Higher Education Research and Development Society of Australasia, Inc

Research and Development in Higher Education:

Reshaping Higher Education
Volume 33

Refereed papers from the

rd
33 HERDSA Annual International Conference

6–9 July 2010

Melbourne, Australia

Singh, J.K.N., Schapper, J. & Mayson, S. (2010). The impact of economic policy on
reshaping higher education in Malaysia. In M. Devlin, J. Nagy and A. Lichtenberg (Eds.)
Research and Development in Higher Education: Reshaping Higher Education, 33
(pp. 585–595). Melbourne, 6–9 July, 2010.

Published 2010 by the

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 Research and Development in Higher Education Volume 33

The impact of economic policy on reshaping

higher education in Malaysia

Jasvir Kaur Nachatar Singh

Penang, Malaysia
[email protected]

Jan Schapper
Monash University, Caulfield, Australia
[email protected]

Susan Mayson
Monash University, Caulfield, Australia
[email protected]

Malaysia has been reshaping its higher education policies since before the1970s. This
paper traces the development of higher education policies that have been developed in
response to changing economic circumstances and the impact of these policies on higher
education in Malaysia over the last fifty years. In particular, we focus on the contribution
of globalisation to the higher education sector in Malaysia. We argue that Malaysia’s
higher education system has moved through four distinct phases that can be understood as
strategic efforts to respond to global economic trends and globalisation.

Keywords: economic globalisation, Malaysian higher education system

Introduction

Over the last five decades, like many other countries, Malaysia has reshaped and restructured
its higher education system. The reshaping of higher education in Malaysia is “influenced by
global forces and global trends” (Lee, 2004a, p. 31) such as economic globalisation. For this
paper, we have followed the view presented by Marginson and van der Wende (2007) that
globalisation as a whole represents “the processes of world-wide engagement and
convergence associated with the growing role of global systems that criss-cross many national
borders” (p. 11). Our focus on globalisation does not deny the influence of internal factors
such as the need for appropriate workforce or human capital to support the Malaysian
economy at every transformation stage (Sato, 2005). Along with economic globalisation,
these factors were significant in reshaping the higher education in Malaysia in its economic
transition from an agrarian economy to knowledge-based economy.

What is illustrated in this paper is the impact of globalisation on the Malaysian economy and
the impetus this has provided for higher education reform. In previous decades, reform in the
higher education sector was a response to local economic conditions and requirements (for
example, a shift from a skilled and trained workforce to a knowledge-based workforce) as
well as international trends. The recent experience of globalisation has, however, served as
the strongest impetus for reform to ensure Malaysia’s higher education sector is consistent
with global trends (Kaur, Sirat, & Azman, 2008; Porter & Vidovich, 2000). In this paper, we
explore how local economic transitions from an agriculture economy to knowledge-based

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economy has had a significant impact on the development of higher education policies in
Malaysia (Lee, 2004b; Sato, 2005) through the National Development Plans as an example of
internal agents responding to globalisation as internal imperatives, with a particular focus on
the contribution of globalisation to the higher education sector in Malaysia

Drivers for reform of higher education

Illustrating the impact of economic globalisation, in the 1970s, Malaysia’s economy was
essentially based on agricultural activities. Global financial trends in the 1980s, however,
signalled the need to shift economic activity from primary industries to an industrial and
productivity-based economy. This movement from agriculture to manufacturing thus created
the need for a highly skilled and trained work force (Ahmat, 1980; Kaur et al., 2008;
Marimuthu, 2008; Mok, 2007). Developments in the current millennium saw the emergence
of the knowledge economy demanding a knowledge-based workforce (Marimuthu, 2008).
Figure 1 depicts these developments.

Globalisation

Agriculture Industrial Knowledge

Economy Economy Economy
(1960s-1980) (1980-2000) (2000 onwards)

National National National

Development Development Development
Plans Plans Plans

Skilled and
Skilled trained Knowledge
workforce in workforce in based
agricultural manufacturing workforce
industries industries

Globalisation

Figure 1: Framework of relationship between Malaysia moving from agricultural-based

economy to knowledge-based economy

Reflective of the interdependency between the economic development and education reform,
Malaysia developed a series of five-year National Development Plans (Rancangan Malaysia
(RM)), which prioritised all levels of education (primary, secondary and tertiary) to produce
the appropriate labour force for each economic phase.

