Malaysia Labour Datafile

Article | 12 Aug 2005 A well functioning labour force is key to economic growth. The charts below display some of the key trends and significant features of both the working population and the unemployed across sex, age and activity. Employment, unemployment and economically active population: 2004 Employment '000; Unemployment '000

Source: Euromonitor International from ILONote: Size of bubble denotes economically active population (EAP) i.e. employed + unemployed

This chart plots unemployed population across the x (horizontal) axis and employed population across the y (vertical) axis. The size of the bubble denotes the total economically active population (unemployed + employed population). It allows the overall size and strength of the labour market to be seen at a glance. A strong labour market is important for economic growth and stability as it is one of the primary factors in potential output i.e. GDP. Asia Pacific female participation in the labour market: 2004 Ranking Country Female EAP: female population 1 2 3 4 5 6 7 8 9 10 14 Malaysia 0.27
Source: Euromonitor International from ILO

Singapore China Vietnam Thailand Kazakhstan Hong Kong, China Japan Turkmenistan Azerbaijan South Korea

0.58 0.53 0.52 0.51 0.45 0.44 0.44 0.42 0.41 0.40

This ratio shows the female economically active population as a proportion of the total female population. The closer the figure is to 1, the higher proportion of women in the

labour market. Female participation in the labour market varies dramatically across countries. Women play an important role in the economy, and in developed countries in particular, it is important that they are fully integrated as populations age and the pool of available labour diminishes. Annual percentage change in number of unemployed: 1988-2004

%
Source: Euromonitor International from ILO

This chart denotes annual percentage growth or decline in the number of unemployed. Changes in unemployment are cyclical i.e. as demand increases businesses take on more workers and unemployment falls. Asia Pacific % aged 60+ who are employed: 2004 Country % of those aged 65+ who are employed 1 2 3 4 5 6 7 8 9 10 Philippines Thailand South Korea Indonesia India Pakistan Japan Malaysia Singapore Hong Kong 50.6 48.8 33.2 30.9 30.7 23.4 20.6 12.9 8.6 5.1

Source: Euromonitor International from ILO and national statistics Note: Malaysia ranking is for % aged 60+ who are employed

This ranking shows the % of those aged 65+ in employment. A majority of developed economies are suffering from ageing populations, which can have negative knock-on effects on the economy. Many need to encourage the older population to work longer in order to avoid a pensions crisis and also to keep the labour market at levels necessary for continuing economic growth. On the other hand, in both developed and developing countries, high old age employment figures could also indicate a lack of pension provision and economic security for the elderly. Employment by category: 2004

%
Source: Euromonitor International from ILONote: A: agriculture, hunting, forestry and fishing; B: community, education, health, social, personal services, public admin and defence; C: construction; D: electricity, gas and water supply; E: finance, insurance, real estate and business services; F: manufacturing; G: mining and quarrying; H: transport, storage and communications; I: trade, motor vehicles and personal and household goods repair, hotels and restaurants; J: undefined sectors

This chart shows the percentage of those employed in each major category. It provides an indicator of the structure of the labour market. When viewed in conjunction with GDP by origin, labour productivity of each sector can also be measured. A high proportion of employment in a sector does not necessarily result in a high economic output of that sector, it may well indicate a lack of competitiveness. Unemployment by Age 1999-2004

'000
Source: Euromonitor International from ILO

This chart shows the age composition of the unemployed population. Unemployment often differs substantially across age groups. Reasons are numerous and depend on the flexibility of the labour market, employment legislation and educational attainment amongst others. For example, it can be harder to dismiss an older worker, as job security may increase with time-served and hence age. Conversely, in a time of increasing

technological advancement and structural change to an economy, an older worker may find his or her skills become obsolete resulting in unemployment.

Malaysia minimum wage delay

Article | 27 May 2008 Although still relatively low on a regional basis, Malaysia is beginning to experience inflationary pressure in 2008 largely owing to rising global prices for oil and basic foodstuffs. While the government's commitment to maintaining price controls on essential goods should help control inflation, this may mean that the government rejects proposals to introduce a national minimum wage, which would have boosted consumer purchasing power. Issue Malaysia's inflation rate is beginning to increase, albeit from a low base:

In March 2008 Malaysia's inflation rate reached 2.8%, up from 2.7% in February 2008; This represented a 13-month high for inflation, which has been kept low via price controls on foodstuffs; This inflation increase is externally led, reflecting rises in global prices for import goods such as oil, wheat, grain and rice; This has revived opposition pressure for the introduction of a minimum wage, which would boost purchasing power particularly among low-income workers. Consumers are beginning to experience mild erosion of purchasing power as high import costs put up the prices of goods not covered by price controls. Importance Malaysia's inflation remains low on a regional basis:

Malaysia's end-year inflation in 2007 reached 2.1%, in comparison to 8.3% in Vietnam, 7.8% in Pakistan and 6.4% in India and Indonesia. This was one of the lowest rates in the region; Inflation rates in selected Asia Pacific countries: 2007

Source: Euromonitor International from IMF

Consumers will not suffer greatly from inflationary pressure, experiencing only mild pressure as opposed to the greater purchasing power erosion experienced elsewhere in the region. This is largely owing to extensive government subsidies on basic goods, including fuel, which have kept prices low relative to the region;

The potential introduction of a minimum wage would therefore shield low-income workers against future inflationary rises, by adding to their purchasing power. Prices are rising sharply among non-subsidised goods and gradually among subsidised goods, as the government adjusts its level of subsidy according to higher import costs. The impact of rising inflation may be felt more by perceptions than actual purchasing power damage, as consumers become concerned about future price increases. Implications Malaysia's government will seek to rein in inflationary tendencies to ensure that domestic demand remains strong:

The government has stated that it will retain price controls, despite the extra state fiscal costs involved in maintaining effective subsidies. This is intended to maintain domestic demand, one of the key drivers of economic growth. Private final consumption expenditure totalled 46.1% of GDP in 2007; However, in the longer term increasing pressure on state finances may reduce the government's ability to finance social programmes and public investment. Government spending rose 17.4% year-on-year in Q4 2007, largely reflecting greater public investment rather than spending on subsidies; However, the government will avoid unnecessary expenditure. As such, the government has rejected proposals by trade unions to introduce a minimum wage, which it had only agreed to consider rather than to implement; This would have set a minimum monthly wage of US$379, boosting consumer incomes. The average gross income of the population aged 20-24 was RM22,073 in 2007, RM24,158 for age 30-34 and RM23,113 for 40-44; Malaysia average gross income by age group: 2007

