It can create an equilibrium of low levels of workers and a large technological gap.
The Malaysian economy can be dragged by the brain drain in the country, Schroder revealed. If measures are not done, the firm noted that brain drain could create a trap wherein there is an undesirable equilibrium of low levels of human capital and a large technological gap.
According to a World Bank report cited by the firm, the rate of which one in 10 Malaysians leave home to work abroad is double the global average.
“Clearly, against a population backdrop of 28 million people, it (brain drain) signifies a massive loss of talent, and erodes an already narrow skill base that is lacking in compensating inflows of skilled migrants,”Schroder co-head of Asian equity alternative investments Robin Parbrook and head of Asian equities Singapore King Fuei Lee said.
According to a report from Malaysia's Department of Statistics, only 14.7 million are part of the labour force out of Malaysia's population of 31.7 million in 2016. Amongst the labour force, 27.3% are high-skill employees including those in managerial, professional or technician roles. Meanwhile, semi-skill workers and low-skill workers make up 59.7% and 13% of the labour force, respectively.
Three out of five said that social injustice is one of the top reasons why they prefer working abroad.
The analysts noted that one in three of the local Malaysian population is made up of Malays or the Bumiputra. The Constitutional law gives them access to special privileges including mandatory discounts on property, quotas for educational opportunities, preferential treatment for government contracts, and extra assistance when starting businesses.
“This often places the other ethnic groups, especially the Chinese, at a considerable disadvantage when embarking on their own economic progression paths, and conjures a strong feeling of unfair treatment and non-inclusiveness,” the analysts commented.“It is therefore not surprising that amongst the diaspora headed to the popular destination of Singapore, Chinese makes up the largest ethnicity,” they added.
In 2010, the World Bank reported that 88% of Malaysian immigrants in Singapore are of Chinese descent. Meanwhile, those of Bumiputra and Indian descent make up 6% and 5% of Malaysian residents, respectively.
Through the years, the Malaysian government tried to address the brain drain through the 1Malaysia programme introduced in 2010 to provide employment and income generating opportunities for the poor and hardcore poor. They also established the Talent Corporation in 2011 to provide a hub where professionals, student, employers as well as academic and industry partners can find work that will be beneficial to them.
However, Schroder said that the initiatives to reduce brain drain have not been very successful. 1Malaysia Development Berhad (1MDB) is a product of the 1Malaysia programme which has been scrutinized by the new government as it was plagued with corruption and graft.
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