We live in an intensely competitive global economy. Countries and companies across the world are competing for resources, talent, and prestige. A recently released ranking by the Institute of Management Development ranked Malaysia as the 12th most competitive country in the world, a respectable ranking but trailing far behind Singapore’s third place finish.

Singapore

Singapore finishes in third place

Malaysia moved up 3 spots to reach 12th place, while Singapore also moved up 2 spots to secure its third place finish. Hong Kong is only one spot behind Singapore at 4th and Taiwan came in at one spot behind Malaysia to finish in 13th place. No other countries from Asia were present in the top twenty.

Indonesia came in at 37 while China dropped from 21st to 23rd. The United States led the list in 1st place, trailed by Switzerland. Sweden, Germany, and Canada came in at 5th, 6th, and 7th place respectively, with the UAE and Denmark rounding out the top-ten. Both New Zealand and Australia placed in the high teens on the list.

The rankings measure 300 different criteria to assess how well countries manage their resources and competencies. Among the many factors considered are inflation, brain drain, foreign direct investment, and stability of exchange rates. Compared with most rankings, Institute of Management Development’s ranking is exceptionally holistic.

Najib trying to fulfill vow to make Malaysia more competitive

Remaining competitive has been an important goal for the Malaysian government. As Malaysia as continued to develop it has lost its low cost labor advantage to neighbors, such as Cambodia and now Myanmar. This puts Malaysia at risk of falling into a middle-income trap.

If the country’s talents and business environment do not improve enough to attract higher value businesses, while at the same time it loses its low cost labor advantage, economy growth could stall and the economy might even contract.

Developing higher value industries, attracting global talent, and otherwise improve the education levels and competitiveness of the general population are now among Malaysia’s top priorities. Prime Minister Najib stated this past fall that he wanted to see Malaysia break into the top ten on this particular competitiveness ranking.

The recent climb of three spots has put the country in striking distance. The Malaysian government has been working to reform its economy to encourage innovation and the development of high tech industries. Already a world-wide leader in advanced manufacturing, Malaysia is now trying to emerge as a fully developed and diversified economy.

Some factors, however, have been holding the country back. Skyrocketing living and real estate prices are contributing to inflation and restraining consumer spending. Meanwhile, political turmoil and other factors has sent the Malaysian ringgit roiling while corruption and graft remains a problem. This biggest challenge, however, may be Malaysia’s continued brain drain.

Brain drain holding country back

Last fall, consulting firm Kelly Services found that as many of 1 in 5 of Malaysia’s highly talented individuals were leaving Malaysia, many of them bound for Singapore, Australia For a country trying to make itself competitive in the global landscape, losing so many talented individuals could prove to be a huge set back.

Many of those leaving are Chinese and to a lesser extent Indian. In Malaysia, long standing affirmative action policies have favored Malays. The government is dominated by Malays, many government procurement contracts go to Malay companies, and scholarships usually reward lesser Malays over more qualified Chinese and Indian students.

As a result, many non-Malays are deciding to take their talents elsewhere. Singapore has been the biggest benefactor of this migration, undoubtebly contributing to the country’s perch near the top of the rankings. If Malaysia is going to continue to climb the rankings, it will have to figure out a way to retain talent.