Brain Drain In Malaysia
Brain drain—the migration of talent across borders—touches the core of Malaysia's aspiration to become a high-income nation. Human capital is the bedrock of the high-income economy. Sustained and skill-intensive growth will require talent going forward. For Malaysia to stand 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.
How Large Is Malaysia's Brain Drain?
The Malaysian diaspora is large and expanding. Our conservative estimate puts the worldwide diaspora at one million people in 2010. The actual number could be significantly larger depending on how many Malaysian-born are part of the nonresident population of Singapore—no data is available. The diaspora has grown rapidly: it almost quadrupled over the last three decades.
The diaspora is geographically concentrated and ethnically skewed. Singapore alone absorbs 57 percent of the entire diaspora, with most of the remainder residing in Australia, Brunei, United Kingdom and United States. Ethnic Chinese account for almost 90 percent of the Malaysian diaspora in Singapore; they are similarly overrepresented in the countries of the OECD.
About a third of all migration is brain drain. Malaysia's rate of brain drain is elevated: the skilled diaspora is now three times larger than two decades ago. Migration has increasingly become the preserve of the skilled. Singapore absorbed most of the brain drain, both in terms of stock (54 percent in 2010) and increment (68 percent over the last decade). Over the last decade, the skilled diaspora in Singapore has grown at a yearly rate of 6 percent.
What Is the Impact of Brain Drain?
Malaysia's brain drain is intense relative to a narrow skill base. One out of ten Malaysians with a tertiary degree migrated in 2000 to an OECD country—this is twice the world average and including Singapore would make this two out of ten. Brain drain is aggravated by a lack of compensating inflows. Malaysia is a major receiving country, but most immigrants are low-skill and the high-skill expatriate base has shrunk by a quarter since 2004. Many skilled migrants have spent their formative years overseas, which lowered the fiscal cost of migration but also the chances of return migration.
Brain drain need not trap a country into a vicious cycle of human capital flight and slow growth. Contrary to popular belief, brain drain brings also benefits. Some of these may not be immediately visible but over time they may turn detrimental brain drain into beneficial brain drain. The possibility of of migration may promote skills formation domestically. The existence of a diaspora can be positive for the exchange of goods, capital and ideas.
The brain drain has not eroded the number of graduates available domestically. Universities have managed to replenish the outflows. But brain drain is likely to have reduced the quality of the human capital stock. Brain drain is prone to positive selection: the best and brightest typically leave first. Firms in Malaysia raise the quality of the skills base as a top concern. While brain drain is not the only factor affecting quality, it has likely been an important one.
How Can Policies Address Brain Drain?
Brain drain is a wave to be ridden, not a tide to be turned. Brain drain reflects the forces of globalization that make the world a smaller place. Brain drain is not unique to Malaysia and neither is it avoidable or to be avoided. The challenge for Malaysia, as for many other countries, is to embrace the global mobility of talent. As Malaysia needs talent, it will need to turn the brain drain to its advantage. It will need to reverse the deterioration in skill quality and expand the narrow skills base.
Brain drain is a symptom, not a problem in itself. Brain drain is the outcome of underlying factors. Individuals respond to incentives and disincentives—the push and pull factors that drive the migration decision. Identifying these constitutes the first step towards formulating policies. Key factors that motivate Malaysians to move abroad include differences in earnings potential, career prospects, quality of education and quality of life. Discontent with Malaysia's inclusiveness policies is a key factor too—particularly among the non-Bumiputeras who make up the bulk of the diaspora.
By boosting productivity and strengthening inclusiveness, Malaysia can address the brain drain comprehensively. Productivity improvement will require a revamp of the education system—to stimulate the supply of quality skills and raise productivity-linked wages. To raise the demand for these skills, productivity improvement will also require efforts to promote innovation and stimulate competition. Malaysia can also tackle the push factors of migration by updating its inclusiveness policies.
Today over 90 percent of all inequality is a function of socio-economic differences within ethnic groups, rather than between them. Productivity and inclusiveness lie at the heart of Malaysia's transformation programs. Implementing these forcefully will go a long way towards turning the brain drain into a gain.
Targeted measures such as talent management and diaspora engagement complement, but cannot substitute for, comprehensive reforms. Malaysia will need to participate in the global competition for talent. Surveys of the Malaysian diaspora point to a strong sense of attachment to the motherland. If the enabling conditions are satisfied, talent management policies could play a pivotal role in promoting return migration. Malaysia can tap also into the global talent pool directly and broaden its expatriate base. The Talent Corporation is developing new initiatives and the Residence Pass and Returning Experts Programme are welcome first steps to ease the flow of skill across borders. In addition, Malaysia could also engage more deeply with the diaspora, creating diaspora trade councils, involving the diaspora in investment promotion missions, and even considering direct inputs from the diaspora into policymaking - World Bank