Overcoming the Economic Slump and Unemployment


*All views expressed are entirely the interviewee’s and do not represent any institutions. 

In conjunction with FLY’s July theme of Covid-19 and the New Normal, FLY: Malaysia’s journalism department reached out to Mr Nicholas Khaw, an Economist at Khazanah Nasional Berhad to share his insights on one of the most concerning phenomena to youth and society as a whole: unemployment and the new way forward post Covid-19. In addressing these issues, Nicholas offered his two cents of advice for youth today in embracing the challenging times ahead from his own lens and experience. 

The journey of a  curious young rebel to humble Harvard beginnings

Nicholas, or as he would like to be referred to as Nick, was a JPA scholar, where one would normally envisage obedience as a distinguishing trait. Nick jokingly remarked that he was one of the rebels in class which prompted his teachers to place him in the school debate team. After completing his secondary studies, Nick proceeded to apply for Harvard and successfully made his way into the Ivy League. He recalled the amazing opportunities Harvard offered to him in his undergraduate and postgraduate times there. During undergraduate studies, Nick quickly learned the meaning of humility considering the sheer amount of bright talents he was being surrounded and was grateful for these opportunities as he was able to engage in thought-provoking discussions with his classmates. As he put in words, “Learning from people who are smarter than you is invaluable.” To pursue his interest further in Economics, Nick eventually took up his Masters in Public Administration in International Development at Harvard Kennedy School, where he narrowed down towards economic development studies. 

Most of his economic interest is the interplay of economic history and how it impacts economic outcome today. He quoted an example with a paper written by Paula Giuliano, Nathan Nunn and Alberto Alesina that studies how land fertility can affect the technological tools used on those lands which affects gender equality across generations and how the nature of the land can create a long-term cultural impact today. 

When Nick returned to Malaysia, he was placed in the Economic Planning Unit where his work mainly involved formulating government policies, leaning more towards social welfare. Today, Nick is the Director of the Research Division of Khazanah Nasional Berhad, where his role includes looking up research for Khazanah’s investment. A large part of it includes helping the dual fund structure of Khazanah – the strategic fund and commercial fund to think through their investment strategies as well as analysing the possible risks and returns for these funds. 

Covid-19, The Economy and Unemployment

 When asked about his views on the current state of Malaysia’s economy, Nick expresses that there is no certainty to the future and at best, most of us can only make educated guesses which are hypothetical. However, he notes that while shops are reopening, this is not the only factor to ascertain if the economy is going to do well in the future. Another factor to look into, for example, is the work resumption rate ; if more businesses are shutting down and not reopening, this may make the economy worse off. Other than that, if people are spending less and are saving for the future due to uncertainty, this will in turn affect the velocity of money, thus further worsening the economy.  Nick elaborated further how the Malaysian economy stands to lose out in this pandemic, as international tourism is currently put on hold and business deals can not be made due to restricted air travel. With more than 60% of the economy comprising the service sector, this is an unsettling situation for us.

 As Nick puts it, the pandemic has opened our eyes on how Malaysians are very close to living in poverty, from having food on the table to not having any at all. From observation alone, many of us are struggling to make it through on a day-to-day basis, let alone living comfortably. The recently released poverty statistics in Malaysia also renders this true. He expresses how this is a byproduct of an economy that has not done a sufficient role in providing jobs where people can live comfortably. With just a nudge of an income shock, a majority of us are not able to pay for bills and put food on the table. 

 The prevalence of the gig economy in these trying times, in Nick’s opinion, is uncertain to be a net total positive or negative for Malaysians. On one hand, Nick agrees that if push-comes-to-shove and “you need to survive, do what you gotta do”. However, freelancers do not have the same social security like full-timers and they are not based on contracts, he explained. To further the discussion, we asked Nick if settling for freelancing jobs may lead to deskilling of graduates. He answered that it entirely depends on what job is being taken up by the graduate. He believed that there will always be transferable skills or core values that one will learn from jobs that may not necessarily be a person’s first choice. However, if the individual takes up freelancing opportunities that are completely different to what is studied, such as food delivery services and courier, it will eventually lead to deskilling in the long run. In short, a mismatch of skills will happen in both cases but deskilling may happen in one of these instances.

With the premise of the economy laid out, we moved on to identify viable solutions for these issues. While cash handouts and the economic stimulus packages do help alleviate some of the burden for Malaysians, Nick stressed that it is not a favourable long-term remedy. As a proposal, Nick suggested that the nation needs to decide on what type of industry it is steering towards, be it pharmaceuticals or software engineering, before being able to solve the unemployment issue. For example, MITI has identified 5 potential sectors Malaysia may delve into the future, namely, E&E, M&E, aerospace, chemicals and medical devices.

Through our discussion, we were able to relate how developmental economics plays a role in shaping the future of our economy. Nick introduced Nicholas Hausmann’s concept of economic complexity which tells us that the more complex an economy is, the higher the income levels of its people.  The complexity of the economy  depends on the uniqueness of the goods produced and the diversity of exports. If lesser countries produce that specific good, the country producing it will be deemed more complex while the latter tells us that if said country exports a wide range of goods and services, it is also more complex. 

Nick then relates a country’s economy to a game of Scrabble. If Malaysia has a single letter of A or a series of As, the only word it can create is AAAA. However, if all the alphabets are available to be used, a myriad of words can be created. Hence, if we equate those Scrabble pieces with skillsets, we can conclude that the Malaysian economy would be able to have a meaningful market solution to youth unemployment if  the jobs created value skills in which youths are more aligned with. Seeing that Malaysia is heavily dependent on traditional services, we must try to deviate from services which are of lower-added value and seek for our economy to be more complex in nature like South Korea, as an example.

On the issue of unemployment, one of the advice Nick gave to young fresh graduates facing unemployment is to have the eagerness to learn beyond our degree. Whether you are majoring in Economics or any other studies, the ability to draw the connection between other disciplines, be it Sciences or Humanities, improves our understanding of the world. This would in turn largely enhance our skills in finding a solution for a problem at work or in our personal lives. Apart from that, one should also continue to upskill through enrolling in Massive Open Online Courses (MOOCs) or any other platforms available. Another interesting advice was to partake in part time work, be it at your local university’s dining hall or even cleaning the restrooms. Participating in activities that challenge one’s intellectual comfort zone can also be a plus point such as case study competitions or the Chartered Financial Analyst (CFA) Challenge. The value of humility to experience something foreign and new, in his eyes, is important. On the attitude side, resonating with Mark Cuban’s  words, as an employer himself, Nick casually says that “you are there to reduce your boss’ stress”, do not be ‘dramatic’ and to always remember that you play an important role in a team.

 Before ending the session, Nick shared with us his hopes for the future. He walked us through the basic process of establishing a policy. A good policy must not only be theoretically correct to solve the problem at hand, the people must also be able to get behind it and it must be implementable by any agency. While the policies implemented to tackle unemployment are not as rampant as other countries, a policy is a work-in-progress and Nick remains positive that incremental changes happening today is a good sign that we will come to a sound solution.

Journalists: Bryan and Guan
Author: Faith Ling

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