Monday, April 30, 2007

Human Capital

Hurray, my first article is published in the New Straits Times ;) For those who hasn't read it, the article entitled "Human capital the key to growth" was printed yesterday (Sunday). They were also kind enough to credit me as the Economic Advisor to DAP Secretary General. ;)

AS an economics enthusiast, I’ve often been asked, "What determines the size of an economy?" Is it dependent on rubber and high oil palm prices? Or the size of our oil and gas resources? Or instead, is it dependent on land area and population?

Malaysia is extremely well endowed with fertile land, large tracts of tin mines as well as some of the highest quality petroleum reserves in the world. Singapore, our neighbour down south, however, is not as fortunate.

To put it bluntly, it is a tiny island, 480 times smaller than us, completely unsuitable for commercial plantation and lacking any natural resources. Even its population today of some four million, excluding migrant workers, is one-sixth of Malaysia’s population.

If the size of an economy is dependent on the factors highlighted above, such as arable land and natural resources, Malaysia’s economy should be many times the size of Singapore’s. However, reality paints a very different picture.
While Malaysia’s economy of US$130 billion (RM444 billion) is still larger than Singapore’s US$117 billion, the latter is only smaller by some 11 per cent. And if the rate of growth currently experienced in both countries persists for the next decade, then our tiny neighbour could soon boast a larger economy than Malaysia.

How is it even possible for a country with a sheer lack of resources and land mass to do so well? How did a country that was barely half our economic size in the early 1980s catch up within such a short period of time?

Through a simple exercise of elimination, it all boils down to a simple single factor — human capital.

Singapore’s near compulsive obsession with human capital, both in terms of enhancing its local citizenry as well as attracting the best foreign talent, has probably resulted in the highest concentration of top brains per square foot in the region, if not the world.

Every year, for example, Singapore provides financial incentives in the guise of the Asean Scholarship to hundreds of Malaysian students at all levels — post-UPSR, post-PMR, post-SPM and post-STPM — to study in some of the best schools on the island.

I was a fortunate beneficiary of such a scholarship after completing my primary school education in Batu Pahat. Unlike me, however, and unfortunately for Malaysia, most of my peers have chosen to work or even settle permanently in the island nation.

My best friend in primary school, who received the same scholarship after Form Three, went on to pursue his degree at Oxford University on a Neptune Orient Lines (NOL) scholarship. He now works for them, one of the largest shipping companies in the world, as an expatriate country manager in Vietnam.

Another fellow scholar graduated from London School of Economics (LSE) on a scholarship from Singapore Airlines (SIA). Most impressively, at the young age of 36, he has been appointed the chief executive officer of SIA’s subsidiary airline, SilkAir, as of March this year.

And when I had my annual Chinese New Year reunion with my home town classmates this year, I was heartbroken to hear that one of them, who is an academic with one of Singapore’s institutions of higher learning, had just renounced his Malaysian citizenship to become a Singaporean.

These are not my only examples, and you can be assured that I do not have a monopoly on talented friends. A local senior law lecturer recently commented that the Universiti Malaya (UM) law faculty was depleted of quality academics because Malaysians make up some 40 per cent of law lecturers at the National University of Singapore.

While Malaysia Airlines (MAS) struggled over the past decade with cumulative losses in excess of RM1 billion, SIA, which split from MAS in 1972, shone brightly as one of the most profitable airlines in the world. Ironically, it was an outstanding Malaysian and a former academic with UM, Dr Cheong Choong Kong, who led SIA to an unbroken 31-year record of profitability through turbulent economic times before his retirement in 2003.

Hence, when Prime Minister Datuk Seri Abdullah Ahmad Badawi rolled out the Ninth Malaysia Plan (9MP) with an emphasis on human capital, I was pleased to a certain extent. The 9MP had an entire chapter dealing with human capital.

The human capital policy thrusts called for the creation of "universities of international standing and ensuring that tertiary institutions meet the needs of employers" and "nurturing an innovative society with strong science and technology capabilities and the ability to acquire and apply knowledge", among other things.

However, as part of the thrust, there was only a cursory mention of a "National Brain Gain Programme" to be spearheaded by a focal point at the Science, Technology and Innovation Ministry.

