LAUNCHING OF UNDP’S 2009 GLOBAL HUMAN DEVELOPMENT REPORT

YB TAN SRI NOR MOHAMED YAKCOP
MINISTER IN THE PRIME MINISTER’S DEPARTMENT

RENAISSANCE HOTEL KUALA LUMPUR
6 OCTOBER 2009

Salam sejahtera and a very good morning

His Excellency Mr. Kamal Malhotra
UNDP Resident Coordinator for
Malaysia, Brunei and Singapore

Distinguished Guests, Ladies and Gentlemen

1. Let me at the outset express my sincere appreciation to the UNDP for inviting me today to launch for Malaysia the 2009 Global Human Development Report. The report titled, Overcoming Barriers: Human mobility and development is indeed timely as increasing globalisation has escalated migration as a force of economic development - a phenomena we need to take heed and understand.

2. With globalisation, the world has become flat. National economies do not merely compete for trade. In the global arena, countries are engaged in an intense competition for factors of production. To 19th century economists, the comparative advantage between nations was determined as a function of factors of production, namely labour, land and capital, which were viewed to be fixed. Today, all factors of production have become more tradable and mobile. Global financial markets have developed to render financial capital especially fluid across borders.

3. Ease of migration has also made labour increasingly mobile. It is estimated that nearly one billion people are on the move, which means that one in seven of the world’s population is a migrant.

4. Even the role of land as a fixed factor of production has transformed, as economies have restructured increasingly beyond land based agriculture and manufacturing, towards services. The advent of technology and telecommunications, have in turn made services no longer restricted to location but increasingly tradable, especially in the realms of outsourcing.

5. As a result of these trends, the competitiveness of a nation is not cast in stone. Rather, competitiveness will be largely driven by the ability of a country to develop, attract and retain the appropriate factors of production to support its economic development. In this respect, national policies play a key role in enhancing national competitiveness.

6. From the time since independence, Malaysia chose to adopt a pro-business policy stance and be inclusive as a major trading and open economy. This has been key in facilitating rapid economic growth and in transforming Malaysia from poor country dependent on rubber and tin, into a diversified and industrialised nation. Malaysia’s openness to foreign capital and labour is well reflected in our policies. The Prime Minister had reinforced our stance of openness by announcing this year, further liberalisation of services and the FIC guidelines. Our acceptance of foreign labour is demonstrated by the presence of more than 2 million legal migrants, making up almost 20% of our labour force.

7. It has clearly been a mutually beneficial relationship between migrant workers and Malaysia. Access to work in Malaysia has provided opportunities for higher income. At the same time, migrant workers have undoubtedly contributed to economic growth and development, given their employment in key sectors such as palm oil, manufacturing and construction. At the same time, the availability of migrant domestic helpers has also facilitated the successful participation of Malaysian women into the workforce, particularly in the pursuit of managerial and demanding careers.

8. Critics of foreign labour may highlight the large outflow of remittances, valued at RM 17 billion in 2007. However, this is more than offset in GDP terms by the value of goods and services produced as a result of their labour. At the same time, access to foreign labour as a flexible factor of production, enhances the resilience and responsiveness of the Malaysian economy through global boom and bust cycles.

9. Going forward, Malaysia’s economic policies will continue to be pragmatic, in the context of safeguarding national interest. There are costs and downside risks associated with managing foreign labour and therefore, it is important that responsibility for bearing these costs are equitably borne by those who mainly benefit from access to labour, namely employers.

10. Malaysia’s success thus far has been built on transformation into a high middle income country. Policies will need to be developed to support the changing needs of the economy and attract factors of production of the appropriate quality to enable a second round of transformation into a developed nation. Appropriate incentives will be required to evolve the supply and demand of human capital to be more in line with the needs of a new economic model, premised on an innovation and knowledge intensive economy.

11. Beyond cross border migration, internal migration, particularly from rural to urban has been a major driver in Malaysia’s economic development. In 1970, more than 70% of the population was rural. By 2008, this had halved to about 35%. Over this same period, the rural to urban income disparity has only marginally reduced from a ratio of 1:2.1 to 1:1.8. Thus, greater urbanisation has contributed towards raising average incomes and enhancing the quality of life.

12. The importance of internal migration, as highlighted in the 2009 Global Human Development Report, is very much in line with the key conclusions of the World Bank’s 2009 World Development Report (WDR), titled Reshaping Economic Geography. The WDR 2009 highlights that successful economies are those with high density, mobility and integration.

13. In the developed world, density is well reflected in the likes of Japan, where 35 million or close to 30% of the Japanese population is concentrated in Tokyo, which accounts for only 4% of Japan’s land area. In terms of high mobility, 35 million out of 300 million Americans changed their residence in 2006, of which 8 million changed states in the USA.

14. A key message is that globalisation requires countries to increasingly specialise and within each country, it is at urban centres where production and economic activity will be concentrated in order to reap the full value of agglomeration. Hence, migration to urban centres is a natural economic force and should be facilitated. However, at the same time, economic integration can be pursued to ensure development is inclusive and that there isn’t a persistent difference in basic living standards between rural and urban centres.

15. To support the natural migration to urban centres, the Malaysian Government is focused on ensuring that we develop livable cities. Facilitating internal migration is key towards enabling access to economic opportunities and thus, supports higher incomes. Specific focus and resources will be spent to address urban issues, such as improving public transportation and remedying urban slums. At the same time, the Government will also continue to take an inclusive stance on development by enhancing the quality of life in rural areas by upgrading connectivity and ensuring access to quality education and utilities.

16. In addition to supporting internal migration, Malaysia is also keen to attract back and facilitate the reverse migration of the Malaysian diaspora. It is estimated there are approximately 350,000 Malaysians working abroad and many of whom, highly skilled knowledge workers. To complement our internal efforts to accelerate Malaysia’s transition towards a knowledge based economy, we need to leverage on the capabilities residing abroad.

17. Currently, the Government has in place numerous initiatives to tap into the Malaysian Diaspora. In the past decade, Malaysia launched programmes beginning 1995 to encourage relocation and formal networking of scientists and experts abroad. Our Brain Gain Malaysia programme included facilitation of R&D collaboration, industry cluster development and incentives manned by a dedicated implementation unit. As of today, 677 scientists have registered with the programme as networking scientists.

Distinguished guests, ladies and gentlemen,

18. Migrations have occurred throughout human history, beginning with the migration out of Africa approximately 70,000 years ago to the rest of the world. As it was presumably the case from the beginning, migration today is ultimately driven by the opportunity for a better life. Mobility has the potential to enhance economic development – both for source and destination countries and regions.

19. Human capital is an increasingly important factor in enhancing competitiveness and transforming the economy. Therefore, policies need to be developed and adapted over time, to ensure that it is win-win and in line with the evolving developmental needs of the economy. On that note, it gives me great pleasure to officially launch the 2009 Global Human Development Report - Overcoming Barriers: Human Mobility and Development.

( Economic Planning Unit )
6 October 2009