Education tops once again Malaysia’s political and economic agenda. Prime Minister Najib Razak unveiled on October 10 the new federal budget for 2015, in which education receives the largest allocation equal to RM56.6 billion (USD 16.2 billion), or 26% of the overall budget.
Education is recognized as the cornerstone of Malaysia’s Economic Transformation Programme. As such, it has been identified as a National Key Economic Area, with the objective of making Malaysia an international education hub by attracting 200,000 international students by 2020. Already in 2011, the World Bank assessed that Malaysia’s public expenditure on primary and secondary education as a percentage of GDP, was slightly higher than OECD average (3.8% versus 3.4%). In the Asian context, Malaysia’s public spending on education was more than double that of other ASEAN countries (3.8% versus 1.8%), and 1.6% higher than the “Asian Tigers” (South Korea, Hong Kong, Taiwan, and Singapore).
Concerns over deteriorating performance despite enormous investment
Experts in the sector, however, are raising eyebrows over the decreasing quality of education offered as well as the expected return on investment of the 2015 budget for education. Concerns are rising due to Malaysia’s deteriorating performance in the PISA assessment. According to the latest report, Malaysia scored below OECD average and in some areas (science and reading) the country’s performance worsened compered the previous assessment.
Critics underlined that the policy embraced by the government is excessively investment-driven without paying the necessary attention to teachers’ training and development needs. The 1BestariNet project, for instance, has the objective to supply 4G broadband access to all 10,000 schools in the country and promote the use of e-learning techniques by supplying new technological equipment thereby cutting the ratio of student-device to 10:1. Budget 2015 records a RM200 million (USD 57.3 million) increase in “hardware” developments (infrastructure and ICT) but also a RM600 million (USD172 million) cut in “software” services, such as pre-service, in-service and leadership training of teachers. From 1999 to 2010, the Ministry has invested approximately RM6 billion on ICT infrastructure for schools. However, UNESCO states that there is still little evidence that the usage of this technology is actually facilitating creativity, problem solving, and critical thinking.
Risks and opportunities of aligning education to economic objectives
On the one hand, education lobbyists such as Parents Action Group for Education (PAGE) and public think tanks as the Penang Institute criticized the economic-oriented educational system that leaves little room for social objectives and equitable development of students. It appears that the adoption of latest technologies has little marginal impact on pupils in rural areas, where teachers do not receive the necessary training to reap the benefits of ICT infrastructure. On the other hand, the World Bank praises Malaysia for its effort in addressing the mismatch between education and market requirements, a gap responsible for leaving many graduates jobless. The presence of publicly funded high-tech parks – such as Kulim High-Tech Park, Senai Park, Technology Park Malaysia, Kuantan High-Tech Park – distributed on the whole national territory contribute to shape a conducive environment by leveraging R&D potential and profitability for innovative companies.
The internationalization of education
Malaysia is taking advantage of the rising global student mobility. According to UNESCO, the country is the 11th most preferred study destination worldwide and hosts students from approximately 100 countries. Due to steer competition from mid-value manufacturers such as India and China, Malaysia is investing heavily on education as the key variable to accomplish its economic transformation. This move did not go unnoticed to many MNCs that are picking Kuala Lumpur as their regional HQ because of the availability of high-skilled human capital. Private institutions and international schools have been mushrooming along with foreign universities setting branch campuses in Malaysia. EduCity, for instance, a project spearheaded by the federal government and State of Johor, is Malaysia’s first multi-campus education cluster. Ten international education institutions have signed up to set up local campuses in EduCity so far, of which two are secondary schools and the rest are higher learning institution. This provides foreigners with opportunities to send their children to internationally accredited institutions and places Malaysia in the right position to attract new talents from all around the world to fulfill its vision to become an international education hub.
Here you can download the latest report I contributed to realize on Malaysia. It was recently distributed with The Daily Telegraph.
Take a look at it or download it (it’s free) if you want to know more about Malaysia’s…
- Business environment
- FDI incentives
- Innovation and high-tech cities
- Regional economic corridors and related investment and business opportunities
- Education, human capital development, and the transition towards a “knowledge-based economy”
- The country’s global leadership in Islamic finance, a viable financial alternative for all
- Oil & Gas
- Tourism attractions
Malaysia ranks 6 in the World Bank’s Ease of Doing Business Report 2014.
