Productivity Performance - MPC
Productivity Performance - MPC
Productivity Performance - MPC
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www.mpc.gov.my
18 th PRODUCTIVITY REPORT<br />
MALAYSIA PRODUCTIVITY CORPORATION<br />
All rights reserved.<br />
No part of this publication may be reproduced, stored in a retrieval<br />
system or transmitted, in any form or any means, electronics, mechanical,<br />
photocopying, recording or otherwise, without the prior permission of<br />
the Malaysia <strong>Productivity</strong> Corporation.<br />
May 2011<br />
For further information, please contact :<br />
Director General<br />
MALAYSIA PRODUCTIVITY CORPORATION<br />
P.O. Box 64, Jalan Sultan<br />
46904 Petaling Jaya, Selangor, Malaysia<br />
Tel: 603-7955 7266, 7957 8068<br />
Fax: 603-7954 0795<br />
www.mpc.gov.my<br />
ISSN 1394-410X
STATUTORY REQUIREMENTS<br />
In accordance with Section 7 of the Malaysia <strong>Productivity</strong> Council<br />
(Incorporation) (Amendment) Act 1991, Malaysia <strong>Productivity</strong> Corporation<br />
hereby publishes and submits to the Minister of International Trade and<br />
Industry the status of productivity in Malaysia.
MESSAGE FROM THE MINISTER OF INTERNATIONAL<br />
TRADE AND INDUSTRY<br />
MALAYSIA<br />
In its quest towards expediting the journey towards achieving high income<br />
economy status, the Government launched the New Economic Model (NEM)<br />
which is supported by four major pillars namely, 1Malaysia: People First,<br />
<strong>Performance</strong> Now concept, Government Transformation Programme (GTP),<br />
Economic Transformation Programme and Tenth Malaysia Plan (10MP) in<br />
2010.<br />
The ultimate objective of these programmes is to improve per capita<br />
income to at least USD15,000 by 2020. This can be achieved by sustaining<br />
an average 4.6% productivity growth per annum to ensure that we are on<br />
the right track to attain developed country status.<br />
In 2010, Malaysia’s productivity performance grew by 5.8% to RM51,591. The<br />
significant jump in overall productivity growth was expected considering<br />
the remarkable recovery of the economy from the previous year’s decline<br />
of 1.9%. Malaysia registered the highest productivity growth as compared<br />
to selected OECD countries such as Sweden (4.4%), Germany (3.5%), USA<br />
(2.7%) and Finland (2.7%). However, some Asian countries recorded higher<br />
productivity growth namely, Singapore (11.8%), China (10.0%) and Taiwan<br />
(8.2%).
During the period of 2001-2010, the growth in TFP was 1.5% contributing<br />
32.9% to national economic growth. The result shows that Government<br />
efforts to increase the contribution of TFP were effective where creativity,<br />
innovation and better management practices as well as higher added value<br />
investment contributed significantly towards the growth.<br />
I am pleased to note that our economy is now on a much better footing and<br />
this was due to concerted efforts taken by all parties. It is my sincere wish<br />
that the strong collaboration between the private and public sectors be<br />
continued to spur the economy to greater heights.<br />
DATO’ SRI MUSTAPA MOHAMED<br />
Minister of International Trade and Industry<br />
Malaysia
STATEMENT BY THE CHAIRMAN<br />
This <strong>Productivity</strong> Report is the 18 th edition published by <strong>MPC</strong> and provides<br />
a comprehensive analysis on productivity performance of Malaysia<br />
focusing on the key economic sectors. The performance of those National<br />
Key Economic Areas (NKEAs) identified under the Economic Transformation<br />
Programme (ETP) and the National Key Result Areas (NKRAs) under the<br />
Government Transformation Programme (GTP) will also be discussed in this<br />
report.<br />
The <strong>Productivity</strong> Report provides the analysis on productivity performance<br />
at industry, sectoral, national and international levels as well as the public<br />
sector. This includes the impact of productivity performance of the NKEAs,<br />
the best practices observed and the strategies to be pursued in the various<br />
economic sectors.<br />
