This article first appeared in The Edge Malaysia Weekly on August 21, 2023 - August 27, 2023

AS Malaysia’s long-standing brain drain dilemma intensifies in the global race for talents — now exacerbated by the weak ringgit, increased polarisation and racial politics — authorities warn that, left unchecked, the hollowing out of the nation’s talent pool will prevent certain sectors from moving up the value chain.

For too long now, the nation has been overly reliant on foreign workers because of the inability of many industries to fill critical occupations related to highly technical skills such as ICT, electronics, engineering and research. In addition, there is the issue of a lack of suitable jobs or salaries, where graduates who initially intend to return to Malaysia upon graduation end up pursuing careers overseas because the local jobs in the talents’ fields of choice do not justify the investment poured into their education.

“In the era of globalisation, we face intense competition over talents. Within Asia-Pacific, Taiwan, Hong Kong and Singa­pore are major destinations for highly skilled professionals. Competitive pay and benefits packages aside, foreign job seekers in these countries benefit from attractive immigration policies,” Monash University Malaysia School of Business Prof Niaz Asadullah, who is also the Southeast Asia lead of the Global Labor Organization, tells The Edge.

“For these reasons, Singapore also attracts a large number of semi-skilled and unskilled Malaysians. Two years ago, Australia introduced a visa scheme targeting Southeast Asian farmers. Regional competition for talents, regardless of their nationalities, will further intensify as countries try to recover from the pandemic.

“The Malaysian government should accept the new reality and adopt a merit-based policy to make the labour and immigration laws more flexible, both for citizens and foreign professionals.”

Human Resources Minister V Sivakumar reportedly said in March that a total of 1.13 million out of 1.86 million Malaysians who had migrated overseas were residing in Singapore as at 2022, and that Malaysia’s brain drain stood at 5.5% of the population, far higher than the global average of 3.3%.

Data from the Department of Statistics Malaysia showed Singapore as being “the most favoured country”, with 54% of overseas Malaysians employed there, followed by Australia (15%), the UK (5%) and the US (10%).

Sunway University Business School professor of economics Dr Yeah Kim Leng acknowledges that the shrinking ringgit, which has plunged 5.28% to 4.465 against the US dollar and weakened 3.84% to 3.42 against the Singapore dollar so far this year, stands out as a push-pull factor for local talents seeking better career opportunities and commensurate compensation packages in other countries.  He adds that increased polarisation and racial politics tend also to cloud the country’s future growth prospects and socio-political stability. Yeah is one of five advisers to the Ministry of Finance.

“Although the brain drain is a global phenomenon, the government of the day [has a responsibility] to find out [why exactly the] labour force [is draining out], and tackle the reasons,” observes Lee Heng Guie, executive director of the Associated Chinese Chambers of Commerce and Industry of Malaysia’s Socio-Economic Research Centre (SERC).

Labour economists stress that to address the pull factors causing the brain drain, there need to be accelerated economic growth and industrial upgrading, an increase in employment and entrepreneurship opportunities as well as raised incomes and living standards.

Yeah explains: “A dynamic and progressive economy will not only stem talent outflow but could also result in a brain gain. Thus, policies and strategies to liberalise protected sectors of the economy, attract technology and knowledge-intensive investments, incentivise industrial upgrading and advanced skills training are essential components of the talent development and retention policy package to stem the talent outflow.”

It is widely understood that incentive packages to attract returning talents currently include lower tax rates, relocation benefits, work permits for foreign spouses and family perks. But these — though they “act as sweeteners” — may not be enough to woo talents home if the overall social, economic and business environment is not conducive, Yeah points out.

“Besides a stable, dynamic and progressive macro environment, expanding income and career advancement opportunities are [critical] for talent retention,” he says.

“As the skills shortage in Malaysia is highly varied and industry-specific, there is a need to foster closer collaboration between industry players, institutions of higher learning and the government to address specific skills gaps that have constrained the country’s potential to achieve higher growth.”

Yeah adds that the mainstreaming of technical and vocational education and training (TVET) is critical to address the existing supply-and-demand imbalances in tertiary education.

He says closer tripartite collaboration is also crucial, in view of the fast-changing socioeconomic, business and technology landscape brought about by advances in artificial intelligence and digital transformation. “Instead of talent retention, the focus could then be on talent circulation within and from abroad so that the country’s human capital is continuously upgraded and fully utilised to raise the well-being of the country and its citizens,” he suggests.

