Singapore tops Asian countries in Global Talent Ranking report which assesses the extent to which countries develop, attract and retain talent to sustain the pool that enterprises employ to create long-term value.
The World Talent Ranking Report 2018, released this week finds that all in all, talent and education are the major drivers of long-term economic growth for any country. With the evidence IMD Business School has collected for the last 30 years shows that the countries which succeed in the long run (Singapore, Malaysia, Taiwan in Asia) also display relatively higher quality in their education systems. Similarly, the countries that have ranked lower for long periods (Philippines, Indonesia) report disproportionally lower levels of public investment in education.
Looking at Asia’s top performers, Singapore continues to excel in attracting talent from abroad and in offering a top-tier pool of highly-skilled professionals to its firms. Compared to countries in the top 10, Singapore lags behind in terms of investments in public education (34th position in the Investment and Development factor for 2018). However, this factor shows a progress of two positions with respect to 2017. Further improvements in this factor will therefore allow the country to enter the top 10
South East Asia has also made an amazing progress in the last years. Philippines, that invested in education only 2.47% of its GDP in 2015 (compared to a world average of 4.5%) now invests 3.07%. South Korea invests 5.07%. These are good signs, but it is not enough: Estonia, a country with a stellar performance in all international comparisons, invested 6.07% of its GDP in education in 2017 (compared with 5.63% in 2015). So, there is much more to be done: India, Singapore, Taiwan, and Thailand have reduced their levels of investment in the last years.
In the meantime, countries in the region have primarily relied on attractiveness of foreign talent by offering life quality, high salaries and a safe environment. This is the case of Singapore, replicated as well by Hong Kong and Taiwan. Others like Thailand, Indonesia and the Philippines still struggle to prevent talent drain. However, talent attractiveness is not a long-term solution. Because by opening borders to talent competition, countries can end up in a segmented labour market between expats and locals. Unless the government promotes policies to incorporate local talent (as it happens in the UAE and Saudi Arabia), local employees will be displaced to low productivity / low salary jobs. Global talent is desirable in order to incentivise the local labour force to improve their skill level to be able to compete, but this is never possible if the national education systems are not ready. This is today the problem of South East Asia (with remarkable exceptions). Not surprisingly, and with the exception of Canada, all the countries in the top ten of the 2018 IMD World Talent Ranking are European.
When advising governments on the best policies to increase prosperity, I often say that it is best to start with the reforms that take the longest to implement. This is obviously difficult when politicians do not stay in power forever and they focus on too-short-term agendas. In fact, the recent examples of successful countries (Singapore, Switzerland, Estonia) show that once the long-term issues are resolved, it is easy to promote economic growth, innovation, the financial health of the country and the attraction of foreign investments.
The most important of such long-term reforms is education. In the same way that money is the currency of transactions, talent is the currency of a country’s prosperity. Education is the ultimate driver of entrepreneurship, the ability to innovate, efficiency and productivity, life satisfaction and economic growth. Most of the disruptive innovations that we have seen in the last 40 years (starting with the internet, but also driverless cars and collaborative business models) ultimately require skills for their design and creation. There is no creativity without technique.
Innovation ecosystems are mushrooming everywhere in the world today: Silicon Valley of course, but also Cryptovalley in Switzerland, the various innovation parks in Singapore, Hong Kong, Thailand, South Korea, the Skolkovo Innovation Center in Russia—to cite a few. The model is always the same and quite simple: to innovate, we need capital and regulation. Additionally, the most important factor is talent and ideas. These are always the result of good education policies that foster creativity, out-of-the-box thinking and, overall, technical training.
The productivity of a country, and therefore its wage levels, depend to a great extent by the quality of human capital and the talent of the labour force. As the world has moved massively into a services society (something that, in China and India, is happening too rapidly), the value of human skills and education has also increased. One hundred years ago, the importance of brains was lesser compared to the power of a machine, the availability of sources of energy and the heads of cattle possessed. Nowadays there is a direct relationship between productivity and talent. This is so because the human brain has become more important than the human legs and hands. The 80,000 employees of Tata Motors generate an annual revenue of $520,000 per capita. Similarly, the 22,000 employees of DBS in Singapore produce $509,000 per head. In contrast, Tencent’s 38,000 employees have a productivity of $924,000 per head.
This is not because China is more competitive than Singapore or more efficient than India, quite the opposite. The reason is that Tencent’s is less capital and more labour intensive. As we evolve into a digital society this will be more and more prevalent. In an economic systems in which we use more and more machines, it will be those who control them the ones that will make a difference
Talent and education shall be promoted not only for economic reasons. A recent survey in the UK has shown that graduates display a higher degree of life satisfaction than non-graduates. Bhutan, that manages the Gross Happiness Index as a key performance indicator of the country, incorporates the quality of the education system as a major driver of the index. And as life satisfaction increases, people are more productive, spend more, improve the image of their country, attract foreign visitors and investment, and pay more taxes.
One of the key take aways from the study is that globally governments should better focus on the reforms that drive long-term competitiveness. Education being the most important. Of course not all education systems are alike and obviously throwing money into education will not solve a country´s problems alone. But it is very important to design at every point, curriculums and subjects that fit the needs of the labor market in every country. If a nation is going through a massive digital transformation, let´s educate computer programers. In a manufacturing economy, let us invest in engineers. In a services economy, customer centricity must be taught.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Professor Arturo Bris is the Director of IMD World Competitiveness Center. At IMD he directed the Advanced Strategic Management program from 2009-2014. He has directed programs for senior executives in several industries and continents.
Prior to joining IMD, Professor Bris was the Robert B & Candice J. Haas Associate Professor of Corporate Finance at the Yale School of Management (USA). A Research Associate of the European Corporate Governance Institute, and a member of the Yale International Institute for Corporate Governance, he has worked extensively on issues of Corporate Governance, Financial Regulation, and International Valuation.
Professor Bris taught Corporate Finance and Investment Banking at Yale from 1998 to 2005, where he received the Best Teacher Award twice. His consulting experience includes companies in both the US and Europe.