The first three National Development Plans developed in the 1960s were designed to support
what we have referred to as the Agricultural Economy period. Initially the RMs focused on
primary and secondary education to support the agricultural economy with little emphasis on

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 Research and Development in Higher Education Volume 33

higher education. However, this trend changed at the end of the 1970s as the State turned its
attention to tertiary education and established more public universities to improve student
access.

This was followed by the Industrial Economy period where the government introduced
strategies to support science and technology and vocational education. This period began the
trend towards the corporatisation and privatisation of higher education. Lastly, the Knowledge
Economy period has focused on developing knowledge workers through extensive research
components in the Malaysian higher education system. This shift to the need for knowledge
workers began at the turn of the twenty-first century when Malaysia was moving from an
industrial to a knowledge-based economy. The focus at this time changed from training
skilled workers to the creation of knowledge workers who could build the nation’s economy
for greater global competitiveness (Altbach, 2002; Altbach & Knight, 2006; Altbach &
Teichler, 2001; Bakar, 2008; Douglass, 2007; Kaur et al., 2008).

In short, it is clear the Malaysian national higher education system has not remained
untouched by the impact of global economic phenomena. In order to keep up with the global
demand to shift from skilled and trained workforce to knowledge workers, the reshaping of
higher education system was supported by policies to support the Malaysian economy. It is
evident that the higher education sector in Malaysia changed gradually and concurrently with
the economic globalisation. The next section of this paper unfolds and explores the
reformation that occurred in the Malaysian higher education system.

Policy analysis of the Malaysian higher education system

The following sections illustrate the policies of higher education in Malaysia from before
the1970s to the present, an illustration that is imperative to understand the restructuring and
reshaping processes of the country’s higher education sector. The first three phases are
adapted from the work of Molly Lee, a renowned researcher on the subject of Malaysian
higher education. According to Lee (2004b) the growth of Malaysian higher education can be
placed into “three distinctive waves of expansion” (p. 41). An additional fourth phase has
been developed by the author through an extensive literature review and analysis. It is
anticipated that the identification of this later phase of expansion will contribute significantly
to the literature of Malaysian higher education.

First phase of higher education in Malaysia (pre–1970s)

The first phase (pre–1970s) of Malaysian higher education features the colonial period and
early independence years. During this phase, emphasis was given to primary and secondary
education levels (Ahmat, 1980; Sirat, 2008b) to develop skilled workers in support of the
agricultural economy. With this skewed emphasis, only one university was established, the
University of Malaya, where the majority of the students were either of Chinese or Indian
ethnicity (Ahmat, 1980; Lee, 2004b; Sirat, 2008b). However, only the upper class of the
Bumiputra1 ethnicity were entitled to enrol in the university to create an “elite class among the
Malays who would cooperate with the colonial administration” (Sato, 2005, p. 73). This phase
of Malaysian higher education, therefore, belonged to the elite class, and access was limited
(Sirat, 2008b). Further, the State exercised minimal influence on the higher education system
(Sirat, 2008b) in terms of not regulating higher education due to the perceived inferiority of
higher education in comparison to pre-tertiary education.

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It was only in 1962, when the Higher Education Review Committee was formed, that the
development and improvement of the higher education sector was prioritised (Ahmat, 1980;
Sato, 2005). The findings of the Committee suggested that there was a serious shortage of a
qualified professional and sub-professional workforce in fields such as science, medicine,
dentistry, engineering, accountancy, statistics and other technical and managerial professions
(Ahmat, 1980). As a result of these findings, new universities were established in the 1970s
that offered programmes in scientific and technical disciplines (Sato, 2005). The
establishment of these universities is discussed in the next section.

