Rather than one-off handouts or artificial pay increases, Malaysia’s long-term strategy to ensure adequate income to catch up with rising cost of living is to raise productivity.
Finance ministry secretary-general Johan Mahmood Merican explained that while raising the minimum wage would lift income level across the board, it is equally important to create high-value jobs that invariably draw higher salaries.
“The government’s push towards digitalisation, automation and mechanisation will hopefully raise productivity, and eventually leads to higher wages,” he told FMT in an exclusive interview.
Automating manual tasks through technology has long been regarded as a key strategy to push workers up the value chain, a global approach that is only now being accelerated by the rise of artificial intelligence (AI).
In Malaysia, the government is already creating the opportunities for businesses to adopt the strategy.
Under Budget 2026, SMEs will be table to tap matching grants of up to RM5,000 to adopt software such as accounting, POS and e-commerce systems. This is part of a push that has already transformed many traditional, case-based businesses.
“These are ways to help SMEs move up (the value chain),” Johan said.
“We’ve seen successes in terms of cashless payments. Once upon a time we were predominantly cash-based, now even traditional traders use QR codes to accept payment,” he pointed out.
Government efforts to digitalise identification systems, such as with MyDigital ID, are also meant to smoothen business transactions. According to Johan, the cost of customer verification — or what is typically known as e-Know Your Customer (e-KYC) — becomes cheaper, since the private sector can introduce apps on existing government infrastructure instead of building from scratch.
In agriculture, tools such as drones for fertilisation and spraying are helping to break bottlenecks and ease labour shortages, making the sector more attractive to locals who can now serve as drone pilots and machine technicians rather than labourers.
“When solutions like that become widespread, not only does it reduce dependency on foreign labour, but it also helps to attract and retain Malaysian workers,” Johan said.
At the same time, the government is encouraging government-linked companies (GLCs) to benchmark pay to living-wage levels, setting norms that the wider private sector can emulate.
“You have the legal minimum wage, but there also are some GLCs that have already committed to raise their minimum (wage) to living wages levels. Hopefully, that creates a benchmark for the private sector for Malaysian talent.”
Johan stressed that the strategy complements near-term support for households, but the ultimate objective is an economy where innovation-led firms and skilled Malaysians lift income organically.
