KUALA LUMPUR, June 25 — Stalled reforms and perceived discrimination will keep up the chronic brain drain that has hampered Malaysia’s economic development at a time regional rivals are catching up to or surpassing the country, said Fitch Solutions Country Risk & Industry Research.

In a research note today, Fitch Solutions highlighted the continuation of race-based affirmative action as a major cause of local talent choosing to head abroad for better opportunities.

The firm also said the needed reforms — planned or promised — were unlikely to take place now as the country has been plunged into political instability, which in turn has prompted politicians to return to peddling populist measures.

“A chief example would be affirmative action policies favouring the ethnic Malay population (Bumiputra), which is likely to continue to cause a 'brain drain' where talented non-Malay members of the population seek opportunities overseas.


“Talent is key to the country being able to move up the value chain and escape the middle income trap and the brain drain, if left unaddressed, would impede any such drive to upgrade the economy,” the research house said.

Such policies have also contributed to corruption — perceived or real — in Malaysia due, among others, to the preferential procurement policies the government practised in favour of some communities, it added.

While the term “brain drain” is nebulous, the effects of the phenomenon can be demonstrated via employers’ perennial complaints about their difficulty in securing the talent critically needed for their operations.


Last year, recruitment firm Hays’ published a report that said nearly half of employers in Malaysia were not confident they would be able to find the talent vital to expanding their local operations.

As far back as 2011, the World Bank already warned that Malaysia was losing one in five of its graduates to migration, primarily to Singapore’s benefit.

Further worsening matters was the assessment of yet another recruitment firm, Kelly Services, which said in its Malaysia 2019 Salary Guide that the employability of graduates in the country was a concern to companies.

The Fitch Solutions Country Risk & Industry Research report today implied that this trend would not abate without serious reforms that it went on to concede would be formidable even without Malaysia’s current instability..

“These race-based policies will be very difficult to address and look set to slow the pace of economic development for the foreseeable future.”

Compounding Malaysia’s loss of talent was the country’s slowing population growth, which the research house said could fall from 2.3 per cent between 2010 and now to just 1.0 per cent heading towards 2030.