There was no discussion on the issue of attracting and retaining local and foreign talents, a critical element in developing Malaysia’s human capital. It is extremely important for the government to recognise the fact that the development of human capital in Malaysia is intrinsically and inexplicably linked to the issue of brain gain and reversing brain drain.

An effective human capital development policy is not just limited to building more schools and universities, or hiring more teachers and lecturers.

Singapore, for example, has only half our ratio of universities to the population. Yet, two out of their three universities are recognised as among the Top 50 in the world.

The government must give thorough consideration to the all-important qualitative element of uncompromising search for the best-qualified educators and an education policy which rewards academic rigour, critical thinking and analytical intelligence.

Without such a policy structure and ingrained culture in place, it is unsurprising that many young and particularly talented Malaysians will seek out the "borderless" global academic environment in which their potential can be fully harnessed.

Concurrently, the country’s education policy must be complemented with an equally competitive economic environment which provides these talents with fair and equal opportunities to grow in their careers, contribute economically and be compensated accordingly — in order to retain these talents.

Our competitors’ ability to attract young Malaysians, provide undisputed world-class quality education and offer a conducive economic environment has clearly resulted in our loss.

It is hard to imagine that my friends, who have done extremely well for themselves overseas, would have had the same opportunities in equivalent entities in Malaysia.

The government must be commended for highlighting the importance of human capital in the economic growth and development of the country. However, if the government is serious about raising the quality of human capital, much more needs to be done to create a holistic and integrated plan that will honestly appraise and critically examine the quality of Malaysia’s educational institutions.

We must also identify the underlying factors, perceived or otherwise, of the lack of equal opportunities and glass ceilings as well as limited career advancement based on merit in many of our "commercial" organisations.

Should our ample pool of potential talent be fully harnessed, attracted and retained, coupled with our rich and God-given natural resources, then surely we can stay well ahead of our competitors, eliminate poverty sooner and become a truly developed nation by 2020.


Sean Kuay said...

perhaps.. think about this..
their ministers get 25% pay increment.. :):)

Anonymous said...

Is there any insight here? You are talking what our less than bright PM said when he got elected three years ago.

Do you really believe your criticism of their policies is not known? Please.

The truth is political agenda will dominate Malaysia unless the price is too high to pay. So when it comes to human capital and advocate for non-political approach, you are dreaming. Face it Singapore approach is also political with severe darwinistic tendencies to keep the PAP in power. Our is just racially motivated, the core of BN power, overriding everything, which fundametally is flawed. Until that plays out, there is no debate..

Who am I? said...

Perhaps the irony applies to you too Anon 2:14PM.. where's your insight? Actually, TP's suggestions are more constructive than yours... given that you can't win a debate with BN without emphasizing the economics and making it known to many... politics itself anywhere in the world is related to economics... the trick is to link the two... as shown by the archaic name for economics that was "political-economy"... racial politics is just another form of an economic phenomenon... until you link economic thought with the current political situation in Malaysia, you probably can't win over those who blindly votes for BN without thinking much... that is so typical of the Malaysian electorate ...

Daily Nibbler said...

I think it is a good article. Keep it up Tony Pua. What surprised me is that it got published in the NST and it acknowledge you as a economic advisor to DAP. This is unprecedented. Hope to see more of such articles.

There is lots of truth in what you wrote. The question is the will power to steer away from politics when it comes to human capital development AND retention, irrespective of race. The race part in the equation is a tough cookie to crack. For e.g., DSAI advocated the abolition of NEP. Look where it got him in Ijok.

Anonymous said...

2.14 pm, I fully agree with your observation here. There is nothing new. Frankly, it is a research from the head which i think most Malaysians know about it. Come on, not one vice Chancellor from Public universities is a non Malaysia, not one secretary general or director general of an important ministry or agency is a non malay, and not one CEO of a large GLC is a non Malay. I mean what else do we need to say. If indeed they are so good and capable to fill up those positions that we have just mentioned, may I know why they continue need affirmative action. It is really a oxymoron issue if you think about.

Anonymous said...

Boleh land is actually a piece of blessed land, but fallen into the tak boleh hands. If things don't change, it's no different from a hopeless land.

