Ringkasan Kajian 2015-2019.v2

MALAYSIA OIL & GAS INDUSTRY WORKFORCE – ARE WE TUNED-UP FOR THE REBOUND

ABSTRACT

This research was carried out to analyse the readiness of the oil and gas industry towards the
rebound and the readiness of the workforce to face the rebound. The research addresses two areas
which are; (1) the industry readiness – the extent with which the oil and gas industry is capable in
employing workers and (2) the workforce readiness – the extent with which the workforce is
competent to be employed. A survey questionnaire was sent out to six hundred (600) individuals
and companies. A total of 295 completed survey questionnaires were successfully collected with
majority of the respondents being Malaysians currently in Malaysia. The respondents consist of 141
employed individuals, 33 unemployed individuals and 121 hiring managers. Furthermore, a second
set of qualitative questionnaires were sent to nine senior management personnel of oil and gas
companies. The survey shows that vacancy openings during the rebound has begun within the
upstream sector. The hiring strategy used by the hiring managers is to hire qualified and competent
workers internally as well as hire those that are readily available in the market and can start work
immediately. However, most of the companies remain cautious when it comes to increasing
salaries. Majority of the companies indicate that they have a training budget prepared, which they
can use for internal staff development. The survey also indicates that despite the early sign of
rebound, unemployment in the oil and gas industry still exists and companies are selective in hiring
back workers. Due to this, there is still room for reskilling and upskilling to be taken up by the
affected workers, either on their own or through a government funded program. Despite willing to
come back at a lower compensation rate or at different job level, those that have the relevant
industry competencies stand a higher chance to be rehired earlier, to fill up the critical vacancies
available in the three oil and gas subsectors (upstream, midstream and downstream).

Keyword: Oil & Gas Industry, rebound, readiness, reskilling, upskilling.

INTRODUCTION

This report highlights the analytical findings based on a survey data conducted by the Malaysian Oil
and Gas Services Council (MOGSC) in 2018. The research was done to provide support and assistance
to Malaysian oil and gas companies (operators and service providers including training institutions)
to prepare them for the rebound. Analysts are projecting a better outlook for the oil and gas
industry, in view of a more stable crude oil prices at above US$60 per barrel, stronger crude
demand leading to larger inventory drawdown, as well as sustained disciplined production cuts by
Opec and non-Opec members throughout 2018 and beyond (MIDA,2018). Evidences of a rebound
have been mentioned by many industry analysts and researches (The Star, 2018), such as:

i. The recent oil price retrenchment from US$70 per barrel to US$62 per barrel was not
surprising due to the strengthening of US dollar and rising US output, according to Kenanga
Research.

ii. With the anticipation of better oil prices, Petronas is increasing its capex spending by 24%
to RM55bil this year with the oil price assumption of US$52 per barrel, according to
Kenanga Research.

iii. The higher capex spending for 2018 followed Petronas’ financial year 2017 (FY17) core net
profit increase of 27% to RM46.6bil, amid higher crude oil prices and largely successful cost
reduction initiatives, as highlighted by AmInvestment Bank.

iv. As asset utilisation rates have begun to improve, charter rates are expected to have
bottomed out even in the absence of any upward trajectory at this juncture, as highlighted
by AmInvestment Bank.

Another Market Research Report, “Malaysia Oil & Gas Q4 2018”, by Global Information, Inc. (GII),
indicated that Malaysia's long-term crude oil production is being hit as investment in deepwater
exploration and production is curtailed amid low oil prices. However, several large-scale gas
projects are materialising and a string of projects will boost Malaysia's natural gas production over
the coming four years (Global, 2018).

Malaysia’s first foray into oil and gas commenced over a century ago, with the first oil well being
drilled by Shell in Sarawak, East Malaysia in 1910. In 1975, the Petroleum Development Act (PDA
1974) came into being.

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With this Act, a wholly owned government entity was formed with exclusive rights to all the oil and
gas resources in Malaysia- and thus PETRONAS, was born (PricewaterhouseCoopers, 2016). After
Indonesia, Malaysia is the second-largest producer of petroleum and other liquids in Southeast Asia.
Most of Malaysia’s oil comes from offshore fields. Petroleum and other liquids production (including
crude oil, lease condensates, natural gas liquids, biofuels and refinery processing gains) in 2016 was
estimated at 744,000 barrels per day (b/d), a 15% increase from a recent low in 2013, but down
from the country’s peak production of 842,000 b/d in 2003 (US Energy, 2017).

After Qatar and Australia, Malaysia is the world’s third largest exporter of liquid natural gas (LNG)
in 2016. The country’s growing domestic demand and regional gas imbalances in the past few years
prompted the country to open its first regasification terminal as another supply source (US Energy,
2017).

Petronas has built a refining and petrochemicals integrated development project (RAPID) located at
the southern tip of Johor, Malaysia. This project includes a 300,000 b/d refinery that the industry
expects will turn Malaysia from a net oil product importer to a net oil product exporter once it is
operational. In early 2017, Saudi Aramco entered into a joint venture with Petronas, which will
help the refinery to be ready in 2019. The RAPID facility will be Malaysia’s first refinery to process
diesel and gasoline that meet the Euro V standard, which lowers emission levels (US Energy, 2017).

With the positive outlook from market analysts on the rising of oil prices for the year and the
increase in offshore activities, the Malaysian oil and gas companies are looking forward to gain new
projects and secure profitable contracts that can generate growth and expand their capability to
employ new workers. The oil and gas industry has crawled and progressed forward since the 2014
oil price collapse, but industry analysts see growth on the horizon, including the potential to
reclaim some of the jobs lost when upstream operations were put to a minimum or mostly halted.
The issue now is, who will be willing to work in those jobs and what will be the strategy of the
hiring managers? Is the industry ready to offer salary, wages and benefits that can attract the
workers?

