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  • NEW DRIVERS OF GROWTH AND MIGRANT LABOURShankaran Nambiar, Senior Research Fellow & Head,Policy Studies DivisionMalaysian Institute of Economic ResearchKuala LumpurMalaysian Institute of Economic Research

  • OUTLINEMalaysias goals and strategies

    Existing migrant labour policy

    Current state of human capital

    Future directions for policy on migrant labour

  • Source: 10 MPSectoral Performance under 8MP and 9MPAnnual Growth (%)

    Chart1

    5.56.8

    2.51.3

    3.21.8

    04.4

    2.5-0.5

    8MP

    9MP

    Sheet1

    8MP9MP

    Services5.56.8

    Manufacturing2.51.3

    Agriculture3.21.8

    Construction0.04.4

    Mining2.5-0.5

    To resize chart data range, drag lower right corner of range.

  • Source: 10 MP10 MP Sectoral Growth Target

    Chart1

    6

    7.2

    5.7

    3.7

    3.3

    1.1

    Sheet1

    GDP6.0

    Services7.2

    Manufacturing5.7

    Construction3.7

    Agriculture3.3

    Mining1.1

    To resize chart data range, drag lower right corner of range.

  • Share of GDP, by Sector, in 2015Construction 2.9Agriculture 6.6Services61.1Manufacturing26.3Mining5.9

    Chart1

    61.1

    26.3

    6.6

    5.9

    2.9

    Sales

    Sheet1

    Column1Sales

    Services61.1

    Manufacturing26.3

    Agriculture6.6

    Mining5.9

    Construction2.9

    To resize chart data range, drag lower right corner of range.

  • National Key Economics Areas (NKEAs)During 10MP (2011-2015), Malaysias growth efforts will be focused on NKEAsThe NKEA are as follows:Oil and gasPalm oil and related products Financial servicesWholesale and retailTourismICTEducationElectrical and electronicsBusiness servicesPrivate healthcareAgriculture, and Greater Kuala Lumpur

  • NKEAsNKEAs are selected to take Malaysia out of middle-income trapThe success of the NKEAs would be ensured through economic reforms that would inlcude:Modernising business regulationsHuman capital developmentIncreasing domestic competitionRemoving market distortionsImproving infrastructure

  • NKEAs The 11 sector are identified because: currently they are key contributors to GDPessential for future development of economy and Development of KL chosen because it accounts for 30% of Malaysias total GDP

  • NKEAs The potential of the 11 NKEAs will be developed through the following strategic initiativesOil and gasFurther accessing international marketsIncreasing skillsExtending linkagesPalm oil and related productsPromoting Malaysia as a global hubDeveloping downstream activities (eg. biofuel, olechemicals, biofertilisers, pharmaceuticals)Promoting technology and good practices among small holders

  • NKEAs Financial servicesDevelop the financial sector to drive Malaysias economic development -> new technology, innovation, new products, implementing safeguardsA capital market to support transition to a higher income economy

  • NKEAs Wholesale and retailLiberalising the distributive trade Encouraging modern retail formats (eg. hypermarkets, supermarkets, etc)

    TourismPromoting different varieties of tourism (eg. nature, adventure, cultural diversity)Tourism clusters

  • NKEAsICTSupport for niche areas in software developmentPromoting the use of ICT in all industriesEmphasis on creative multimedia

    EducationNew provisions of public higher learning institutions seatsMore fee-paying in public tertiary institutions

  • NKEAs E&EDeveloping centres of excellence especially in R&D and trainingPromoting state skills training centresMoving up the value chains

    Business and professional servicesSupporting market intelligence and networks to help firms export construction servicesEncourage growth of environmental management

  • NKEAsPrivate healthcareEncouraging private hospitals to be accreditedPromoting investment in high-end medical technologyLinks among local and foreign healthcare providers, travel organisations and medical insurance groups

  • NKEAs Agriculture Innovations and ICT based agriculture Intensifying R&D

    Greater KLEstablishing KL as a global financial centreTourist destinationImproving urban public transportation

  • Key Ingredients to drive NKEAsEmphasis on servicesEnvisaged character of agriculture differentShift from labour-intensive to knowledge-intensiveMore emphasis on high-technology, R&D

  • Existing Profile of Migrant LabourEarly 1980s about 136,000 foreign workersPrior to 1997 crisis almost 2 million foreign workers 800,000 of whom were undocumentedPresently about 1.2 million foreign workers

  • Existing ProfileAgricultureIn 1990, foreign workers constituted about 48% of total labour in agriculturePresently, they account for roughly 25% of labour force in agricultureManufacturingIn 1990, foreign workers constituted 10% of labour force in manufacturingCurrently about 25%ServicesDecline from 31% in 1990 to about 25% presently

  • Existing ProfileCountries of Origin

    %Indonesia67Nepal9Bangladesh8India5Myanmar4

  • Existing ProfileMigrant workers are low-cost, unskilled workers engaged in labour-intensive operationsEmployed in: i) construction, ii) plantations,iii) labour-intensive manufacturing, iv) services, (eg. Domestic maids (50% of total foreign labour), and restaurants

  • Innovation Capability Index 2001

    EconomyICIPositionMalaysia0.46760Indonesia0.26187Japan0.88511Korea0.83919Singapore0.74826Taiwan0.86515Thailand0.48854Source: UNCTAD 2005: 114

  • US Patents by Asian Economies 2001-2003

    EconomyDomesticFirmsForeign AffiliatesPublicInstitutionsTotalMalaysia435149Indonesia27-431Korea9,82956276111,152Singapore61041144795Taiwan11,62111894712,686Thailand36-238

  • Researchers per Million People

    200020012002Malaysia276na294Japan5,1045,3205,085Korea2,3052,8802,979Singapore4,1404,0534,352Taiwanna289naSource: WDI online

  • Business and Gross Expenditure R&D as % of GDP

    Chart1

    0.450.7

    1.632.3

    1.72.6

    2.413.4

    0.81.2

    2.33.2

    1.92.6

    0.30.9

    0.61.1

    1.31.9

    BERD

    GERD

    Sheet1

    GERDBERD

    Malaysia0.70.45

    Belgium2.31.63

    Denmark2.61.7

    Finland3.42.41

    Ireland1.20.8

    Japan3.22.3

    Korea2.61.9

    Portugal0.90.3

    Spain1.10.6

    UK1.91.3

  • Getting Ahead: What Role for Migrant LabourShift to knowledge-economy to get out of middle- income trapNKEAs require labour that is:-Highly skilled-Technologically competent-High-costNEM will demand new migrant workers

  • Getting AheadCurrent demand for highly skilled knowledge-intensive workers:about 3% of migrant workersemployed in technical aspects of manufacturing, O&G industry, construction and services (ICT, health, education)paid competitive salaries, receive employment benefits, dont depress wages

  • Policy OptionsShould a restrictive policy be practised?Cost of doing businessCost of implementationCan the government select the right categories of migrant workers?Can the government decide on the quality of capital?

  • Policy OptionsHigh quality migrant labour required Firms best decision-makersGovernment should remove barriers to inflowRestrictions on participation of migrant workers should be removedGovernment intervention in market for education should be minimisedGovernment support for export-oriented manufacturing should be reconsideredBundling of migrant labour type with FDI should be reviewed

  • **

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