An Analysis on Human Capital Development in Malaysia

Topics: Politics of Malaysia, Human resource management, Human resources Pages: 14 (4409 words) Published: March 14, 2011

In current market, SME’s are composed by competitors, regardless of industry. To develop a competitive advantage, it is important that they are truly leveraged on the workforce as a competitive weapon. A strategy for improving workforce productivity to drive higher value for them has become an important focus. SME’s seek to optimize their workforce through comprehensive human capital development programmes not only to achieve their business goals but most important is for a long term survival and sustainability. To accomplish this undertaking, they will need to invest resources to ensure that employees have the knowledge, skills, and competencies they need to work effectively in a rapidly changing and complex environment.

SME’s currently represent 99.2% of total business establishments in Malaysia and provide employment for about 56% of our workforce. SME’s also contribute about 32% of GDP and 19% of the country’s exports. As SME’s are an important agent of economic growth, SME development has been recognized as a priority on the national agenda and many development programmes have been put in place to transform SME’s into competitive, resilient and value-creating entities (Hafsah Hashim, 2009).

Development of human capital in Malaysia SME’s is important towards off great changes in business environment especially in information technology and manufacturing sector. The need of specialist in this field is a must.

In this analysis paper, I will described the important and issues of human capital development in Malaysia SME’s and what are the action of the Malaysian Government will take towards the rapid changes of human capital development especially in SME’s sector.


What is human capital? According Schultz (1993), the term “human capital” has been defined as a key element in improving a firm assets and employees in order to increase productive as well as sustain competitive advantage. To sustain competitiveness in the organization human capital becomes an instrument used to increase productivity. Human capitals refer to processes that relate to training, education and other professional initiatives in order to increase the levels of knowledge, skills, abilities, values, and social assets of an employee which will lead to the employee’s satisfaction and performance, and eventually on a firm performance. Rastogi (2002) stated that human capital is an important input for organizations especially for employees’ continuous improvement mainly on knowledge, skills, and abilities. Thus, the definition of human capital is referred to as “the knowledge, skills, competencies, and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being” (Organization for Economic Co-Operation and Development or OECD, 2001: 18).

The constantly changing business environment requires SME’s to strive for superior competitive advantages via dynamic business plans which incorporate creativity and innovativeness. This is essentially important for their long term sustainability. Undoubtedly, human resource input plays a significant role in enhancing firms’ competitiveness (Barney, 1995).

What is SME’s in Malaysia? Presently, there is no common definition of small and medium enterprises (SME) in Malaysia. Different Agencies define SME’s based on their own criteria, usually benchmarking against annual sales turnover, and number of full-time employees or shareholders’ funds. In addition, present definitions focus mainly on SME’s in the manufacturing sector. The establishment and adoption of standard definitions for SME’s will facilitate better identification of SME’s across sectors, thus enabling more effective formulation of SME policies and implementation of SME development programmes, and provision of technical and financial assistance. It will also allow better monitoring of SME performance and their contribution to the...
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