In 2010, <strong>MPC</strong> was revamped and rebranded integrating innovation and<br />
productivity as spelled out under the New Economic Model (NEM). The core<br />
of this reform agenda is the development of a five-departmental model<br />
incorporating new functions. One of these functions is the establishment of<br />
Regulatory Review department which is also in line with the Tenth Malaysia<br />
Plan where <strong>MPC</strong> has been identified as the agency which will be responsible<br />
for reviewing existing regulations with the view of improving the ease of<br />
doing business and to make recommendations on policy and regulatory<br />
changes that will enhance productivity. This is followed by formation of<br />
Enterprise Innovation department that provides the basis towards greater
emphasis on <strong>MPC</strong>’s innovative programmes at company level. These two<br />
departments will be complemented by three other functions namely,<br />
Business Excellence, Global Competitiveness and Knowledge Management.<br />
This report is the outcome of the continuous support and guidance by<br />
the <strong>MPC</strong> Board Members, members of the Consultative Panels, industries<br />
representatives and associations, ministries and agencies, especially the<br />
Ministry of International Trade and Industry (MITI). <strong>MPC</strong> also works closely<br />
with international agencies such as the Asian <strong>Productivity</strong> Organisation<br />
(APO), Institute of Management Development (IMD), World Economic<br />
Forum (WEF) and Japan International Cooperation Agency (JICA).<br />
I would like to thank <strong>MPC</strong> management and staff for their work on the<br />
publication of this report.<br />
TAN SRI AZMAN HASHIM<br />
Chairman<br />
Malaysia <strong>Productivity</strong> Corporation
MALAYSIA PRODUCTIVITY CORPORATION<br />
Malaysia <strong>Productivity</strong> Corporation (<strong>MPC</strong>) was established to assume an<br />
important role in the enhancement of productivity and quality of the<br />
country towards achieving a higher national economic growth.<br />
To realise the above, <strong>MPC</strong> has formulated a strategic operation based on<br />
the following vision, mission and objectives.<br />
VISION<br />
The leading organisation in productivity enhancement<br />
for global competitiveness and innovation.<br />
MISSION<br />
To deliver high impact services towards achieving performance<br />
excellence through innovation for the betterment of life.<br />
OBJECTIVES<br />
Our corporate objectives are:<br />
Providing value-added information on productivity,<br />
quality, competitiveness and best practices through<br />
research activities and databases;<br />
Developing human capital and organisational excellence<br />
for building a knowledge-based society through training,<br />
systems development and best practices; and<br />
Nurturing innovative and creative culture for productivity and<br />
competitiveness through partnership programmes.
MESSAGE FROM THE MINISTER<br />
STATEMENT BY THE CHAIRMAN<br />
CONTENTS<br />
MALAYSIA PRODUCTIVITY CORPORATION<br />
Vision, Mission and Objectives<br />
REPORT HIGHLIGHTS<br />
PART 1: TOWARDS A PRODUCTIVITY AND INNOVATION DRIVEN<br />
ECONOMY<br />
Chapter 1: <strong>Productivity</strong> <strong>Performance</strong> of Malaysia<br />
Overview 22<br />
Overall <strong>Productivity</strong> <strong>Performance</strong> 23<br />
Sectoral <strong>Productivity</strong> <strong>Performance</strong> 23<br />
Manufacturing Sector 23<br />
Services Sector 24<br />
Construction Sector 27<br />
Agriculture Sector 27<br />
Mining Sector 27<br />
International <strong>Productivity</strong> Comparison 28<br />
Way Forward 30<br />
Outlook for 2011 31<br />
Box 1.1 : Investment Climate and <strong>Productivity</strong> 32<br />
Box 1.2 : Innovation and Knowledge Management 33<br />
Box 1.3 : Sustaining Malaysia’s Competitiveness 34<br />
Chapter 2 : Total Factor <strong>Productivity</strong><br />
Overview 40<br />
Total Factor <strong>Productivity</strong> <strong>Performance</strong> 40<br />
Sources of Total Factor <strong>Productivity</strong> Growth 41<br />
TFP of Selected Economic Sectors 43<br />