Anonymous said...

True Tony,

But its the Malaysian brain drain as I believe you want to underscore, not just ethnic Chinese Malaysians doing well in Singapore.

For example the bio on J.Y.Pillai an Indian Malaysian originally and an old boy from St. Johns Institution, KL. Not many Malaysians know this, Pillay helped build SIA into a world class carrier, and was the Managing Director of the Monetary Authority of Singapore and Government of Singapore Investment Corporation, during the recessionary mid 80s which hit Singapore hard forcing it as always to reinvent itself.

Thanks and I hope that provides a more balanced view of multicultural meritocracy and ascending the cognitive value chain predicated upon diversity.

MM Lee Kuan Yew once praised Pillay as good if not better than the best brains in America. FYI from :

J. Y. Pillay

J.Y. Pillay (b. 30 March 1934, Klang, Malaya) served 34 years till 1995 as a top-ranking civil servant and an entrepreneur. He is one of the pioneers who helped build the Singapore economy after its separation from Malaysia in 1965. His single most significant contribution is in building Singapore Airlines (SIA) into a leading world-class carrier. One of the few highest-ranked Civil Service officers (Staff Grade III), he is also known as a visionary and a brilliant bureaucrat.

Early life
Pillay had his early education at St John's Institution in Kuala Lumpur. He completed his tertiary education at the University of London's Imperial College of Science and Technology, where he obtained a first class honours in Engineering in 1956. After working in the United Kingdom and Malaya for a few years, he came to Singapore to work in the Ministry of Finance in 1961.

Daily Nibbler said...

Dear Anon,

You must be quite passionate about this topic. It is true people like Pillay and Dr Cheong will never ever have the chance to shine in this country. There are many others too and surprisingly some involves talented Malays. All in the name of politics. Having read Tony's profile, I am surprised that he bothered to come back to this country and joined the opposition at that. Takes lots of guts and conviction. Its an uphill task all the way to change the neo-feudal and racial system that is firmly entrenched in this country. Maybe he sees something that I (we) don't. Perhaps he will like to share his vision to see if there are any takers. His article in the NST is a good start. Hope he paces himself well because it going to be a long marathon for him.

Anonymous said...

As long as Malaysia political arena continues to be ruled by a group of mediocre people whose words are louder than actions, it is unlikely that they would be pursuing rational economic policies that would seriously challenge Singapore's economic position. There is no lack of capable people in Malaysia. It is a sad thing for Malaysia but perhaps a relief for Singapore that this group of talents are not being harnessed and tasked to lead the nation.

Anonymous said...

nibble nippler?

Daily Nibbler said...

Heh heh...

Anonymous said...

nippler nibble??

Anonymous said...

It's indeed very surprising that that such an article could appear in NST, which is owned by UMNO. But the Editor has no choice I think, because it has been increasingly perceived as a pro-BN newspaper that only says good things a about the corrupt BN government. As more people boycott NTS (including me), its readership has dropped quite dramatically over the past few months. Publishing Tony's article is just a move to make NST more neutral to win back readership. Anyway, I will continue to boycott NST until it reports more truths, lol...

Daily Nibbler said...

I nibble on many things, subtance or otherwise. Wink!

I read two newspapers everyday and lots of online news. Just love to 'nibble' on news and 'chew' on them not unlike a cow chews its cuds after regurgitation them from their stomachs. Urgh...

I think alternative online news Websites are giving the conventional newspapers in this country a serious run for their money. Their readership is bound to drop with increase in Internet penetration, IT literacy and maturity of the readers. It is just a matter of time. Like yourself, I may give up purchasing two newspapers in the near future. Just waiting for that trigger.

Won't be surprised that the publication of Tony's article is a mistake on the publisher's part and a one off thing (which I hope is not).

Anonymous said...

Hi,YB, no,sorry!, Mr Tony,About this Asia Scholarship(AS) thing.I was there at Sri Hartamas Garden International School last year.My son didn't got thru,hope this year it will be another story.Why don't you stay back then?
I am curious.Luckily not,if you stay back, Malaysia lost another one capable future YB :D

Anonymous said...

