Developing Skills for Innovation and a High Income Economy in Malaysia

This study, conducted by the World Bank at the request of the Government, is motivated by the need to understand Malaysia’s progress in facilitating the shift to a knowledge-focused economy. The assessment has three primary objectives related to the ETP’s goal: to assess whether Malaysia’s labor force has the right types of skills to facilitate the transition to a knowledge economy; to point out economic sectors, occupations, educational institutions, and other areas that must be improved to facilitate this transition; and to offer tested, practical policy solutions to address areas of weakness. This study builds on previous consultations and research conducted in Malaysia in several ways:

1. It uses analytical tools to assess skill levels in Malaysia’s labor market, focusing on both the skills of those supplying labor (workers) and the skills needs of those demanding labor (firms).

2. It uses econometric techniques to evaluate why skills mismatches are present in the Malaysian economy and to provide a detailed picture of the skills needs of the economically important NKEA sectors.

3. It uses a simulations approach to estimate the future skills needs of the Malaysian economy.

4. It draws on best practices from around the world and lessons from the quantitative analyses to offer evidence-based recommendations for policy action.