Malaysian economist extraordinaire, Zainal Aznam

By SOO EWE JIN ewejin@thestar.com.my



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He was frank and forthright with his assessment of many current issues which recently came under fire from certain groups after he pointed out the problems faced by the NEAC in formulating the New Economic Model (NEM)

PETALING JAYA: The last article Datuk Dr Zainal Aznam Yusof wrote for The Star was entitled “Secret Lives of Statistics” which was published on April 18, 2009, as part of Star BizWeek's cover feature on numbers.

He began his article this way, “Alcoholics and economists have something in common. Both have problems of addictions. Alcoholics have a soft spot for alcohol while economists have a fetish for hard statistics.”

Zainal not only had a way with numbers. He certainly had a way with words.

On November 14 the same year, Zainal opened up a bit more on his life to our readers when he was featured in the 10 Questions column.

Giving readers an account of his extraordinary life beyond economics, Zainal revealed how he trekked in the Himalayas to the Annapurna base camp, attempted two Langkawi Ironman events, completed Olympic length triathlons and duathlons and even had time to go sailing.

Datuk Dr Zainal Aznam Yusof

To the public at large, they are probably more familiar with seeing Zainal expound on the economic issues of the day through his columns and watching him anchor many of the Budget discussions on TV.

But Zainal certainly had a life beyond economics. He was a film critic for The Edge, a voracious reader, played the drums and even had a YouTube channel Yowassupproduction on satirical and comedy skits which involved the whole family.

And he loved to cycle. He was a familiar sight riding along the roads of Taman Tun Dr Ismail where he lived.
Through all the years I have known Zainal, the one thing that truly stands out is how he made numbers come to life that can be easily understood by the common man.

As a member of the National Economic Advisory Council, this gift was much needed since he was not just talking to fellow economists but people of different disciplines, including politicians, who can sometimes be befuddled by statistics.

Zainal made immense contribution to our understanding of the economic issues in the country. And his views were also much sought after abroad.

With a doctorate in economics from the University of Oxford, he served in various capacities at Harvard University, Keio University and at the Korea Institute for International Economic Policy. He was also a consultant at the World Bank in charge of political economy of poverty, equity and growth. Because of his wide experience and his ability to convey information to the common man, Zainal was a favourite panelist for the many economic roundtables hosted by various publications.

When he was deputy director of the Malaysian Institute for Economic Research, he started the brown bag lunch talks where serious issues were discussed over lunchtime.

But he faded from public view after he ventured into the private sector and worked for a spell as the South East Asia Regional Economist at Kleinwort Benson Research (Malaysia).

He returned to public policy work after that when he joined ISIS as deputy director-general and became a regular voice in all the various media.

Zainal crunched numbers with ease. For discussions on the Economic Report and the Budget, he needed just a few key numbers. I recall the times when he would call in once he knew we had the Economic Report and asked for certain statistics.

He was so familiar with the document, from his years at Bank Negara, that he could even tell us which page to go to.

I have always enjoyed the non-formal conversations with Zainal. We often bumped into each other at the Bank Negara canteen during the time I was working ISIS Malaysia, which was nearby.

I found it heartwarming that a man in his position was so at ease among the ordinary people who ate at that canteen.

Although he was always seen as an economist on the establishment side, because of his positions in the various government institutions, Zainal was frank and forthright with his assessment of many current issues.



As he wrote in “Secret Lives of Statistics” on what had been the most seminal and outstanding statistics that have appeared so far,

“Over the past 38 years, I think that the statistics on the incidence of absolute poverty, the inter-ethnic income disparity, overall income inequality and the ownership of share capital of bumiputras have been the most outstanding statistics because of their wide repercussions. And controversial too.”

It sounds prophetic now because it was only quite recently that he came under fire from certain groups after he pointed out the problems faced by the NEAC in formulating the New Economic Model.

His frank views put him in the middle of a controversy. I was running through some e-mail exchange we had when I was trying to get him to be a regular columnist for The Star.