Many workers lost their jobs during the oil and gas crisis. More than 2,153 workers from the
petroleum sector were retrenched and they could come back on-line if growth projections for the
industry hold to current form. While there are more than 40,000 workers affected, the price of
crude is now at 70 bbl and the increased global demand could get the industry restarted. Are the
retrenched workers willing to come back and be part of the oil and gas sector? Did the workforce
reskill or upskill themselves during the retrenchment period? In response to this problem, our
survey sought to analyse the opinion of the hiring managers and individuals from the workforce of
the oil and gas sector. The survey was carried out on two types of workforce – those who are
employed and unemployed – regarding their readiness to participate in the oil and gas sectors
(upstream, midstream and downstream). As for hiring managers and senior decision makers, the
questions were focused on their hiring strategy to fill up vacancies and the types of training
(reskilling or upskilling) offered to employees under their training budget.

The research was carried out with the specific objectives as stated below:
a) To analyse the readiness of the oil and gas industry towards the rebound
b) To analyse the readiness of the oil and gas workforce to face the rebound

The research addresses two areas, which are:
a) The Industry Readiness – The extent with which the oil and gas industry is capable in
employing workers
b) The Workforce Readiness – The extent with which the workforce is competent to be
employed

The industry’s readiness is gauged from the hiring manager’s responses on the survey questionnaire.
The hiring managers are from oil and gas companies. The following are the key elements that are
drawn from the survey:

i. Number of Vacancies
ii. Hiring Strategy
iii. Company Compensation vs Market

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The workforce’s readiness is gauged from an individual’s point of view. The individuals are those
who are currently working or have been retrenched from the oil and gas companies. The key
element that are drawn from the survey is career sustainability in oil and gas within 5 years. The
research focuses in Malaysia and all areas that are defined under the oil and gas industry. The oil
and gas industry are divided into three (3) sub-sectors which are upstream, midstream and
downstream. It covers activities related to oil and gas production from exploration, until
transportation of oil and gas to the refinery of petroleum distil. Activities related to refinery and
petrochemical processing is NOT INCLUDED in this research. This research will also NOT INCLUDE
industries or Job Area that supports oil and gas such as NDT, Heating, Ventilation & Air Conditioning
(HVAC), Welding, ICT, Telecommunication, Retails, Logistic, Chemical, Tourism and Hospitality,
Procurement, Human Resources Job Area and Occupational Safety, Health and Environment (OSHE).

METHODOLOGY

The methodology used for this research is online survey using questionnaire. The process involved
are (1) development of the research instrument which is the survey questionnaire, (2) data
collection and (3) data analysis. The survey questionnaire was developed in four stages such as
selection of Malaysia Occupational Skills Qualification Framework (MOSQF) as the model
competency framework; drafting of initial survey questionnaire for the industry experts to validate
during the focus group meeting; validation of survey questionnaire by focus group and enhancement
of survey questionnaire based on the outcomes of the focus group.

a) Data Collection

The survey questionnaire (Survey 1) was prepared in English and developed online using a survey
platform. The link for the second draft was shared to the Focus Group participants on 26th
September 2018 for review and to gather any additional feedback. Once reviewed, the survey
questionnaire was distributed to individuals and companies from the oil and gas industry on 27th
September 2018. The survey questionnaire distribution focused on oil and gas industry individuals
and companies in Malaysia. An initial target of 300 responses with 60% coming from Individuals and
40% from Hiring Managers was set. A total of 295 completed survey questionnaires (98.33% response
rate) were successfully collected with majority of the respondents being Malaysians currently in
Malaysia.

A set of qualitative questionnaires (Survey 2) was sent out on 19th October 2018 to complement the
quantitative set of data that has been collected. The second set of questionnaires targeted Senior
Managers and above in the Malaysian oil and gas industry, with open-ended questions within the
scope of the research. A total of 9 responses were collected.

b) Data Analysis

After the survey questionnaire was collected, the data was analysed and the result of the data
analysis was validated by a validation panel. A qualitative comparative analysis (QCA) has been
used to analyse the casual contribution of different conditions to the outcome of our interest.

c) Validation of data analysis results by Focus Group

On 20th October 2018, six members comprising the validation panel convened to validate the
findings and the recommendations of the research. The validation panel consisted of participants
from the Focus Group who are from various subsectors of the oil and gas industry. Their tasks were
to validate the findings and to provide relevant feedback to the recommendations given in the
report. The panel deliberated on the findings based on their experiences and feedback received
from the field. The final findings and recommendations are the outcome of the validation of the
panel.

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RESEARCH FINDINGS
This section presents the data analysis and discussions gathered from the focus group based on the
data collected from the online survey questionnaire.
a) Background of Survey Respondents
This research focuses on the oil and gas industry in Malaysia with respondents comprising 93.56%
Malaysians and 6.44% non-Malaysians, presumably expatriates and those who are of permanent
residence; that were from three (3) categories.

Table 1: Oil and Gas subsectors of Respondents
Referring to table 1, the data collected gives a good representation coming from the hiring
manager’s perspective regarding their knowledge and understanding of the industry’s rebound
status. Their responses are substantial to achieve the overall understanding of the oil and gas
industry readiness for the rebound.
The highest number of total respondents comprised those between the age of 30 to 44 years, which
represents the working age with two-thirds of them having 6 to 15 years of working experience. The
respondents also comprised both males (86.10%) and females (13.90%). The female representation
in this survey are mostly from the management and executive level positions.
Majority of the oil and gas workforce are permanently hired (45.39%), while 39.72% of them are
contract workers and another 14.89% are hired on project basis. Survey data discovered that the
majority of the unemployed individuals (57.57%) have been unemployed for more than 1 year,
followed by those who have been unemployed quite recently, between 1 to 3 months. The workers
who are unemployed for more than 1 year may be of those categorised as retrenched workers,
while for those who are unemployed recently, may be of those who are working in oil and gas on
contract basis.
Figure 1 shows that the majority of the unemployed individuals are among those having a
Bachelor’s Degree (30.30%) followed by Diploma or Diploma Kemahiran Malaysia Level 4 category
(27.27%). This indicates that most of the high-end jobs were affected by the oil and gas crisis. This
finding is in line with the data from the Department of Statistics Malaysia on the oil and gas
industry workforce, whereby the managerial and professional category of workers registered
highest, followed by technicians and associates.

Figure 1: The highest qualification / competency level of unemployed individuals

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b) Competency Level
Survey data from Table 2 shows that the majority (49.07%) of the employed workers are holding
executive positions and their qualification and competency level.