RM
Source: Euromonitor International from national statistics

Approximately 2.7 million of Malaysia's 27.1 million population would benefit from a minimum wage, mainly being the low-income or unskilled workers; Other countries in the region such as Taiwan, South Korea, Japan, Thailand, India and China have introduced minimum wage legislation although it is not always enforced in the latter two. Consumer purchasing power will not be significantly affected by inflation in the short term but may begin to suffer from reduced state investment in the medium term. Future Scenarios Malaysia's economic growth is set to moderate in 2008, weighing on potential for wage and job growth:

Malaysia's economy is forecast to grow by 5.0% in 2008, down from 6.3% in 2007. However, this is due more to a fall in export demand from the USA than to a decline in domestic demand. The US economy is forecast to grow by 0.5% in 2008, down from 2.2% in 2007; As such, slowing demand for exports will weigh on purchasing power, as the potential for wage growth recedes; This factor will have a greater impact on purchasing power than rising inflation, which the government will continue to keep under control; The government stated in May 2008 that it is not considering introducing a minimum wage in the near term, although it may come under pressure to reconsider if inflationary pressures continue. Domestic demand will moderate in line with economic growth in 2008, although inflation will remain low relative to the region, projected at 2.4% in 2008.

Regional Focus: Rising labour migration within Asia Pacific

Article | 28 Sep 2010 Intra-regional labour migration within Asia Pacific has increased since the late 1990s, driven by globalisation and disparities in labour demand and wage opportunities in the region. Rising labour mobility will have positive impacts on employment, consumer spending and economic growth as migrant workers enhance the flow of remittances, trade and investment in the region. However, it can also be a source of social tensions. Key points As a result of economic integration and rising labour shortages in the region's newly industrialised countries, intra-regional labour migration on short-term contracts within Asia Pacific has increased since the late 1990s. According to a United Nation Development Programme (UNDP) report in 2009, intra-regional migration in Asia accounts for around 20% of total international migration;

The flows of labour migration in Asia Pacific are often from lower-income countries such as India, Indonesia, the Philippines and Vietnam to countries which have labour shortages and offer higher wage opportunities such as Japan, South Korea, Taiwan, Hong Kong and Singapore; Japan and South Korea, however, remain strict on migration due to their emphasis on the importance of maintaining ethnic homogeneity. Foreign citizens accounted for 1.8% and 1.7% of Japan's and South Korea's population in 2009 respectively; Migrant workers play an important role in several Asia Pacific economies such as Singapore and Malaysia. Rising labour migration will improve the region's labour markets and facilitate the flow of remittances, trade and investment between different countries, thus having positive impacts on consumption and economic growth. In the Philippines, the region's largest labour exporter, remittances inflows accounted for 12.2% of GDP in 2009; However, growing migration including illegal labour migration can be a source of tensions between countries and within host countries, undermining the business environment. Flows of migration and remittances in Asia Pacific declined in 2009 as the region's economies were hit by the global recession. Changes in migration trends While the majority of Asia Pacific migrants traditionally went to the West and the Middle East, the largest migration flows are now within the region:

Migration within the Asia Pacific region is characterised by the rising movement of workers from one country to another on short-term contracts as the region's labour markets have become more integrated;

Rising intra-regional migration has been driven by a growing demand for labour from the region's new industrialised countries such as South Korea, Taiwan, Hong Kong, Singapore and Malaysia. Workers emigrate in search of higher income opportunities offered by these countries; Annual disposable income per capita in Malaysia was US$4,007 compared to US$1,274 in the Philippines in 2009; The early flows of labour migration within Asia Pacific were mainly unskilled and semi-skilled workers. Since 2000s, however, the flows of highly-skilled workers have increased due to rising skills shortages. In Singapore, for example, 79.5% of new immigrants in 2009 had post secondary education qualifications, according to national statistics; The share of women among Asian migrants has been increasing due to a growing demand for jobs such as domestic helpers, healthcare workers, as well as workers in the garment and electronic industry. Labour migration sources and destinations Hong Kong, Japan, Singapore, South Korea, Taiwan, Malaysia and Brunei are the major destinations for Asian migrant workers owing to their relatively higher wage opportunities and rising demand for both unskilled and skilled labour. Malaysia, for example, had a net migration the difference between immigrants and emigrants of 93,400 people in 2009; Since the late 1990s, Thailand has moved from being a major supply of labour to the Middle East to becoming a destination country for unskilled migrant workers from its lower-income neighbouring countries. According to the UNDP, the stock of immigrants in Thailand will reach 1.2 million in 2010, compared to 387,500 in 1990; With about 10.0% of the country's total population working abroad in 2009 according to national statistics, the Philippines is considered to be the region's largest labour exporting country. Filipinos take up not only unskilled jobs such as domestic helpers but also semi and high-skilled work as nurses and engineers; Besides the Philippines and Indonesia as the traditional source countries, the flows of migrant workers from Vietnam, Cambodia, Laos and Burma have been increasing. According to Vietnam's Ministry of Labour, Invalids and Social Affairs, there were approximately 450,000 Vietnamese labourers working abroad by 2009, up from about 10,000 people in 1995; South Asian countries including India and Pakistan continue to be net labour exporting countries. India, for example, had a net migration outflow of 652,000 people in 2009. Most Indian and Pakistani low and semi-skilled migrant workers still go to the Gulf region; Generally, immigrants make up a small share of the labour force in Asia overall compared to regions such as Europe but migrant workers have become a critical source of the labour force in several Asia Pacific economies including Singapore and Malaysia. According to The International Organisation for Migration (IOM), migrant workers accounted for 30.0% of Singapore's workforce and 20.0% of Malaysia's workforce in 2009. Stock of immigrants in selected Asian countries: 2005 and 2010

000 people

Regional Focus: Labour Costs Rising Across Asia Pacific

Article | 06 Jun 2012 Labour costs have been rising rapidly across Asia Pacific as the region is moving up the value added chain, thus driving production costs up and posing a challenge to the region's competitiveness. While foreign investments and exports can be hurt, rising wages will encourage consumer spending and economic rebalancing in Asia. The region will continue to be attractive to investors owing to several advantages including its large labour pool with growing productivity and huge consumer markets. Key points

