Dean Forbes


Oxford Analytica Daily Brief

DRAFT 30 May 2014

Published version 7 June 2014

Daily Brief articles do not include the author’s name, and are paywall protected.

Professor Dean Forbes

Matthew Flinders Distinguished Professor

School of International Studies, Flinders University

The Malaysian economy has been growing steadily, averaging increases of about 6.5% per annum for the last 50 years. Malaysia’s brain drain, largely the product of Government action, is causing mounting concern by the World Bank and others, and needs to be reversed if the country is to restructure, build competitiveness and continue to grow its economy.

The Malaysian diaspora overseas exceeds 1.4 million, a large slice out of a total population of 28 million. Some 46% live in Singapore, with the next most popular locations being Australia, the US, UK and Canada.

Competitive knowledge economies require educated and skilled people. China, India, and Singapore have been pro-active in attracting overseas nationals to return and contribute to the knowledge economy.

A significant cause of Malaysia’s problem is the Government’s affirmative action Bumiputera strategy. Introduced after race riots in 1969, it gives privileges to Malays in starting businesses and discounts in real estate, and preference to Malay people in education, university intakes and government jobs.

It attracted the political spotlight in the lead-up to the 2013 elections, with opposition leader Anwar Ibrahim drawing attention to the lack of effective Government action to reverse the brain drain.

Prime Minister Najib Razak leads the Barisan Nasional (National Front) Party. The Government has two over-arching strategies embodied in the Government Transformation Programme  and the Economic Transformation Programme, both launched in 2010, and designed to lead Malaysia towards a high income economy by 2020.

Barisan National had a narrow success at the 2013 election, winning just 47% of the popular vote, and stimulating new measures on the brain drain. He removed some ethnic restrictions under the banner of his One Malaysia campaign that had launched in 2008, shortly before becoming PM. One Malaysia encourages Malaysians to identify by nationality, not by ethnic group.

Najib’s strategy is opposed by conservative Malay groups. One of these is the outspoken Malay supremacist organisation Perkasa, backed by former Prime Minister of Malaysia Mahathir Mohamad, It wants to preserve what it calls ‘Malay rights’ that it believes are threatened by a move towards meritocracy.

Malaysia’s economic strength is due to production and manufacturing which creates opportunities for semi-skilled labour. Its economy is less dependent on research and development resulting in fewer career paths through skilled job opportunities. Other issues helping to fuel the flight of talent include perceptions of low wages and high taxes, such as on consumer goods.

The easy access Malaysians have to Singapore has been a key factor. It creates job opportunities for the kinds of skills that many Malaysians have acquired but are fewer in number in Malaysia, and generally not as well remunerated. In addition to job opportunities Singapore has a much better primary and secondary school system than Malaysia, accessible universities, and a comfortable lifestyle, with quick and inexpensive travel back to Malaysia. Singapore’s recent tightening of opportunities for its ‘foreign talent’ may dilute its attractiveness for Malaysians in the future.

Malaysia’s Talent Corp has been tasked with enticing back some among the 10% of the tertiary educated workforce, estimated at around 300,000, who left Malaysia over the last decade. The Returning Expert Program encourages Malaysians working overseas to take up jobs in Malaysia. It offers permanent resident status for children and spouses along with a flat tax rate of 15%, and tax exemption for personal effects brought back to Malaysia. Talent Corp claims that more than 1,800 Malaysians were persuaded to return between 2011 and 2013.

A key outcome of the Bumiputera strategy is that large numbers of students with Chinese backgrounds go abroad to study, and often stay. Some 81% of Malaysians living overseas have Chinese ethnicity. The countries with the largest concentrations, Australia, the US, UK, Canada and Singapore are also major destinations for Malaysian students.

The Malaysian Government has instituted a ‘dual track’ policy that aims to increase access to universities and to build research capacity. It needs to be able to provide additional opportunities for ambitious Chinese and Indian Malaysian students if it is to have an impact on the brain drain.

Malaysia has one of the stronger university systems in Asia, incorporating 20 public universities, 491 private higher education institutions, and 9 branch campuses of foreign universities. Among Asian nations it is in the top four in terms of expenditure on public universities as a proportion of total public education expenditure. It is ranked 8th out of 20 Asian countries in terms of gross enrolment in Masters and Doctoral programs.

Its strength is broadly comparable with the systems in South Korea, Taiwan and Hong Kong, but well behind the strongest systems in Australia, China, Japan, and Singapore.

The public universities are of a significantly higher standard than the private institutions and, because of Government subsidies, are less expensive for students. However, due to quotas they attract a significant proportion of Malay students, leaving restricted opportunities for the non-Malay Chinese and Indian students. In all around 43% of Malaysian higher education students are in private institutions.

Increasing numbers of unemployed graduates is a growing issue in the region, particularly in South Korea and Japan. It overlaps with employer concerns about skill gaps and shortages in those countries. The education system, it is argued, is not always producing the right kind of graduates.

A 2008 Malaysian study noted that 50% of university graduates found jobs within one year of graduating. While graduate unemployment is less of a problem than in Japan and South Korea, the proportion that is work-ready needs to improve.

Paralleling support for higher education, the Government wants to increase the number of students taking up places in non-university technical programs. These are cheaper alternatives and provide disproportionately greater access for women, mature students, and those from disadvantaged backgrounds. In the 2008 study 53% found jobs within a year of graduating, a fraction higher than university students.

The second of the two-track policies is to expand Malaysia’s research capacity. Establishing Malaysian universities on the world stage based on their research efforts will take some time. No Malaysian universities are currently ranked in the Times Higher Ed top 400 universities, and only Universiti Malaya gets into the top 500 in the Academic Ranking of World Universities.

Under the 10th Malaysia Plan, the effort to produce internationally recognized research universities will focus on five institutions: Universiti Malaya; Universiti Kebangsaan Malaysia; Universiti Putra Malaysia; Universiti Sains Malaysia; and Universiti Teknologi Malaysia. Additional funding has been directed to the target institutions since 2010.

Going forward there is still much to do.

While Malaysia has been politically stable for some time, the fractious environment created by the declining authority of the ruling Barisan National Party and treatment of opposition figures, especially Anwar Ibrahim, will detract from the attractiveness of a return home for tertiary educated Malaysians. It will be compounded by the high level backing of the Malay supremacist organisations such as Perkasa.

Much will also hinge on structural changes within the Malaysian economy and the emergence of more sophisticated knowledge-rich businesses leading to higher wages.


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Kigotho, Wachira 2014 ‘Diversification of tertiary education growing - Study’ University World News, No 316, 18 April 2014

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Pak, Jennifer 2013 ‘Will Malaysia’s brain drain block its economic ambition?’ BBC News Kuala Lumpur, 5 June 2013

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