Malaysia's "Dutch Disease"

William Leong, the PKR Member of Parliament for Selayang, wrote in The Malaysian Insider today that our country is afflicted with "Dutch Disease" or the "Resource Curse". Here's a snippet of Leong's article:

"Malaysia has exhibited the classical symptoms of the “Dutch Disease” or the “Resource Curse”. The term “Dutch Disease” was coined in 1977 by the Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of a large natural gas field in 1959, culminating in the world’s biggest public-private partnership, N.V. Nederlandse Gasunie between Esso (now ExxonMobil) Shell and the Dutch government in 1963, only to see the rest of its economy shrinking.

It refers to the paradox that countries with an abundance of natural resources, specifically resources like minerals and fuels, tend to have less economic growth and worse development than countries with fewer natural resources."

Here's what he has to say on human capital and education:

"The oil and gas revenue-driven economic growth lulled Umno and the BN government to misconstrue the importance of maintaining excellence in our education system. This allowed misguided and mismanaged policies to turn our schools and universities into factories churning out unemployed and unemployable graduates.

This has resulted in our nation suffering a severe underperformance of our education standards. Malaysia tertiary enrolment and completion ratio has lagged that of some of our Asian counterparts. At 28.6 per cent and 15 per cent, Malaysia’s gross tertiary enroll ratio and completion ratio are 7 per cent and 6 per cent lower than the average expected of economies with similar level of GDP per capital.

This means Malaysia is having a tertiary skills shortage. This point to Malaysia lacking the necessary skills and knowledge human capital essential to move the Malaysian economy up the value added chain."

..."With the labour force growing, unemployment rate has stayed range bound at around 3 per cent and with the skills shortage, graduates surprisingly continues to make up an increasing proportion of the unemployed group from 15.2 per cent in 2000 to 25.1 per cent in 2007.

The government, in answer to a question I posed in Parliament, gave the following breakdown of unemployed graduates:-

Ethnic breakdown of unemployed graduates in Malaysia Year    Total   Chinese Indian  Malay

2004    4,594   163     207     4,060

2005    2,413   31      70      2,186

2006    56,750  1,110   1,346   50,594

2007    56,322  1,348   1,401   49,075

2008 (until June)    47,910  1,403   4,694   41,813 Source: Ministry of Human Resources

[Editor’s note: The figures above refer to graduates who registered with the Human Resources Ministry to find jobs. Compared with Malay graduates, Chinese and Indians may prefer to use job recruitment services from the private sector.]

The predominance of Malay unemployed graduates who are overwhelmingly from public universities suggests that we have a problem of graduate skills mismatch.

Singapore in comparison has its universities design their curriculum in collaboration with the industry players. The majority of the students are offered jobs before they graduate and 82 per cent are employed within three months of their graduation."

Not a pretty sight is it?