The problem with IT is not just local. Here are my 2 cents:

1. Malaysia is caught between cheap countries like Indonesia, Thailand, China, India, Pakistan etc and innovative (but expensive) countries like US, Sweden, Australia. We are in no man's land. If companies want cheap, they hire foreigners from other developing countries. I was in a major ERP project (if you don't know what ERP is and you graduated in IT, you better go shoot yourself) for one of the biggest M'sian company, and almost half of the people on the project are from Thailand and Indonesia. On the other hand, if companies want innovative solutions to complex problems, they hire the Mat Sallehs and we had a Dutchman for our project director and an Indian from UK as the project manager.

2. No grassroot IT. For example, in UK. You have football schools for kids and teenagers. All the big clubs have youth academies. In Brazil you have babies playing football before they can even walk (ok, I'm just exaggerating). But you get the point. Same thing with IT. A lot of the Mat Sallehs and even the Indians and Chinese (from India and China, not our local ones) start learning programming and databases from an early age.

3. No detailed or concerted effort from the government. Taiwan and South Korea started out 50 years ago as poor agriculture nations but look at where they are now. They have good national policies and strategies. They promote their industries and encourage foreign direct investments. They build their infrastructure. They build their education system. What does Malaysia have? 9th Malaysian Plan? 3rd Industrial Plan? MyICMS 886? Results speaks for themselves and we are no where near Taiwan, South Korea, Hong Kong or Singapore.

4. Attitude of the Malaysian people. Heck, I'm willing to bet you a dollar that half of the people reading this post don't know anything about 9MP, 3IP or MyICMS. Macam mana nak maju ni???