In response to a question from a reader about his alter-ego, Zainal said it would be a hard choice between Woody Allen and Juliette Binoche.

He loved Woody Allen for his humourous films and writings, making neurosis a necessity and passe, and for defining modern man as those born after Nietzsche's edict that “God Is Dead” but before the recording of the Beatles “I Wanna Hold Your Hand”.

I offered him the loan of my full collection of Woody Allen DVDs which a friend from the United States had given to me.

He wrote back, “You have a fantastic Woody Allen collection. A treasure. I will be in touch soon.” He never did.

Zainal passed away on Saturday, aged 66. He leaves wife Datuk Kaziah Abdul Kadir and children Irwan Shahrizal, 33, Shazalina, 30, and Juliana, 23.

Certainly the world of statistics will feel the loss of this one illustrious person of numbers. And Malaysia, one of its most outstanding economists.

Reversing the brain drain, innovate to compete!

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Reversing the brain drain

By P. GUNASEGARAM

Unless Malaysia succeeds in developing, retaining and attracting talent, its cherished dream of attaining high income by 2020 may be dashed to bits.

PROBABLY for the first time ever we have had substantial facts and figures on Malaysia’s brain drain – and it has taken the World Bank to come out with this (see our cover story this issue).

The World Bank simply defines brain drain as the migration of talent across borders. It is instructive what it says.

“For Malaysia to stand (sic) success in its journey to high income, it will need to develop, attract and retain talent. Brain drain does not appear to square with this objective: Malaysia needs talent but talent seems to be leaving,” the World Bank said in its report on Malaysia. Let’s look at some of the figures as a gauge of the seriousness of the problem. The worldwide Malaysian diaspora is conservatively estimated at one million in 2010, quadrupling over the last three decades.

Singapore alone accounts for 57% of this with the rest dispersed mainly through Australia, Brunei, Britain and the United States. Ethnic Chinese account for nearly 90% of the diaspora in Singapore and are similarly over-represented in other developed countries. And here’s one frightening statistic: “One out of 10 Malaysians with a tertiary degree migrated in 2000 to an OECD (the club of rich countries, but which does not include Singapore) country – this is twice the world average and including Singapore would make this two out of 10.

”In other words, it is very likely that 20% of our best graduates end up in other countries. The reasons why they leave are also instructive: 66% cited career prospects, 60% social injustice and 54% compensation.



The situation is serious and as Malaysia is wont to do under such circumstances, it is resorting to ad hoc measures such as tax rebates on those returning and a corporation to attract talent into the country.

These will only chip away at the massive outcrops of declining educational standards, a badly implemented social restructuring policy, a poor system of rewards and the unwillingness to move away from low labour costs to high value-added manufacturing and services amongst others. The changes that are needed are deeply structural. First, everything possible has to be put into raising educational standards to improve the quality of those entering the workforce. South Korea had one third Malaysia’s per capita income in 1970 but now it is three times Malaysia’s. Such change would not have been possible without a super educational system at every level.

Developing talent at every level simply has to start with education and we have to put the best talents, facilities and other resources into this. Right now only the most dedicated or those who don’t have other choices go into teaching because it is neither rewarding nor respected as a profession.

Next we need social re-engineering to gear towards giving equal opportunities for advancement instead of a premature equalisation of outcomes whether in terms of wealth ownership or employment creation.

Otherwise the ultimate result might be plain mediocrity and creating a small class of privileged wealthy who have done little or nothing to deserve their wealth. Otherwise too, the talented who get little or nothing face despair and look elsewhere for their rewards.

Then we need too the unfettered opportunities, entrepreneurship and incentive for talent to flourish and to be adequately rewarded. We can’t continue to base our competitiveness on low wages and costs. In this respect, a weak currency and its attendant poor purchasing power is a sure way to chase talent out of the country.

