By M. Bakri Musa

Chapter 7: Enhancing Human Capital
Enhancing Human Capital Through Education

Globalization is driven essentially by knowledge; the new economy is appropriately called the K(for knowledge)-economy. Knowledge is the important ingredient of the new economy, and also its measure. Knowledge has replaced the economists’ “factors of production” – land, labor, and capital – as the chief economic resource.

The philosopher Saidina Ali perceptively observed that knowledge, unlike wealth, protects us under all circumstances, but we have to protect our wealth constantly against theft and inflation. The world around may crumble but with my knowledge and skills as a surgeon, I can still contribute and be productive. Further, wealth is diluted when shared; knowledge on the other hand, increases and gets enhanced when shared. A discovery in one field often stimulates innovations in another, thereby increasing our overall knowledge. Knowledge is also amplified through such exchanges. The nuclear magnetic resonance (NMR) that was used initially in basic research to identify chemical molecules is now used routinely in clinical medicine. Indeed the market for this is worth considerably more. Wealth if kept secret may retain its value, but knowledge kept secret will quickly become obsolete and worthless.

Globalization greatly enhances the diffusion and amplification of knowledge and ideas.

The remarkable aspect of investing in education and knowledge is that the returns are both cumulative and synergistic. The more we invest, the greater the returns. One set of knowledge enhances the effect on another. As observed by the economist William Esterly, “Investment in knowledge leaks from one person to another and realizes its full potential when high-skilled individuals match with each other. The more existing knowledge there is, the higher is the returns to each new bit of knowledge.”

I will illustrate this with a real life example.

About ten years ago a Malaysian patented a unique engineering device. This grew out of his doctoral studies. He wanted to stay in America for a while to develop his invention, but being a government-sponsored student, he was forced to return. He approached his departmental head at a Malaysian university for some protected time to work on his new gadget but was of course denied. Instead he was forced to teach an introductory calculus class. He appealed to his vice chancellor, but the latter was not interested in the travails of a junior instructor. Besides, Malaysian universities are more teaching factories rather than research centers. The vice chancellor, having no original invention of his own, did not appreciate the young lecturer’s dilemma. In the end, as is so typical of the fate of many talented Malaysians, the engineer left the country.

In America he was able to find an independent laboratory to perfect his invention, and with the help of a venture capital firm and a patent attorney, he was able to successfully market his product and establish his own company. He was greatly aided by the presence of all the supporting infrastructures.

The remarkable success of Silicon Valley, California, is due to this synergy of the various elements, “clusters” to use Michael Porter’s phrase. Each segment brings its own skills and knowledge, thus amplifying each other. A patent attorney would be useless without inventors; likewise, a venture capitalist would not survive unless there are entrepreneurs. All these elements complement and reinforce each other, hence the synergism.

Back to the Malaysian inventor, even if his university had been supportive he would still have difficulty bringing his invention to market because of the lack of supporting infrastructures.
Malaysia was fortunate that right from the very beginning its leaders were fully conscious of the need to develop the citizens. Its leaders wisely chose to build schools rather than barracks, and train teachers instead of soldiers. Significantly, the nation’s first minister of education was no less than the able Deputy Prime Minister, Tun Razak. He purposely took on that portfolio to demonstrate the government’s commitment to education. Ever since then that portfolio has been widely regarded as the most important and prestigious. All the country’s prime ministers (except the first of course) had once held that position.

When Tun Razak was Minister of Education, his budget was the largest, reflecting the importance placed on education. Unfortunately his stream of successors as Education Minister had all been singularly unimpressive, except possibly for Dr. Mahathir in the 1970s. Following Mahathir that ministry again reverted to form, with its mediocre string of ministers. Razak and Mahathir recognized the importance of their assignments; they enhanced the reputation of the ministry. In contrast, their successors used the prestige of the ministry to further their own selfish political ambitions. They merely coasted along or worse, pandered to the political whims of the day. They let the schools and universities to deteriorate.

In an attempt to reverse the decline and in a marked departure from tradition, Prime Minister Mahathir chose the current minister, Musa Mohamad, the first non-politician appointed to the post. Sadly, thus far he has simply carried on this mediocre tradition, fumbling from one crisis to another.

Education remains the biggest item of expenditure in Malaysia. Both in absolute amount as well as relative to the budget, GDP, and population, Malaysia spends more on education than Taiwan or South Korea but has precious little to show for it. The Malaysian Ministry of Education is extremely inefficient; its mission cluttered. First is the poor leadership. Second, it has too many items of its agenda beyond education – politics, social engineering, and public works. And third, it is too much like the defunct Soviet system.

I will cite one glaring stupidity of the ministry. Up until the economic crash of 1997, Malaysia sent thousands of young Malays abroad simply to complete their matriculation, essentially Sixth Form classes. There were scandals where students were sent to fly-by-night “educational” outfits that existed only on paper, and of students being stranded abroad because the “colleges” they had been enrolled had not even been built!

For the cost of sending two students abroad, Malaysia could have easily employed a professor from Berkeley to come to Malaysia, thus benefiting many more students. I can see the rationale for sending them to top universities or for pursuing courses of study not available in Malaysia. But these students were taking run-of-the-mill undergraduate courses at third-rate institutions. While they were expending billions on these students, local universities were starved for funds to expand their libraries and laboratories.

Additionally, the government also runs a system of expensive residential schools where students get free tuition plus room and board. Even children of millionaires and ministers do not have to pay a dime for their children to attend these expensive schools. The ministry is also responsible for distributing millions worth of contracts for construction, equipment, and textbooks. But instead of getting the best value for its money, such contracts are given instead only to Bumiputras, especially those with high political connections. Consequently because of the limited competition and lack of transparency, these contracts incur significant costs overruns and are often delayed or never completed.

A recent example was the contract for supplying computers to schools. At the end less than 10 percent of the projects were completed. Instead of punishing and blacklisting those recalcitrant contractors, the ministry merely extended their deadlines. This of course would be repeated many times. In the end it is the students who suffer.

To put matters in perspective, private colleges in Malaysia are being built and run at a fraction of the cost of running similar government institutions. And their graduates are more employable than products of public institutions.

The ministry is a replica of the defunct Soviet system: highly centralized, strict top-down command, and rigid controls at all levels. The minister even appoints universities’ departmental heads! When led by efficient and imaginative ministers like Razak and Mahathir, such a structure produced admirable results. Left in incompetent hands, and you have a disaster that is the present system.
The present centralized system is clearly inadequate. American universities are widely regarded as the best precisely because there is no central authority; there is no ministry of higher education. Each institution is free to chart its own course. Consequently, the crowd at Harvard is very different from those at Creekville State University; nonetheless graduates from both places are needed. In contrast, American public schools, highly controlled and regulated, lag behind those of many other countries.

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