Second phase of higher education in Malaysia (1970–1990)

The second phase of Malaysian higher education spanned from the 1970s to the 1990s (Lee,
2004b), when the country’s economy shifted from an agriculture-based one to an industrially-
based economy. According to Selvaratnam (1988), the transition to this phase was a
consequence of the severe ethnic riots in 1969, a period predominantly marked by “existing
inequities in income and opportunities” (Ahmat, 1980, p. 722). The inequities were
characterised by the Bumiputras earning relatively low incomes as farmers and fishermen in
rural areas, while the Chinese lived in urban areas, earning better incomes as entrepreneurs
and traders. The Indians also fared economically better as wage labourers in the rubber
estates, railways and public works department (Selvaratnam, 1988). The majority of capital
ownership in business was controlled by the Chinese (60 per cent) as compared to only four
per cent by the Bumiputras, who also constituted the majority of poor households (74%)
(Ahmat, 1980; Selvaratnam, 1988).

The inequality was also apparent in education, wherein the Bumiputras and Indians were
restricted to primary education and with very limited opportunities for English education,
whereas the Chinse community had access to post-primary levels of education (Ahmat, 1980;
Selvaratnam, 1988). As a result, there emerged an “ethnic economic imbalance and lack of
national unity” (Lim, 1995, as cited in Lee, 2004b, p. 42) where Bumiputras lagged behind in
both education and socio-economic life (Ahmat, 1980; Selvaratnam, 1988).

According to Lee (2004a), education was the most important instrument to achieve national
unity, social equality and economic growth. In order to eradicate poverty, a trained and skilled
workforce was needed, thereby increasing productivity and raising the income levels of all
Malaysians (Ahmat, 1980). Higher education, therefore, became the only medium for
developing and producing this trained and skilled workforce. More specifically, higher
education was visualised as a significant vehicle to improve the socio-economic standing of
the disadvantaged Bumiputras (Lee, 2004b; Selvaratnam, 1988; Sirat, 2008b).

In restructuring education and society, the State implemented the “ethnic quota admission
policy whereby the admission to the public higher learning institutions will be based on
ethnicity composition” (Lee, 2004a, p. 35). Under this policy, the ratio of admission became
55:45 for Bumiputra and non-Bumiputra students (Lee, 2004b; Marimuthu, 2008; Neville,
1998; Sato, 2005). By replacing the academic merit policy of the First Phase, the State,
through its Ministry of Education played an interventionist role and regulated the higher
education system towards achieving the national agenda (Lee, 2004a). This policy was
implemented as “a positive discrimination policy in favour of the Bumiputras” (Lee, 2004b,
p. 40).

This phase also witnessed the democratisation of higher education as the State increased the
number of public higher education institutions to widen students’ access to higher education

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 Research and Development in Higher Education Volume 33

(Mohamedbhai, 2002). In addition to the University of Malaya, four more universities were
established from 1969 to 1972 to reinforce priorities in science, arts, agriculture and
engineering courses (Ahmat, 1980; Lee, 2004b).

Later, in the 1980s, two more universities were established; the International Islamic
University Malaysia (IIUM) in 1983 which specialised in Islamic-based human resources
training courses and the Northern University of Malaysia (UUM) in 1984 which specialised in
management sciences, business and information technology courses (Lee, 2004b; Sato, 2005).
The success of this policy development was apparent in the growth of Malaysian student
enrolments which increased by 235.5 per cent from 11,364 students in 1970 to 38,125
students in 1980 and up to 69,700 students in 1985 (Malaysia, 1981; Malaysia, 1986).

Third phase of higher education in Malaysia (1990–2000)

In the 1990s, another phase of restructuring engulfed Malaysia’s higher education system
brought on by the introduction of neo-liberal economic ideologies and changed value systems
within Malaysia’s public sector (Lee, 2004a). This third phase witnessed the introduction of
both privatisation and corporatisation policies in the higher education sector as well as the
establishment of the higher education quality assurance agencies.