International Total Factor <strong>Productivity</strong> Comparison 45<br />
Sources of TFP Growth in the Selected Countries 46<br />
Box 2.1 : Labour <strong>Productivity</strong> and Total Factor <strong>Productivity</strong> 48<br />
Box 2.2 : Driving Towards Innovation-Driven Stage of Development 50<br />
Box 2.3 : Global Innovation Index 52
CONTENTS<br />
PART 2 : ELEVATING THE ECONOMY TO GREATER HEIGHTS<br />
Chapter 3 : <strong>Productivity</strong> <strong>Performance</strong> of the Services Sector<br />
Overview 56<br />
<strong>Productivity</strong> <strong>Performance</strong> 57<br />
Total Factor <strong>Productivity</strong> 59<br />
Strategies and Outlook 60<br />
Logistics Services 61<br />
Overview 61<br />
<strong>Productivity</strong> <strong>Performance</strong> 63<br />
Best Practices 62<br />
Strategies and Outlook 62<br />
Information and Communication Technology (ICT) Services 63<br />
Overview 63<br />
<strong>Productivity</strong> <strong>Performance</strong> 63<br />
Best Practices 64<br />
Strategies and Outlook 64<br />
Wholesale and Retail Trade Services 65<br />
Overview 65<br />
<strong>Productivity</strong> <strong>Performance</strong> 65<br />
Best Practices 66<br />
Strategies and Outlook 66<br />
Business and Professional Services 67<br />
Overview 67<br />
<strong>Productivity</strong> <strong>Performance</strong> 67<br />
Best Practices 68<br />
Strategies and Outlook 69<br />
Tourism Services 69<br />
Overview 69<br />
<strong>Productivity</strong> <strong>Performance</strong> 70<br />
Best Practices 70<br />
Strategies and Outlook 71<br />
Private Education Services 71<br />
Overview 71<br />
<strong>Productivity</strong> <strong>Performance</strong> 72<br />
Best Practices 72<br />
Strategies and Outlook 73
CONTENTS<br />
Healthcare Services 73<br />
Overview 74<br />
<strong>Productivity</strong> <strong>Performance</strong> 74<br />
Best Practices 74<br />
Strategies and Outlook 75<br />
Box 3.1 : <strong>Productivity</strong> of the Hotel Industry by Region 76<br />
Chapter 4 : <strong>Productivity</strong> <strong>Performance</strong> of the Manufacturing Sector<br />
Overview 80<br />
<strong>Productivity</strong> <strong>Performance</strong> 84<br />
NKEAs Sub-sectors and Industries <strong>Performance</strong> Analysis 88<br />
International Comparison 93<br />
Total Factor <strong>Productivity</strong> (TFP) of Selected Manufacturing<br />
Sub-sectors 2006-2010 94<br />
Best Practices 95<br />
<strong>Productivity</strong> Linked Wage System 96<br />
Innovation through Innovative and Creative Circle (ICC) 96<br />
Total Quality Management 96<br />
Quality Management Practices 98<br />
Strategies and Outlook 98<br />
Box 4.1 : On-The-Job Training (OJT) in Plastics Industry<br />
OJT in Plastics Companies 100<br />
Box 4.2 : Elements of <strong>Productivity</strong>-Linked Wage System<br />
(PLWS) in Collective Agreements 102<br />
Box 4.3 : ISO 9000 Practices and Management 104<br />
Chapter 5 : <strong>Productivity</strong> <strong>Performance</strong> of the Agriculture Sector<br />
Overview 108<br />
<strong>Productivity</strong> <strong>Performance</strong> 108<br />
Land <strong>Productivity</strong> 108<br />
Labour <strong>Productivity</strong> 109<br />
Capital <strong>Productivity</strong> 109<br />
International Agricultural <strong>Productivity</strong> Comparison 109<br />
Human Resource Capacity Development 110<br />
Best Practices 112<br />
Good Agricultural Practices (GAP) 112<br />
Organic Farming Practices 112<br />
Contract Farming 112<br />
Strategies and Outlook 113
CONTENTS<br />
Capitalising on Malaysia’s Competitive Advantage 113<br />
Tapping Premium Markets 115<br />
Ensuring Food Security Objectives 117<br />
Expanding Participation in the Regional Agriculture<br />
Value Chain 117<br />
Enablers to Support Development of the Agriculture Sector 118<br />
Conclusion 118<br />
Box 5.1 : Integrating Innovation to Enhance Agricultural<br />
<strong>Productivity</strong> and Food Security 119<br />
Chapter 6 : <strong>Productivity</strong> <strong>Performance</strong> of the Construction Sector<br />
Overview 124<br />
<strong>Productivity</strong> <strong>Performance</strong> 124<br />