That’s how we can retain talent and attract it too, realising that we must be open and free to import the best the world has to offer in terms of people, goods and services at the best prices. For these things to happen and be sustained what we need is honest policy and implementation untainted by corruption so that the most can be done with the resources at our disposal instead of frittering these away through all sorts of leakages in the system. It is no accident that the least corrupt countries are often the most developed and have the highest income.

If there is a lesson from the World Bank report, it is that we must return to the basics and work ourselves up from there. There is no shortcut, but once critical mass is reached progress grows in leaps and bounds.

Managing editor P Gunasegaram believes that an uncompromising stand towards excellent and quality education bereft of political and other pressures will do more towards a high income Malaysia than almost anything else.

Related Stories:
How can Malaysia stem the tide of talent migration?
The big picture on skilled labour market
Can Malaysia reform fast enough to meet challenges?
Talent Corp CEO: Need to change business model
The ‘vicious cycle’ of brain drain



PM: Innovate to compete

By LESTER KONG  lester@thestar.com.my

PUTRAJAYA: The country's economic competitiveness will continue to be threatened if Malaysia relies on cheap foreign labour and is reluctant to innovate, said Prime Minister Datuk Seri Najib Tun Razak.

He said the country's labour productivity also needed a large jump for local small and medium enterprises to compete well in the increasingly globalised and liberalised markets.

Najib said Malaysia's labour productivity was valued at RM15,000 per employee per year compared to RM103,000 for each American employee.

“According to this benchmark and compared to other countries, we are still very low.

“We must change in the next few years to raise productivity by 100%,” he said after chairing the 11th National Small and Medium Enterprise Development Council (SMEDC) meeting here yesterday.

Let’s talk business: Najib with International Trade and Industry Minister Datuk Seri Mustapa Mohamed (third from right) and Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz (right) at a press conference after chairing the SMEDC meeting in Putrajaya Friday.
 

Najib, who is also the Finance Minister, said lack of funding was the least of the SMEs' weaknesses as RM6bil had been allocated for SME development this year through various ministries and agencies.

He said the key weaknesses are weak managerial and entrepreneurial skills, reluctance to innovate and use technology and reliance on human-intensive labour to generate output.

“We find that many problems do not stem from funding but rather from the need to boost (SMEs') capacity,” he said.

Regarding a World Bank report on Thursday, Najib admitted that businesses were hampered by the slew of licences and permits required to start and conduct business and that this could encourage “elements of corruption”.

“The council (SMEDC) has decided that more radical steps are needed to relax permit requirements as a whole. This is related to our competitive policy to make it easier for companies to enter a market,” he said.

“A green lane policy has been established where the Govern-ment will give opportunities through contracts to use their products or services.

“We are looking at what other help we can give to enable these companies to enter the global market,” Najib said.

On foreign direct investments, Najib said FDIs into Malaysia had increased four-fold since 2009, rising from US$1.4bil (RM4.2bil) in 2009 to US$9bil (RM27bil) last year.

“I am confident that we will be able to ensure a very healthy growth in FDIs. But don't forget, it's not only about FDI, it's also about domestic investment as 73% of our development plans involves these,” he said.
Najib admitted that brain drain remained a major obstacle to Malaysia's plans to achieve a high-income developed status by 2020.

“We have identified (brain drain) as one of the problems that we need to find solutions to. That's why we set up Talent Corp.

“We will try to overcome (brain drain) through Talent Corp and other policy measures,” he said.

“It (brain drain) is not something that is happening now. It is a problem that has been happening for some time.”

He said the ringgit's gain over the US dollar will not affect Malaysia's exports.
“Local companies should use our stronger ringgit to strengthen processes in their companies, such as buying equipment and ensuring their supply chains are more efficient,” he said.

How can Malaysia stem the tide of talent migration?

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Migration of talent – how can Malaysia stem the tide? 
By THEAN LEE CHENG and FINTAN NG starbiz@thestar.com.my

Brain drain stands in the way of a high-income Malaysia, a World Bank report says. But the solutions are not easy.