According to TalentCorp’s Critical Occupation List, occupations requiring high skills and knowledge related to ICT, electronics, engineering and research have consistently been listed as “hard to fill” since 2015. It has been the same with other occupations in finance and business management where research is a prerequisite. Considering that was a good eight years ago, and that the problem persists, indicates how difficult it is to overcome the challenge and how much more thought and action need to be taken to address the issue.

Speaking of its efforts to bring talents home, which include the Returning Expert Programme (REP, an incentive programme to attract targeted professionals for coveted skills), TalentCorp Group CEO Thomas Mathew points out that, since January 2011, the agency has received a total of 10,587 REP applications, out of which 6,726 have been approved and 4,372 applicants had successfully returned to work in Malaysia as at June 30. “Our returnees have mostly returned from [in this order] Singapore, China, the UK, Australia and the United Arab Emirates. The top sectors they are actively involved in are oil and gas, ICT and global business, financial services, electrical and electronics, and healthcare,” he says.

“Finally, it is the combination of government and the market that creates a positive environment to attract Malaysian — and international — talent into the country,” says Dr Tricia Yeoh, CEO of think tank Institute for Democracy and Economic Affairs (IDEAS). “The agency has a host of incentive programmes, which have expanded its scope beyond just attracting talent back to Malaysia. An impact assessment of these programmes would need to be conducted to understand fully what the agency itself has done.”

A related matter is Economy Minister Rafizi Ramli’s recent emphasis for a policy to stop the practice of using the RM1,500 minimum wage as a benchmark starting pay for skilled workers. He articulated that if the minimum wage is set as a benchmark for unskilled workers, then fresh graduates and young professionals should be paid more.

Economists concur, slamming the benchmark low salary as “a regressive development” that must be overhauled to push towards greater transparency, career prospects, wage trends and productivity in the labour market.

“A typical fresh graduate’s starting pay of RM2,500 is not even close to a sustainable living wage. [The argument may be that] the candidate’s performance has yet to be tested, but starting salaries must be seriously looked into if [Malaysia] is to be [a destination with starting salaries] that are competitive to that of neighbouring countries and one that has a high talent pool. The government need not please everyone, but there can’t be a continual talent outflow every year,” emphasises SERC’s Lee.

Yet, there has always been tension concerning wage policies, where employers, especially those in both the small and medium enterprise (SME) and micro, small and medium enterprise (MSME) segments, continue to struggle with high business costs. Even then, the tension relates to minimum wage, never mind the higher wages commanded by skilled workers.

“Instead of worrying about wage policies, the government should address the underlying structural issues. First, increase the employability of our graduates by investing in quality education and training. If the average productivity of our workers increases, the gain in output will outweigh the cost in terms of a higher wage bill,” says Monash University’s Niaz.

“Second, make the labour market competitive so that the forces of demand and supply can reward workers [according to] their productivity. This requires formalising the business practices of SMEs, many of which operate in the informal sector.

Another related challenge is the issue of segmentation — workers of certain social backgrounds enjoy privileged access to certain jobs such as government-linked companies and public enterprises.”

While emerging economies have historically experienced brain drain, the economists point to China, South Korea, Taiwan and Australia as nations that have successfully overcome the problem. They explain that the central government of China, as part of a merit-based talent-attracting strategy, adopted a comprehensive National Talent Development Plan, which launched industry- and province-specific schemes for hiring top Chinese experts alongside top foreign experts. China has effectively countered the brain drain and out-migration by growing and upgrading its economy to the extent that there is now reverse migration of its overseas talents.

The economists add that countries that focus on developing their indigenous technological capabilities — such as South Korea, Japan and Taiwan — are also reaping the rewards of harnessing their talent pools to accelerate growth and achievement of high living standards, and that beyond relaxing rules related to immigration and emigration, governments in these countries have introduced a range of rewards for returnees, including more investment in high-quality jobs.

“But let’s not forget that these are also countries that have significantly improved the overall living standard of citizens by closing gaps in the quality of public services vis-à-vis that in high-income nations,” says Niaz. “This is one reason that, even in the absence of any specific government initiative, Australia has seen nearly half a million of its overseas citizens voluntarily return home during the pandemic.”

IDEAS’ Yeoh concludes: “[Ultimately,] ensuring that there is a fair and level playing field for talent to ‘play’ in is key; individuals will need to believe that they will be given fair opportunities to rise and thrive within any sector, whether in the public or private space. This includes, for example, appointments and promotions, procurement of goods and services, as well as access to funding for research and development. A more transparent and accountable environment would help in creating fair opportunities for all Malaysians alike.” 

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