I don't think it is a mistake, nobody in NST would miss the word DAP. I think it is a briliant article it didn't sound like it is against the government. In fact the author commended the government several times highlighting more needs to be done. The article is a success because it didn't put blame on anyone, this is unlike many articles I've seen written by other DAP members. Good job!

Wilson J Q Quah said...

A really good article tony. But please, convince everyone in DAP about this and produce a good plan which can prove that it is better than the current government's plan.

This must be in detail, otherwise who are we pulling here?

Daily Nibbler said...

Anyway, keep it up Tony. You choose to fight this battle. Lets see if you could convince voters of your vision.

Anonymous said...

Please dont get me wrong, I agree to everything you said.

However looking at the title of your article - how do you justify to your readers that the strength of the Singapore economy is due to its investment in human capital?

You arguement of "Through a simple exercise of elimination, it all boils down to a simple single factor — human capital" has simply waved away too many other policies the country has done over the years.

Anonymous said...

We already know that we have wasted human capital and economic opportunities for decades. The simple estimate put that waste at least 2X our present GDP for the last 30-40 years. A more accurate calcuation would likely be in the ball park of 4X.

The issue isn't even whether we are wasting human capital and opportunities still. The issue is should we or should the powers that be. That is a harder to debate.

The feeling among thougtful people like Tony is that we should not be because the waste isn't worth it anymore. The sense is that the cost is not worth the gains even for the bumiputras. Even among the real smart bumis they get this sense but politically they can't or don't know how to sell it. Its counterintuitive and there is no simple sound-bite that the average person especially the rural and semi-educated Malays can understand.

If you want to move the debate, move it in more critical and comprehensive fashion. Make sense numerically and in simple concepts, that will give a real political solution to the debate..

Let me start for example the issue with J.Y Pillay and wasted opportunities of his talent. There is no point debating him because they are willing to give that cost.

Instead we should talk of Tony Fernandez. Those who Datuk Fernandez was that his life was leading to nowhere despite his middle-class background in his younger days. He instead headed overseas where he was trained and given opportunities to grow. He took that personal asset and with RM1, created Air Asia and give opportunities to many. The question is how many Tony Fernandez have Malaysian given up? Why was not Air Asia created by some other people who was educated and trained here?

While Datuk Fernandez is a truly talented individual, its likely we have given up and are still giving up far many people like him and the opportunities that come with it.

More importantly, Datuk Fernandez has shown there is no necessecity if you look into his organization - run on merit and diverse in all aspect.

Anonymous said...

guess who is the godfather of tony fernandez?

Daily Nibbler said...

Who? Pray tell.

Anonymous said...

Tony, thanks for your article. what's causing the "brain drain" out of Msia? Many Chinese Msians feel they arent wanted and needed in Msia, 2nd class. Just look at the way they treat non-Malays Msians residing outside Msia, on simple things like renewing passports, registering marriages, register births. ask any non-Malay Msians living outside Msia and they will have many stories to tell you. I'm a Sabahan (to be precise Sandakan) living in Spore. another possible reason of the "brain drain", can you imagine how I would feel if I have been paying my taxes tear in year out and with all the resources of Sabah, many towns in Sabah, including Sandakan, looked not too different from 20-30 years' ago, minimal improvement to the infrastructure, still getting the regular black outs etc. what am I paying taxes for ? fix these and there's chance for 2020 otherwsie it will be a 2020 on shaky foundations

Anonymous said...

Brilliant article!

Malaysia's gain can also be Singapore's gain.

Hope that through your efforts, Malaysia will be able to prosper and not suffer the consequences it's past myopic policies of only biasing to the Malays. Meritocracy works better than self-illusion or wishful thinking.

James, Singaporean.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Good work Tony. Your article appeared in The Straits Time (Singapore) today. Admire your decision of going back and entering politic to make a change for a better Malaysia. I am also suprise a DAP adviser article will appear in NST.

Malaysian living in Singapore

Lucky Tan said...