One of the key variables to make sure to become the location of choice of foreign investors is the ease of doing business. As you can see, one of the indicators in the table above is “Paying Taxes.” So let’s take tax incentives and regulations for instance, as I’ve had the opportunity to interview the CEO of the Malaysian Inland Revenue Board, Tan Sri Shukor.
In Malaysia it is possible to file taxes online, through an e-filing system. The e-filing system not only guarantees efficiency for the government and companies in terms of cost and time savings but it also ensures fair treatment to the public (for instance you can get tax returns within 30 days).
Moreover, in line with the government strategy to develop strategic economic activities (e.g. biotechnology industries, operational headquarters, international procurement centers, regional distribution centers, real estate investment trusts, treasury management centers, 4 and 5 Star Hotels in Peninsular Malaysia, private and international schools, provider of industrial design services in Malaysia, child care centers and pre-school education), international investors allocating resources in specific geographical areas or sectors enjoy tax holidays and don’t have to pay income tax for a certain number of years. Dividends are tax-free and companies willing to re-invest in R&D in Malaysia may be eligible to double-deduction.
Companies that are recognized with the Pioneer Status are eligible to a tax exemption ranging from 70 to 100%. In alternative, another tax incentive is the Investment Tax Allowance (ITA) for projects that imply long-term large capital investments.
The government has created a conducive ecosystem for business to thrive and the private sector aligns profit-making with innovation and socio-economic development. All the ingredients are there to make Malaysia an economic case study of excellence.
Italy ranks 65, after all European countries except for Greece, Romania, Czech Republic, and Malta.
If we don’t want to get stuck in this recession for decades this is definitely an area that we must reform. We need to simplify procedures and digitalize systems. This is also a way to cut public spending. Let’s get rid of red-tapes and reduce excessive costs (e.g. notary fees); a good idea could be to create a one-stop center for opening up a business where you take care of all paperwork/procedures at the same place. Should there be a need to communicate with different offices, this should be done internally and electronically.
Let’s compare the “Paying Taxes” indicator. Besides the fact that our tax rate is equal to 65.8% of profits, while in Malaysia is 36.3%; the time and labor tax and contributions are 2/3 times higher in Italy than the average in OECD countries and Malaysia.
In Italy it takes 269 hours per year to pay taxes against 175 as an average of OECD countries and 133 in Malaysia. Labor tax and contributions stand as high as 43.4% in Italy. It’s 23.1% in OECD countries and 15.6% in Malaysia. How can we expect our unemployment rate to go down? It’s simply impossible for many companies to hire more workers with these labor costs.
In order to be more competitive in the global market we need to increase significantly what here is referred to as “ease of doing business.” Regulations must be simplified; procedures must be streamlined; and systems must be digitalized. A reform in this direction will not only attract foreign investors, but also help us cutting public spending.
Oh, and I almost forgot… English…Because nobody else speaks Italian besides us.
Comparative Politics Vol 1: Education. Malaysia vs Italy – Politica Comparata Vol 1: Istruzione. Malesia vs Italia
I’ve been working on a socio-economic report in Malaysia for a few months now. Malaysia has accomplished an incredible development since its independence from the UK in 1957. From 1970 to 2010 the level of poverty has decreased from 49,3% to 3,8% (see p. 53). The various governments have significantly contributed to the economic transformation from an agricultural-based economy to an industrial one. The economic transformation is now set to make Malaysia a knowledge-based economy.
Political stability has been a crucial factor in the development of the long-term vision (from 1957 till today there have been 13 elections and 6 PMs whereas in Italy we’ve had 41 PMs’ alternations from 1946 up to today considering elections, cabinet re-shuffles, ‘coups within the Cabinet’ due to internal power struggles, and all sorts of other incomprehensible dynamics typical of Italian politics).