Table 2: Position and Qualification / Competency Level of Employed Individuals
(Based on Individuals Currently Employed in the Oil & Gas Subsector – 108 respondents)

This is supported by survey response from hiring managers that requires candidates for Management
and Executive positions to have a minimum qualification or competency level of a Bachelor’s
degree. Supervisors or Senior Technicians are required to have a minimum of Vocational and
Technical Certificate or Sijil Kemahiran Malaysia Level 1, 2 or 3. Foremen or Technicians are
required to have a minimum college Diploma or DKM Level 4.

In terms of competency enhancement among the unemployed, 63.64% did not partake in any
upskilling and 75.76% did not take any reskilling efforts during their unemployment period. The
finding shows that the majority of them have not taken any effort to enhance their competency.
Those who had taken training to reskill and upskill themselves did so through their own self-funding
(84.85%) and took certifications related to the oil and gas industry field only. Those who are self-
funded choose to reskill and upskill themselves and stay within the industry instead of moving out.

This feedback could also suggest that the respondents may want do reskilling and upskilling to a
new industry if they have other sources of funds. This is because a high number of these individuals
did not receive any funding from other sources such as sponsored programs from government bodies
or organisations to partake in upskilling and reskilling training. Another possibility of not taking any
opportunity to reskill or upskill is because they are already competent in their field of work and
have no plan to venture into other industries, even though they have been retrenched or their
contract has ended.

c) Industry Rebound

A large percentage of the companies (63.10%) did not have critical vacancies in the next 3 months.
The companies that do have vacancies (36.90%) listed 152 vacancies in the upstream subsector,
followed by 65 vacancies in the downstream subsector and 3 in the midstream subsector. At this
early stage, the data indicates that despite most of the companies did not have any vacancy in the
next 3 months, the upstream sector is the first to react to the market rebound with the most
vacancies listed.

The question on employee turnover rate in a company can be quite a sensitive one. Figure 2 shows
that 32.23% of the companies have an average employee turnover rate between 0 to 10%, followed
by 19.83% having between 10% to 20% of employee turnover rate. This is indicative that employee
retention rate in the oil and gas industry for the year is high, and talent was retained.

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Figure 2: Employee Turnover Rate
78.79% of the unemployed respondents stated that it is difficult for them to get hired for the same
position as their last held in the oil and gas industry. The majority of them are willing to either
return to the same job they last had even at a lower salary rate or taking a position that is less
related to their competency. 64.46% of the employers indicated that it was moderately easy for
them to find and employ new personnel to fill current vacancies. This situation clearly shows that
currently there is an oversupply of manpower to vacancies in the market. At this time, employers
can easily fill in their vacancies, whilst those who are currently applying for the positions will likely
face difficulty to be hired.
About 46.10% of total respondents said their compensation packages increased in the last 12
months, while 34.75% of them said theirs stayed the same. Meanwhile, 58.57% admitted that the
salary packages currently offered to them are below their expectations. On the outlook for 2019, a
high percentage of the respondents (77.30%) expect their salary, wages and benefits to steadily
rise, which indicates employee confidence on the rebound of the industry.
d) Industry Readiness
The industry readiness is measured based on the number of vacancies in the oil & gas industry, the
hiring strategies of the companies and the compensation package offered by the companies. From
the survey, as illustrated in Figure 3 below, the most preferred approach to hire employees is to
upgrade internal staff.

Figure 3: Hiring Strategy
Based on the findings in Figure 3, it can be deduced that the most preferred hiring strategy to seek
competent personnel is via internal sourcing. The reason could be to avoid getting into the long
procedure in the hiring process while fast action is needed for the coming rebound.

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Fresh graduates and internship shall become the secondary resources to support these companies.
At this early stage of rebound, relevant technical and vocational training providers should take the
opportunity to ensure that their students enter the industry as interns and apprentices either
through Sistem Latihan Dual Nasional (SLDN) or through industry collaborations. This can ensure
that by the time the industry is ready to take in entry level personnel, they have been exposed and
trained with the competency required to enter the industry.

Majority of the hiring managers indicated that they have yearly training budget (60.33%) and have a
planned schedule (62.81%) for their employees to upskill or reskill themselves in the second half of
2018 and the year 2019. The companies also indicated that they seek (59.50%) for training support
or funds from other sources, such as HRDF, Talent Corporation, Teraju, etc. This training budget
implicated that companies are preparing their workers towards the industry rebound.

It’s understood that salary, wages and benefits will be on the rise during the coming rebound.
47.93% of hiring managers indicated that their salary, wages and benefits have stayed the same in
the last 12 months, whilst 42.15% had an increase in their budget. The statistics implies that oil and
gas companies are still cautious in increasing salary, wages and benefits. This statement can be
supported by a survey done by Hays Report on Asia Salary Guide. The survey done by Hays has
found that even though Malaysian business activity increases for the year, employers remain
cautious when it comes to increasing headcount and salaries.9

Based on the survey regarding the salary, wages and benefits budget, there seems to be a mix
reaction for the 2019 outlook. From the data, 47.93% said that they would maintain the same
budget while 45.45% indicated they will have a rise. The survey also shows that the employers are
taking a much more cautious approach in increasing salary, wages and benefits during this early
stage of rebound.

With respect to the occupational competency standards, the majority of the oil and gas companies
surveyed (71.90%) prefer international competency standards, followed by National Occupational
Skills Standards (54.55%) and Company Standards (54.55%). This shows that SKM certification is
relevant to the oil and gas industry; however, the employees still need to be competent in
international industry standards. International standards are required in the oil and gas industry to
ensure that the standards and practices are in line with the operating procedures and best
practices used globally within the activities of petroleum exploration, production, engineering and
maintenance across the three subsectors.

e) Workforce Readiness

The workforce readiness is measured based on the career sustainability factors in the oil & gas
industry. The factors include competency level, willingness to come back to the oil & gas industry,
their reskilling efforts to enhance their skills and competency, and their confidence level on the oil
& gas industry. Some of unemployed workforce in the oil and gas industry are willing to come back
into the industry, even at a lower scale or lower job function. The survey data indicates this strong
reflection, even though some of them may have gone to other industries.

