POPULATION, HUMAN CAPITAL AND DEVELOPMENT THE MALAYSIA EXPERIENCE Cheong Kee Cheok, Goh Kim Leng, Abdillah Noh, Kuppusamy Singaraveloo and Lee Hwok Aun Faculty of Economics & Administration, University of Malaya, and School of Government, Universiti Tun Abdul Razak National Conference on Population and Development, Putra Jaya,June 26, 2014

INTRODUCTION  Population-development nexus multifaceted, but economic growth a major part of discourse  East Asian experience rich with lessons: Rapid transition, diverse paths, complex impact – winners and losers, government matters  Human resource a key part of the equation  Malaysia as case study: rapid transition; multi-ethnic population from immigration, human capital for Vision 2020  Will review (a) demographic transition (b) efforts to deepen human capital base (c) extent these efforts succeed, and (d) draw implications Malaysia Population Human Capital & Development2

MALAYSIA’S DEMOGRAPHIC TRANSITION Census Year Population (mil.) Population Growth Rate (%) Crude Natural Increase Rate (%) Economic Active Population (% of Total Population) Population Aged 0-14 (% of Total Population) Population growth affected by 2 events Rapid decline in natural increase rate Growing share of economically active population Malaysia Population Human Capital & Development3

BUT LABOR SUPPLY SHORTAGE Year Labor Force Participation Rate (%) Education Gross Enrollment Rates (%) TotalFemalePrimarySecondaryTertiary (1995) Rapid economic growth but … Low LFPR and Rapid expansion of education enrollment Malaysia Population Human Capital & Development4

IMMIGRANT LABOR FILLS THE GAP No. of Immigrant Workers (000) Percent Share from IndonesiaBangladesh Thailand, Philippines, Pakistan All Other Sources % Change p.a ,470 2, The Flow of Legal Immigrants Workers to Malaysia 1999 – 2008 Legal + illegal Estimated 2 million illegals Indonesians dominate But sources diversifying Mostly low- skilled Brain drain of high-skilled workers Cheap labor model … Cannot achieve Vision 2020 Malaysia Population Human Capital & Development5

EDUCATION BY THE NUMBERS …. Education Achievement/ Ethnic Group Birth Cohort Before % Entering Primary Year 1 Malay Chinese Indian % Schooled up to Lower Secondary Malay Chinese Indian % Progressing from Lower Secondary to Completing Upper Secondary Malay Chinese Indian % enrollment primary Over 75% lower secondary Parity across ethnic groups for both But not for upper secondary Gender parity more than achieved - F>M Achievement by Levels of Education among Malaysia’s Ethnic Groups Malaysia Population Human Capital & Development6

SUPPORTED BY LARGE PUBLIC BUDGET As % of GDPAs % of Total Public Expenditure Malaysia China Indonesia Korea, Rep. Philippines Singapore Thailand Vietnam (1995) (1995) (1999) 11.1 (2001) (2004) (2009) (2010) Rapid expansion of private tertiary education, enrollment exceeded public tertiary education in 2010 But TVET role small, reflecting societal focus on academic education Public Expenditure on Education: Malaysia and Selected East Asian Countries Malaysia Population Human Capital & Development7

NOT BY NUMBERS ALONE …..  Females: high enrollment rates, low LRPRs, those working were in lower- paid jobs  Students from low income households suffer major disadvantages  No level playing field between public and private tertiary education in which >50% of students enrolled  Eroding education standards  Attitudes towards and issues regarding TVET Malaysia Population Human Capital & Development8

ERODING EDUCATION STANDARDS Country/Skill Tested TIMSSPISA Mathematics Malaysia Korea, Rep. Singapore Taiwan Science Malaysia Korea Singapore Taiwan Malaysia’s Test Scores in International Tests TIMSS and PISA, 1999 to 2012 Malaysia Population Human Capital & Development9

WHAT DO EMPLOYERS THINK OF MALAYSIA’S TERTIARY EDUCATION OUTPUT? Malaysia Population Human Capital & Development10

THE PROBLEM WITH TVET  Public perception: TVET the refuge of those who cannot make it academically  Malaysia’s TVET system public sector focused  More ‘talk’ than ‘walk’  Public sector system has multiple agencies but limited coordination  Many changes but no institutional memory  Funding not tied to target achievement, hence efficiency, equity of use of funds unknown Malaysia Malaysia Population Human Capital & Development11

VISION 2020 WITHIN REACH? Labor Productivity 2009 ($’000 per employee Skilled Workforce 2008 (%) Malaysia Population Human Capital & Development12

CONCLUSION: NO HAPPY ENDING … YET  Malaysia is reaping a demographic dividend from a growing EAP. But this dividend will not last for ever.  But benefit partially eroded by low LFPR among females  While education is the right reason to stay out of the labor force, staying out after completion is human capital lost. So also is job mismatch suffered by females in the workforce.  The education system, academic and TVET, has serious challenges. “The Malaysian experience speaks to the fact that the benefits of the demographic dividend will not accrue automatically to a country and its citizens. It must be earned. Government policies are needed to capture these benefits. But they can also lead to these benefits being denied. “ Malaysia Population Human Capital & Development13

THANK YOU Questions welcomed 14Malaysia Population Human Capital & Development Changes in Countries’ GDP between 1960 and 2008