The New Economic Model, launched in 2010, affirmed that employing immigrant labor has delayed the upgrading of Malaysian manufacturing. We found that evidence based on the share of skilled workers, wage rate growth, capital use and productivity growth is consistent with this assertion. The way forward should embrace, among other factors, two thrusts: better regulation of foreign workers and the cost of using them in order to pressure firms to upgrade and increasing the talent pool to support the transformation. The latter thrust should include measures to raise the skills of natives, retain skilled natives, attract native talent residing abroad and enticing non-native talent to help the upgrading process.
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