Asia Pacific has traditionally been attractive to investors due to the region's relatively cheap labour and the ability to provide economies of scale. The region has become the world's largest manufacturing centre, accounting for 49.1% of the global total manufacturing production in 2011. Yet labour costs have been rising across Asia Pacific due to growing productivity, inflation, skills shortages and workers movements; The trend of rising labour costs is most visible in China and India, the second and third largest economies in the world in 2011 in terms of GDP at purchasing power parity. The average wage per hour in China grew at an average annual rate of 10.8% in real terms from 2006-2011. This was mainly driven by an average yearly 20.1% increase in labour productivity as well as many Chinese regional government policies to raise wages in order to encourage production and exports of higher value-added goods. It was also due to numerous regional governments in China raising the minimum wage, as part of a broader drive to encourage exporters to produce more sophisticated goods in China. Since the late 2000s, minimum wages have also been raised in many other countries such as Thailand, Vietnam and Indonesia;

Rising wages will push up production costs in Asia, putting downward pressures on businesses' profits and leading to higher prices for products made in Asia. This can affect exports and foreign direct investment (FDI) inflows into the region. More expensive labour may also prompt global manufacturers in Asia to relocate their production to cheaper places. The region attracted a quarter of the world's total FDI inflows in 2010; Consumer spending in Asia will be boosted owing to rising incomes, thus helping to restructure Asian Pacific economies which are used to relying on exports. Consumer expenditure accounted for 51.2% of total GDP in Asia Pacific in 2011, compared to 61.1% for OECD countries; Despite the pay hikes, wages in many Asian countries remain much lower compared to those in advanced economies. The average wage in manufacturing in the United States in 2011, for

instance, was 23.6 times higher than in Indonesia in the same year. Given their large labour pools, growing productivity as well as vast consumer markets, Asian Pacific economies are still an attractive option for manufacturers compared to other regions and countries. Wage hikes across Asia Pacific Many economies in Asia Pacific have seen a rapid rise in wages since the late 2000s:

China and India are among the countries which have seen the fastest growth in labour costs. From 2006-2011, the average wage per hour in manufacturing in China rose by 57.5% in real terms to reach RMB18.5 (US$2.9) in 2011. The average wage in India's manufacturing sector reached Rs37.9 (US$0.8) per hour in 2011, representing a real period growth of 39.0% during 2006-2011; Growth of Wage per Hour in Manufacturing and Productivity in Selected Asian Pacific Countries: 2006-2011 Real Average Annual Change %

Source: Euronomitor from International Labour Organisation (ILO)/Eurostat/national statistics.

Labour costs also went up significantly in Thailand, South Korea, Malaysia and Azerbaijan. In Malaysia, the average per hour wage in manufacturing grew at a real average rate of 3.7% in real terms during 2006-2011 as a result of rising living costs and labour shortages; Japan still has the highest labour costs in the region, with an average wage in the manufacturing sector at 2,000 (US$25.1) per hour as of 2011. The country, however, experienced a slight contraction of 1.4% in real wages from 2006-2011 due to years of economic stagnation and deflation. Sri Lanka and Myanmar had the lowest average wage in manufacturing in the region, at US$0.6 and US$0.3 per hour in 2011 respectively, making them attractive options for manufacturers as wages increase elsewhere in the region;

Countries which also saw a slight decline in real wages are the Philippines and Indonesia, primarily due to inflation and currency depreciation. Since 2010, however, both countries have raised their minimum wages. For instance, the 2011 minimum wage in Jakarta, Indonesia's capital city, increased by 15.4% over the 2010 level, according to national statistics. Rising productivity, workers' demands for higher pay and skill shortages as major drivers There are several factors contributing to the wage rises in Asia Pacific:

Due to a shift of labour from agricultural work into more productive jobs in industry, labour productivity has increased quickly in most Asian Pacific countries, thus leading to wage growth. Backed by strong investment and a robust expansion of the manufacturing sector, China's labour productivity grew quickly at an average rate of 20.1% per year from 2006-2011.

Manufacturing has now become an important driver of many Asian economies such as Thailand as it accounted for 35.1% of the country's total GDP in 2011;

Workers across the region have called for better wages given their countries' healthy economic growth and rising living costs. In countries like Indonesia, Thailand, China, Sri Lanka, Vietnam and Bangladesh, low-wage workers' protests have put pressures on governments and businesses to raise wages. In 2011, Thailand's average wage per hour increased by 3.4% in real terms over the previous year following numerous workers strikes to demand better wages; Since the late 2000s, governments in the region have introduced new labour and minimum wage laws in an effort to protect workers, ease labour unrests and narrow the national income gaps. Given rising discontent among workers, in 2008 China enacted new labour legislation which limits overtime and sets minimum wages, which has led to higher costs for manufacturers; As Asia Pacific is facing an increasingly shortage of skilled labour due to inadequate education and vocational training, businesses must now pay higher wages to attract skilled workers. The engineering designs/services sector in India saw the highest salary increase countrywide in 2011, at 14.4% over 2010 according to trade sources. Impact on businesses and consumers Given the region's position as the world's manufacturing hub, a rising trend of labour costs in Asia Pacific will have important implications for consumers and businesses around the globe:

Investors and manufacturers in Asia Pacific will face downward pressures on their profit margins as rising labour costs lead to higher production costs. This will significantly affect global manufacturers and brands in the garment, automobile and electronics sectors which have major production bases in Asia such as Adidas, H&M, Foxconn, Nokia and Honda; Higher labour costs in Asia will eventually be passed on to consumers worldwide, who will have to pay more for made-in-Asia goods. Despite a slowdown of the global economy, the world's index of consumer prices rose to 214.7 in 2011 (1995=100), significantly up from 171.8 in 2006; Wage rises will however benefit workers in Asia, thus enhancing their purchasing power. Thanks to rising disposable incomes, consumer expenditure in Asia Pacific grew robustly at an average annual rate of 4.6% in real terms from 2006-2011. Rising purchasing power among Asian consumers will in turn benefit consumer businesses in the region; Rising wages will also have a positive impact on income distribution in Asia. Despite the region's strong economic growth, income inequality has been rising and is especially high in countries such as China, Malaysia and Thailand, posing a threat to the country's business environment. Due to existing disparities between regions and ethnic groups, Malaysia's Gini index a standard economic measure of income inequality varying between 0% (perfect equality) and 100% (perfect inequality) rose from 44.2% in 2000 to 50.6% in 2011. Impacts on economies in the region and beyond Rising labour costs will challenge Asia Pacific's competitiveness in labour-intensive manufacturing sector, thus impacting FDI inflows to the region. The region attracted 25.0% of the world's total FDI inflows in 2010, with China and India being among the world's largest receivers of FDI. FDI inflows are traditionally important for Asia Pacific's economies as a source of capital, employment, and technology transfer; Facing higher costs, businesses in the region may relocate their production bases within or outside the region. As labour has become pricier in China, since late 2000s some manufacturers have moved to cheaper sites such as Vietnam, Cambodia and Bangladesh. Economies outside Asia such as Mexico or sub-Saharan countries could also benefit from a potential shift of investments out of Asia;

