The Brain Drain: A World Crisis

The Brain Drain: A World Crisis

Professor Dr Kriengsak Chareonwongsak

Senior Fellow, Harvard University’s Center for Business and Government

              Many countries at present face a Brain Drain crisis as intelligent people work abroad. This impacts development in many aspects, including economics, and also impacts the knowledge necessary for national development. Many Israeli scholars and professors, for example, move to work in other countries due to superb benefits and life security.

           A study by Dr Dan Ben-David, a professor of the Public Policy department of Tel Aviv University, shows that 25% of Israeli scholars and professors work full time for leading universities in the United States. This is a loss for the country. Three major reasons for this loss are less salary, lack of government funded research support, and concern for the limited national budget required in a long term educational development plan. Thus, those who receive overseas study scholarships do not want to return to work for their country. This is a failure for their government’s educational policy implementation.   

           One study of the Organization of Economic Cooperation and Development: OECD reveals that during 2003-2004, there were 82,905 foreign scholars and professors in the United States universities, or about 7% of all foreign scholars and professors working for educational institutions in US universities. British scholars and professors were in the first rank. However, compared to scholars and professors who work in Britain, this number, 3,117, was only 2.1% of all scholars and professors in Britain. The second was that of Canadian scholars and professors, who represented 12.2% of Canada’s domestic total of scholars and professors. Contrastingly, the number of Israelis who work for high-ranking universities in the United States, at 1,409, represented a proportion of 24.9% of all Israeli domestic scholars; twice that of Canada’s rate and five times more than other developed countries. In deeper detail, when divided into different subjects, it was found that one professor in every eight in Chemistry, one in every three in Computer Technology, 15% in Philosophy, and 29% in Economics were the statistics of Israelis working in the United States proportionate to Israelis working domestically.

           As in Israel, Russia is also facing a Brain Drain crisis. According to the Thai Embassy in Moscow, (2006), Russia since 1991 has been facing this type of problem; where highly educated people tend to work internationally. Experts in Science, Computer, Math, Genetics, and Bio-Technology are pioneers who work in foreign countries because at home in their own, there are only low salaries, out-dated tools, no future career prospects, and no social acceptance. The above facts drive scholars to the point where they have no choice, but to be a professor in a United States’ university.

           Thailand’s Brain Drain

           A Brain Drain situation is happening in Thailand as well, where a proportion of top people are turning to work in the private sector where they can earn much more than they can in state departments. Some go to work for foreign universities where they receive more benefits and resources than they would in the state system in order to develop scholarly work.

           In addition, Thailand lacks an effective mechanism through which to maintain people of genius to work for the country. A good example of this situation is the case of Thai youths who won medals for the Education Olympics. According to a conversation in January, 2006, between Professor Dr Sutud Yoksan; a professor of Physical Studies in the Science Department at Srinakharinwirot University, together with a 1987 award researcher in Physical Studies, and a newspaper manager, these children (Thai youth medal winners in the Education Olympics) are keenly expert in certain special fields. Thus, the government should encourage them to continue growing in their fields of expertise. However, what in fact happens is that the government gives support only by way of budget, but there is no law or regulation about coming back to work for the country after representing Thailand in an  academic competition, or even about receiving a scholarship to study abroad for more than ten years. Thus, we cannot know if these top students, who will be an important source of power to develop the country, can achieve what they would like to learn, and will come back to work for the country or not.

           Since there is no existing strategy by which to gain as much knowledge as possible from this prodigy group, their lives will just be to study abroad, and work in their professional field, which will contribute nothing to the country.  Many intelligent people are attracted by a high income, excellent work atmosphere, and life security when they are an expatriate worker. The same situation also happens in Singapore and Malaysia. There are more than 150,000 Singaporeans who work as expatriates; 40% are offered highly paid salaries by foreign companies. In Malaysia, brilliant students will get scholarships to study in Singapore for three years. After graduation, they can stay in Singapore for another three years. Not only do they earn much more than they would working in Malaysia, but they also gain opportunity for permanent residency in Singapore.

Case Study: A Solution to the Foreign Country Destination Brain Drain

           We must accept that the Brain Drain problem is happening globally. The reasons for this include there being no policy or measures of any kind to persuade intelligent people to work for their own countries, where there is no future career for them, no appropriate work atmosphere, low earnings, and low life-quality.

           Every country experiencing this problem is trying to find a solution to persuade its people not to work abroad.

           In Malaysia, although support policies have been established to prevent the Brain Drain; including vehicle and income tax exemption from the Ministry of Finance, and research budget provision from the Ministry of Human Resources, it has not met with success. This is because wages are very low in Malaysia, compared to other countries.

           In China, whereas 1,070,000 Chinese study abroad, only 275,000 have come back to serve their country. The government tries to stop this situation by granting privileges to those who graduate from foreign countries, for example, granting them the right to work either in urban or rural areas without adhering to their native provincial registration; a registration aimed to prevent the flow of rural workers to city areas. The government also sets a quota aside for special promotion to high salaried positions, and facilitates visa documents for domestic and international travel. For those yet to graduate, the government will grant them a research support budget in their country of study.