Here, the Government implements 5-year economic plans (i.e. the 10th Malaysia Plan currently underway). Back in 1991, the former Prime Minister Tun Mahathir launched his programme, Vision 2020, in order to make Malaysia a high-income country (the World Bank currently ranks Malaysia as an upper middle-income country).
There are many aspects that struck me positively. Above all the fact that everyone is conscious that in order to enjoy higher standards of living, the key variable to invest on is education. In 2011, the Government allocated 20.9% of the total public spending on education against 8.9% in Italy in 2010. If we look at other industrialized countries, the US allocated 12.7%; the UK 13.3; Norway 15.3%.
Universities here work hand in hand with industry in order to facilitate the access to the labor market. The Government supports financially all high-tech sectors that promote high-skilled labor and contribute to the economic transformation of the country. Due to steer competition from mid-value manufacturers such as India and China, Malaysia has taken a different direction by focusing on its comparative advantages (e.g. biotechnology considering the incredible biodiversity present in Malaysia) and investing heavily on technology and innovation (and by attracting FDI) thereby upgrading the value chain from mid to high-value added.
What about us? When is the last time we spoke about industrial policies (let alone five-year plans with investment targets, expected growth, and employment opportunities)? The complete absence of policies in our political debate is baffling as it is the lack of information and statistics. This is the website dedicated of the Economic Transformation Programme. It might be because I haven’t been in Italy for a while now, but I can’t remember anything like this in my country.
When are we going to understand that we have to focus on our comparative advantages? We have to realize that countries and entire regions that were excluded from the global market have now entered it as a consequence of globalization. The great majority of labor-intensive economic activities has moved where labor cost is lower. Trying to compete on a large scale on mid-value goods is a waste of time. So is seeking to get those jobs back. The inability to innovate and interpret the major socio-economic upheavals is what has brought Italy to a slow but steady decline.
How is it possible that in the country that boasts the highest number of UNESCO World Heritage sites (49) History of Arts – as a high-school discipline – gets cut down (or eliminated?) along with our permanent delegation to UNESCO? Of course I’m not saying that everyone should become either an artist or an art critic, but this is certainly an area that makes Italy unique in the world and that would create massive spin-offs in tourism and cultural economic activities.
Energy policy? Italy imports 79% of the energy it consumes. Considering how much we spend, we should be at the forefront in terms of R&D in renewable energy. Not only for strictly economic reasons, but also for strategic political ones (e.g. the consequences of Libya post-Gaddafi; and the Ukrainian conflict with Russia and the threat it poses in terms of gas supply to Europe). We could create, like in Malaysia, economic corridors in order to develop strategic economic areas with tax breaks, simplified regulations, and partnerships with universities in order to promote R&D and attract FDI, thereby creating high-skilled (and high-income) employment opportunities.
Lesson learned: the creation of a conducive ecosystem for innovative businesses starts from investments in education and R&D.
Mi trovo da qualche mese in Malesia per sviluppare un report socio-economico sul Paese. La Malesia ha fatto passi da gigante dal 1957, anno della sua indipendenza dalla Gran Bretagna. Dal 1970 al 2010, il livello di povertà è stato ridotto dal 49,3% al 3,8% (vedi p.53). I Governi che si sono succeduti hanno contribuito significativamente alla trasformazione economica da una società agricola a industriale e ora “knowledge-based.”
La stabilità politica di cui gode la Malesia ha certamente contribuito allo sviluppo di una visione di lungo termine (dal ’57 ad oggi ci sono state 13 elezioni e 6 Primi Ministri contro i 41 avvicendamenti di Capi di Governo in Italia dal 1946 ad oggi, tra elezioni, colpi di palazzo, rimpasti, ribaltoni e altre denominazioni intraducibili e incomprensibili al resto del mondo).
Qui si fanno piani economico-industriali su base quinquennale (attualmente è in atto il 10th Malaysia Plan) e nel 1991 l’allora Primo Ministro Tun Mahathir lanciò il suo programma Vision 2020, una roadmap con lo scopo di far diventare la Malesia un Paese ad alto reddito (attualmente è classificato secondo la World Bank come upper middle-income).