The region's export sector could also be hurt by increasing labour costs and a loss of investments. Exports have been a key driver of economic growth in many Asian Pacific countries including China, Malaysia, Singapore, Thailand and Vietnam. Total exports made up 84.4% of Malaysia's total GDP in 2011; Asia Pacifics Real GDP and Total Exports Growth: 2006-2011

annual % change

Source: Euronomitor from national statistics/Eurostat/OECD/UN/International Monetary Fund (IMF), International Financial Statistics (IFS).

Domestic consumption will however receive a boost as workers' wages are rising. This will help to rebalance many of the region's economies which have been depending on external demands. Consumer expenditure accounted for 39.9% of China's total GDP in 2011, significantly lower than 61.1% in the United Kingdom, for example; Economic restructuring may encourage emerging economies in the region to shift from low-cost manufacturing to higher value-added products. Countries such as India and China have raised their investments in research and development (R&D) activities, with total expenditure on R&D expanding robustly 35.5% and 91.2% in real terms from 2006-2011 respectively. Prospects As emerging economies in Asia Pacific are moving up to the value added chain, the rise of labour costs is an inevitable trend but the region should maintain its comparative advantages:

Pressure for wage increases will continue to grow in line with economic growth and inflation. The region's real GDP growth is forecast to remain strong at 5.9% in 2012, the highest rate in the world while the inflation rate is expected to ease from 5.7% in 2011 to 4.3% in 2012 as a result of monetary tightening policies; In November 2011 China launched a national five-year plan (2011-2015) which aims to restructure the economy away from low cost manufacturing towards value-added industries. According to the plan, expenditure on research and development will be raised to account for 2.2% of the country's total GDP, compared to 1.5% in 2011. This would fuel more wage rises in China in the long term, while cheaper economies elsewhere in Asia will take on low cost

manufacturing activity; While Asia may see some withdrawals of production and investments as a result of rising labour costs, the region will remain competitive globally due to its large labour pool, growing productivity levels and huge consumer markets. China and India alone had more than one third of the world's total labour force (38.8% of the world's population aged 15-64 in 2011). In addition, countries such as Singapore, Malaysia, Hong Kong and South Korea are likely to remain attractive to investors due to their excellent infrastructure and favourable business environments.

Emerging Focus: Potential of Female Employment in Emerging Market Economies

Article | 23 Feb 2012 Better access to education and global initiatives towards empowering women is benefitting female employment in emerging market economies. Higher female labour participation is playing a significant role in driving economic growth by expanding the labour force, yielding higher disposable incomes for women, enhancing spending power and consumer markets for female-oriented consumer goods. Over the coming years, this could unravel untapped potential and benefit many businesses. Key points

The employed female population in 25 key emerging market economies (EMEs) rose to 707 million in 2011, from 679 million in 2006. However, at 38.3% of total employed population in 2011, the employed female population as a proportion of total employed population in EMEs has remained relatively unchanged since 2006;

Female labour participation rates, however, remain low. On average, EMEs had a female employment rate of 48.6% of working age (15-64 years) female population in 2011. This was only marginally higher than 47.6% recorded in 2006 and significantly lower than the average male employment rate of 75.5% of working age (15-64 years) male population in the same year;

China accounted for 49.2% of the employed female population within EMEs in 2011, employing the largest number of women in the world (348 million). India employed the second largest number of women in EMEs at 94.7 million in 2011, followed by Indonesia (42.2 million), Brazil (41.3 million) and Russia (34.5 million);

Russia and Ukraine had the highest proportion of employed female population among EMEs. In 2011, women accounted for almost 50.0% of the total employed population in these countries. On the other hand, countries in the Middle East and North Africa (MENA) like the UAE, Saudi Arabia and Egypt had the lowest proportion of employed female population among EMEs (12.0-18.0% of total employed population) in 2011;

With better access to education and improvements in wage discrimination legislation, a growing number of women are joining the workforce in EMEs. As a result, average female disposable incomes are rising and women are increasingly having a significant influence on spending patterns. This can benefit businesses across sectors that are particularly targeting this consumer group. Female employment varies across EMEs

In 2011, emerging Asia employed the largest number of women within EMEs. China, India and Indonesia alone accounted for 65.2% of the total employed female population in EMEs as these three countries have amongst the largest populations in the world. In addition, economic, social and political developments in emerging Asia have brought profound changes in the status of women since the early 2000s;

India employed 94.7 million women in 2011 the second largest in EMEs. However, women accounted for only 22.8% of the total employed population during the year, significantly lower than the average of 38.3% in EMEs. Despite improvements in education, many women in India, particularly in rural areas, remain uneducated and work informally in the agricultural sector;

EMEs in Eastern Europe have the largest proportion of employed female population as a result of high female literacy rates, low gender inequalities, equal opportunities in employment and generous maternity policies. In Russia and Ukraine, women accounted for almost 50.0% of the total employed population in 2011 the highest amongst EMEs;

During the same year, women accounted for less than 20.0% of the total employed population of EMEs in the MENA region like the UAE, Saudi Arabia and Egypt. These countries are still governed by patriarchal societies where gender based disparities, particularly in education and employment, are high and in some countries codified by law;

On average, female employment rates in EMEs stood at 48.6% in 2011, significantly lower than 62.9% in developed economies. During the year, Saudi Arabia had the lowest female employment rate within EMEs at 14.7%, followed by Egypt (17.2%), and India (25.0%). On the other hand, Thailand, China and Vietnam had the highest female employment rates in 2011 among EMEs, at over 70.0%. Employed Male and Female Population in Selected EMEs: 2011 % of total employed population

