Malaysia at a Crossroads

Malaysia has been a laggard over the past decade with investors concerned that middle class income and productivity trends (growing at 4.5% annually) have fallen behind countries such as India and Indonesia, let alone China.  Although there is some debate over what this actually means in practice, Malaysia's elections focused squarely on this perceived economic malaise and the reasons behind it. 

Education is one example. Malaysia has prided itself on becoming a viable international education hub next to rival Singapore, and with some success. The country has plans to increase its current 86,000 international students to 200,000 in future to attain a regional "hub of choice" status by 2020. This not only will bring in export revenues but is expected bolster Malaysia's reputation for trade in the region and upgrade its own tertiary education system.

However on the homefront there are questions.  As the chart below illustrates, Malaysia's total public spending on education has fallen dramatically, from 28 per cent of total government expenditure in 2003 to 17 per cent in 2008. This fall is an even stepper than the post-1997 Asia financial crisis, at a time when Malaysia was one of Asia's economic darlings. Since 2001 Thailand's levels also fell but have started to retrace earlier levels. Meanwhile Indonesia's have increased most dramatically, far exceeding both of its neighbors.

Malaysia's Malaise:   Education as % of Total Government Expenditure*


  Source: World Bank; (courtesy of Indexmundi)

 * Includes government spending on private education and subsidies

Will Malaysia's elections usher in a fresh look at spending on education and training? Will increased foreign investment in education, related technology and services follow? 

I would wager that increased pressure to find economic solutions will provide a renewed focus on education investment in all forms, and that ignoring this problem will set Malaysia back further against its competitors in the region. As the region continues to pour money into training its populations, Malaysia is at a crossroads.