However, during the downturn (2014-2018) it is expected that the unemployed workers will move
to other sectors to find new jobs. From the survey, 75.76% of the respondents indicated that they
have searched for jobs in other industries.

Based on the responses regarding the outlook for 2019, majority of the workers in the oil and gas
industry indicated a medium confidence level in their job security in the next 3 years, expecting
salary, wages and benefits to rise (77.30%). Such strong sentiment shows workforce confidence that
the oil and gas industry is in the state of rebound, and they are ready to come back into the
industry.

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RECOMMENDATIONS

Based on the findings and discussions, the following recommendations are proposed:

a) Strategy to Reskill and Upskill the Unemployed

i. Individuals who have been unemployed for more than one year are required to be
upskilled or reskilled either in the oil and gas sector or in any new industries. This will
help them to get back to work in the industry and be competent with their peers and
associates.

ii. There are already NOSS developed for industries selected by the unemployed workers
for job opportunities other than oil and gas. Therefore, they can opt to reskill and
upskill themselves with the industry competency, if they have the funds to take the
training.

iii. From findings, 50% of the unemployed respondents hold qualifications below degree
level. This category of workforce is very suitable to be certified under the SKM
certification, either via PPT for the oil and gas sector or SLDN for the selected
industries.

iv. It is highly recommendable for government funds to be made available for the
unemployed workers to be reskilled and upskilled, even though the training needed
may not be for jobs in the same oil and gas sector.

b) Strategy for Competency Training via SLDN and Pengiktirafan Pencapaian Terdahulu (PPT) for
the Employed

i. The survey findings portray a good scenario that companies are training their staff for
competency development. There are two ways to give certification to their employees,
with SKM certification via SLDN or PPT. Hiring managers should consider making their
company a JPK Accredited Centre for SLDN.

ii. Hiring managers should benchmark their companies with other Accredited Centres.
Companies like Boustead and Serba Dinamik are some of the leading oil and gas
companies that have set up Accredited Centres within their organisations and given
certificates to their employees while they are on the job. This type of on-the-job
certification within the oil and gas companies can help speed up the required
certification needed by the industries, for both international and national
certifications.

iii. Companies that are hiring fresh graduates should train them through SLDN during
internship and probationary period. Some of the yearly training budget can be used for
on-the-job certification programs, where it can help speed up the entry level
personnel to be competent. The concept of “Train & Hire” or “Train & Placement” can
easily be implemented under this approach.

iv. There is a need to have more “Awareness Session” for SLDN implementation. Many oil
and gas companies are not aware of the benefits and the strategy that they can
implement to hire workforce. More talks and discussions should be held with the
industry by MOGSC as the Industry Lead Body, to showcase successful companies that
have implemented SLDN.

v. There are other issues not raised in the survey such as financial support and banking
facilities. New studies should be conducted for the need of new funds to support the
growth in the oil and gas industry, not only for human capital development but also for
talent innovation.

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CONCLUSIONS

The research has covered specific aspects of industry readiness and workforce readiness towards
the rebound in the oil and gas sector.

Industry Readiness

The survey indicates that the oil and gas industry is ready for the rebound. Currently, the upstream
subsector has more vacancies compared to the other two subsectors which is midstream and
downstream. Although the oil and gas companies are still cautious about salary, wages and
benefits, they do allocate training budgets for staff development, reskilling or upskilling. This is
supported by the survey results in all three subsectors, as summarised below:

 The number of vacancies for the second half of 2018 and the year 2019 are higher in the
upstream subsector.

 There are more job openings offered under permanent hire and for 6-12 month’s hire.
 The preferred strategic approach in hiring new workers is to promote in-house employees,

followed by hiring the right type of expertise and competent workers from the market.
 Majority of the companies surveyed apply international competency standards; followed by

company standards and national competency standards.
 Most of the hiring managers have training budgets.
 Companies are showing higher retention rate and retaining their employees.
 Hiring managers are not facing any difficulty in hiring new staff or competent workers in

contrast with employees looking for jobs.
 There is willingness to re-hire workers that was retrenched previously.
 Hiring managers are still cautious about offering high compensation packages.

Workforce Readiness

In preparation towards the rebound, it is important for the workforce to be industry competent.
However, the oil and gas industry has not reached full employment. There are still room for
improvement and opportunity for the workforce to prepare themselves for the comeback. With
regards to workforce readiness, the unemployed should still make an effort to take up upskilling
and reskilling initiatives and prepare themselves, now that they have seen signs of rebound in the
economy. Despite willing to come back at a lower compensation rate or at different job level,
those that have the relevant industry competencies stand a higher chance to be rehired earlier, to
fill up the critical vacancies available in the three oil and gas subsectors (upstream, midstream and
downstream).

Those who are unable to match the demand of the industry competencies need to find a funding
platform for upskilling and reskilling programs. The entry level workforce, especially fresh
graduates, should develop themselves and seek competency programs that are demanded by the
industry. Those that are currently working, may continue to develop their industry competencies in
order to stay relevant. The following are the key findings that are drawn from the survey:

 Most of the retrenched workers remained in the oil and gas sector and relevant industries.
 Workers are willing to come back for the same job in the oil and gas sector at a lower

salary.
 Workers are willing to take jobs that are less relevant to their current competencies at a

lower compensation rate.
 Reskilling efforts taken during the past two years to shift to a different industry is low.
 Most of the trainings taken including those that were self-funded are still related to oil and

gas field of work.
 The chances to be rehired for the same position as their last one is low.

