Lessons from "benchmark" countries : Korea & Ireland

Rapid global technological changes have resulted in an increase in the demand for workers with higher education. Not only is this trend identified in OECD countries, but it is also observable in most East Asian countries. In response to the intensification of competition caused by the emergence of China and India, many East Asian countries have to restructure their economies to produce more skilled- and capital-intensive goods to remain globally competitive. This shift in the industrial structure has greatly increased the demand for skilled labor, creating significant skills shortages and mismatches as the workforce try to upgrade their skills level to meet the demand. The problem of skills shortages and mismatches is especially acute in Malaysia as indicated by the Investment Climate Survey Report by the World Bank in 2005 (ICSR 2005). The objective of the paper is to study the problem of skills shortages and mismatches in the Malaysian economy. By making reference to policies adopted by the best-practice countries of Ireland and Korea, the paper suggests various institutional and policy levers that could address the skills shortage problem in Malaysia. Both Ireland and Korea are open economies that have successfully tackled the skills shortage problem faced by their economies and have adjusted their industrial structures to produce higher value-added activities.