Privatisation policy in higher education system

In Malaysia, the 1997 Asian financial crisis and tight budgetary constraints of the State led to
privatisation of public higher education institutions (Lee, 2004a; Marimuthu, 2008; Mok,
2007). Other reasons for privatisation policy in higher education system are unmet demand
for tertiary education due to insufficient enrolment placements in public institutions, the
ethnic quota policy that favoured the Bumiputra ethnicity and heightened economic costs of
studying overseas caused by the 1997 financial crisis (Lee, 2004a).

To institutionalise private higher learning institutions and branches of foreign universities in

the country, government legislation was promulgated, specifically, the amendment of the
Universities and University Colleges Act (UUCA) in 1995 and the Private Higher Education
Institutions (PHEIs) Act in 1996 (McBurnie & Ziguras, 2001; Mok, 2007; Sato, 2005). As of
June 2007, there were about 32 private universities and university colleges registered in the
country (Ministry of Higher Education, 2007). In addition, there are four foreign university
branch campuses in Malaysia such as the University of Nottingham Malaysia Campus,
Monash University Malaysia, Curtin University of Technology Sarawak and Swinburne
University of Technology Sarawak Campus (Ministry of Higher Education, 2007).

Corporatisation policy in higher education system

In addition to the privatisation initiatives that sought to develop Malaysian higher education,
all State-controlled universities were corporatised in 1995 (Marimuthu, 2008; Sirat, 2008a).
The corporatised universities were expected to self-generate a proportion of their income by
entering into business enterprises and promote partnerships with private businesses (Abdullah
& Othman, 2008) through consultancies (Mok, 2007). With State funding expected to
decrease from “86.6 per cent in 1996 to about 60 per cent in the year 2005” (USM, 1996, as
cited in Lee, 2004a, p. 41),corporatised universities were expected to diversify their income
through market-related activities such as from “full-fee paying overseas students, research
grants and consultancy, franchised educational programmes, rental from university facilities
and interest or divined from investment” (Lee, 2004a, p. 41).

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In short, the idea of corporatisation was to give the universities more institutional and
financial autonomy (Lee, 2004b). However this did not materialise due to the unwillingness
of the State to free up public universities to enter the market (Sirat, 2008a). Also, because of
the 1997 Asian economic crisis, the State postponed the plan to reduce funding (Lee, 2004a)
as it was thought the public universities would not be able to sustain themselves through this
crisis.

Quality assurance
The Quality Assurance Framework for Universities was established (Lee & Gopinathan,
2007) to control, monitor and maintain quality in higher education in the government’s efforts
to become the centre of learning and educational excellence by the year 2020 (Jie & Idris,
2009; Kanji & Tambi, 1999) (see Figure 3).

The drivers that led to establishment of the quality mechanisms in Malaysia were firstly to
monitor the diversification of funds through the corporatisation policy. With the
encouragement of the privatisation of higher education, the Malaysian government also
identified the need to maintain some control over the quality of education offered by private
educational institutions in Malaysia. Secondly, to attract and retain foreign students to study
in Malaysia, quality mechanisms needed to be established to improve and assure the services
offered by all higher learning institutions (Sohail, Rajadurai, & Rahman, 2003).

During the course of the 1990s and early 2000s, a range of mechanisms were introduced to
ensure the quality of higher education in Malaysia was commensurate with its global
competitors. The development of some of these initiatives is outlined in Figure 2.

Factors/ 1) Diversification of funds through corporatisation

Drivers/ 2) Privatisation of higher education
Impetus 3) Internationalisation

1) Total Quality Management (TQM)

2) Establishment of National Accreditation Board (NAB) in 1997
Quality 3) Establishment of Quality Assurance Division in Ministry
Mechanism of Education in 2001
4) Establishment of Malaysian Qualification Framework and
Malaysian Qualification Agency (MQA) in 2007

1) Advocate the New Public Management (NPM) values such as

Impact of
accountability, efficiency, effectiveness, productivity
Quality

Figure 2: A framework: the emergence of quality in Malaysian higher education

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 Research and Development in Higher Education Volume 33

