Tuesday, May 28

Strong Singapore dollar causing permanent brain drain from Malaysia

Thanesh, who has a diploma in IT and management, jumped at the opportunity of a job in Singapore even though he has to start work a few days before the Deepavali celebrations. He has secured a job with a company providing ground handling services in Changi Airport and starts with a basic salary of S$2,000 (RM6,982) per month.

With an allowance and overtime, Thanesh expects to get a net monthly income of S$2,300. He estimates his travel expenses from Johor Bahru, where he will stay, to Changi Airport in Singapore to be less than S$350 per month. After deducting the cost of accommodation and food, Thanesh is confident of setting aside more than RM1,000 per month.

What workers like Thanesh are expecting to put aside as savings corresponds closely with the findings of a survey on what Malaysians do with their Singapore dollar earnings.

The 2018 survey revealed that 51% of Malaysians who commute to Singapore to work save at least 10% of their monthly earnings while another 22.4% save between 11% and 20%.

Malaysians residing in Singapore are also able to set aside a substantial amount as savings despite the high cost of living in the city state. The survey showed that about 35% of Malaysians working and residing in Singapore tend to put aside up to 10% of their income as savings while another 27% set aside up to 20% of their income for a rainy day.

In Malaysia, the situation is a stark contrast for workers like Thanesh. Residing in Taiping, the 24-year-old technician was hardly earning RM2,000 per month at a small factory. In some months, he had to borrow to make ends meet.

The lure of the Singapore dollar against the ringgit is the primary reason drawing large numbers of skilled and semi-skilled workers to seek employment there.

According to a 2020 study by the United Nations Department of Economic and Social Affairs (UNDESA), there are some 1.8 million Malaysians living abroad for various reasons, including work and studies. These are part of the statistics on Malaysia’s “brain drain”.

Of the total number, 1.2 million or about two-thirds are based in Singapore.

Apart from those residing there, more than one million Malaysians commute to the island republic daily for work. The majority of those commuting live in Johor Bahru.

On paper, those commuting to our neighbour down south on a daily basis do not form part of the brain drain. But in reality, these workers should be included in the statistics because a survey shows that those who have worked in Singapore for more than three years are prepared to continue working there.

That is despite long working hours and sometimes holding “dirty” jobs such as cleaning. They have to wake up at 4am to get past the congested causeway to Woodlands, Singapore, by 7am for immigration clearance. After that, they travel by bus to Kranji to catch a train to their work destination.

Perhaps the clearest indication of the lure of the Singapore dollar is the high percentage of Malaysians who were prepared to return to the island for employment after the pandemic. This is despite Singapore imposing some of the strictest conditions in the region during the pandemic. Malaysians were not allowed to return home for close to two years.

According to data, some 400,000 Malaysians who opted to return to Malaysia before the borders closed were left without a job. But a 2022 study by the Institute of Labour Market Information and Analysis (ILMIA) revealed that 62% are prepared to go back to Singapore and the majority are those who worked there for more than three years.

Remittance loophole?
The number of Malaysians seeking employment in Singapore will only continue to grow for a multitude of reasons. Apart from the favourable exchange rate, it is due to higher salaries, better opportunities and bigger increments.

Prior to the pandemic, the minimum salary for unskilled workers was S$1,500. But after the pandemic, the amount was raised to S$2,000. The starting salaries are higher for degree holders prepared to work in the service industry where they would be eligible for an S pass.

Before the pandemic, those with school certificates such as the Sijil Pelajaran Malaysia were able to get a job in Singapore. After the pandemic, the tendency is to select those with a minimum of a diploma. Malaysian degree holders prepared to work in the service industry are also more in demand than Chinese and Bangladeshi workers because of their better cultural fit.

There is nothing wrong with Malaysians working abroad, including in Singapore. This brain drain cannot be helped. Other Asian countries such as the Philippines, India, Indonesia and even China lose their best talents to Singapore.

But these countries draw significant benefits from the inflow of remittances from their workers abroad. The money flowing in helps with their exchange rate.

A 2019 study by UNDESA showed that the annual remittance inflow to India was US$83.1 billion, followed by China with US$59.5 billion. The Philippines and Bangladesh received US$34.9 billion and US$21.7 billion respectively from their citizens working abroad.

In Malaysia’s case, according to the ­UNDESA study, remittance inflows amounted to US$1.4 billion, which is significantly lower than even Indonesia.

Why is this the case?
It is probably because a big proportion of Malaysia’s population working abroad are in Singapore.

According to a study by ILMIA, a large number of those working in Singapore do not use official channels to bring back the money. They prefer to repatriate their funds in the form of cash, instead of using remittance agents and banks.

The ILMIA study aligns with the findings of a 2018 World Bank Research report. It stated that Malaysia received remittance inflows of US$1.8 billion, of which US$1.2 billion came from Singapore.

Malaysia cannot reverse the brain drain into a “brain gain” as long as there is a Singapore that is always hungry for talent. Instead, it should do its best to optimise the situation. For starters, Malaysia should work on capturing as much as possible, the inflows of remittance into the system.

For that, the country needs to build a database of the number of people working abroad, including in Singapore. There are already suggestions on how it can be done.

From there, the authorities can adopt gentle methods to channel the remittance inflows into our financial system.

This article first appeared in Forum, The Edge Malaysia Weekly.

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