Removing Blocks In Professional Service

IN the Asean Economic Community (AEC), the services sector has been recognised as the major engine for growth, contributing 40% – 60% of the gross domestic product (GDP) of Asean countries.

This contribution is predicted to increase to at least 70% in the future, similar to the percentage seen in developed nations.

Professional services are an integral part of the services sector. The classifications in the professional services subsector are shown in Figure 1.

Figure 1

(Source: 25th Productivity Report 2017/2018)

Professional services: Global outlook

According to the Professional Services Global Market Report 2018, the largest region in the professional services market in 2017 is North America, taking up the lion’s share with 37%.

This was largely due to high demand for professional services across industries, such as legal, advertising, accounting and photographic services.

The second largest region was Western Europe (24%), while the smallest region was Africa (4%).

There is a positive trend in professional services where firms are becoming more adept at using social media to source for and interact with clients online. Many firms have found it beneficial to market their services and keep an eye on their competitors in cyberspace.

A good social media presence helps firms to increase their reach, enhancing awareness among potential clients of its existence. It can help firms improve customer satisfaction and relationships too.

More on MPC: The Latest Developments in the ICT Subsector in Malaysia

Professional services in Malaysia

According to the 25th Productivity Report 2017/2018, the professional services subsector comprised 3.9% of the Malaysian services sector’s added value (worth RM24.7 billion), last year.

From 2016 to 2017, the productivity of the professional services subsector increased by 9.7% (to RM79,192).

On the employment front, this subsector contributed 3.5% to the total employment in the services sector last year.

But like most industries in the age of disruption, professional services are facing challenges brought on by rapid technological developments – the accounting industry in particular.

Challenges ahead

Exports are a key driver in our economic growth, but the market for professional services in Malaysia is still primarily domestic. This is of no surprise as this subsector is still populated largely by SMEs.

In contrast, the global professional services market is dominated by large companies, which collaborate to take on big projects.

In particular, inconsistent and contradictory regulations can potentially cause regulatory risks and lead to compliance cost.

“We appear to have a shortage of skilled professionals, but actually Malaysia has a lot of talent, but we don’t focus on optimising our resources collectively. As a result, we have growth, but it is slow,” says Ts Choo Kok Beng, the Professional Services Productivity Nexus Champion for the Malaysia Productivity Corporation (MPC).

For 25 years, MPC has worked towards improving productivity in Malaysia. Some of its efforts for various segments of industries in Malaysia include workshops, training programmes, and consultancy services on how to enhance productivity.

It has also awarded grants and recognitions to exemplary organisations that conduct research projects related to productivity.

At the turn of the millennium, MPC began developing benchmarking and best practices, studying how to enhance competitiveness and innovation at the national level.

Through the collaboration with the Economic Planning Unit (EPU), the Malaysia Productivity Blueprint (MPB) was launched in 2017, to further accelerate productivity growth. Nine priority subsectors were established – one of which is Professional Services.

At the turn of the millennium, MPC began developing benchmarking and best practices, studying how to enhance competitiveness and innovation at the national level.

Through the collaboration with the Economic Planning Unit (EPU), the Malaysia Productivity Blueprint (MPB) was launched in 2017, to further accelerate productivity growth. Nine priority subsectors were established – one of which is Professional Services.

“In other countries such as Japan and Korea, they are more focused on their objectives. In a relatively short time, they have advanced so much because of their unwavering focus. And now Indonesia is beginning to focus on developing talent too,” explains Ts Choo, who is the immediate past president of the Malaysian Service Providers Confederation (MSPC).

“How did these countries accelerate growth? For certain issues, they have a dedicated coordinating ministry that handles the activities of ministries which go towards the same objective. This coordinating ministry will be able to get everybody to focus.”

Looking at the facts

It is important to do research, background checks and perhaps consult some experts in the relevant field before arriving at a decision or conclusion.

In this way, armed with the proper knowledge and understanding, better and impartial outcomes can be achieved, rather than listening to advice of friends, acquaintances or gossip-mongers.

“I’m a Fellow of the Academy of Sciences Malaysia (ASM). I’ve learnt from the clever people in ASM, with all their doctorates, that we must use data and statistics for analysis to produce evidence-based recommendations and solutions.You cannot  analyse situations based on emotions. What you feel is what you feel. Good luck to you!” Ts Choo says candidly.

“Let’s look at education. We have heard a lot of negative comments about our education system over the years. However, we have produced many doctors, until we have run out of places for the doctors to work in.We have produced many competent lawyers, architects, engineers, accountants, technologists and technicians. For a small country, we have produced a lot. The numbers are there.”

“However, they function in their own respective way. When you function in your own respective way, there is no pulling together of resources. Then, it will not be as productive as it could be.”

“According to the department of statistics, 98.2% of our enterprises are SMEs (consisting of not more than 75 employees). Therefore, it is quite natural that we want to focus on the SMEs. Professional services are also a part of SMEs.

“The professional services companies are not big in Malaysia. They are mainly small, but the problem is, many of them are happy with where they are. They are not hungry to grow and expand,” says Ts Choo.  

“As the champion for professional services, I have to figure out how to get them to want to grow and seek new challenges. The impact of technology is so drastic, that if you don’t adapt to the new way things are being done, you are going to be left out.”

Removing blocks that prevent progress

In order to accelerate the growth of professional services, Ts Choo used engineering services as the driver because it cuts across the board and involves every sectors.

He recalls how he had asked the former International Trade and Industry minister Datuk Seri Mustapa Mohamed  to assist him in holding a town hall meeting for 70-90 engineers. The turnout exceeded expectations – 100 came, says Ts Choo.

Prior to the town hall, some background work was done to compiled relevant data and statistics to share with those who attended. They had also obtained information on 10 foreign consulting firms – their turnover, staff strength, productivity per head, and most importantly, their shareholding.

“We had a dialogue. We wanted to find out what was the stumbling block, so that we can transform the productivity of the country’s engineering services. We needed consensus from everybody. We found out what the stumbling block was. We needed institutional reform,” Ts Choo elaborates.

Ts Choo continues: “The Engineers Act 1967 (Revised 2015) controlled the business of the engineering consulting firms. It restricted their capitalisation. The regulations of the Act, allows for only 30% of shareholders to be from non-professional engineers. Most if not all were good enough to serve the needs of the domestic market.’

“They make RM 1-2 million per year, they are happy already. The removal of the shareholding restriction will allow a few to be financially stronger and compete with foreign firms dominating the local market and even venture aboard. GLCs can assist by appointing such firms to be the principal consultants that have the capital to engage experts.”

Mustapa,Ts Choo says, had advised that the next step should be to organise a bigger forum, with all the stakeholders – not only the engineers, but also bankers, lawyers and others.

“If there was consensus, a paper can be prepared and submitted to the government for the cabinet to approve.” states Ts Choo

Moving forward

If there is a will, there is a way. The way forward for professional services looks promising, if they can focus on their objectives, and adopt a growth mindset.

The Malaysia Productivity Corporation (MPC) has started a nationwide productivity movement across all segments of society to create higher levels of awareness and understanding of the importance and benefits of productivity at enterprise level, along with guidance on how to measure and track productivity. For more information on their Productivity Nexus, go to wayup.my. To learn more about MPC, visit mpc.gov.my.