World Bank warns Malaysia’s leading firms are struggling to innovate, raising concerns over underemployment

Malaysia’s most productive companies are facing growing pressure to innovate and expand, with the World Bank warning that many top-performing firms are failing to scale effectively. This slowdown is now being linked to rising underemployment and fewer opportunities for high-paying careers across the country.

In its latest Malaysian Economic Monitor report, the World Bank highlighted that although some local firms have improved domestically, Malaysia’s top frontier companies are still falling behind global competitors in terms of productivity, innovation, and long-term competitiveness.

The report stressed that many of the country’s most productive businesses are not growing at the pace needed to create stronger economic impact. As a result, the number of quality, high-income job opportunities remains limited, especially for skilled graduates entering the workforce.

The World Bank also raised concerns over the increasing trend of skills-related underemployment in Malaysia. Over the past decade, more graduates have found themselves working in positions that do not fully utilise their qualifications, experience, or capabilities.

According to the report, several structural challenges continue to slow innovation in the country. These include limited collaboration between universities and industries, weak technology transfer from foreign companies, and the continued brain drain of talented Malaysians seeking better opportunities abroad.

The organisation noted that while less productive firms have shown improvement locally, the productivity gap between Malaysia’s top companies and leading global firms has continued to widen. This growing divide is affecting the nation’s ability to compete internationally and attract high-value industries.

Experts believe stronger innovation ecosystems, improved research partnerships, and better support for local businesses could help Malaysia strengthen its economic future while creating more meaningful and higher-paying employment opportunities for the next generation.