Engineers Still in Demand, But Take Pay Cuts

Posted on January 1, 1999 
Filed Under Julian, Nikkei Electronics Asia

Engineers are still in demand in Malaysia, but their incomes may have shrunk as result of the economic crisis and slump in the electronics industry in the last year and half.

A recent survey by the Institution of Engineers Malaysia indicated that average salaries dipped by between 6 and 20% since the crisis began.

About half of the 1,250 survey respondents said they were affected through cuts in salaries, bonuses, increments and benefits, while 3% said they were unemployed as a result of the crisis.

However, the other half stated they were completely unaffected by the crisis.

The association, which represents 14,000 engineers, maintains that Malaysian engineers are still very much in demand both locally and abroad.

IEM president Mohamed Mazlan expects a shortage of 7,000 engineers by the year 2000, as he said the country was still relatively fast-developing.

The IEM started a program to help retrenched and unemployed engineers in September 1997, for which 70 affected members signed on. The low numbers were indicative that engineers could still find jobs on their own.

Engineers, technical personnel and skilled labor are also still in demand in Penang, which hosts a number of multinationals involved in electronic component manufacturing.

“Despite lay-offs by some local companies, such personnel continue to be reabsorbed by other multinationals who have invested well and continue to perform,” said Boonler Somchit, executive director of Penang Skills Development Centre (

Somchit said that employers, however, were more likely to do local inhouse training programs, rather than send staff abroad.

“After the bubble burst, employers were more cautious and with limited budgets they wanted more focused programs geared towards specific skills and increasing productivity rather than general administrative and services-type programs,” he said.

The PSDC trains engineers, technicians and production workers from various multinational and local manufacturers. Since 1989 it has conducted more than 2,000 courses attended by more than 37,000 participants.

Somchit said the crisis also had its upside by affording a “correction” to the manufacturing industry in Penang, which was marked by rampant job-hopping and uncontrolled wage increases.

“Employees now are more willing to take pay cuts, forgo overtime and retrain, rather than change jobs for better wages. Fresh graduates also can’t afford to be choosy,” he said.

Somchit said wage rises are now more likely to commensurate with productivity increases. “The manufacturing industry in Penang will be better for it once the crisis is over,” he said.

Penang was struck by a rash of retrenchments particularly among disk drive manufacturers in 1998. SyQuest Technology Inc and Read Rite Corp shut down their plants affecting more than 5,700 staff, while Seagate Technology Inc slashed 2,200 staff from its payroll.

Malaysia’s economy is currently mired in its first recession in 13 years, and the government is projecting a modest 1% growth in 1999.

Analysts say the 34% depreciation of the ringgit against the US dollar since July 1997, hinders Malaysia’s attempt to raise the value-added in its manufacturing processes. Foreign multinationals now pay less for labor, power, water, taxes, material and equipment sourced locally.

This leaves the local electronics industry still stuck in the rut of being a cheap labor source for high volume manufacturing, with less likelihood of manufacturers transferring capital-intensive technology and setting up design and research and development operations within existing plants.

Controversial currency controls introduced in September 1997 have also increased the administrative burden among some manufacturers and may have already undermined long-term confidence in the business environment in Malaysia.

Published in Nikkei Electronics Asia, Jan 01, 1999

by Julian Matthews, Malaysian correspondent


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