Malaysia and the Knowledge Economy

Earlier this month, the Malaysian Ministry for Higher Education and the World Bank hosted the Regional Higher Education Conference Strategic Choices for Higher Education Reform in Kuala Lumpur. The joint MOHE/World Bank conference was not a coincidence. The timing of the event coincided with the completion of a research report by the Malaysian Economic Planning Unit and the World Bank: “Malaysia and the Knowledge Economy: Building a World-Class Higher Education System” (pdf 1 MB).Malaysia

The 258 page report presents a good analysis of the current situation and puts forward some sound policy recommendations. Most of these are in line with my own observations and my field work that I conducted in Malaysia last year. Below is an executive summary of the executive summary and a few additional thoughts and observations coming from my side:


The progress of the Malaysia economy in recent decades has been nothing short of impressive, a reflection of strong macroeconomic management and political stability. However, Malaysia’s sustained competitive edge is not guaranteed. Recent efforts by the Government have brought about significant achievements, attesting that with appropriate funding, dedication, and high caliber leadership, Malaysian universities can achieve excellence. However, few Malaysian universities have achieved a competitive position internationally.

Steering and Governance

The attainment of world class status by Malaysia universities hinges, in part, on keeping a fine balance between two competing objectives: expanding the system and improving quality. Relaxing the administrative and financial rules and controls that public universities are required to conform to in their daily management would allow them to focus on important institutional development issues. The 1996 legislative framework that was designed to enhance public university autonomy as part of the “corporatization” reform should be fully implemented, along with some strategic additions.

Cost sharing and accessibility

There are clear indications that Malaysian students and families are willing to contribute to the cost of their education, provided they can enroll in universities perceived as offering good quality and relevant programs. However, as universities consider increasing tuition fees to promote cost-sharing, they must ensure that this does not have adverse effects on equity, particularly with respect to student loans and grants.

To promote greater efficiency and innovativeness in the use of public resources, the Government should consider expanding the amount of funds available to universities through performance-based funding mechanisms. To integrate its research universities into the global research community, Malaysia will need to consider several options for restructuring its research funding mechanisms. One of the most effective ways of allocating research funds is to promote the development of centers of excellence.


While quality education may be defined in terms of internationally accepted criteria and standards for academic programs and educational experiences, a “world-class” education implies achieving a much higher threshold of quality where academic performance and output are measured relative to a league of very select institutions. Academic programs could be reformed to enhance the transparency and quality assurance mechanisms of the Malaysian higher education system. High quality teaching and innovative methods of delivery, particularly at the undergraduate level, are key components of top level universities. This requires avoiding excessive teaching loads, enabling integration of research experiences in undergraduate courses, relating course evaluations to promotion considerations and applying transparent criteria for faculty promotion. The current faculty shortage can be addressed by reviewing the current retirement age of 56. Student learning must be enhanced so that graduates can succeed in the local and international labor markets.


Concerns about the workplace relevance of university education remain. The Government has responded to the rising numbers of unemployed graduates with numerous commendable policy initiatives. But the main challenge for policy makers is not simply ensuring that graduates find employment, but rather employment that best uses their education. The Government could focus on several longer-term policy priorities to encourage more efficient labor markets that will lead to improvements in labor market outcomes for university graduates and for other educational groups, and a more effective transmission of knowledge and skills from education and training institutions to the real economy.

The national innovation system

Malaysia’s quest to become a sophisticated knowledge-based economy is likely to be frustrated, unless policies to link Malaysian firms with universities and research institutes are strengthened. A world-class national higher education system is a sine qua non for improving the national innovation system. The Ninth Malaysia Plan sets the ambitious target that science & technology activities contribute at least one-third of Malaysia’s annual economic growth. However, Malaysia’s skills and technology upgrading policies did not have the intended effects. Besides support to the university system to achieve “world class” status, and the policy to ensure continued growth, prosperity, and rising standards of living, Malaysia must move towards becoming an innovative knowledge-based economy. This will both reinforce the demand for universities to produce students with skills for innovation and encourage a spirit of innovation throughout the education sector. A variety of complementary policy reforms can help to improve the efficiency of the Malaysian national innovation system in which universities will play a major role:

  • Funding research competitively and selectively.
  • Establishing professionally managed Technology Commercialization Offices housed in selected universities.
  • Developing a Technology Broker program.
  • Involving the universities in regional development efforts.
  • Strengthening university-industry linkages.
  • Building the institutional capacity for third mission activities.
  • Developing entrepreneurship courses.
  • Aligning the university culture with the business culture.

In conclusion

The Malaysian higher education system is at a critical point in its evolution. The Government has the potential to continue to build on past achievements and foster a system that meets the needs of a leading knowledge-based economy. At the same time, without focused and strategic reforms, the Malaysian higher education system may lag behind neighboring countries that are actively developing and rewarding the most innovative and accomplished universities. Such reforms will need to focus on:

  1. choosing more effective governance and financing models;
  2. improving the overall quality of the universities with a focus on academic programs, faculty management, and student learning;
  3. equipping university graduates with the tools necessary for a knowledge-based economy;
  4. strengthening the national innovation system by creating stronger links between Malaysian firms and universities.

Although the report appears to do a good job in diagnosing the problems and in finding the appropriate solutions for them, the crucial part will be in the way in which the recommendations will be actually transposed into policies and – even more important – whether the policies will actually be effectuated. I have come across many good initiatives that address the issues above, but many of them lack real results because they get stuck in government bureaucracy, in existing vested interests or because of contradicting governmental policies in adjacent fields.

The autonomy (or corporatisation) as foreseen in the 1996 reforms has never been actually implemented or realised. Therefore, the most important recommendation is to come to a true implementation of autonomy in Malaysian higher education. Hopefully this report marks the start of truly meritocratic policies and true freedom and autonomy of the Malaysian higher education institutions. This will in turn also enhance the innovative capacity of the Malaysian economy and the society as a whole.

Update: also take a look at Bakri Musa’s analysis of the report in Malaysiakini (subscription required, but reproduced at Education Malaysia).

Leave a Reply

Your email address will not be published. Required fields are marked *