In 1992, Total Quality Management and International Standards ISO for quality assurance
(Pang, 2008; Sohail et al., 2003; Srikanthan & Dalrymple, 2007), were established and
mandated by the Malaysian Public Service Department (PSD) (Kanji & Tambi, 1998).
Further, in 1996, the Ministry of Education initiated the customer charter concept (Sohail et
al., 2003) and established a “policy and quality section to monitor the implementation of the
country’s education policy at all levels based on the TQM principles” (Sohail et al., 2003, p.
141). In addition, the National Higher Education Council was established in 1996 to control
the standards of public higher education institutions (Kanji & Tambi, 1998; Sohail et al.,
2003).

The National Accreditation Board Act in 1996 was established to oversee the “quality of
courses delivered, reviewing the curriculum, examination scripts, assignments, students’
learning outcomes, student support, academic faculty and interviewing staff and students”
(Marimuthu, 2008, p. 278). For the first time in Malaysian higher learning institutions, review
visits by the Board assured minimum standards (Lim, 2008; Tambi, Ghazali, & Yahya, 2008).
In 2001, the Quality Assurance Division (QAD) of the Ministry of Education was established
to govern state-owned higher education institutions through a set of standards focused on
teaching and learning, programme evaluation, leadership and governance, student assessment
and student selection (Tambi et al., 2008). In 2007, the Malaysian Qualification Agency
(MQA) was established under the Malaysian Qualification Framework (MQF) to provide
quality assurance for both public and private higher learning institutions (Marimuthu, 2008;
Pang, 2008).

The main purpose of these strategies was to establish and maintain internationally recognised
standards of quality in the Malaysian higher education system and to strengthen the nation’s
position in relation to its international competitors. These initiatives were part of a broader
program introduced in the 1990s within the Malaysian public sector referred to as the New
Public Management (NPM) values. The NPM project drew on the methods, values and
practices of the private sector that included efficiency, effectiveness, productivity, flexibility,
delivery and excellence with the purpose of improving public sector performance.

Building on the improved performance that resulted from the implementation of NPM, the
assurances of quality and the competition between private and public higher education
institutions in Malaysia, developments in the early 2000s were designed to further consolidate
Malaysia’s competitiveness in the global education market.

Fourth phase of higher education in Malaysia (post 2000 onwards)

This phase began at the turn of the 21st century when Malaysia was moving from an
industrial-based economy to a knowledge-based economy. The focus changed from training
skilled workers to the creation of knowledge workers who could build the nation’s economy
for greater global competitiveness (Altbach, 2002; Altbach & Knight, 2006; Altbach &
Teichler, 2001; Bakar, 2008; Douglass, 2007; Kaur et al., 2008). With globalisation as a
backdrop, this phase has seen the formation of the Research Universities (RU) policy and the
more recent Accelerated Programme for Excellence (APEX) University.

The establishment of the Research Universities (RUs) policy

In Malaysia, research universities (RUs) were established to develop human capital or highly
trained knowledge workers to support the knowledge economy (Ho-Abdullah & Yahaya,
2007; Kaur et al., 2008; Sato, 2005). The four research universities (RUs) were established in
the year 2006. Selected according to strict criteria, the four RUs include the Universiti Malaya

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(UM), Universiti Sains Malaysia (USM), Universiti Kebangsaan Malaysia (UKM) and
Universiti Putra Malaysia (UPM) (Ministry of Higher Education, 2007). It is evident that
universities accredited with the RU status showed two characteristics; the first, is that each are
state controlled universities and the second, is that each are amongst the oldest and most
established universities in Malaysia.

There are several major impacts of the RU policy. Firstly, the RUs are promised financial
autonomy in terms of “additional funding for research activities, research management,
quality assurance, RU incentive grants and specialised research services such as patenting”
(MOHE, 2004, as cited in Komoo, Azman & Aziz, 2008, p. 5) as well as the institutional
autonomy in terms of facilitating research activities (Sirat, 2008a).

