Human Capital in Malaysian SMEs: HR Practices, Uniqueness, and Value

Government Policy

The Malaysian government has a long history of planned economic development, namely through three critical policy plans; the New Economic Policy (NEP), National Development Policy (NDP), and National Vision Policy (NVP) (Ong et al., 2010). The present conceptualisation for economic development is contained in the recent ‘SME Master Plan’ (2012-2020). As a consequence of the Asian financial crisis of 1997, the Malaysian government has changed focus and recognised the value of the SME sector as a key means to insulate the economy from its previous vulnerability to external global shocks, in particular by reducing an overreliance on foreign direct investment (Ong et al., 2010; Ahmed et al., 2011). Allied to this, in aspiring to achieve a ‘developed nation’ standing by, or before, 2020 the Malaysian government has also refocused attention on the human capital requirements of the nation (Hashim et al., 2005). The SME Master Plan sets out six specific growth areas for SME development and performance improvement, one of which centres upon human capital development. The plan notes that the Malaysian workforce typically lacks job readiness, has low utilization of existing training, and typically receive non-competitive rewards and benefits. The government’s intention is to increase human capital levels and intensity across the SME sector to enable innovation as a key driver of enhanced economic growth across the economy. At a macro-level the government objective is to broaden the employment base and increase average per capital income in an attempt to achieve the status of a high income economy. At a more micro-level, however, very little is known about the actual in-firm processes which can potentially drive economic growth in Malaysia (Hashim et al. 2005). Similarly there is limited knowledge of the existing human capital levels or requirements of SMEs and how they may potentially help or hinder this objective (Garengo and Bernardi, 2007).