International Comparisons of Construction <strong>Productivity</strong> 125<br />
Best Practices 126<br />
Strategies and Outlook 126<br />
Conclusion 131<br />
Box 6.1 : Economic Tranformation Programme 2011-2020 : Boost<br />
for Construction Sector 132<br />
PART 3 : STRENGTHENING PUBLIC-PRIVATE PARTNERSHIP<br />
Chapter 7 : <strong>Productivity</strong> <strong>Performance</strong> of the Public Sector<br />
Overview 136<br />
<strong>Productivity</strong> <strong>Performance</strong> 136<br />
Revenue and Expenditure 137<br />
<strong>Performance</strong> of the Public Service Sub-sectors 137<br />
General Public Administration 138<br />
Security 138<br />
Economic Services 138<br />
Social Services 139<br />
Health Services 140<br />
Education 140<br />
Infrastructure 141<br />
Corruption 142<br />
International Comparison 142<br />
Public Finance 142<br />
Fiscal Policy 142<br />
Institutional Framework 144<br />
Business Legislation 146
CONTENTS<br />
Strategies and Outlook 149<br />
Reducing Crime 149<br />
Fight Corruption 149<br />
Improve Student <strong>Performance</strong> 149<br />
Raise Living Standards of Low Income Households 150<br />
Improve Rural Basic Infrastructure 150<br />
Improving Urban Public Transportation 151<br />
Conclusion 151<br />
Box 7.1 : Talent Management Practices in Government-Linked<br />
Companies 152<br />
Chapter 8 : New Sources of Growth Based on 12 National Key<br />
Economic Areas (NKEAs)<br />
Overview 156<br />
The Impact of Forward and Backward Linkages of the12 NKEAs 156<br />
Best Practices 159<br />
Strategies and Outlook 159<br />
Chapter 9 : High Impact <strong>Productivity</strong> Drivers<br />
Moving up the Value Chain 162<br />
<strong>MPC</strong>’s Business Transformation 163<br />
Action Plans to Ensure Implementation 165<br />
Measuring Success 165<br />
Box 9.1 : Opportunities to Sustain Malaysia’s Competitiveness<br />
Through Modernising Business Regulations 167<br />
Box 9.2 : Green <strong>Productivity</strong> (GP) in Malaysia 170<br />
Box 9.3 : Nurturing Organisations Excellence for Global<br />
Competitiveness 172<br />
Box 9.4 : Enhancing Organisational Capability Through ICC 175<br />
Box 9.5 : Quality Management Excellence Award (QMEA) 2010 177<br />
APPENDICES<br />
Appendix A : <strong>Productivity</strong> 180<br />
Appendix B : Innovation 186<br />
Appendix C : Competitiveness 187<br />
Appendix D : Technical Notes 189<br />
Appendix E : The Contribution by Sub-sectors 2010 191
CONTENTS<br />
<strong>MPC</strong> BOARD OF DIRECTORS 192<br />
<strong>MPC</strong> CONSULTATIVE PANELS 193<br />
PARTNERSHIP 198<br />
<strong>MPC</strong> MANAGEMENT TEAM 199<br />
<strong>MPC</strong> OFFICE ADDRESSES 200<br />
REFERENCES 202<br />
ACRONYMS AND ABBREVIATIONS 205<br />
INDEX 209
REPORT HIGHLIGHTS<br />
PRODUCTIVITY PERFORMANCE OF MALAYSIA<br />
Malaysia’s <strong>Productivity</strong> <strong>Performance</strong><br />
Malaysia’s journey towards achieving high income economy was gaining momentum as<br />
reflected by a remarkable leap in its competitiveness ranking from 18th position in 2009 to 10th<br />
position in 2010. The impetus to achieve developed nation aspiration was further supported<br />
with the launching of several national programmes in 2010.<br />
Malaysia’s productivity performance grew by 5.8% to RM51,591 in 2010. The productivity<br />
growth was driven mainly by both the manufacturing (9.4%) and services sectors (4.7%). As<br />
anticipated, the manufacturing sector recorded a much higher growth than the national growth<br />
of 5.8% caused mainly by improved industrial production.<br />
The overall productivity performance was also supported by commendable expansion in the<br />
communication (6.6%), real estate & business services (5.9%), transport & storage (5.7%), utilities<br />
(5.6%) and wholesale & retail trade (5.2%) sub-sectors.<br />
International <strong>Productivity</strong> <strong>Performance</strong><br />
In 2010, Malaysia registered the highest productivity growth of 5.8% compared with Organisation<br />
of Economic Cooperation and Development (OECD) countries, like Republic of Korea (4.9%),<br />
Japan (4.1%), Sweden (4.4%) Germany (3.5%), USA (2.7%) and Finland (2.7%). The average<br />
