Dear MOF, I have a question, followed by a long unstudied rant.
"What is going to stop citizens from demanding higher wages per hour once their output per hour has improved?"
Question ends; rant begins.
If the MOF's real intention is to reduce the trade in non-citizen-manhours, then increasing productivity per-citizen-manhour is NOT sufficient. Because, the citizen is not going to change her asking price for RM-per-unit-of-production. If she learns how to do more per hour, she will then ask for more pay per hour. If she cannot find a buyer for her time at the new and improved price, of her new and improved productivity, she will look for jobs outside Malaysia, just like all her clever older siblings.
Malaysia has has less of a shortage of skills due to failures in upskilling, than a shortage of skills due to failure to pay globally competitive rates for talent. The rates of remuneration demanded by some talent are denominated in more than just money - millions of people around the world, give up opportunities to make money, in order to acquire more freedoms. Sell money, buy freedoms. You can classify these freedoms in various ways, but Malaysia lacks many of them. So Malaysia simply doesn't compete well with many richer countries not because those countries are richer in materials, but because those countries are richer in freedoms.
Malaysia has chosen for 30 to 40 years, instead of providing freedoms of equality to its citizens, to forego the provision of such freedoms, and to focus on remunerating labour with material currencies. As an employer, Malaysia pays more in cash, and less in freedoms. Citizens that want more freedoms: depart. Non-citizens that want more cash: arrive. So regardless of how clever and productive our citizens are, some of them that need freedoms, they are going to quit. This is partly why Malaysia is poor - it is not because we are unable to upskill citizens. It is because we are unable to provide certain skilled Malaysians with social and commercial environments that make them want to stay here.
Because there is no ban on skilled citizens leaving, we constantly sell certain staff-citizens (a) who are among those that provide the greatest production-per-RM, to other countries - these happen to be individuals who also deliver high production-per-hour. And then we buy staff-expats (b) from countries such as Indonesia, Bangladesh, Nepal, and the Philippines, to replace those staff-citizens (a) we sold - these staff-expats (b) just happen to offer lower production-per-hour than the staff-citizens (c) which we didn't sell to other countries, but these staff-expats (b) are cheap, and provide production-per-RM which is on par with the staff-citizens (a) we fired, effectively replacing the leavers on the labour supply curve.
That is because labour supply is not denominated in production-per-hour, but in production-per-RM. Manhours are a political strawman, and when the rubber hits the glove-moulds, no one cares how many hours anyone worked: only how much RM is paid for the total amount of work that got done.
If the MOF and MOHR are serious about fixing Malaysia's brain-drain and the ensuing dependence on staff-expats, then the ministries must focus not on some fake and trivial objective of "upskilling staff-citizens", but instead look more closely at the issue of "why do our staff-citizens, who accept a low RM-per-unit-of-production, why do those particular staff-citizens leave our country?" In fact, why do we keep losing them? Why do good people want to be paid more just to stay here?
There are numbers for that answer, if you look for it in the right place. But simply improving the rate at which we upskill staff-citizens is not sufficient, because as long as they are unhappy, they will always cost more, anyway.
//
Reflections on rant, to follow.
It's probably already in some elementary 2nd year labour econs text lol. And I think it conflates the question about how to deal with the labour supply problem, with the issue of people leaving the country. I'm sure that there are political economic rationale for both, I'm not sure that they're related. Unfortunately I now have to make some time to patch up my ignorance of basic labour economics, and the economic quantification of lifestyle and political freedoms.
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