World Bank says: NEP, brain drain holding back Malaysia

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Malaysia’s brain drain getting worse, says World Bank
By Lee Wei Lian

KUALA LUMPUR, April 28 — World Bank senior economist Philip Schellekens painted a gloomy picture of the Malaysian brain drain situation today saying that it not only grew rapidly but is likely to intensify, further eroding the country’s already narrow skills base.

Schellekens said that the number of skilled Malaysians living abroad has tripled in the last two decades with two out of every 10 Malaysians with tertiary education opting to leave for either OECD (Organisation for Economic Cooperation and Development) countries or Singapore.

“Brain drain from Malaysia is likely to intensify in the absence of mitigating actions,” he said at the launch of the World Bank report titled “Malaysia Economic Monitor: Brain Drain”.

The report defined brain drain as the outflow of those with tertiary-level education.

The economist said Malaysian migration was increasingly becoming a skills migration with one-third of the one million-strong Malaysian diaspora now consisting of the tertiary educated.

“Expect the trend to continue,” he said.

He added that the outflow of talent was not being replaced with inflows, thus damaging the quality of Malaysia’s “narrow” skills base, noting that 60 per cent of immigration into Malaysia had only primary education or less, even as the number of skilled expatriates declined by 25 per cent since 2004.

The report also noted that there was a geographic and ethnic component to the brain drain, with about 88 per cent of the Malaysian diaspora in Singapore being of ethnic Chinese origin.

“The numbers for US and Australia are similar,” said Schellekens.

Report figures also show that 54 per cent of the Malaysian brain drain went to Singapore while 15 per cent went to Australia, 10 per cent to the US and 5 per cent to the UK.

The top three drivers for brain drain identified by the report were career prospects, compensation and social justice.

“(Lack of) Meritocracy and unequal access to scholarships are significant push factors and a deterrent to coming back,” said Schellekens. “Non-Bumiputeras are over-represented in the brain drain.”

He suggested that Malaysia implement important structural reforms in tandem with introducing targeted measures such as income tax incentives to reverse the brain drain.

“Once the highway is built, you must compete for traffic,” he said. “One suggestion is to hold a competition among members of the diaspora to get ideas on what can be done to attract them home.”

He added that while this report estimated the Malaysian diaspora at one million compared with about 1.4 million in a previous World Bank report, it was due to the lack of Singapore government information on the breakdown of its non-resident population.

“This is a conservative estimate and the diaspora could well be larger,” he said.



NEP, brain drain holding back Malaysia, says World Bank

KUALA LUMPUR, April 28 — More than one million Malaysians live abroad, the World Bank said today, adding that policies favouring Malays are holding back the economy, causing a brain drain and limiting foreign investment.

In a Bloomberg news service report today, World Bank senior economist Philip Schellekens was also quoted as saying that foreign investment could be five times the current levels if the country had Singapore’s talent base.

“Migration is very much an ethnic phenomenon in Malaysia, mostly Chinese but also Indian,” Schellekens (picture) told Bloomberg in Kuala Lumpur on Tuesday ahead of the report’s release today.

Governance issues and lack of meritocracy are “fundamental constraints” to Malaysia’s expansion because “competition is what drives innovation,” he said.

Malaysia’s growth fell to an average 4.6 per cent a year in the past decade, from 7.2 per cent the previous period.

Singapore, which quit Malaysia in 1965, expanded 5.7 per cent in the past decade and has attracted more than half of its neighbour’s overseas citizens, according to the World Bank.

Malaysia has in recent years unveiled plans to improve skills and attract higher value-added industries.
The World Bank conducted an online survey in February of 200 Malaysians living abroad in conjunction with the Kennedy School of Government at Harvard University.

They cited better career prospects, social injustice and higher wages as their main reasons for leaving, the Washington-based lender said in the Bloomberg report.

Singapore has absorbed 57 per cent of Malaysia’s overseas citizens, with almost 90 per cent of those crossing the border ethnic Chinese, the World Bank said.

“If Malaysia has the investment environment of Singapore and also had the innovation and skills environment of Singapore, then foreign direct investment inflows into Malaysia could be about five times larger,” Schellekens said in the Bloomberg report.

“They need to boost productivity and strengthen inclusiveness.”

Prime Minister Datuk Seri Najib Razak has pledged to roll back the country’s NEP-style policies but he also told the Umno assembly last year that the government’s social contract of providing benefits to Bumiputeras cannot be repealed.

According to the Bloomberg report, Najib has eased some rules to woo funds, including scrapping a requirement that foreign companies investing in Malaysia and locally listed businesses set aside 30 per cent of their Malaysian equity for indigenous investors. Last year, he unveiled an economic transformation programme under which the government identified US$444 billion (RM1.3 trillion) of projects from mass rail transit to nuclear power that it would promote in the current decade.

“If everything is implemented as they say, Malaysia is going to be a star economy,” Schellekens told Bloomberg. “The problem is implementation.”

World Bank: Reforms under New Economic Model should accelerated

KUALA LUMPUR: Although Malaysia has taken steps to restructure its economy via the Economic Transformation Programme, more deep-seated reforms as laid out in the New Economic Model (NEM) have slowed as the Government seeks a balance between tackling more immediate problems and long-term transformation.

The World Bank, in the fourth edition of the Malaysia Economic Monitor, noted that while the project-based initiatives as represented by the National Key Economic Areas had demonstrated “notable progress,” cross-cutting reforms under the NEM should be accelerated.

Minister in the Prime Minister's Department Tan Sri Nor Mohamed Yakcop told reporters after the launch yesterday that there was more to be done.

 

Tan Sri Nor Mohamed Yakcop says resources are needed to overcome major challenges.

 He added that the resources were needed to overcome major challenges. “It's all a matter of sequencing,” he said.

The World Bank in the economic report observed that foreign investors remained “skeptical” about the impact of the cross-cutting reform announcements under the NEM.

“Most do not price the NEM measures into their medium-term forecasts, considering them instead as upside risk factors,” the Washington-based international financial institution said.

The World Bank said the skepticism was likely reflected in two issues - the difficulty in implementing cross-cutting reforms and the perception, likely due to a lack of communication, that the Government was not doing enough in pushing the NEM reforms.

Statistics revealed in the report included a conservative estimate of a one-million strong Malaysian diaspora, largely located in Singapore, Australia, Brunei, Britain, the United States and New Zealand.

Of this, nearly 90% were of ethnic Chinese descent while for the diaspora as a whole, one-third had tertiary education with the rate of the qualified migrating having risen in recent years.

The report added that Singapore was the destination of 57% of those who had left.