The ‘vicious cycle’ of brain drain

Source:The Business Star, The ‘vicious cycle’ of brain drain By FINTAN NG

WE have often heard how brain drain is a vicious cycle and how this cycle has affected Malaysia’s current and future growth prospects.

The country, despite seeing a large diaspora in comparison to the population, is a “receiving country” with as many as 2.4 million immigrants according to the World Bank‘s 2011 Migration and Remittances Factbook.
Of these, some 40% have secondary education while in recent years, some 40% had no formal education at all.

The stock of Indonesian-born immigrants accounted for about 1.4 million,
placing the Indonesia-Malaysia migration corridor among the largest corridors in the world; it’s about one third larger than the Malaysia-Singapore corridor.

 The stock of Indonesian-born immigrants account for about 1.4 million people, placing the Indonesia- Malaysia migration corridor among the
largest in the world.

Needless to say, the number of low-skilled immigrants depresses the wage
levels while productivity and innovation suffer as well.

Human capital is the bedrock of the high-income economy,” the World Bank
says in the fourth Malaysia Economic Monitor adding that brain drain creates a vicious cycle that may entrap a country into an undesirable equilibrium with low levels of human capital and a large technology gap.

It observes that although other countries in the region have seen a more
rapid increase in their brain drain in the 1990s, the intensity of the brain
drain is high in Malaysia because the “stock of human capital domestically has not grown as fast as elsewhere”.

Recruitment specialist Robert Walters’ managing director for Singapore and
Malaysia Andrea Ross tells StarBizWeek that although there is an increase
in the number of overseas Malaysians returning, mainly due to family reasons, an equal number of young, well-educated Malaysians leave the country.

“There is definitely a brain drain from Malaysia to locations like Australia,
Hong Kong and Singapore where lifestyle and earning capabilities are different,” she says.

The World Bank’s statistics show that for every ten skilled Malaysians born
in the country, one of them elects to leave the country. This is double the
world average. If Singapore is included, the estimates of Malaysia’s brain drain intensity will double.

Given a narrower skill-base, as proxied by educational attainment (where only a fifth of the workforce have some form of tertiary qualification), the impact of a person leaving should also be higher in Malaysia than elsewhere.

“The low-skill base is inherently related to the challenges Malaysia faces in
its education sector,” the World Bank says.

AmResearch Sdn Bhd senior economist Manokaran Mottain says it is encouraging to note that local universities have been churning out larger numbers of graduates over the years.

“But the number needs closer scrutiny. Are we producing the right people for the future, especially in the skilled areas?” he asks.

Manokaran says to compete, the country should seriously reconsider bringing back the teaching of Science and Mathematics in English. “Also, we note the Government’s efforts to enhance the quality of graduates via incentives to further their studies. We should have more post-graduates in the future,” he says.

Manokaran adds that the lower skill base will have an impact on innovation
and productivity, which is one of the key driving factors of sustained
productivity improvement.

Like his peers, they share the World Bank’s views on more deep-seated reforms as laid out in the New Economic Model. Manokaran says “comprehensive reforms are needed in order to improve productivity and inclusiveness.

He says there is a need to raise productivity in order that wages can be
raised in the public and private sectors.

“As people grow accustomed to higher real wages abroad, this may provide
incentives for more to return. A stronger ringgit will also help to boost the
chances,” Manokaran says.

Meanwhile, Deloitte Consulting Malaysia executive director Andrew Lee says the erosion of the skill base and the consequent lack of innovation can be seen in investors bypassing the country as “the available labour market is a major deterrent to foreign investment in Malaysia”.

The World Bank’s most recent investment climate assessment (in 2009) suggests that Malaysia continues to face a tight labour market for skills and that this is affecting firm productivity.

In a 2007 survey of Malaysian manufacturing firms, the average time spent to recruit a professional worker was reported to be a lengthy period of six weeks with the situation deteriorating slightly from 2002, the date of the previous investment climate assessment.

“From a cross-country perspective, it takes a long time in Malaysia to hire a
skilled technician and there is also greater uncertainty about how long it
takes,” the World Bank says.

“The country is not yet ready to attract the types of sophisticated
knowledge-based foreign direct investment (FDI) further up the value chain,” Lee observes.

This is despite the fact that the Government is making efforts in developing
local industries, which will be a key factor in cementing demand for skilled
labour and creating development opportunities which were previously
unavailable.

Lee says at the same time, assembly-type low tech FDIs now find the
Philippines a more attractive investment destination than Malaysia, which is
still nurturing investments from conventional developed countries that are
expected to slow down on foreign investments.

Robert Walters country manager for Malaysia Sally Raj says factors such as
tax, salaries, infrastructure and meritocracy have to be considered as well to
draw Malaysians back to the country.

“We also noticed a trend of returning Malaysians, notably from banks in the
Middle East. Three years ago, Dubai was one of the hot spots where many
professionals flocked to build their careers, but we’re gradually seeing a
return of these candidates, both to Malaysia and neighbouring countries,” she adds.

Related Stories:
Migration of talent how can Malaysia stem the tide?
The big picture on skilled labour market
Can Malaysia reform fast enough to meet challenges?
Talent Corp CEO: Need to change business model
Reversing the brain drain

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One Response to “The ‘vicious cycle’ of brain drain”

  1. News for Malaysia Talent Corporation about Brain Drain « Dr Ko Ko Gyi’s Blog Says:

    […] The ‘vicious cycle’ of brain drain (drkokogyi.wordpress.com) […]

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