Chinese Brain Drain: Use the right medicine to solve problems

华商与经济转型系列60：华人人才流失（下）对症下药留住人才

Brain drain is a big problem for Malaysia since decades ago. Worst is this problem inclined to Chinese ethnic, thus creating a time boom towards national integration. Variety solutions and efforts were done but brain drain persists. Thus, we try to propose some suggestions, hoping to contribute in lessening if not reversing brain drain in Malaysia.

Hippocrates, an ancient Greek physician who was known as father of Western medicine once said “diseases were caused naturally”. Treating it as a disease of nature imbalance, brain drain is like water flowing from higher ground to lower ground. Once these grounds are balanced, the water will not be flowing again.

Solving Monetary Imbalances

An important but not the only factor to make these grounds imbalances is monetary rewards. Better career prospect, most probably due to higher salary in foreign countries is identified as main drivers of brain drain. Unfortunately, to balance domestic and foreign salary is a gigantic task. Please look at the current scenario as in Table 1.

As at 2011, among the main brain drain receiver countries are Singapore, Australia, United States, United Kingdom, Canada, Brunei and New Zealand. Their Gross National Income (GNI) per capital ranged from 3.00 times (New Zealand) to 8.02 times (United States) higher than Malaysia. GNI per capita is used to represent aggregate income (salary). Assuming Singapore has zero growth for 8 years from 2011, Malaysia needed an annual growth rate of 25.93% to matched current Singapore’s GNI per capita in year 2020. Malaysia needs annual growth rate of more than 20% to match Australia, United States, United Kingdom and Canada. 

Table 1: GNI per capita (constant 2000 US$) Ratio

Countries	Average (2005 to 2011)	2011	Annual growth rate needed* (%)
Singapore / Malaysia ratio	6.29	6.32	25.93
Australia / Malaysia ratio	4.98	4.65	21.18
United States / Malaysia ratio	8.02	7.35	28.33
United Kingdom / Malaysia ratio	6.08	5.49	23.73
Canada / Malaysia ratio	5.31	4.89	21.96
Brunei / Malaysia ratio (2009)	3.89	3.59	17.33
New Zealand / Malaysia ratio (2010)	3.00	2.86	14.02

* Annual growth rate needed for Malaysia to achieve foreign countries’ GNI per capita by 2020 (8 years from 2011). All data are sourced from World Bank.

Such a big gap in income per capita needs to be balanced back. Three solutions are suggested. Firstly, Malaysia needs to shift from low value-added to high value-added product and services that give high income employment to local talents. South Korea has chosen healthcare, contents, tourism, education and green financing while Singapore has potential in chemicals, electronics, biomedical manufacturing and ‘HQ & professional services’ as their high value industries.

Look at the ETP and other industrial policies, and you will find that Malaysia seems like Jack of all trades but master of none. Thus, we should be highly selective to choose very few industries to be developed into global giant earning huge profit. Then, only local talent can be retained with high salary.

Secondly, Malaysian agriculture sector should be enhanced greatly to create high skill jobs and agribusiness opportunity for local talents. Various Entry Point Projects (EPP) of ETP for agricultural sector do needs lots of scientists, management and global marketing expertise and entrepreneurs, hence helping to retain talents. For examples, more scientists are needed for research on biodiversity of high-value herbal production (EPP 1), developing aquaculture (EPP 4 and EPP 6) and increasing productivity of paddy farming (EPP 10 and EPP 11). Management and marketing expertise needed for commercialization and professional administration service for EPP 3, EPP 8 and EPP 9. Young graduates and other skilled labor have opportunity to be entrepreneur locally in almost every EPP.

In view of this, our education system, especially at the tertiary level, should be clear on two aspects, namely (i) matching the economics needs with relevant courses or subjects, and (ii) planning the best estimate number of talents needed to produce for each sector and sub-sector of the economy, included modern agricultural sector. Failure to do the (i) may results in our fresh graduates either over-qualified or under-qualified. Failure to do the (ii) may results in over-supply or under-supply of talent. Over-qualified and over-supply in turn may result in brain drain. Under-qualified may result in unemployment of graduated in Malaysia, thus a push factor for them to look for lower-level-jobs-but-higher-paid at overseas.