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SUPPLY AND DEMAND OF TVET WORKFORCE IN MALAYSIA AEROSPACE INDUSTRY

ABSTRACT

In recent years, Aerospace Manufacturing has become one of the fastest growing sub- sectors in
Malaysian Aerospace Industry, followed by MRO sub-sector, System Integration sub-sector, and
Engineering and Design sub-sector, which in 2018, achieved RM14.4 billion annual revenue.
However, the rapidly emerging market and new technology development in Aerospace Industry give
challenges in human capital development and relevance of currently available training program in
the Malaysia TVET institutions. Therefore, the Department of Skills Development (JPK), Ministry of
Human Resources, in collaboration with the National Aerospace Industry Coordinating Office
(NAICO), Ministry of International Trade and Industry, have taken the initiative to conduct a study
on supply and demand of TVET Workforce in Malaysian Aerospace Industry. The aim of this study is
to identify the current Malaysia Aerospace industry needs, capabilities, investment opportunities
and gaps between demand and supply of the TVET workforce. This study was conducted in several
phases, starting with the preparation of questionnaire, industry engagement and survey
consultation, demand and supply gap analysis, and ended with the final report documentation. The
demand analysis involved 43 Aerospace Industries which are the contributors of 80 percent of the
total aerospace annual revenue. The supply analysis covered respondents from TVET institutions
accredited by the Ministry of Human Resources, Ministry of Education, Civil Aviation Authority
Malaysia (CAAM) and other agencies. The study discovered that the current supply of white collar
and blue-collar workers are insufficient to meet the demand of the forecasted workforce over the
next 5 years, especially for Licensed Aircraft Technicians in MRO sub-sector and the Technician in
Aerospace Manufacturing sub-sector. The majority of the Aerospace industry sub-sectors reported
the major employment challenges are in the aspect of technical competencies, and adapting to
advanced technology. The industries realise that the TVET programs and competency recognition
are important to face the challenges by providing industry-ready workforce.

Keywords: Aerospace Industry, supply, demand, employment.

INTRODUCTION

The Eleventh Malaysia Plan (RMKe-11) 2016-2020 sets out the key strategies to enhance human
capital development to meet the needs of an advanced nation. These strategies take into account
the changing needs arising from the emergence of global megatrends such as disruptive
technologies, shifts in demographics towards greater urbanisation and ageing population. These
developments will significantly change the structure of future jobs, skills requirement and demand
on the education system.

During the review period (2016-2017), Malaysia has maintained full employment while improving
labour productivity. Achievements were also made in mainstreaming and broadening access to
quality Technical and Vocational Education and Training (TVET) programs, expanding lifelong
learning programs, and improving the quality of education as well as global ranking of local
universities. Despite these achievements, major challenges persist in terms of low creation of
skilled jobs, slow wage growth, low female labour force participation rate as well as high youth
unemployment.

The Industry Lead Body (ILB) appointed by the Department of Skills Development (Jabatan
Pembangunan Kemahiran - JPK), National Aerospace Industry Coordinating Office (NAICO) is
responsible for guiding the overall development of the aerospace industry's human capital for skills
training under JPK. This involves the development of the Occupational Framework (OF) and
National Occupational Skills Standards (NOSS) and certification for Recognition of Prior Experiential
Learning.

As a continuous development towards competent workforce supply, JPK awards NAICO to develop a
study on "Supply and Demand of TVET Workforce in Malaysia Aerospace Industry". The findings of
the study will provide a functional data for JPK to acknowledge the occupational demand and
supply, and become a guideline to expand the occupational horizons in the aerospace industry.
Correspondingly, upgrading and triggering efforts to bridge the identified or emerging skills gaps
within the aerospace industry respond to any rapidly emerging investment prospects. Figure 1
shows the Malaysia Aerospace industry snapshot.

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Figure 1: Malaysia Aerospace Industry Snapshot (2018)
The objectives of this study are:

(a) To identify the current Malaysian Aerospace Industry needs by:
 Identifying the employment challenges in the aspect of technical competencies and
adapting to the advanced technology.
 Identifying new skills requirements for new job opportunities in the Aerospace Industry.

(b) To identify Malaysian Aerospace Industry capabilities by:
 Determining the employment statistics in the Aerospace Industry focus area of
Aerospace Manufacturing, MRO, Systems Integration, Engineering and Design.
 Evaluating the programs by institutional academic/TVET qualifications, professional
qualifications, skills, training needs including upskilling and reskilling for the Aerospace
Industry for the period of 2016-2018, and recommendations to improve the programs.

(c) To identify the gaps between the demand and supply by:
 Analysing the skilled workforce market demand and supply of the Aerospace Industry.
 Determining the salary range based on the job level requirements including
compensation and benefit.

(d) To identify the opportunities of Aerospace Industry investment by
 Analysing the projection of demand and supply of each focus area in the Aerospace
Industry for the period of 2019-2023.
 Identifying the capabilities and opportunities to facilitate and increase investments into
Malaysia, and promoting economic development of the Aerospace Industry in Malaysia.

The scope of this study is categorised into 4 aspects such as geographical, aerospace industry &
institution, demand analysis and supply analysis.

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METHODOLOGY

The extensive trend study was conducted in the first part of the survey. The aim of the trend study
is to gauge the current development of the Aerospace Industry around the world. The study is
conducted with reference to the aircraft manufacturing data and orders as reported by major
companies including Boeing and Airbus. In addition, Aerospace Industry-related companies’
investment plans, particularly in Southeast Asia region, are considered. The national policy and
plan as enshrined in the “Malaysian Aerospace Industry Blueprint 2030” also complement the study.
The questionnaire was then developed by considering the project objectives. The mapping of the
defined objectives to the survey question was then constructed.

Inputs and comments from industries, technical institutes, government institutions and agencies are
important for this study. These inputs were collected from surveys (questionnaire) and published
data. The survey was completed in two months, where the appointed consultants visited, faxed and
emailed the related companies to obtain the required data. For the workforce demand, four zones
have been identified as the focal points of the Aerospace Industry, namely the Northern Zone
(Penang, Perak, and Kedah), the Central Zone (Kuala Lumpur and Selangor), the Southern Zone
(Melaka and Johor) and East Malaysia (Sabah and Sarawak). The East Coast region on the other hand
has been identified as the workforce supply. The sampling size for the demand analysis consists of
at least 43 main industries which have been identified as the major contributors to the total
Aerospace Industry.

FINDINGS AND DISCUSSION

a) Demand and Current Workforce

The vast majority of the current workforce came from operators and technicians; both covering
approximately 40% of the total workforce in this sub-sector. Ratio of approximately 50% between
operators and technicians indicates the industries are deemed to require medium and high skill
workers (ILO,2008) (skill levels 2 and 3 workers) in this sub-sector.

