Malaysia and the knowledge economy : building a world class higher education system

 Report No. 40397 - MY Malaysia and the Knowledge Economy: Building a World-Class Higher Education System March 2007 The World Bank  CURRENCY EQUIVALENT (Exchange Rate Effective end of March 2007) Currency Unit = Malaysian Ringgit (RM) RM 1 = US$ 0.263 US$ 1.00 = RM 3.8 FISCAL YEAR January 1 to December 31 Vice President: James W. Adams, EAPVP Country Director: Ian C. Porter, EACTF Sector Director: Emmanuel Y. Jimenez, EASHD Sector Manager: Christopher J. Thomas, EASHD Task Team Leader: Omporn Regel, EASHD ii  Table of Contents Foreword ...................................................................................................................... vii Acknowledgements.......................................................................................................... viii Abbreviations..................................................................................................................... ix Executive Summary ......................................................................................................... xiii Introduction......................................................................................................................... 1 PART I. Diagnosis of the Present Situation....................................................................... 5 Chapter 1. Benchmarking the Malaysian Innovation System........................................... 5 Chapter 2. Main Issues and Recent Developments in the University Sector.................. 25 Chapter 3. Governance and Financing............................................................................ 35 Chapter 4. Quality and its Determinants......................................................................... 43 Chapter 5. Graduate Employment and Unemployment .................................................. 65 Chapter 6. Contribution of the Universities to the National Innovation System ............ 79 PART II. Options for Reforming the Malaysian University Sector .............................. 103 Chapter 7. Steering the Future of Higher Education..................................................... 103 Chapter 8. An Improved Financing Model for the Malaysian Universities.................. 119 Chapter 9. Improving the Quality of Teaching and Learning....................................... 137 Chapter 10. Producing the Right Graduates to Increase Relevance ............................... 167 Chapter 11. Strengthening the National Innovation System........................................... 185 Bibliography ................................................................................................................... 250 List of Annexes Annex 1. Terms of Reference of the Study.................................................................... 219 Annex 2. List of Institutions Visited and Persons Met .................................................. 225 Annex 3. Classification of Countries by Models of National Technological Learning. 227 Annex 4. Resource Diversification Matrix for Public Higher ....................................... 237 Annex 5. Monitoring Indicators for the Student Loan Program.................................... 238 Annex 6. Which Allocation Mechanism is more Effective? ......................................... 239 Annex 7. Indicators Used by International Ranking Exercises ..................................... 240 Annex 8. Rankings of Business Administration Schools .............................................. 244 Annex 9. Recent "Excellence" Initiatives...................................................................... 247 List of Tables Table 1.1 Malaysia's Recent Economic Performance in Perspective.............................. 8 Table 1.2 Competitiveness Rankings............................................................................. 10 Table 1.3 Innovation Capability Index 2001 ................................................................. 11 Table 1.4 Technological Activity and Human Capital Indices, 2001............................ 13 Table 1.5 US Patents by Asian Economies, 2001-2003 ................................................ 13 Table 1.6 Researchers per Million People ..................................................................... 15 Table 1.7 R&D Expenditure as a Percent of GDP......................................................... 16 Table 1.8 Malaysia's Inward FDI Index Rankings: Potential and Performance ........... 18 Table 1.9 Educational Attainment of the Adult Population (15 and over) .................... 21 Table 1.10 Graduation and Enrollment Rates.................................................................. 22 Table 2.1 International University Rankings ................................................................. 29 iii  Table 2.2 Unemployment Rates...................................................................................... 31 Table 2.3 Gender Gap in the Labor Force ...................................................................... 32 Table 3.1 Extent of University Autonomy in OECD Countries and Malaysia............... 36 Table 3.2 Public Expenditures on Tertiary Education .................................................... 39 Table 3.3 Unit Costs in Malaysian Public Universities (2005) ...................................... 40 Table 3.4 Allocation of the National Higher Education Fund ........................................ 41 Table 3.5 Financial Performance of the National Education Fund................................. 42 Table 4.1 Enrollment and Output of Graduate Students at the Doctoral Level, 1997-2005 ....................................................................................................... 51 Table 4.2 Enrollment and Output of Graduate Students at the Master's Level, 1997-2005 ....................................................................................................... 51 Table 4.3 Enrollment and Output of Students at the Bachelor's Level, 1997-2005....... 51 Table 4.4 Proportion of Faculty with a Ph.D among Top Rated Canadian Universities 54 Table 4.5 Comparison of Distribution of Faculty by Rank ............................................ 55 Table 4.6 A Comparison of Malaysia's QAD with QA Systems in ............................... 63 Table 5.1 Number and Employment Share of University Graduates ............................. 70 Table 5.2 Employment of Young University Graduates Age 20-29 Years .................... 71 Table 5.3 International Comparisons.............................................................................. 72 Table 5.4 Percent of Graduates Employed 3-6 Months after Graduation....................... 77 Table 6.1 Overview of Industrial Policy Strategies in Malaysia .................................... 89 Table 6.2 Overview of Policy Initiatives