Third, the government should adopt policy for strong exchange rate. Higher foreign currency relative to Malaysian Ringgit greatly pushes away both our skilled and unskilled labor. United Kingdom Pound is almost five times our currency value. Other countries’ currencies are two to three times higher than us (see Table 2). Continuous inflation in Malaysia has made domestic purchasing power worst. 

Table 2: Exchange Rates of Malaysian’s Favorite Brain Drain Destination

Countries	Exchange rate (RM/foreign currency)
Singapore	2.4547
Australia	3.1691
United States	3.0056
United Kingdom	4.8335
Canada	3.0540
Brunei	2.4547
New Zealand	2.5232

(Rates are as at 15^th January 2013. Rates from Bank Negara Malaysia website)

Roughly, S$1500 to S$2500 salary for fresh degree holder working in Singapore will translate into RM3682 to RM6137 in Malaysia. Is this range of salary possible in Malaysia?

Stronger exchange rate might hurt export competitiveness but with retained local talents, it is time for Malaysia to upgrade its production level. We should not continue to compete with price but compete with quality and brand distinctiveness.

Solving Inferior Perception

Besides monetary imbalances, brain drain is also caused by perception that “the moon overseas is brighter”. Working in a well established multinational company in a developed country is a pride to local talent. Thus, to reduce brain drain, policies to attract world top multinational companies to Malaysia is like killing three birds with one stone. First, foreign direct investment (FDI) for these companies will be huge, thus contributing to future domestic output and income. Second, Inflow of such big amount of foreign money will strengthen Malaysian Ringgit. Third, these FDIs usually come with their management talents and technologies. Hence, the foreign top multinational do create jobs for local talents and impart better technology and knowledge to the locals. Big multinational companies are keen to operate in Asia due to lower production cost. Yet, at the same time, these companies do offer good employment to both unskilled and skilled workers.  Thus, specific privilege like ten years tax incentive should be tied with retaining and developing local talents as well as job creation to both skilled and unskilled workers.

This solution has been applied by countries such as Indonesia. For example, Indonesia has been attracting Nestle to expand its product line there. In 2013, Nestle will have new plant at Karawang to start new production of Milo and Nestle Cerelac. One will notice that current Nike football jerseys are made in Indonesia. Nike provides 171,276 jobs at Indonesia, 318,335 at China, 312,114 at Vietnam and 24,718 at Bangladesh but only 8,337 at Malaysia. Furthermore, 62% of workers at Nike factories in Malaysia are migrants as contrast to less than 4.5% in other mentioned countries. Thus, how can we improve the employment opportunities and salary of workers in Malaysia?

Solving Social Injustice and Other Imbalances

Social injustice needs to be solved too. This is the second highest push factor for brain drain, especially for the Chinese. Solution is simple to say, yet difficult to implement. It involves a lot of sensitive issues and constitution matters. Nonetheless, there are still many spaces for meritocracy such as education opportunity, scholarship, grants, employment in public sector and recognition of achievement.

Last but not least is the accumulation of many minor factors. These include crime, green environment, transportation matter and human rights. Increasing scary stories of crime happening in our neighborhood do help to encourage Malaysian to work at other safer countries like Singapore. Indirectly, efforts and policies to fight crime are important to solve brain drain. So do reducing pollution and radioactive risk, improving public transport and ensuring high standard of human rights. These could help to retain Malaysian brain in the country.

Conclusion: Can it be solved?

It is easier to start new than to disentangle decades of mess. The matter is we cannot start new without disentangling the past problems. If we took are to solve brain drain diligently and wholeheartedly, time will prove that things will get better. 

[Chinese version published at Nanyang Press, 4th February 2013. Available online at http://www.nanyang.com/node/509198?tid=687. This English version may be slightly different from the Chinese / newspaper version]