At the same skill level, Malaysian Skills Diploma (DKM) level 4 produced better satisfaction level
than polytechnic diploma graduates. Majority of the companies believed that the Malaysian Skills
Certificate holders performed better due to the industrial adaptation and practical acquired during
the formal education. This was indicated by certain portion of very satisfied level at any TVET
education background. For Civil Aviation Authority of Malaysia (CAAM) graduates, 17% of the total
weightage fell under the dissatisfied condition.

The analysis found that the average salary for engineer position is approximately RM2,200 for fresh
graduates, RM2,700 after probation, RM4,000 5 years after the probation period, and the average
maximum salary is in the range of RM6,000 to RM7,000. Compared to the published data of the
salary range for Manufacturing Sector in Malaysia [2], the average minimum salary for Aerospace
Manufacturing sub-sector is low. The publication reported that the minimum and maximum salary
range for production engineer in Manufacturing Sector in Malaysia ranges from RM3,500 to RM6,700
(MEF, 2018).

The salary range for technicians in this sub sector was found competitive as the salary matched
with the salary range for technician in the Manufacturing Sector in Malaysia (MEF, 2018), ranges
from a minimum of RM2,000 to maximum of RM4,000. The similar salary range is observed for
quality inspect or job function. SKM was found as a distinctive fact that contributes to higher salary
for technicians. SKM holders can earn as higher as RM400 different than non-SKM holders.

The data was in conjunction with employers’ satisfaction on the workforce performance data. More
than 45% employers felt very satisfied with the work performance of the workforce with CAT A and
CAT B license. CAT A license is awarded to the Licensed Aircraft Engineers (LAT) while CAT B
license is awarded to the Licensed Aircraft Engineers (LAE). Next, 20% employers felt very satisfied
and 60% employers felt satisfied with the performance of workforce from Diploma Lanjutan
Kemahiran Malaysia (DLKM) background. 17% employers felt very satisfied and 75% employers felt
satisfied with the performance of the workforce with bachelor’s degree from technical universities
followed by DKM and SKM levels where 12.5% employers felt very satisfied and 62.5% employers felt
satisfied with their work performance.

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From the data, it is suggested that workforce with license and technical background will produce
high quality work and perform better compared to the others because of their early technical
training that is relevant to the MRO industry as well as early exposure to the industrial work
environment.
On the other hand, most MRO LAEs are non-SKM holders because most of them are the products of
Civil Aviation Authority Malaysia Approved Training Organisation (CAAM ATOs). This study found
that the average starting salary for MRO LAE is almost double than an MRO Engineer's (i.e. non-
licensed engineer) salary. However, the salary range of MRO LAE is larger than the other MRO
positions since the MRO LAE holds the type-rating license. Even at starting salary, a MRO LAE with a
type-rating license can obtain up to the maximum of RM12,000 salary per month.
For Foreman in MRO sub-sector, 5 years before the probation period, SKM level holders have a very
small range of salary, indicating that only a small number of companies have hired MRO Foreman
with SKM level certificates. The starting salary is RM8,000, but can go up to a maximum salary of
RM17,000 per month.
MRO Supervisors have an average salary of around RM2,000 – RM4,000 per month. MRO Supervisors
with SKM level background were found to have higher salary compared to non- SKM level holders. In
addition, the highest salary income in the MRO sub-sector is the MRO Superintendent with the
average starting salary of more than RM10,000 per month, and the maximum salary recorded is
approximately RM19,000 per month.

Figure 2: Employers’ satisfaction on the workforce performance based on education background
(MRO sub-sector)

Figure 2 shows that the data are in conjunction with employers’ satisfaction on the workforce
performance. 100% of employers felt satisfied with the performance of the workforce with DKM
certificates, bachelor’s degree from technical universities and bachelor’s degree from Aerospace or
Aeronautical Program in Research University. In contrast, the percentage of employers that felt less
satisfied for workers with SKM Levels 1 to 3 and diploma polytechnic is 34% and 50%, respectively.
This statistical data indicates that a lot of improvement can be made to the skill training programs
related to the System Integration sub-sector.
Engineers and technicians in System Integration sub-sector are called the specialists and
technologists, respectively (MOHR, 2017). The starting salary for the System Integration Specialist is
similar with normal engineers in other sub-sectors, in an average of approximately RM2,500 per
month. Then, it increases gradually after the probation period. The probation period usually takes
about 6 months. Compared to a non-SKM, a System Integration Specialist with SKM certification
background earns higher pay with a maximum salary of up to RM9,000 per month.

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The same trend is observed for System Integration Technologist. The average starting salary for this
position is approximately RM2,200 per month, and will increase gradually up to the maximum salary
of RM7,000 per month. Similarly, a technologist with SKM certification background receives higher
salary compared to a technologist with Non-SKM background. In comparison with other sub-sectors,
the Engineering and Design sub-sector is dominated by white collar workforce. According to this
survey data, engineers are the main technical personnel in this sub-sector, and their educational
background is at least a university bachelor’s degree. Engineers with university bachelor’s degree
background are preferred due to the nature of this sub-sector which requires high critical thinking
and technical knowledge in designing and solving complex engineering problems. However, it is
discovered that most employers are less satisfied with the performance of current engineers with
university bachelor’s degree holder. Therefore, there are a lot of opportunities and rooms for
improvement to enhance the current Aerospace and non-Aerospace Engineering Programs at
universities. Fugure 3 shows the employers’ satisfaction on workforce performance based on
education background (System Integration sub-sector).

Figure 3: Employers’ satisfaction on workforce performance based on education background
(System Integration sub-sector)

Engineers in the Engineering and Design sub-sector are defined as Technologists (MOHR, 2017).
Average starting salary for a Technologist is similar to engineers in other sub-sectors which is
approximately RM2,500 per month. However, after the probation period, the salary increases up to
RM10,000 per month. Results from the analysis reveal that the maximum salary for an Engineering
and Design Technologist is RM14,000 per month.

b) Gap Analysis and Additional Workforce for Next 5 Years
Job positions in Aerospace Industry can be further classified into specific codes under the Malaysia
Standard for Classification Occupations (MASCO) (MOHR, 2013). Five main job positions discussed in
this report are classified into 3 major job categories; Professionals, Technicians and Associate
Professionals, as well as Plant and Machine Operators and Assemblers. This major job categories are
classified based on the educational and skill level requirement. Four skill levels are involved in this
occupational classification. Level 1 is the lowest skill level defined under the elementary
occupation group, while level 4 is the highest skill level defined under the professional group.
Twelve job classes have been determined in the Aerospace Industries, classified into a 4-digit
MASCO code. Level 2 and level 3 skills are defined under the plant and machine operators, and
assemble groups and technicians and associate technician professionals respectively.