Source: Euromonitor International from International Labour Organisation/Euromonitor International

Barriers for working women Women face widespread challenges in entering and staying in the workforce. As a result, female employment rates in EMEs like India, Morocco, Saudi Arabia, Romania and China dropped marginally between 2006 and 2011 while many others only saw a slight improvement:

Family and social pressures prevent women from either joining the workforce or result in women dropping out of the workforce. Well-qualified women in EMEs like Brazil and China are sideswiped about childcare issues and elderly care. In addition, stereotype discrimination against women in managerial positions exists particularly in China, India and the UAE as women are not seen as having leadership potential;

In the UAE and other Middle Eastern countries, where traditional gender boundaries remain entrenched, women need to exercise caution to maintain their reputations in predominantly male environments. According to the World Economic Forum's Gender Gap Report 2011, the UAE ranked 103 out of 135 countries the highest rank in the MENA region;

Women in many EMEs have limited access to health, education and employment. For example, in India, a majority of females, particularly in rural India, still remain illiterate, as families prefer to educate males to females. Although female adult literacy has improved from 46.0% in 2000 to 55.0% in 2011, it is significantly lower than the male adult literacy rate of 79.5% in 2011;

There are also some barriers around mobility for women in EMEs. Safe commuting has proven to be a challenge in emerging Latin America and Asia. Many women feel unsafe about getting to and from work, particularly if the job entails late evening travel. Female Employment Rate in Selected EMEs: 2006 and 2011 % of working age (15-64) female population

Source: Euromonitor International from national statistics

Potential in working women Empowering women has a multiplier effect that leads to more job growth, stronger domestic economies and higher standards of living:

Between 2006 and 2011, the employed female population in EMEs grew by 4.1% to reach 707 million by the end of the period. An increasing number of women who are actively employed can play a significant role in driving economic growth by increasing productivity, reducing poverty and improving social indicators like health, gender gaps and children's education outcomes;

In Turkey, for example, the low female employment rate (26.1% in 2011) is obstructing the country from becoming a fully-fledged member of the European Union. According to the World Bank and the Turkish government, higher female labour force participation could yield substantial social and economic dividends to the Turkish economy;

The structure of female employment is changing within EMEs, shifting from agricultural and manufacturing jobs towards the service industries. As EMEs continue to drive global growth and women comprise of almost 40.0% of the labour force in these economies, multinational companies are looking at harnessing talents of qualified women to start up, expand and mange their enterprises;

As the pool of working women increases, disposable incomes rise unraveling significant consumer market potential for businesses across sectors that are targeting this consumer group. Between 2006 and 2011, female annual disposable income per capita on average grew by 25.7% in real terms (fixed US$ constant) with economies like Argentina, China, Ukraine and Thailand witnessing over 40.0% real growth during this period;

Rising disposable incomes significantly impacts purchasing power and spending habits in women. Women tend to spend more of their earned income on food, healthcare, home improvement and schooling. Higher wages will also allow for more discretionary spending on non-essentials like clothing and footwear;

In addition, EMEs offer a huge potential to businesses operating in the beauty and personal care market where there is an increasing demand in categories like skin care, hair care, cosmetics and fragrances. Prospects

Between 2012 and 2020, the employed female population in EMEs is forecast to grow by 12.4% on average. By 2020, the employed female population in EMEs will reach 752 million accounting for 37.9% of total employed population in these countries;

EMEs in the MENA region like Egypt, the UAE and Saudi Arabia will see the largest growth in employed female population between 2012 and 2020, at over 30.0%. As seen in the Arab Spring of 2011, women in these countries are now defying gender roles and breaking conservative attitudes by stepping out into the workforce;

China, India and Indonesia will continue to employ the largest number of women among EMEs in 2020 employing 67.2% of the total employed female population in EMEs. However, between 2012 and 2020, China's employed female population is forecast to shrink by 1.2% due the country's one-child policy and preference for a male child;

In many EMEs like the Philippines, Colombia and others in the MENA region, female adult literacy rates are catching up with male literacy rates. The potential of working women will be realised by better education as it helps improve gender parity and change attitudes towards women. This will continue to open up doors into the working world for women across EMEs.

Business Environment: Malaysia

Country Briefing | 22 Jan 2013 Malaysia offers a very competitive business environment thanks to its continuous reform efforts, efficient institutions, flexible labour market and relatively low tax levels. Foreign investment has been strong while healthy economic growth will continue to boost consumer expenditure in the medium and long term. However, rising labour costs, skills shortages, government affirmative actions and foreign ownership limits remain problems faced by businesses in the country.

SUMMARY
Malaysia ranked 12th out of 185 countries in the World Banks Ease of Doing Business 2013 report. It was also the easiest ranked country for getting credit and the fourth most effective country in terms of protecting investor rights. Malaysia ranked 60th out of out of 183 countries in Transparency Internationals Corruption Perceptions Index 2011, although anti-corruption efforts have been reinforced since 2008. The Malaysian government has gradually liberalised its investment laws and introduced incentives for investors in targeted sectors such as electronics and green energy but still maintains some foreign ownership limits. Malaysia has a relatively low tax level, as its total tax rate as a percentage of total company profits was 24.5% according to the Doing Business 2013 report, significantly lower than the East Asia & Pacific average of 34.5%. Driven by a positive economic outlook and favourable investment conditions, foreign direct investment (FDI) inflows to Malaysia surged to RM36.6 billion (US$12.0 billion) or 4.2% of total GDP in 2011. Nevertheless, investors in Malaysia are facing higher labour costs and skills shortage problems. The average hourly wage in the manufacturing sector grew by 19.2% in real terms during 20062011. Malaysia aims to become a high-income country and a developed digital economy by 2020. Government spending on education increased from 5.7% of total GDP in 2006 to 7.5% in 2011. The household possession rate of broadband Internet enabled computer rose to 57.8% in 2011, up from 11.7% in 2006. Total expenditure on research and development (R&D), however, remained relatively low at 0.6% of total GDP in 2011. Backed by rising disposable incomes and

positive consumer confidence, per capita consumer expenditure is forecast to expand at an annual average rate of 3.4% in real terms during 2012-2020.