productivity growth of the OECD countries was 2.8% in 2010.<br />
Developed economies continue to register high productivity levels but registered lower<br />
productivity growth due to their matured economies such as Japan (USD80,307; 4.1%), the USA<br />
(USD80,284: 3.2%) and United Kingdom (USD59,276; 1.8%). <strong>Productivity</strong> levels of these three<br />
countries were four to six times higher than Malaysia at USD13,577.<br />
In contrast, developing economies experienced higher productivity growth in line with their<br />
economic expansion and dynamism. For example, China (level: USD4,087; growth: 10%), India<br />
(level: USD2,736; growth: 6.7%) and Thailand (level: USD4,854; growth: 5.9%). In this regard,<br />
Malaysia’s productivity level of USD13,577 was higher than these countries.
Total Factor <strong>Productivity</strong><br />
During the period 2006-2010, the GDP growth of 4.6% was supported by productivity growth of<br />
2.9% and 1.6% employment growth. The growth in productivity was derived from TFP growth of<br />
1.7% and capital intensity of 1.3% during the same period.<br />
During the period of 2001-2010, the growth in TFP was 1.5%; contribution of TFP to national<br />
economic growth was 32.9% while capital contributed 37.7% and labour 29.4%.<br />
This is an indication that economic growth was fuelled by more capital-intensive inputs rather<br />
than labour-intensive production indicating that the country was moving towards both<br />
investment in state of the art technologies and inculcating a knowledge-based economy.<br />
Transformation of <strong>MPC</strong><br />
In line with the Government’s initiatives to move the country forward, <strong>MPC</strong> has been revamped,<br />
focusing in the areas of competitiveness and innovation in 2010.<br />
With the goal of building a forward-looking, responsive and dynamic <strong>MPC</strong>, a five-departmental<br />
model that integrates innovation and productivity activities together with regulatory review<br />
collaboration was established namely, Regulatory Review, Enterprise Innovation, Business<br />
Excellence, Global Competitiveness and Knowledge Management. Through these core<br />
functions, <strong>MPC</strong> will monitor, review, assess and provide recommendations for policy and<br />
regulatory changes, improve enterprise innovation by creating and implementing eco systems<br />
to address the entire innovation value chain. <strong>MPC</strong> will also measure and certify companies and<br />
show-case models to spur competition and set best practices for others to emulate. Global<br />
competitiveness benchmarks will also be developed as well as generating knowledge based on<br />
productivity and innovation.<br />
Outlook for 2011<br />
A more optimistic global economic outlook has replaced concerns about the risk of a possible<br />
recession. Malaysia’s GDP growth in 2011 should stabilise to 5.5%. With the Asian economies<br />
expected to be the main drivers of global economic growth in 2011, most economists are<br />
expecting them to continue driving global productivity growth. Malaysia’s productivity for 2011<br />
is anticipated to grow by more than 4.7%.<br />
The productivity of the services sector is expected to grow by more than 4.3% in 2011. The<br />
performance will be supported mainly by communication, transport & storage, utilities and<br />
finance & insurance sub-sectors.
<strong>Productivity</strong> in the manufacturing sector which recorded a significant 9.4% growth in 2010,<br />
could ease to 5.3% in 2011 taking into consideration the softening of the global market which<br />
will have an impact on external demand for Malaysia’s manufactured export.<br />
The services sector is expected to grow more than 4.3% in 2011 led by communication, utilities<br />
and transport & storage sub-sectors. The agriculture sector is expected to register a productivity<br />
growth by more than 4.8%. The sector has been identified as one of the leading sectors in NKEA.<br />
The construction sector is targeted to post a productivity growth of more than 3.5% in 2011. The<br />
sector is to benefit from the projects implemented under the ETP amounting to RM200 billion.
