Malaysia's brain drain to Singapore inevitable due to currency differentials, says World Bank

TheEdge Tue, Jun 11, 2024 11:29pm - 1 week View Original

KUALA LUMPUR (June 11): It is impossible to stop or prevent Malaysians from moving to Singapore for jobs because of the currency differentials, according to the World Bank.

“Most countries see things like this where highly educated people leave the country,” said World Bank Group chief economist Dr Indermit Gill.

“If you look at income differences between Indonesia and Malaysia, it is about three times higher in Malaysia. You will see Indonesians coming to look for jobs in Malaysia.

“So, there is no reason why you will not see Malaysians leaving for Australia, Singapore, the US, or the UK because wages are higher there. It is a natural process,” Indermit told reporters at a media roundtable.

The World Bank Group panel discussion on economic growth in middle income countries. (From left) Yasuhiko Matsuda, Wong Shou Ning, Datuk Seri Idris Jala, Dr Indermit Gill, Nurul Izzah Anwar, Liew Chin Tong, Dr Nadia Me Diop and Dr Apurva Sanghi. (Photo by Patrick Goh/The Edge)

World Bank lead economist Dr Apurva Sanghi concurred, saying "it is impossible to stop and prevent people from moving to Singapore because of the currency differentials".

Instead of looking at how to stop the inevitable, Apurva said Malaysia should focus on productivity to increase wages, as current wages in Malaysia remain commensurate with productivity.

“I keep hearing people saying wages are low [in Malaysia]. Low compared to what? Wages are lower in Malaysia compared to Singapore and Australia, fine. But wages are not low compared to productivity in Malaysia,” he said.

“You cannot legislate productivity. You cannot legislate higher wages. You have to fix productivity,” he said.

According to the Department of Statistics Malaysia (DOSM), year-on-year growth in labour productivity stood at 1.9% in the first quarter of 2024 (1Q2024), compared to 1.7% during the same quarter in the previous year.

On the notion of “brain drain” being typically perceived as negative, Sanghi said there is a misconception that there is a fixed amount of labour going around the economy, which needs to be corrected.

“For example, when the US changed its visa policy to attract more nurses from the Philippines, it actually increased the incentives for more Filipinos to enter the nursing industry,” he continued. “For every migrant that left (the Philippines), nine more got licences and stayed behind.”

“In India, you see the same thing,” he added. “Many Indians left the country [to join the information technology (IT) industry in other countries]. There are [still] a huge number of IT professionals [in India], and the country is now a hotbed for digital transformation because of that,” he added.

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