FOR over 25 years, Malaysia was one of the few Asian countries blessed with an annual growth of 7% and up. The country's growth spurt occurred between 1967 and 1997, which paved the way for the shift from low-income to middle-income. Among developing countries, Malaysia made tremendous progress in poverty reduction. In the 1970s and 1980s, income inequality was reduced dramatically while a Malay middle-class emerged.

World Bank’s Philip Schellekens ... ‘Whatever we present here we can stand by.’

These are laudable achievements no doubt. Nevertheless, in today's fiercely competitive global landscape and Malaysia's eye-popping data of escalating brain drain, the challenges for the country to move forward are far, far more complex.

Last year, Malaysia had recorded a strong recovery but the momentum appeared to have tapered off with jittery growth in the last two quarters. While business sentiment has improved in the first quarter of this year, consumer confidence has weakened on concerns of rising inflation.

Growth is expected at 5.3% this year and 5.5% in 2012. The three key risks in the near term are:

• A weaker-than expected global recovery, which will dampen growth momentum,
• A further strengthening of inflationary pressures, which may undermine consumer spending, and
• Weak fiscal consolidation.

Over the medium term, various government initiatives are being put in place to boost economic growth. But over and above the Economic Transformation Programmes and New Economic Models, the heart of Malaysia's transformation hinges on two fundamentals productivity, which requires a revamp of the education system, and policies of inclusiveness. Discontent with Malaysia's inclusiveness policies is a key factor, particularly among the non-bumiputras who make up the bulk of the diaspora.

Human capital is, after all, the bedrock of a high-income economy or for any economy for that matter. Sustained and skill-intensive growth needs talent going forward. Malaysia needs to develop, attract and retain talent.

Brain drain does not square with this objective. Malaysia needs talent, but talent seems to be leaving.

Brain drain the migration of talent across borders has long been a subject of debate and controversy. Of late, it has been openly discussed in the media, which is to be viewed positively. At least there is that openness today which was not there 10 years ago. The creation of Talent Corp Malaysia Bhd to bring back our own, and to attract new talent, is also a tacit acknowlegement by the Government that we need to manage our human capital carefully and diligently.

Brain drain is by no means something unique to Malaysia. It is something faced by many others. Taiwan saw many of its talented leave for Silicon Valley; the former Irish president Mary Robinson, during her presidency, did much to engage the Irish diaspora.

Within Asia, the brain drain is most pronounced in South-East Asia, according to the Malaysia Economic Monitor: Brain Drain released on Thursday (www.worldbank.org/my). The report says emigration rates are the highest in middle-income countries, which have both the incentive and the means to migrate. The incentive would be less strong for high-income countries. For low-income countries, financial and human capital constraints may make emigration less likely. Malaysia falls into the middle-income category.

The World Bank's Bangkok-based senior economist Philip Schellekens, who produced the report after an online survey among 200 respondents from the 1 million Malaysian diaspora around the world acknowledges that this number is small.

Click on image for actual size.
 

“But the World Bank, in the first place, does not wish to present this as a definite conclusion. Instead, it wishes to convey a qualitative feel of what is going on. The study can be seen as the first step towards understanding what has been driving brain drain in Malaysia and how policymakers can address it.”

The report measures the size of the Malaysian diaspora and brain drain, its key characteristics and its evolution over the past 30 years. It gives an updated picture on the basis of the most recent information available, including Singapore's census results which were released early this year.

“We've avoided at all costs to use anecdotal sources for such a sensitive topic. So, whatever we present here we can stand by. We also document our sources of information so that other people, as part of this process, can continue the work, refer to our study, look at the numbers and update or improve them.”

It is an extension of previous reports on Malaysia, Growth through Innovation and Inclusive Growth. 

Why do people leave?

Brain drain is a symptom, not a problem in itself. It is the outcome of underlying factors as all of us respond to push and pull factors. While not every person leaving Malaysia constitute a brain drain, about a third of them do. Seen from the long lens of emigration and its effect years from today, Malaysia is not only losing talent today, it is also losing talent tomorrow, because children who leave with their parents, and who spend their formative years abroad, are less likely to return.

