with changing industry requirements," he added.
Tan said improving job opportunities and wages would take time and require sufficient investment as Malaysia continued to develop its capabilities in emerging technology sectors.
He added that lower inflation did not mean prices were falling but rather they were rising at a slower pace, while wage growth might still lag behind the rising cost of living.
On cash assistance, Tan said cash assistance under the 2027 Budget could provide short-term relief to households but sustained improvements in living standards would depend on higher wages and stronger productivity among businesses.
"Malaysia needed to build long-term economic resilience against external shocks, adding that upskilling workers and digitalising MSMEs would be important to strengthening productivity and ensuring more sustainable economic growth," he said.
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