April THE WORLD BANK

Transcription

1 Malaysia Economic Monitor Brain Drain April THE WORLD BANK

2 How is the economy performing post-recovery?

3 Growth momentum picked up late but output losses from the crisis persist Real GDP growth, QoQ, sa, percent Actual and simulated GDP levels (sa), Q1 2008= GDP level without crisis (sa) Actual GDP level (sa) 9.2% % Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q Q1 Q3 08 Q1 Q3 09 Q1 Q3 10 Q1 Q3 MALAYSIA ECONOMIC MONITOR Note: No-crisis scenario assumes quarterly growth at averages of

4 Inflationary pressure is building... but remains benign in regional context CPI inflation: YoY and MoM (3mma, saar), percent 8 8 CPI inflation, YoY, percent Indonesia 6 Month-on-Month 6 China Thailand Malaysia -4 Year-on-year Jan-09 Jul-09 Jan-10 Jul-10 Jan-11-4 Aug-09 Feb-10 Aug-10 Feb-11 MALAYSIA ECONOMIC MONITOR 4

5 Export recovery lagged the region s... a decline in structural competitiveness? Goods export volume in USD, rebased to Jan 2007=100 E&E export value, sa, rebased to Jan 2008= Hong Kong SAR, China (127) Korea Republic (138) Malaysia (117) Singapore (131) Thailand (124) Taiwan, China (130) Indonesia China Korea Malaysia M M M M M01 55 Jan-08 Jan-09 Jan-10 Jan-11 Note: Export volume of Jan 2011 relative to Jan 07 (=100) in brackets MALAYSIA ECONOMIC MONITOR 5

6 Foreign direct investment rebounded... but remains well below potential Total FDI inflows, USD billion (UNCTAD data) Actual and simulated average annual FDI inflows from 24 OECD economies during , USD billion, OECD bilateral FDI data 9 8 Actual Predicted Partial improvement Best practice MALAYSIA ECONOMIC MONITOR 6

7 What is the outlook for growth? MALAYSIA ECONOMIC MONITOR

8 In the near term, output is expected to resume growth at pre-crisis rates 8 Actual and forecast real GDP growth, year-on-year, percent f 2012f MALAYSIA ECONOMIC MONITOR 8

9 Over the medium term, the challenge is to escape the middle income trap... Real GDP growth, percent Annual growth over in GNI per capita against level Malaysia Korea Hong Kong Singapore MALAYSIA ECONOMIC MONITOR 9

10 ... and book further success in reducing poverty and inequality Gini coefficient of inequality and poverty incidence Share of national poor in 2009, percent % Sabah % Sarawak Kedah Inequality (left) 40% 30% 20% Perak Kelantan Johor Terengganu Selangor Pahang P.Pinang Perlis Poverty (right) 10% W.P.KL N.Sembilan % Melaka W.P. Labuan MALAYSIA ECONOMIC MONITOR 10

11 The reform agenda: progress has been made, but implementation needs to be accelerated Assessment and articulation: significant progress Frank assessments Bottom-up and private-sector led approaches Sound structure of the reform agenda Implementation: more needs to be done New frameworks to facilitate implementation Positive sentiment on NKEA projects Interviews suggest skepticism on NEM Addressing cross-cutting issues is key, else: Project-based growth acceleration not sustained Underlying competitiveness eroded MALAYSIA ECONOMIC MONITOR 11

12 Whither the Brain Drain?

13 Why a report on brain drain? An impediment to Vision 2020? Malaysia needs talent Talent seems to be leaving A subject of debate and controversy Anecdotes are abundant Systematic studies are few A topic that raises many questions How large is the brain drain? What is its economic impact? How can policymakers respond? MALAYSIA ECONOMIC MONITOR 13

14 (1) How large is the brain drain? The Malaysian diaspora is estimated at one million as of 2010 The diaspora is geographically concentrated and ethnically skewed About a third of all migration represents brain drain MALAYSIA ECONOMIC MONITOR 14

15 Diaspora is estimated conservatively at 1 million, of which a third is brain drain 1,400 Diaspora in 2010 Brain drain in ,415 1,415 1,200 conservative estimate Assumptions on Singapore nonresidents 1,000 1,023 1,023 Share Malaysian Share skilled Base 0% 0% S1 15% 15% S2 15% 30% S3 45% 15% 0 Baseline S1 S2 S3 S4 S4 45% 30% Note: in thousands MALAYSIA ECONOMIC MONITOR 15

16 Singapore s nonresident population has grown rapidly Evolution of population in Singapore, thousands Nonresidents Permanent residents Citizens 754 1, ,194 2,623 2,985 3, MALAYSIA ECONOMIC MONITOR 16

17 Diaspora and brain drain are concentrated in just a few countries Share in diaspora, by destination country Singapore 54% 57% Australia Brunei 3% 10% 7% 15% United Kingdom United States Canada New Zealand 6% 5% 6% 10% 2% 4% 2% 2% Diaspora in 2010 Brain drain in % 10% 20% 30% 40% 50% 60% MALAYSIA ECONOMIC MONITOR 17