Tony Pua,

Your article is outstanding. I would just like to comment that Singapore itself is losing top talents to Western countries. Many Singaporeans leave for USA & Britain and choose not to return. While Singapore has made a tremendous effort and has been successful in attracting talents from China & India, there are many limitations living on a small island. Many of the Chinese & Indians simply refuse to give up their citizenship and take up Singapore citizenship. Also, a large number see Singapore as stepping stone to other countries.

Singapore's GDP growth is not due to human capital alone. It has to do with efficiency, infrastructure investments, pro-business policies etc. Human capital probably accounts for half the GDP growth.

The Foreign Talent policy in Singapore has been a very liberal one. Basically, the floodgates were opened. As better educated foreigners come to Singapore, the income gap also rises and so does cost of living. Singapore, with the exception of oil rich middle eastern countries, brings in the most number of 'talents' per capita. While there is little doubt that this approach accomplishes the highest GDP growth, it does come with a social cost.

Malaysia will have the benefit of learning Singapore's lesson. There is a middle path when it comes to attracting foreign talents to bring about optimal benefits for Malaysian citizens.

Anonymous said...

Dear Tony,

You wrote an excellent piece, which the Singapore ST even picked it up from the Malaysian NST and published in full on 3 May, showing your byline. Your article is well-balanced, and can be food for thought for rational thinking people, which sad to say,is lacking in our govt. The brain drain from Malaysia to Singapore has been going on for many years, and many of the Singapore leaders, both past and present, were or are from Malaysia. For instance, Singapore Health Minister Khor Boon Wan is from Penang, so are MPs Dr Amy Khor and Irene Ng. There are also countless brainy people like Hyflux CEO Olivia Lum who is from Kampar and well-known surgeon Dr Tan Kai Chah, who performed the liver transplant operation on Mediacorp star Andrea d Cruz a few years ago.

I think there are at least 300,000 Malaysians who are Singapore PRs either staying in the republic and commuting from JB and the reason they are in Singapore is mainly because they see no future for their children's education in Malaysia. They have become Singapore's gain because of the malaysian govt's racial discriminatory policies. If these were repealed, I am sure many Malaysians staying in Singapore will return home as deep inside their hearts, they still love Malaysia very much. It is ironical that their love for their home country coincides with their hatred for the racist Malaysian govt.

Anonymous said...

Dear Tony,

Politically, it scares me. Your article is well written as an analysis of the Malaysian situation.

However, there is the issue of the *solution*. Your party DAP seems to offer none. It has merely been offering criticisms (sometimes of the trivialest nature) this past decade. Even if it offers a good solution, it must be in control of the government to implement them.

Otherwise, the current government will just steal the solution (and your ideas) and claim the credit.

Also, I hope you can take a stronger role in creating DAP policies and strategy (does DAP even have one besides just sabre rattling?) to win. Non-Chinese, and a number of Chinese, are not enamoured with DAP at all. And I think you can help, by reaching out to the modern and overseas-educated Malays (and Indians) of today.


Anonymous said...

43 years ago the late Tun Razak had told Harry Lee that brilliant people leaving are " trouble drain " and not brain drain. It is just thatb the present government is continuing the same policy. Watch Discovery on Smart Tunnel and Petronas Twin Towers and you can count the number of Malaysain invovled in so called Mega projects.

Anonymous said...

Hi, Guys,

...Singapore's GDP growth is not due to human capital alone. It has to do with efficiency, infrastructure investments, pro-business policies etc. Human capital probably accounts for half the GDP growth....

You don't throw in 100 billions and expect to get a world-class infrastructure overnight. You need good brains to manage the 100 billions. So looks like some of the guys still do not quite appreciate human capital :)

Anonymous said...

Hi Anon above,

/// ...Singapore's GDP growth is not due to human capital alone. It has to do with efficiency, infrastructure investments, pro-business policies etc. Human capital probably accounts for half the GDP growth.... ///

More than half the GDP growth I would say. I think Tony is using human capital in the broader sense than just merely a factor of production. You mentioned efficiency and pro-business policies as part of the reasons for high GDP growth. Delve deeper - what are the determinants of efficiency and good policies? Right - human capital!

Anonymous said...