The report removes the veil of doubt and uncertainty over some numbers. Some of the key highlights are:

● The Malaysian diaspora is large and expanding, with a conservative estimate of about 1 million worldwide last year. The diaspora has quadrupled over the last 30 years, and is geographically concentrated and ethnically skewed.

● Singapore alone absorbs 57% of the entire diaspora, with the rest residing in Australia, Brunei, Britain and the United States. - Malaysia's brain drain is intense relative to its narrow skill base. - The brain drain is aggravated by a lack of compensating inflow. While many Singaporeans leave the city-state for greener pastures, many highly skilled expatriates also enter the republic.

The situation is different in Malaysia. While Malaysia receives many, most who come have low skills. Coupled with this dire situation, Malaysia's high-skilled expatriate base has shrunk by a quarter since 2004.

● The number of skilled Malaysians leaving for Singapore has increased from 10% in 1990, 23% in 2000 to 35% last year. This is defined by those who have tertiary education. About 47% of all skilled foreign-born residents in Singapore were born in Malaysia.

Malaysia is not on the brink of a crisis, but it can do better as it has a lot of potential. Brain drain, says Schellekens, should not be viewed as potentially negative. It has its positive potential, as when it aspires a young person to pursue tertiary education, as when it allows those who remain to leverage on those who have succeeded abroad.

“There is an increased openness in Malaysia to discuss these issues and this is a welcome development,” he says.

The report goes beyond stating numbers and facts. It also identifies two areas the government needs to seriously look into the need to improve productivity and to strengthen Malaysia's policies of inclusiveness.

Talent Corp CEO Johan Mahmood Merican says the report is not something new. “It lends credence to what the Government already knows and we have taken action even before the World Bank report was released. There is a lot of work-in-progress which supports the direction that we have initiated.

“What is important is there is an urgency for us to change the business model if we are to advance. It is not a case of whether we stand still or we advance. If we stand still, we are effectively regressing. Vietnam and Indonesia are getting their act together and recording high growth. In that sense, it is consistent.”

Johan says the usefulness of such a report is that while it highlights the potentially negative effects of brain drain, it also highlights the flip side, its positive effects.

“Malaysia has been spared from the detrimental part of it in the sense that our industries have not come to a halt, as in some other countries. At the same time, it has not been as beneficial to us as a country, as it has to some other countries. So at this point in time, it is neutral. The question is, how do we make it net positive? This is where Talent Corp comes in. We are beginning to engage with Malaysians abroad and with the private sector,” Johan says.



Courting talent back

Four months after its establishment, Talent Corp is primarily focused on facilitating initiatives to attract, nurture, engage and retain talent to support human capital needs of the Economic Transformation Programme (ETP). This has resulted in the Residence Pass that enables top foreign talent, especially those in the ETP, to continue working in Malaysia for a longer tenure and fewer restrictions. There has also been revisions to the Returning Expert Programme to encourage more Malayisan professionals working overseas to come home and help drive the nation's economic transformation, especially in the ETP. Because of Malaysia's base in manufacturing, parcticularly in electrical & electronics, an industry-led initiative to address the sector's talent requirements, with an emphasis on nurturing local talent was launched last week. Similar groups in other key economic sectors are currently in the pipeline.

“This is clearly a long-term project. We are looking at small starting steps this year to ease the mobility of talent and to establish a baseline for future work,” says Johan. Other initiatives in the works will be announced later this year in due course.

Johan also brings up the success story of Pua Khien Seng, the Malaysian who invented the pen drive, and who has been residing in Taiwan for 16 years. Pua is now president and co-founder of Phison Electronics Corp, a listed technology company in Taiwan with a market capitalisation of almost NT$40bil (RM4.3bil).

“His business will always be in Taiwan. So how do we leverage on that? How can we facilitate that engagement with Pua, and other Malaysians, who are residing abroad?”