           With such privileges adapted for use by marketing tools, the hiring of high potential people will guarantee their ability to earn special benefits, have an attractive income, career progression, the contribution of their potential toward national benefit, and being facilitated in their work in some manner. These strategies have increased the number of graduate students returning home. In 2006, 42,000 students returned to China after graduation; a 21.3% increase from 2005. Moreover, China has the advantage of nationalism and strong cultural values when it comes to persuading Chinese people to return to their own country.

           The conclusion of this matter is to ensure the necessary development of multifarious, simultaneous measures whereby the Brain Drain situation can be prevented. These measures must directly solve the cause of the problem, which will vary from country to country.

           Thailand needs to hasten the finding and developing of strategies to keep brilliant people working for the country. Such strategizing must ensure coverage of every aspect of the problem. Sometimes, we must think ‘out of the box,’ which will begin with planning a search for field experts, then developing the potential of these prodigies through their family connections, outlining an educational course suited to their ability, determining a position from which to influence their development; and lastly, offering incomes of high rating, as per the market mechanism. 

The Hamburger Crisis and Asian Financial Cooperation

The Hamburger Crisis and Asian Financial Cooperation

Dr.Kriengsak Chareonwongsak

Senior Fellow, Harvard Univerisity

Two words best fit our global financial surge of recent times: “upside down.” In financial markets, the rich generally accumulate assets, and therefore play a role as creditors lending their financial resources to those who are poorer. Ironically, Asian, especially East Asian, countries have been the creditors of major Western countries, especially the USA, although the average per capita GDP of Asian countries is far less that of the Western hemisphere countries.

This phenomenon has occurred due to the vast current account deficit of the USA, as well as Asia’s enormous current account surplus. Without intervention of any kind, this international trade imbalance finally leads to US Dollar depreciation and Asian currency appreciation. Thus, to suppress currency market fluctuation, governments must manipulate their countries’ net capital inflow in order to compensate current account deficit/surplus. This mechanism operated when the American government issued a host of bonds that were largely bought by the Chinese government.

Unfortunately, to lure capital inflow, the US government ineluctably raised the Fed rate. It was a doubly-inauspicious situation for America when the rising US interest rate coincided with a bubble burst in the housing sector, causing a US credit crunch that has lasted since late 2007.

A tropical depression of credit crunch gusting to a hurricane of global economic crisis, is the reason why Asian financial sectors are now suffering. The credit crunch plus US and European financial market panic has aggravated their firms’ liquidity problem. Many parent companies in America and Europe have therefore drawn their money back from their subsidiaries in Asia. At Macro level, private capital outflow thus reverses back to America and Europe, causing tremendous plummets to the Asian stock market index and slight currency depreciation throughout Asia.

The tremendous private capital outflow implies that Asian firms are going to face a liquidity problem and there will be scarcity in borrowing resources. As a result, the private sectors of some emerging Asian countries, in Vietnam for example, will need financial resources to boost their liquidity.

Good news: Asia has abundant savings, relative to the rest of the world. That is, financial resources within Asia are available. Bad news: Asian intraregional financial integration is weak and nascent; the volume of private sector Asian intraregional capital flow is not large enough. Therefore, the cross-border borrowing and lending volume among Asian countries is too minimal to be significantly supportive in a mutual manner.

Many measures can be applied to indicate the level of financial integration, and almost all of them point to Asian financial integration as inter-regional (outside Asia) rather than intra-regional (within Asia). According to IMF statistics, Asia’s portfolio liabilities to other Asian countries are at least three times less than those to NAFTA or EU. This is also true in the case of portfolio assets. Osaka University professors have also found a convergence of savings-investment correlations among Asian countries, concluding that Asia’s regional financial integration has progressed since the 90’s, but is still left behind by other world blocs.

We know that Asian countries need financial resources to increase the liquidity of their private sectors, but their current financial integration level needs time to develop. That is, Asia’s current intraregional financial market is not functioning well enough to be of mutual assistance within Asia– not to mention financial resources from USA or Europe that because of the crisis are even more limited than in Asia. One single solution may lie in the area of G-to-G financial cooperation.

Many governments in Asian countries, especially Japan and China, have a cornucopia of public savings in reserve asset form. These untapped reserve assets can be utilized by lending them to governments in emerging Asian countries, which is now deemed to be less risky than lending them to crisis-affected Western countries, and more productive than just keeping them in treasure.

As for its indirect positive impact, G-to-G financial cooperation in Asia would not only support international trade, and political and cultural integration, but would also stimulate economic growth in emerging Asian economies which receive financial aid. Due to the crisis, within a very short time, exports to USA would be unable to function as Asia’s economic driving force, making intraregional trade possibly the best alternative. In the context of growing intraregional trade nowadays, an economic boom in neighbor countries is synonymous with an increase in import from trade partners. Ultimately, the positive effect is back to the lender.

I believe that the classic phrase, “give and take,” is still applicable in the case of Asian financial integration.