It was estimated that each RU required RM 150 million each year and an initial grant of RM
200 million was suggested to jump start the RUs (Ministry of Education, 2004). Ninety per
cent of the funds were to be granted by the State for development and operational purposes
and the remaining was to be generated by the universities through tuition fees, consultation
fees and other source of income (Ministry of Higher Education, 2007). In addition,
partnerships with other ministries such as the Ministry of Science, Technology and Innovation
(MOSTI) were important because various grants were to be made available to generate quality
research in the field of science, engineering and technology. The funds were to be channelled
to the RUs for the purchase of facilities, technological equipment, to build research
laboratories, payment for post-doctoral fellows, research assistants and support staff, lecture
theatres equipped with the latest technology and so forth in order to promote research culture
in the RUs (Ministry of Education, 2004; Ministry of Higher Education, 2007).

The research governance structure in the RUs was to be revamped to facilitate research, with
the RU concept paper suggesting that “shared governance between the Board of Directors
(BOD) and the Senate should be set up to avoid conflict of power and to reduce bureaucracy
in decision making” (Ministry of Education, 2004, p. 9). Further, “a joint select committee
(JSC) on research is to be constituted with the powers delegated by both BOD and the Senate
over matters of research” (Ministry of Education, 2004, p. 4). Next, the Research Trustees
Committee (RTC) was constituted to manage all internal or external funding granted or
allocated for research in order to “liberate the RU from the rigid financial procedures of
Treasury” (Ministry of Education, 2004, p. 9).

Finally, the development of a performance and competitive culture is also embedded in the
RUs policy. For example, several incentives were suggested in the concept paper including
rewarding the RUs the Research University-Research Training Scheme (RU-RTS). This grant
involves rewards for the RUs that “provide high quality research training environments and
support excellent and diverse research activities” (Ministry of Education, 2004, p. 12).
Further, promotion of the academic staff to professorship is to be based on academic
excellence according to “publications in high-impact journals, international journals, citation
index journal and joint writing with renowned foreign counterparts” replacing the current
practice of promotion based on work performance (Ministry of Higher Education, 2007,
p. 107).

APEX University
The latest edition in the history of higher education in Malaysia is the introduction of
Accelerated Programme for Excellence (APEX) University in the year 2008. The APEX
university in Malaysia is benchmarked on best practices and adapted from Germany, Taiwan,

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 Research and Development in Higher Education Volume 33

China, South Korea and Singapore (Merican, 2008). The APEX University has been
established to elevate the research universities to the next level, that is, to be world renowned.
The impact of the APEX policy is to have autonomy in finance, governance, service scheme,
management, student enrolment based on merit and tuition fees, with an emphasis on
internationalisation to select the world’s best academics. The target of the APEX University is
to become one of the 100 best universities globally (Merican, 2008).

In September 2008, Universiti Sains Malaysia (USM) was announced as Malaysia’s only
APEX University. Its selection as the APEX university was based on criteria including the
quality and reputation of its academic staff, research achievements, academic programmes of
choice and relevance, strong leadership and management, strategic partnerships with industry
and other stakeholders and excellent infrastructure (Merican, 2008). In summary, USM was
chosen based on its state of readiness, its transformation plan and preparedness for change
(Lee, 2008).

Conclusion

The purpose of this paper was to explore the impact of global economic trends towards
reshaping higher education policies in Malaysia. In doing this, it has provided a review of
current literature and policy documents to demonstrate ways in which economic globalisation
now shapes the higher education policy. While not the key focus of the paper, the analysis
also acknowledges the role of government and other internal agents that have influenced these
policy responses. Overall, it is clear that higher education policies designed and implemented
across the four phases of development are efforts to shape and reshape the Malaysian higher
education system in response to the economic globalisation and the current need to develop
the Malaysian society.

Notes
1
A Bumiputra is a Muslim Malay constituted under the Article 160(2) of the Constitution of Malaysia, which
stipulates that a Malay is “a person who professed the Muslim religion, habitually speaks the Malay language
and conforms to the Malay customs” (Saw, 2006, p. 13).

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