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Putting the Malaysian diaspora into perspective

Malaysia is one of the countries most affected by brain drain. It faces a major problem in not only being incapable of delivering the required talent, but also in being unable to retain the current local talent or attract foreign ones. Malaysia aims to escape the second-world chasm and join the league of high-income nations by 2020, but the biggest deterrent is the lack of skilled human capital. Because of the severity of this issue in Malaysia, the World Bank chose it as part of their Economic Monitor report to examine the brain drain issue.

Malaysia’s population as of 2009 is 27.5 million. Since it is extremely difficult to keep track of the current Malaysian diaspora which is so widely spread out, the World Bank used previous data and took into account the most recent trends, and from it estimated that at least 800,000 and up to 1.4 million Malaysians were currently living overseas. Among the diaspora, more than a third of them are over 25, which the World Bank has identified as the brain drain, or rather Malaysian citizens that are living abroad and contributing to countries other than their own. As of 2000, 46% of the Malaysian diaspora reside in Singapore and actually make up 45% of Singapore’s resident immigrant population.

Current trends show that the growth of migrants to Singapore is steadily decreasing (currently around 2.4%, down from 4.5% in 2000), while the growth of migrants to New Zealand, Australia and United Kingdom is increasing (currently around 4%, up from 1.6% in 2000).

If we focus just on the brain drain group, 40% of them are living in Singapore as of 2000, up from 19% in 1990. In 1990, Australia was the leading magnet for skilled labor, with 36% of them heading there. In 2000 however, this number dropped to 23%. The main factor in this trend change is the converging of skill intensity between Australia in Singapore, which still exceeds Malaysia by far, hence attracting a larger number of migrants to the more accessible Singapore.

Simply put, one in every ten skilled Malaysians born in Malaysia choose to leave the country, which is twice the world average. While the numbers are similar to Singapore and Hong Kong, they are actually incomparable to Malaysia because that is a typical situation for small and open economies. Skeptics argue that the immigration population of 2.4 million, which is at least 1 million more than the diaspora, compensates for the brain drain. However, a substantial amount of the immigration population is low-skill foreign labor and does not help with the loss of skilled brain drain, especially for technology-based jobs.

The Main Factors of the Malaysian Brain Drain

The World Bank identified in their Monitor Report the factors of the Malaysian brain drain. The main cause is attributed to the less attractive salary and benefits offered in the country. This difference is especially noticeable in the high-skill technology sector. For example, the starting salary for a fresh graduate with a bachelors in computer science is $50,000 in the United States. In Malaysia, the starting salary is barely $10,000. Even after adjusting for cost of living, the starting salary in Malaysia is nowhere as attractive as developed countries as overseas. This is further aggravated by luxury taxes in Malaysia. For example, a brand new Toyota Corolla costs as low as $18,000 in the United States but costs more than double in Malaysia. The brain drain is also attributed to the lack of career prospects and unavailability of opportunities in specific fields. A majority of Malaysia’s economy is based on production and manufacturing instead of research and development, which makes it a magnet for semi-skilled labor but results in the lack of skilled job opportunities.

A sensitive, yet substantial cause of the Malaysian Brain Drain is social injustice. Malaysia consists of 63% Malays, who are referred to as “bumiputera” or directly translated as “sons of the earth”. They are given special privileges as determined by the Constitution which includes extra assistance in starting businesses, mandatory discounts for real estate and a quota system based on racial distribution for education opportunities. This feeling of unfair treatment has resulted in a diaspora with a strongly ethnic dimension, with 81% of emigrants being Chinese. Their dissatisfaction is expressed through many mediums, such as blogs in which Nancy Goh, a Malaysian working in Washington DC as an IT project manager, tells her story (http://malaysiapushfactor.blogspot.com/2009/01/malaysian-diaspora-speaks-up.html). Even foreign observers recognize this as a major cause of brain drain, as expressed by former United States ambassador to Malaysia, John Malott, in an article published in the Wall Street Journal (http://online.wsj.com/article/SB10001424052748704422204576129663620557634.html).