OPERATING ENVIRONMENT
Continuous reforms for a competitive business environment Malaysia has maintained a business-friendly environment and ranked as the easiest country to get credit and the fourth most effective economy in terms of protecting investors rights out of 185 countries in the World Banks Ease of Doing Business 2013 report. Malaysia ranked 12th out of 185 countries in the World Banks Ease of Doing Business 2013 report, a ranking lower than South Korea (8th) but higher than Japan (24th). The country continues to be the easiest country in the world to get credit thanks to a supportive financial sector and a wide availability of credit information. However, despite some recent improvements, Malaysia still ranks relatively low in the category Dealing with Construction Permits (96th out of 185 countries in the Doing Business 2013 report). For example, a company must complete 37.0 procedures to build a warehouse in Malaysia, compared to the East Asia & Pacific average of 17.0 procedures. Malaysias ranking in the 2013 report represents an upgrade of two positions from its 2012 ranking (out of 183 countries). This is mainly thanks to the countrys reforms to speed up the process of getting construction permits and registering a property. For example, Malaysia successfully reduced time needed for registering a property from 48.0 days in the 2012 Doing Business report to 14.0 days in the 2013 report. As a result, Malaysias ranking in the category Registering Property improved significantly from a 62nd position in the 2012 report to a 33rd position in the 2013 report. Nevertheless, there was a significant downgrade in the category Starting a Business for Malaysia, from 42nd position in the 2012 report to a 54th position in the 2013 report. This was, however, mainly due to stronger reforms undertaken by other countries rather than a deterioration of Malaysias regulatory environment for starting a business. Malaysias economy has posted healthy growth rates since 2010 as a result of a booming commodity-export sector, government stimulus spending and strong domestic consumption. Its real GDP growth rate is forecast to rise to 5.4% in 2012, up from 5.1% in 2011. It is set to fall slightly to 4.7% in 2013. Under its Economic Transition Plan (ETP), an initiative launched by the Malaysian government in 2010 to turn Malaysia into a high-income economy by the year 2020, the government commits to invest heavily in the countrys infrastructure while continuing to reform the countrys business environment. Business confidence, therefore, has been positive amid the countrys positive economic outlook. Chart 1 Ease of Doing Business Ranking 2012 - 2013

Ranking out of 185 countries

Source: Doing Business, World BankNote: (1) Regulations in Doing Business 2013 are measured from June 2011 until June 2012. The data for all sets of indicators in Doing Business 2013 are from June 2011 until June 2012 (except for paying taxes data which refers to JanuaryDecember 2011). (2) Rankings are based on data sets across 185 countries. (3) Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 185 economies. A high ranking means the regulatory environment is conducive to the operation of business.

Malaysia ranked 25th out of 144 countries in the World Economic Forums Global Competitiveness Index 2012, down by four positions compared to the 2011 ranking (out of 142 countries) as other economies improved to move ahead in the rankings. With a supportive financial sector and business-friendly institutional framework, Malaysia scored better than some other countries in the region including Thailand (38th) and Indonesia (50th) in the 2012 rankings. Since the introduction of a new Anti-Corruption Bill and a Malaysian Anti-Corruption Agency (MACC) in 2008, efforts to combat corruption have increased in Malaysia. For example, the government has made use of electronic data-based procurement to make the processes more transparent and speeded up the trial processes for corruption cases. Nevertheless, corruption remains a concern in Malaysia, which is most prevalent in institutions such as the police and political parties. Malaysia ranked 60th out of 183 countries in Transparency Internationals Corruption Perceptions Index 2011, ranking lower than South Korea (43rd) but higher than Indonesia (100th). Chart 2 Global Competitiveness Index in Selected Countries 2012 2013 Ranking out 144 countries

Source: World Economic ForumNote: The Global Competitiveness Index measures the microeconomic and macroeconomic foundations of national competitiveness, taking into account 12 subjects - Institutions, Infrastructure, Macroeconomic stability, Health and primary education, Higher education and training, Goods market efficiency, Labour market efficiency, Financial market sophistication, Technological readiness, Market size, Business sophistication and Innovation.

GOVERNMENT REGULATION AND TRADING ACROSS BORDERS

Strong incentives for investments in targeted sectors but restrictions remain in some others Malaysias FDI inflows reached RM36.6 billion (US$12.0 billion) or 4.2% of total GDP in 2011, compared to 2.8% in Thailand and 0.4% in South Korea. The Malaysian government generally pursues a pro-investment policy and since 2009 has made efforts to liberalise and remove restrictions in investment laws in order to attract FDI. For example, it reduced the Bumiputra-equity requirement the share of ownership for Malaysias indigenous group for new listings of foreign owned corporations from 30.0% to 12.5% in 2009. The government also removed foreign ownership limits for 27 services subsectors in the same year. However, limits and restrictions still exist in some sectors such as finance, telecommunications and logistics. For instance, foreign investors can own only up to 70.0% of domestic Islamic banks and 30.0% of domestic conventional banks. Also, the Malaysian government still holds significant stakes in a number of companies through its governmentlinked investment corporations. Under its ETP initiative, the Malaysian government actively encourages investment in targeted industries such as electronics, medical devices, green energy, machinery and equipment, oil and gas, and transportation equipment. Investors in these sectors can enjoy incentives ranging from tax and regulatory exemptions to public service commitments. Thanks to its reform efforts and a positive economic outlook, Malaysia has seen growing inflows of FDI since 2009. In 2011, the country attracted RM36.6 billion (US$12.0 billion) of FDI inflows, accounting for 4.2% of total GDP in the year, compared to 3.7% recorded in 2010. The level of FDI outflows has been higher than inflows as it reached RM46.7 billion (US$15.3 billion) in 2011, representing a real growth of 5.4% over 2010. Since the 2000s Malaysian companies have increased their investments abroad, especially to regional economies such as Vietnam, Cambodia, China and India. Malaysia has a developed infrastructure including highways, railways, seaports, airports and industrial parks, thus creating favourable conditions for businesses. The country ranked 29th out of 144 countries in the category Quality of overall infrastructure sub-category of the World Economic Forums Global Competitiveness 2012 rankings. Following Malaysias 10th Plan for the period 2011-2015, the government will spend a total of RM2.7 billion (US$0.9 billion) to build and upgrade the countrys infrastructure in order to enhance trade efficiency and logistics systems. Malaysia pursues open trade policies and maintains strong trade relations with other countries in order to support the countrys trade-dependent economy (total exports accounted for 78.8% of total GDP in 2011). The country has free trade agreements (FTAs) with Japan, Pakistan, New Zealand, India, China and Australia as well as some other FTAs under the Association of Southeast Asia Nations (ASEAN). According to the World Banks Ease of Doing Business 2013 report, Malaysia performed better than many countries in the Asia Pacific region in the category Trading across Borders, ranking 11th out of 185 economies. The average time taken to export in Malaysia was 11.0 days, much faster than the East Asia & Pacific average of 21.0 days. The time taken to import was even shorter with 8.0 days, compared to the East Asia & Pacific average of 22.0 days. It took 5.0 documents to export and 6.0 documents to import. The average cost to export a container stood at US$435, remarkably lower than the East Asia & Pacific average of US$923 while the

cost to import a container stood at US$420, compared to the East Asia & Pacific average of US$958. Chart 3 FDI Intensity and FDI Flows 2006-2011 US$ billion / % of GDP