18 The rate of brain drain remains elevated... Estimates of yearly growth in skilled-migrant population, 25+, Singapore 6.0% New Zealand 4.7% Brunei 4.7% United States 3.5% Australia United Kingdom 2.9% 2.6% 4.2% average Canada 0.5% 0% 1% 2% 3% 4% 5% 6% MALAYSIA ECONOMIC MONITOR 18

19 ... because migration to Singapore is becoming primarily skilled migration Share of skilled migrants at destination in total migrants at destination, 25+, percent 80% 78% 79% 60% % 65% 68% 70% 71% 56% 40% % 35% 34% 20% 18% 23% 0% 10% 6% Brunei Singapore UK New Zealand USA Australia Canada MALAYSIA ECONOMIC MONITOR 19

20 (2) What is the economic impact of brain drain? Brain drain is aggravated by a narrow skill base and a lack of compensating inflows Brain drain imposes costs, but can also bring benefits Brain drain has likely contributed to an erosion of the already narrow skill base MALAYSIA ECONOMIC MONITOR 20

21 Brain drain is intense relative to a narrow skill base Gross emigration rate, percent, OECD destinations Hong Kong 30% 33% Singapore 14% 25% Malaysia 11% 20% 26% 34% Korea China 8% 3% 4% 10% adding Singapore* Japan 1.3% 1.2% 5% global average % 10% 20% 30% MALAYSIA ECONOMIC MONITOR 21

22 Brain drain is not alleviated by compensating inflow of skilled migrants Share of migrants in total employment Share of migrants with no formal education Share of migrants with primary education MALAYSIA ECONOMIC MONITOR 22

23 Brazil 2003 Malaysia 2007 Thailand 2007 Ireland 2005 Germany 2005 Korea 2005 India 2002 Russia 2005 Indonesia 2003 Brain drain has likely eroded the quality of the skill base 10 Number of weeks to fill vacancy for skilled technician 8 Percent of managers considering skill set of local skilled production workers poor or very poor. IT English language proficiency Professional communication Creativity/innovation Technical/professional Problem solving Numerical Time management Leadership Adaptability Social Manufacturing Services Teamworking MALAYSIA ECONOMIC MONITOR 23

24 (3) How can policies address brain drain? Brain drain is a wave to be ridden, not a tide to be turned It is a symptom of underlying factors, not a problem in itself To address the brain drain at its root, the productivity and inclusiveness agendas are key Targeted policies to facilitate the flow of talent can complement but not substitute MALAYSIA ECONOMIC MONITOR 24

25 Brain drain is a symptom of underlying factors... productivity and inclusiveness are key Percent of respondents listing factor among top three concerns Career prospects 66% Social injustice 60% Compensation 54% Study and stay on 30% Safety and security 28% Politics 23% Study and return 19% Livability 12% 0% 10% 20% 30% 40% 50% 60% 70% Source: Survey of the diaspora MALAYSIA ECONOMIC MONITOR 25

26 Brain drain requires a comprehensive approach: (a) Boosting productivity to raise wages... Contribution to labor productivity growth, percentage points 7 TFP Land Skills 5 Capital Services Industry Agriculture Memo: Manufacturing Note: TFP = total factor productivity MALAYSIA ECONOMIC MONITOR 26

27 ...by addressing the supply side (improving education system) TIMMS score of 13-year olds in science, by percentile Share of 14 year old with math score below 400, TIMMS Singapore Taiwan, China England Japan Korea Russian Hong Kong, China US Australia Malaysia Thailand Int'l average Indonesia 10th (Science) 90th (Science) Pahang Terengganu Urban Sarawak Rural Perak Perlis KL Selangor Melaka Johor Sabah Pulau Pinang Kedah Kelantan Negeri MALAYSIA ECONOMIC MONITOR 27

28 ...and addressing the demand side (promoting innovation and competition) 100% Share of firms considering lack of appropriate source of finance as factor hampering innovation activities, according to importance 80% 32% 23% 29% 15% Share of firms indicating anti-competitive practices as severe of very severe problem, , percentage points % 71% 41% 15 40% 20% 0% 38% 55% 47% 19% 43% 30% 23% 24% 10% Manufacturing firms 20 Services firms Not important or slightly important Moderately important Very important MALAYSIA ECONOMIC MONITOR 28

29 Brain drain requires a comprehensive approach: (b) Enhancing inclusiveness to leverage on all talent Share in Malaysian resident diaspora in Singapore, by ethnicity, Share of Malaysian adults in US by language group, % 80% % Chinese English 60% 40% Malay Indian 40% 85% 88% 30% 61% Other Asian Other 20% 20% 0% 9% 6% 5% 5% Chinese Malay Indian 10% 0% 18% 10% 6% 2.3% 2.2% MALAYSIA ECONOMIC MONITOR 29

30 With enabling conditions in place, talent management and diaspora engagement can complement Expatriates, thousands, by sector employed. Peninsular Malaysia only 50 Manufacturing Services 40 Other MALAYSIA ECONOMIC MONITOR 30

31 Thank you MALAYSIA ECONOMIC MONITOR 31