Ci sono tantissimi aspetti che mi hanno colpito in maniera positiva (e spero di aver la possibilità di approfondirli in post futuri). Ma ciò che mi ha sorpreso maggiormente è che tutti sono consapevoli del fatto che per raggiungere migliori standard di vita, la variabile fondamentale su cui investire è l’istruzione. Nel 2011 in Malesia, la spesa pubblica verso l’educazione è stata del 20,9% del totale contro l’8,9% dell’Italia nel 2010. Se guardiamo altri Paesi industrializzati, gli USA investivano nel 2010 il 12,7%; la Gran Bretagna il 13,3%; la Norvegia il 15,3%.
Le università qui lavorano a strettissimo contatto con l’industria per favorire l’inserimento nel mercato del lavoro e il Governo sostiene finanziariamente tutti quei settori high-tech o che favoriscono lo sviluppo di high-skills che promuovono la trasformazione economica del Paese. Trovandosi a competere con colossi del settore manifatturiero di medio valore aggiunto (India e Cina), la Malesia ha intrapreso una direzione diversa, sfruttando i propri comparative advantages (per esempio nel settore della bio-technology data l’incredibile biodiversità) e investendo in maniera massiccia in tecnologia e innovazione (con incentivi per favorire l’entrata di investimenti stranieri diretti) che permetterà la trasformazione della produzione da medio ad alto valore aggiunto.
E noi? Da quanto non si sente parlare di politica industriale (figuriamoci di piani quinquennali con target specifici per quanto riguarda livelli di investimento, aspettativa di crescita e numero di posti di lavoro)? L’assenza di policies è a dir poco sconcertante nel nostro Paese e lo è altrettanto la mancanza di accesso a informazioni e statistiche. Questo è il sito che riguarda l’Economic Transformation Programme in atto in Malesia. Sarà che manco dall’Italia da un po’ ma non ho memoria di niente del genere. Soprattutto perchè manca la politica alla base.
E noi quando capiremo che per crescere economicamente dobbiamo concentrarci sui nostri comparative advantages? Dobbiamo renderci conto che la globalizzazione ha permesso l’entrata nel mercato globale di Paesi ed intere regioni che fino a poche decine di anni fa ne erano completamente escluse. Di conseguenza, gran parte dei lavori di tipo labor-intensive si sono spostati dove la manodopera costa una frazione di quella dei Paesi industrializzati. Cercare di competere in larga scala su questo territorio è tempo perso. Cercare di far “rientrare” quel tipo di posti di lavoro lo è altrettanto. La nostra incapacità di innovare, di interpretare gli sconvolgimenti globali a livello socio-economico ha portato al declino il nostro Paese.
Ma come si fa, nel Paese che vanta il più alto numero di siti Patrimonio dell’Umanità dell’UNESCO (49) a ridurre (o cancellare?) le ore di insegnamento di Storia dell’Arte e la rappresentanza permanente presso l’UNESCO? Questo non vuol dire (come molti bacchettoni italiani pensano) che “non possiamo mica tutti essere artisti o critici d’arte” ma di sicuro questo è uno di quei comparative advantages di cui sopra che rendono il nostro Paese unico al mondo e che creerebbero un immenso indotto tra turismo e cultura.
Politica energetica? L’Italia importa il 79% dell’energia che consuma. Noi dovremmo essere l’avanguardia della ricerca nel settore delle rinnovabili considerando quanto spendiamo. Non solo da punto di vista strettamente economico, ma anche politico, l’energia è strategica per non essere soggetti a shock esterni (si pensi alla Libia post Gheddafi e al conflitto russo-ucraino e le conseguenze sull’approvvigionamento del gas in tutt’Europa). Si potrebbero creare, come in Malesia, corridoi economici specializzati in settori strategici per l’economia con incentivi fiscali e regolamentari e partnership con le università per favorire la ricerca e lo sviluppo e attrarre investimenti esteri diretti creando così opportunità di lavoro di alta competenza (e alto reddito).
Morale della favola: la creazione di un ecosistema che favorisce lo sviluppo di attività economiche innovative parte da investimenti in educazione e ricerca e sviluppo