Source: Euromonitor International from International Monetary Fund (IMF), International Financial Statistics and World Economic Outlook/UN/UNCTAD/national statistics.Note: FDI refers to foreign direct investment.

TAX ENVIRONMENT
Relatively low tax rates Malaysia was placed 15th out of 185 economies in the category Paying Taxes according to the Doing Business 2013 report, a ranking lower than Hong Kong (4th) but much higher than Indonesia (131st). Malaysia has implemented a number of major tax reforms including the introduction of a singletier system in 2008 which made the countrys tax system more simple and business-friendly. According to the Doing Business 2013 report, the total time taken for an enterprise to prepare, file and pay its taxes and contributions in Malaysia was 133 hours per year, higher than in Singapore with 82.0 hours but much lower than East Asia & Pacific average of 209 hours. The corporate income tax in Malaysia stood at 25.0% in 2012, remaining unchanged since 2009. Small and medium sized enterprises (those with a capital of RM2.5 million (US$0.8 million) or less) are subject to more favourable tax rates at 20.0% for the first RM500,000 (US$161,290) of taxable income and 25.0% for the rest. The total tax rate as percentage of total company profits was 24.5% for Malaysia according to the Doing Business 2013 report, lower than most countries in the region including Singapore (27.6%) and Thailand (37.6%). The country levies a sales tax similar to value-added tax (10.0% as of 2012) and services tax on certain goods and services. The implementation of the proposed Goods and Services Tax (GST), which will replace the existing sales and service tax, has been put on hold since 2010 for further review by the government. Labour taxes and contributions were 15.6% of commercial profits according to Doing Business 2013, compared to the East Asia & Pacific average of 10.9%. With the existence of an informal sector, tax evasion does occur in Malaysia. According to the countrys Inland Revenue Board (IRB), about 20.0% of Malaysias tax payers fail to submit their return forms to the IRB each year. The IRB has therefore planned to strengthen the collection of tax revenue by launching criminal investigations against tax evaders in 2013 in addition to the current civil remedies available.

Chart 4 Total Tax Rate and Number of Hours to Prepare, File Returns and Pay Taxes in Selected Countries 2011 % of total profits / hours per year

Source: Doing Business, World BankNote: (1) Total tax rate measures the amount of taxes and mandatory contributions payable by the business in the second year of operation, expressed as a share of commercial profits. The taxes included are profit or corporate income tax, social security contributions and other labour taxes paid by the employer, property taxes, turnover taxes and other small taxes (such as municipal fees and vehicle and fuel taxes). (2) Doing Business paying taxes data refers to JanuaryDecember 2011.

TECHNOLOGICAL INNOVATION
Ambitious plans to become a digital economy Malaysias expenditure on research and development (R&D) remains relatively low at 0.6% of total GDP in 2011, which may pose a challenge to the countrys goal to have a developed digital economy by 2020. Malaysia has a fast-growing information and communications technology (ICT) industry, driven by market liberalisation and strong government policy. Recognising the role of ICT in its economy, the government of Malaysia has since 2011 launched a national programme called Digital Malaysia which aims to increase ICT penetration and advance Malaysia into a developed digital economy by 2020. Being based on a public-private partnership model, the programme is expected to generate RM31.1 billion (US$10.0 billion) worth of investments in key projects such as e-payments, cloud computing, e-education and e-commerce. A shortage of skilled labour, however, poses a challenge to the development of Malaysias ICT sector. Malaysia ranked 29th out of 142 countries in the World Economic Forums Network Readiness Index (NRI) in 2012. The NRI measures the propensity for countries to exploit the opportunities offered by information and communications technology. With this ranking, Malaysia scored better than China (51st) but lower than South Korea (12th). In 2011, the share of household possession of mobile phones and broadband Internet enabled computers rose to 93.6% and 57.8% of all households respectively, significantly up from 79.1% and 11.7% in 2006. The rollout of a National Broadband Network (NBN) which provides fibre-based high-speed broadband connection since 2011 will give a further boost to ICT usage in Malaysia. Total expenditure on R&D in Malaysia reached RM5.4 billion (US$1.8 billion) in 2011, representing a growth of 26.4% in real terms over 2006. The share of total R&D expenditure to total GDP, however, remained unchanged at 0.6% since 2006. With this R&D expenditure level, Malaysia fell significantly behind the newly industrialised economies in the region such as Singapore and Taiwan where total expenditure on R&D made up 2.7% and 2.9% of total GDP respectively in 2011. Business enterprise funds had the largest contribution towards total expenditure on R&D so far, making up 85.8% of all R&D expenditure in 2011, whilst

government funds comprised only 4.2%. Under its investment laws, Malaysia provides a range of incentives to companies which provide R&D services to Malaysia including for example, a fiveyear income tax exemption. Chart 5 Total Expenditure on R&D by Category 2006-2011 % of total expenditure on R&D

Source: Euromonitor International from EUROSTAT, UNESCONote: R&D refers to research and development.