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Similarly, all three unit groups of technician level (coded as 3115, 3122, and 3151) are also
considered under the critical occupations list (ILMIA, 2019) involving Mechanical Engineering
Technicians; Mechanical Engineering Technicians (Industrial Machinery and Tools); Machinery
Technicians; CNC Technicians; Welding Technicians; Mechanical Technicians; CNC Supervisors;
CAD/CAM Technicians; Manufacturing Supervisors; Production Supervisors; Quality Control
Inspectors and Aircraft Maintenance Technicians (Engines). For operators, occupations involving
only unit group 8189 are mentioned as critical specifically for Machine Operators; Production
Operators; and Equipment and Machine Operators. Figure 4 shows additional number of blue collar
and white-collar workforce required in the next 5 years for all sub-sectors.

Figure 4: Additional number of blue collar and white-collar workforce required in the next 5 years
for all sub-sectors

There are several NOSS programs developed by JPK that are related and applicable to the
Aerospace Industry (Figure 5). The programs can be grouped into several categories as listed in the
graph. Among these, only two programs (and their NOSS) are specified for the Aerospace Industry,
namely Aircraft Maintenance (Mechanical/ Avionics) offered by ADTEC Shah Alam and Aircraft Sheet
Metal Structure Repair, which is offered by IKBN Pekan and APR- Aviation Training Centre. In 2018,
there were a total number of 1,445 of graduates from all related programs, while only 9.5% or 137
graduates were from ADTEC Shah Alam, IKBN Pekan and APR–Aviation Training Centre.

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Figure 5: NOSS developed by JPK which are applicable to the Aerospace Industry

In 2018, Part 147 CAAM Approved Training Organisation (ATO) produced 23% more CAT A licensed
graduates than the CAT B, which were in line with the current and next 5 years’ demand. However,
looking at the additional number of LAT for the next 5 years, which requires a total of 2,402 LATs
or 480 LATs per year in the next 5 years, the number of LATs produced in 2018 was about 28% less
than the forecasted demands. In contrast, the number of graduates with CAT B license has already
met the next 5 years forecasted demands. In addition, in 2018, CAAM ATO only produced CAT A1,
A3, B1.1 and B2 basic license graduates, specifically focusing on turbine engines.

The number of graduates for MOE institutions are obtained from the statistical data of Tracer Study
carried out in 2018. Graduates under this governing body are segregated into 4 types of institutions;
public universities, private universities, polytechnics and community colleges. The graphs represent
the number of Mechanical Engineering and Aerospace specific program graduates produced at
different levels of study. Public universities are the main producers of bachelor’s degree graduates
for both Mechanical Engineering and Aerospace specific programs, while polytechnics produce the
highest number of diploma graduates. This study shows that polytechnics have not produced any
aerospace related graduates up to 2018. Most Aerospace related diploma is produced by private
universities, focusing on the Aircraft Maintenance Program. Yet, up to present, there are still no
graduates from the Aerospace Manufacturing Degree program. In fact, most Research University
graduates come from general Aerospace or Aeronautical Engineering Programs (not specific to any
sub-sector).

c) Demand and Supply Gap
Based on the statistical data from this study, the current number of blue-collar graduates produced
per year, including those from general Mechanical Engineering program, are 11,413 graduates.
Among these, 347 are the Licensed Aircraft Technician (LAT) graduates, 860 are the DKM/DLKM
graduates and 94 are the SKM Levels 1 to 3 graduates. In comparison, the forecasted demand for
the next 5 years shows that the total number of 6,358 blue collar workers are required. However,
the data indicates that the current supply of LATs, which is 347 persons per year, is insufficient to
cater the forecasted demand, which is 2,402 or 480 LATs per year. Similarly, only 94 graduates with
SKM levels 1 to 3 certifications are produced per year compared to the demand of 210 graduates for
the next 5 years. On the other hand, the current supply of the white-collar graduates are 7,074
persons per year. This includes 217 Licensed Aircraft Engineers (LAE), 153 Aerospace related
bachelor’s degree graduates and 20 Aerospace related postgraduate degree holders. Over the next
5 years, the demand for LAEs has become saturated, where only 241 LAEs are required. However,
the current supply of graduates with degree qualification is still insufficient to meet the demand of
188 white collar workers with Aerospace degree for the next 5 years.

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CONCLUSION AND RECOMMENDATION

a) Conclusion

i. The major employment challenges are in the aspect of technical competencies and
adapting to advanced technology (i.e. Industry 4.0 and Digitalisation).

ii. Competency recognition would provide better career prospects for the workers (company
tends to offer SLDN program to SPM leavers). The industry realises the importance of TVET
is the ability to provide industrial-ready graduates.

iii. Current number of aerospace related programs are unable to support the forecasted
demand in the next 5 years (industries would need to hire the non-aerospace related
graduates to satisfy the demand and retrain them).

iv. Aircraft manufacturing sub-sector is found as the major contributor to the total current
workforce, consisting of 4,707 blue collar workforce of operators and technicians.

v. In MRO, significant increases in technician and licenced aircraft technician (LAT) positions
are expected in the next 5 years (2,254 technicians and 2,402 for LATs).

vi. Bigger attention should be given to the production of LAT graduates as the forecasted
demand is approximately 8 times bigger than the current supply.

vii. Statistical data proved that TVET graduates of JPK would potentially cover a bigger
percentage of blue-collar workers in the next 5 years.

viii. By providing enough competent and skilful workforce who are able to adapt to the latest
technologies, international companies will be interested to invest in Malaysian aerospace
industry (catalyst technology transfer).

b) Recommendation
i. Aero Manufacturing Sub-Sector

AERO MANUFACTURING SUB-SECTOR

Issues Recommendations

Lack of technical Shared facilities between institutions and industry will
competencies in advanced provide institutions with critical resources and potential to
technology due to lack of share expensive high technology equipment. Empower the
facilities in the academia-industry linkage for academia engagement
institutions. through smart partnership is recommended. Not only for
enrichment of academia or skilled trainer industrial
It is expected that more experience, industrial engagement could ensure that
aerospace and non- institutions are updated with the industrial development.
aerospace companies will SLDN is an example of a smart partnership program that
have to invest into focuses on providing technical competency through
automation towards the institutions-industry expert sharing. Industrial internship
adaptation of Industry 4.0 program for academia/trainer should be enhanced to
to stay ahead of the improve their competency up to the industrial standard.
competition, and expects
their future employees to The basic knowledge and skills as stated below are required
be equipped with such
skills. in TVET to give graduates basic understandings on how

Industry 4.0 elements and applications work:

1. Introduction to Artificial Intelligence, Robotics and

Smart Devices.