The larger question is: Can targeted measures such as talent management and diaspora engagement substitute more comprehensive reforms?

Schellekens thinks not. “Our observation is that the targeted measures developed by Talent Corp are helpful. These are first steps in the right direction but if the underlying deterrents are not addressed comprehensively, then these measures will only have a marginal impact.”

The fundamental issues, or underlying factors why people leave relate to economic incentives, which can be captured under the umbrella of low productivity, and social disincentives which reflect discontentment among the non-bumiputras with Malaysia's inclusiveness policies.

“If you want to tackle the brain drain in a comprehensive fashion, it is not through reversing it or trying artificially to stop it. Tackle the fundamentals and things will happen automatically; people will feel incentivised not to leave the country, or to return if they have left,” Schellekens, the lead author of the report says.

The report highlights the progress made by South Korea. It was a third poorer than Malaysia in the 1970s in terms of average income but nowadays it's three times richer. One remarkable aspect of South Korea's development path has been its attention to investment in quality education. As with Singapore, Hong Kong, China and Japan, the bedrock of any country's progress is its human capital.

A statement from RAM Ratings Services Bhd says: “While we may be comforted by the report's finding that the brain drain has not reduced significantly the country's stock of educated workforce, it highlights the disconcerting fact that the country has a narrow skills base and that its skilled human capital base continues to slide, exacerbated by the brain drain. We need to actionalise inclusiveness under the clarion call of 1Malaysia and sharpen the focus on competitiveness, meritocracy, good governance and productivity in both the government and private sector. Only by unleashing private sector dynamism, entrepreneurialship and innovativeness can we sustain the virtuous circle of high investment-growth-productivity increases.”

Its chief economist Dr Yeah Kim Leng adds: “It would be difficult to achieve the high income target by 2020. Productivity growth would slow as the labour market would be more confined to lower-skilled sets. The country's industrial and technological upgrading and its shift up the value chain would be hampered by skills shortages, higher cost of foreign skilled manpower and deficiencies in innovation and entrepreneurship.”

While our challenge is to tap into our potential and we are blessed with an abundance in myriad areas and sectors this has become more difficult than a decade or two ago because competition in the region for trade, talent, and foreign direct investment has intensified. While we bicker among ourselves, other countries are forging ahead very quickly.

As Malaysia climbs up the income ladder, new challenges in form of innovation will come our way.
Says Schellekens: “Malaysia aspires to base its future growth on innovation. This means that growth will become more skills-intensive, creating a demand for skilled people as well as leading to rising wage levels for the skilled. This may accentuate the income disparity between the skilled and the unskilled, leading also to social challenges between the city and countryside.

Another challenge is the need for more internal competition. Iron sharpens iron.

“There is a sense of urgency for Malaysia to implement the structural reform agenda more quickly as well as comprehensively, else the underlying momentum of growth will deteriorate through an erosion of competitiveness. We are concerned that some of these trends may be happening already, as with the parts and components trade within the electrical and electronics of Malaysia,” he adds.

Malaysia Economic Monitor, April 2011

Click on a thumbnail to access the higher resolution version (you may want to enlarge the resulting browser window to get the largest view possible). To save a copy, right-click on the hi-res image and choose "save as" or "save image as".  The Brain Drain Challenge in Pictures
The Malaysian diaspora in 2010 is estimated at 1 million, a third representing brain drain	The diaspora is geographically concentrated	The pace is brain drain is elevated
Relative to narrow skill base, brain drain is intense	Brain drain is a symptom driven by productivity and inclusiveness concerns	Boosting productivity will require up-skilling through education and innovation policies
Reducing the ethnic skew in the diaspora will require updating inclusiveness policies	Targeted policies to tap into global talent and engage with the diaspora would complement

Related Stories:

Reversing the brain drain, innovate to compete!

 The big picture on skilled labour market
Can Malaysia reform fast enough to meet challenges?
Talent Corp CEO: Need to change business model
The vicious cycle' of brain drain