LABOUR AND EDUCATION

Flexible labour market During 2006-2011, Malaysias average hourly wage in the manufacturing sector grew by 19.2% in real terms, resulting in higher costs for businesses. Adult literacy rates in Malaysia have increased steadily to reach 93.5% of the total population aged 15+ in 2011, up from 91.5% in 2006. As part of efforts to transform Malaysia into a knowledge-based economy, the government has prioritised education, as government spending on education grew at an annual average rate of 11.3% in real terms during 2006-2011 to reach RM66.2 billion (US$21.6 billion) by the end of the period. The share of government expenditure to total GDP also increased accordingly from 5.7% in 2006 to 7.5% in 2011. The number of students in higher education was 1.0 million in 2011, up from 0.7 million in 2006. There were 216,334 graduates in all programmes in Malaysia in 2011, an increase of 2.5% over 2006. The discipline with by far the highest number of graduates was Social Sciences, Business and Law with 65,773 graduates (31.2% of the total number of graduates) in 2011, partly due to higher wage levels associated with these professions, while the lowest number was graduates in Agriculture with 2,321 (0.2% of the total number of graduates). Despite the increases in the number of higher education students and graduates, Malaysia continues to face a severe shortage of skilled labour, especially in the countrys key sectors such as ICT, financial services, energy and construction. This has been due to a brain drain problem as well as a mismatch between the knowledge provided by education institutions and market demand. Each year, thousands of Malaysian graduates and professionals move to other countries such as Australia and Singapore in search of better work opportunities. Malaysias growth potential, therefore, is currently hindered by a lack of skilled labour.

Chart 6 Number of Higher Education Students and Adult Literacy Rate 2006-2011 000 / % of population aged 15+

Source: Euromonitor International from UNESCO/national statistics.

The total economically active population in Malaysia was 12.6 million in 2011, of which 3.0% were unemployed. The countrys unemployment rate was therefore relatively low compared to some other countries in the Southeast Asia region such as Indonesia (6.6% in 2011) and the Philippines (7.0% in 2011). Malaysias youth has the highest rate of unemployment, the 20-24 age group was by far the largest in 2011 at 36.7% of the total unemployed population. This partly reflects the mismatch of education quality and labour market demand. In 2011, the Trade, Motor Vehicles and Personal and Household Goods Repair, Hotels and Restaurants sector employed the largest proportion of the population (24.1%). The Community, Education, Health, Social, Personal Services, Public Admin and Defence sector saw the biggest increase in employment, from 17.0% of total employed population in 2006 to 18.6% in 2011. During the same period, employment in the Agriculture, Hunting, Forestry and Fishing sector declined the fastest from 14.6% to 13.8% of total employed population. This is because the agriculture sector has lost its importance in Malaysias economy which is moving towards higher value-added manufacturing and services. Malaysia has a relatively flexible labour market which allows employers to give trial periods and impose no limits on short-term employment contracts. According to the World Banks Employing Workers report 2013, the average severance pay for dismissing a worker due to redundancy in Malaysia was 17.2 weeks, remarkably less costly than in Indonesia (57.8 weeks), for example. The average hourly wage in the manufacturing sector in 2011 in Malaysia was RM13.4 (US$4.4), lower than in Singapore (US$17.4) but higher than in Thailand (US$1.6). During 2006-2011, Malaysias average hourly wage in the manufacturing sector increased by 19.2% in real terms, among the highest rates in the region, driven by rising living standards and workers demand. In an effort to protect low-income workers, the government of Malaysia introduced in May 2012 for the first time a minimum wage law which stipulates a minimum salary of RM900 (US$290) per month for private sector workers in Peninsular Malaysia and RM800 (US$258) for workers in Sabah and Sarawak. Rising labour costs will result in a higher cost of doing business in Malaysia. In 2011, Malaysias labour productivity reached US$23,316 per person employed, representing a robust growth of 49.5% over the 2006. Amid the global economic crisis of 2008-2009, labour productivity in Malaysia contracted by 14.9% year-on-year in 2009 but it has increased impressively again at 13.5% in 2010 and 13.1% in 2011 as a result of the countrys strong economic recovery. Nevertheless, Malaysias labour productivity remains lower than in South Korea where the figure was US$41,321 per person employed in 2011. Chart 7 Employment by Industry 2011

% of total

Source: Euromonitor International from International Labour OrganisationNote: Undefined sectors refers to activities not adequately defined elsewhere in the other categories.

CONSUMER LANDSCAPE
Consumer spending increasing owing to positive economic prospects Young adults (aged 18-29) are the major driver of Malaysias consumer market as they made up 21.5% of total population in 2011. Consumer confidence has been high in Malaysia since 2009 owing to the countrys strong economic growth and positive job prospects. As a result, total consumer expenditure rose to RM452 billion (US$148 billion) in 2011 while per capita consumer expenditure reached RM15,846 (US$5,178), representing a real growth of 6.0% over 2010. Backed by Malaysias healthy economic growth, per capita consumer expenditure is forecast to expand at an annual average rate of 3.4% in real terms during 2012-2020 to reach RM21,948 (US$7,099) in real terms by 2020. In 2011, the proportion of spending on discretionary items in per capita terms (everything except spending on food and non-alcoholic beverages and housing) was 69.8% of total consumer expenditure, remarkably higher than 54.2% in 2006. Although discretionary spending is increasing, Malaysian consumers still spent most on food and non-alcoholic beverages, at 19.8% of total consumer expenditure in 2011. Per capita annual disposable income stood at RM16,011 (US$5,232) in 2011, an increase of 33.3% in real terms over 2006. With this income level, Malaysian consumers earn on average more than their Chinese counterparts (US$3,061 in 2011) but less than South Koreans (US$12,453). The savings ratio stood at 8.5% of per capita annual disposable income in 2011, a level that has gradually declined since 2006 when it was 9.0%, as a result of improved consumer confidence. Young adults (those aged 18-29) are the largest consumer segment in 2011, totalling 6.1 million or 21.5% of Malaysias total population in the year. By 2020, however, middle youth adults (those aged 30-44) will overtake young adults to become the most dominant consumer segment as it is forecast to account for 22.3% of total population by then. Driven by rising disposable income and rapid urbanisation, Malaysias consumer landscape provides significant

opportunities for consumer businesses in a wide range of sectors, especially discretionary goods and services such as household durables, transport, communications and leisure. In the medium and long term, elderly consumers will grow in importance as the population is ageing at an accelerating pace. This will create new opportunities for businesses in sectors such as health goods and medical services. Chart 8 Consumer Expenditure by Type 2000-2020 US$ per capita

Source: Euromonitor International from National statistical offices/OECD/EurostatNote: (1) Data for all years is in fixed constant US$; 2015 and 2020 data refer to forecasts. (2) Other goods and services refers to consumer expenditure on Alcoholic Beverages and Tobacco, Clothing and Footwear, Household Goods and Services, Health Goods and Medical Services, Transport, Communications, Leisure and Recreation, Education, Hotels and Catering and Miscellaneous Goods and Services.