2. Basic Programmable Logic Controller (PLC)

programming and Apps/Application creation.

3. Data Science

More advanced courses specific to the discipline as follows:

1. Big Data Certification
2. Internet of Things Certification

Artificial Intelligence Certification.

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University graduates lack More learning time in industries would provide students
practical knowledge and with greater exposure to real working experience. MOHR
ability to suit current and MOE collaboration means to recognise the competency
industrial demand – more level of 2U2I, 3U1I and SLDN program graduates through
focused on theory rather dual certification (SKM + Diploma/Degree).
than practical.

No institution offers Utilise the JPK’s accredited centres to offer the following
the following programs: NOSS:

1. AerospaceTechnical 1. TP-075-1/2/3:2012 (Aircraft Painting)
Painting
2. C282-002-2/3:2019 (Aircraft Component Assembly)
2. Technical Assembly 3. MC-116-1/2/3:2014 (Eddy Current Testing (ET) - Aerospace
3. NDT for Aerospace
4. Metal Surface Treatment Materials, Components & Structures)
5. Quality Assurance and
4. MC-117-1/2/3:2014 (Radiographic Testing (RT)- Aerospace
Control for Aerospace
Materials, Components & Structures)

5. MC-062-1/2/3 (Aerospace Ultrasonic Testing)
6. 6. M712-003-1/2/3:2017 (Penetrant Testing–Aerospace

Materials, Components and Structures)

Develop NOSS for the following:

1. Special Process; Aerospace Metal Surface

Treatment.

2. Quality Assurance and Control for Aerospace: AS9100 and

Nadcap Certification

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ii. MRO Sub-sector

Issues MRO SUB-SECTOR
Recommendations

Industry still less Develop programs to upskill ex-Airforce to be certified and
recognised to serve the civil MRO sector.
recognises the
Develop NOSS to certify technicians based on industrial
contributions made by specifications or to become LAT based on CAAM
requirement. NOSS C331-010-4:2019 - Aircraft Maintenance
highly skilled maintenance (Avionics) has been developed in 2018 as an effort to fulfil
the demand in LAT, certified by CAAM. Same methodology
professionals (Example; Ex could be used to develop the NOSS module for different
LAT categories.
Airforce).

Certifying technicians to

become independent

workers takes time.

Current LAT graduates are Utilise the JPK’s accredited centres and industries to cater
insufficient to support the to the demand. Prioritise the sector and provide sufficient
demand for the next 5 fund especially for Perbadanan Tabung Pembangunan
years. Kemahiran (PTPK) to support the increasing demand. LAT
training should involve CAAM.
Graduates lack soft skills
Introduce/enhance soft skill elements including
(communication using communication with business and aviation English,
leadership skills, project management skills and ethics in
business and aviation relation to MRO NOSS.

English, leadership and Collaborate with CAAM approved organisations that conduct
type-rated training to train basic license holders.
project management,
Nurture more related SLDN programs in the MRO sector.
creativity and innovation)
Collaborate with MBOT as a professional platform for
and work ethics. technologists, technicians and skilled workforce for
continuous staff development.
Lack of employees with
the latest type-rated
aircraft.

Lacking ability for
continual learning in other
technical competencies to
support business growth.

Less professional society
platform for continuous
staff development.

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iii. System Integration Sub-sector

Issues SYSTEM INTEGRATION SUB-SECTOR

No standard qualification in Recommendations
the field of system
integration to set the core Develop dedicated programs/NOSS related to the aerospace
technical competencies. system integration that cover the following elements:

1. Engineering programming for aerospace system
2. Understanding aerospace system buses development

(programming and system module)

The NOSS could be developed according to the available NOSS
of M711-003-4/5:2019 (Robotic system programming and

integration).

iv. Engineering and Design Sub-sector

Issues ENGINEERING AND DESIGN SUB-SECTOR
Recommendations

No upskilling program Develop dedicated program/NOSS for Level 4 and 5
related to the IR 4.0 certifications related to the aerospace engineering and
element in engineering design that cover the following elements:
and design makes
experienced staff hard to 1. Finite Element Analysis (FEA) covering the aerospace part
accept the emerging
advanced technologies. design analysis

2. Enhance IR 4.0 element in the NOSS such as big data and

analytics (utilises the Internet of Things to capture,
analyse, and store data at every stage of production,
from design through production), virtual reality and
augmented reality in simulation.

REFERENCES

International Labour Organisation. (2008). International Standard Classification of Occupation 2008
(ISCO-08).

Malaysian Employers Federation. (2018). MEF Salary Survey for Executives 2018 www.mef.org.my.
Date accessed: 15th September 2019.

Malaysian Employers Federation. (2018). MEF Salary Survey for Non-Executives 2018 -
www.mef.org.my. Date accessed: 15th September 2019.

Ministry of Human Resources. (2017). Aerospace Industry Occupational Framework. ISBN 978-967-
0572-76-5.

Ministry of Human Resources. (2013). Malaysia Standard Classification of Occupations (MASCO)
2013.

Institute of Labour Market Information and Analysis (ILMIA), Ministry of Human Resources. (2019).
Critical Occupations List 2018/2019 (Occupation Report).

Sistem Kredit Kemahiran Malaysia (SKMM), Department of Skills Development, Ministry of Human
Resources, Malaysia.