Maybe not many Malays involved in these mega projects. Malays think of the idea and workers can be imported like in middle east to carry out the job. When the projects are completed thay can go back from where they come from. So no need for large permanent residential homes. No need for pig farms etc etc like in UAE and other middle east countries. Money to fund these projects come from petronas, easy to share because population is now reduced to 70% !

Anonymous said...

You are right in a broad sense, but as with most Malaysians (I hate to generalise, but, sigh) you are confused on many deeper points.

1) Malaysia has a large agricultural population to take care of. Work, food, shelter. You cannot just "develop" manpower, but ignore your background logistics. You need to eat too. In times of natural diseaster and war, self-sufficiency gives much relief.

2) Singapore's FT policy is at great contention at this moment. In fact, Singapore has just cut back on benefits for SPRs and foreigners. Look at Dubai, who too had a great "FT" policy, but is now cutting back. Your views are flawed, if not incomplete.

3) While Singapore Universities have merit based admissions which Malaysian Universities fare badly against, you must note the intricate details.
a) Only the top 20% of Singapore's population are given admission to NUS, NTU and SMU. This ensures a labour cap. This provides grounds for the non minimum wage (market intervention) policy of the Singapore Government, but ensures that wage for graduates do not shrink below a certain level through numerical control and "free-market" operations.

b) The top brains of Singapore are tapped and sent overseas with Government scholarships. Foreigners in Singapore Universities only serve to make up for the obsense of these top brains to give competition and training to the next levels of Singaporean talents. It also serves to boost the Universities talent pool, but is secondary. As a side note, the "top bright Malaysians" do not always win the next level Singaporeans in NUS, NTU and SMU. Says a lot about your own talents. I am not being arrogant, but I am saying that Malaysians should start being more humble too.

4) Malaysia's prosperity translates to more cities for educated Singaporeans to find work in. Singapore is NOT "stealing", "robbing" Malaysian talents. In fact, we want Malaysia to prosper. If you do not, then your guys will continue to come to Singapore and depress our wages. So stop accusing us before you look yourselves in the mirror.

5) If it takes a simple Singaporean like me to point these out to a upcoming politician like you, yes, I am worried for my own future. Malaysia and Singapore's economies are so tied in many intricate ways, if you guys flop, we are shitted as well.

Anonymous said...

Do not be proud your article was used in Singapore. Understand the context it was used for.
Singapore's FT policy is highly unpopular now, for good reasons. And PAP is desparate to shore up confidence in their pet project, and themselves. Your article is used in a biased setting towards a probable propaganda context.

A little on the ASEAN scholarship. If you read LKY's memiors, there is this paragraph [note: not quoting exact words] where he writes how "indebted" he felt towards the Malaysian Chinese, esp those in Sabah and Sarawak. They had "supported" and "voted" for him, trusting that he will "bring them out of racial policies". But he "deserted" them when Singapore was kicked out by Tungu. You may think the ASEAN scholarship as a way of "atonement" by the man himself towards the Malaysian Chinese. Plus, if talents can be "stolen", "tempted" by only a few thousand dollars, then Malaysia has to do a lot of soul searching on why your talents are so "cheap".

This "talent stealing" rubbish should be put in perspective.
1) Is Singapore the ONLY country giving scholarships to Malaysians?
Ans: No.

2) Is Singapore giving scholarships ONLY to Malaysians?
Ans: No.

So who is the petty thief trying to capitalise on a global trend by painting herself as the victim constantly being robbed?

Then here's another one.

3) If Singapore does not give scholarships to these Malaysians, do they want to go overseas?
Answer this truthfully yourself.

The issue lies not with Singapore. So stop picking bones with us when your own house is not in order.

Singapore is doing what we can in order to survive. And if Malaysia is just to improve, Singapore will be happier to need to do a lot less of such heavy logistics, and rely on Malaysia's economy instead. Stop playing the reverse role, and start working towards mutual benefit. We have suffered for 40 years, and we have not complained, yet.

Anonymous said...

It is time a or two Chinese Malaysian be prepared to be Prime Minister of Malaysia. Let's face it, even with a Chinese Malaysian PM, he / she still has to advocate Malay First Policy; if not, how can one get enough vote to be in power? Then, he / she must then find a way to mix Malay First with Talent First together to create a vibrant environment for both to thrive.