The limited access to high-quality education also remains to be a significant cause of brain drain. Enrollment into affordable public tertiary education institutions is very limited and based on racial quotas while private universities are costly and aren’t anywhere near the standards of universities in developed countries. Primary and secondary education, although free, is of substandard quality and it is uncommonly supported by long hours of outside tutoring for those who can afford it.

The close proximity of Singapore and its substantially more developed environment also encourages the Malaysian diaspora to migrate there. The proximity allows them to keep in touch with family left behind in Malaysia, and the extensive network of Malaysians already living there make it easier for them to make the move.

Policy Approaches to Solve Brain-Drain

The Malaysian government is fully aware of the debacle facing them and has taken many efforts to try to overcome the issue. They identify productivity and inclusiveness as the key factors to solve emigration and have established the Government Transformation Programme (GTP) and Economic Transformation Programme (ETP) to tackle the issue from these perspectives.

The World Bank discovered through recent investment climate assessments that the limited amount of skill is one of the deterrent factors to invest in Malaysia, since it is still considered to be in the low-skill low-productivity chasm. They also report that there is an especially large deficiency in creativity and innovation in the IT sector, which makes it unsuitable for IT research and development. One of the causes of this condition is the extensive protection and boost given by the government to the local market, which discourages investors from investing in Malaysia. This protection reduces the drive for innovation since it allows them to be complacent. The government realizes this and is beginning to extend incentives to foreign investors to encourage more competition and increase innovation.

Under the GTP, the government is hoping to address the issue of non-inclusiveness for non-Bumiputeras. Through it, the Prime Minister, Datuk Seri Najib Razak has launched the 1Malaysia campaign, which encourages Malaysians to no longer identify their culture by race but by nationality. The 2010 issue of the World Bank Monitor Report proposed a three-pillar approach to implementing 1Malaysia, by increasing economy-wide income-earning opportunities, promoting investment in human capital and providing social protection for the poor and vulnerable.

The government is also currently working with Talent Corporation to attract, nurture and retain talent required for a high-income economy. Among its current efforts is working with the government to change its overseas scholarship policy to allow scholarship holders to serve their bond by working at a private company in Malaysia that would fully utilize their skill instead of the government. It has also introduced the Returning Expert Program to encourage Malaysians currently working abroad to return home. Among its incentives are a flat tax rate of 15%, tax exemption for all personal effects brought home and permanent resident status for spouse and children. However, this effort has come under criticism for not offering competitive benefits. South Korea, for example, offers tax-free incentives for certain skilled foreigners who choose to work there.

More policies to increase competitiveness in the labor market are needed to push up wages, a main deterrent of returning to Malaysia for diaspora. The government also needs to reduce disparities in the availability of the quality basic education among states and between rural and urban areas, restructure the vocational training system and ensure that skills being produced match the market. Policies that would ensure that benefits get to the people who really need it and provide them with adequate protection to allow them to take prudent risks are also necessary to prepare them for the current global economy.

Feedback from the current diaspora is also essential in determining policies to reduce brain drain. Based on a survey done by a Malaysian student currently studying in California, she was able to collect much valuable information about the Malaysian diaspora, including suggestions on how to solve it (http://pluggingthebraindrain.wordpress.com/). Some of the most popular responses were a paradigm shift away from raced-based towards need-based affirmative action and evidence of fundamental and positive change in the government. Other suggestions were to allow dual citizenship, practice meritocracy in race-blind way in hiring and daily workplace activities, more transparency in policy making, strengthening the role of the media, reduce government intervention in the economy, adopt systems of international standards in pay and benefits, open up more opportunities for non-Bumiputera students and strengthening teaching and research quality of faculty at universities.

To see the full Monitor Report, go to: http://siteresources.worldbank.org/INTMALAYSIA/Resources/324392-1303882224029/malaysia_ec_monitor_apr2011_full.pdf.

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