PART 1<br />
Towards a<br />
<strong>Productivity</strong><br />
and Innovation<br />
Driven Economy
CHAPTER 1<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
of Malaysia
PRODUCTIVITY PERFORMANCE OF MALAYSIA<br />
Overview<br />
• Malaysia’s journey towards achieving high<br />
income economy was gaining momentum<br />
as reflected by a remarkable leap in its<br />
competitiveness ranking from 18 th position<br />
in 2009 to 10 th position in 2010. The impetus<br />
to achieve a developed nation aspiration was<br />
further supported with the launching of several<br />
national programmes in 2010.<br />
• In 2010, GDP grew by 7.2% (Figure 1.1). It was<br />
driven mainly by external demand which<br />
spurred expansion in domestic production<br />
as well as domestic demand brought about<br />
by both higher private and public spending.<br />
Strong performance was registered by most<br />
of the economic sectors ranging from 0.2% to<br />
11.4% especially services 1 and manufacturing<br />
sectors which contributed 48.5% and 27% to<br />
GDP respectively (Figure 1.2).<br />
Percent<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
-4.0<br />
Computed from :<br />
Figure 1.1: Gross Domestic Product (GDP) and<br />
<strong>Productivity</strong> Growth, 2006-2010<br />
5.85<br />
3.84<br />
2006<br />
6.48<br />
3.83<br />
4.71<br />
3.51<br />
-1.71<br />
-1.94<br />
2007 2008 2009 2010<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Figure 1.2: <strong>Productivity</strong> and GDP Growth<br />
of the Economic Sectors, 2010<br />
GDP<br />
<strong>Productivity</strong><br />
7.16<br />
5.78<br />
• Manufacturing, communication, utilities,<br />
wholesale & retail trade, real estate & business<br />
services and transport & storage showed the<br />
most significant year-to-year improvements in<br />
terms of GDP growth in 2010.<br />
Percent<br />
12.0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
9.42<br />
7.16<br />
5.78<br />
11.39<br />
6.85<br />
4.74 4.64 5.19<br />
<strong>Productivity</strong> growth<br />
GDP growth<br />
1.82 1.72 0.13 0.23<br />
Malaysia<br />
Manufacturing<br />
Services<br />
Construction<br />
Agriculture<br />
Mining<br />
Computed from :<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
1<br />
Except Government Services<br />
22 <strong>Productivity</strong> Report 2010/2011
Chapter 1<br />
Overall <strong>Productivity</strong> <strong>Performance</strong><br />
• Malaysia’s productivity improved by 5.8% to<br />
RM51,591 in 2010. The significant jump in<br />
overall productivity growth was in tandem with<br />
a notable recovery of the economy (Table 1.1).<br />
• The growth in productivity was driven<br />
mainly by both the manufacturing (9.4%)<br />
and services sectors (4.7%). As anticipated,<br />
the manufacturing sector recorded a much<br />
higher growth than the national growth of<br />
5.8% attributed mainly by improved industrial<br />
production.<br />
• The overall productivity performance was also<br />
supported by commendable expansion in the<br />
communication (6.6%), real estate & business<br />
services (5.9%), transport & storage (5.7%),<br />
utilities (5.6%) and wholesale & retail trade<br />
(5.2%) sub-sectors.<br />
Sectoral <strong>Productivity</strong> <strong>Performance</strong><br />
Manufacturing Sector<br />
• <strong>Productivity</strong> growth in the manufacturing sector<br />
grew to 9.4% in 2010 caused by a significant<br />
improvement in external demand.<br />
• Despite remarkable gain in productivity growth<br />
for the manufacturing sector in 2010, the<br />
sector’s productivity level of RM54,392 in 2010<br />
remained below pre-crisis levels of RM55,349<br />
(2007) and RM56,449 (2008) (Figure 1.3). It is<br />
important for the sector to implement various<br />
productivity enhancement programmes such<br />
as Quality Environment initiatives, Total Quality<br />
Management (TQM) system and Innovative and<br />
Creative Circle (ICC) activities.<br />
RM Thousand<br />
58.0<br />
56.0<br />
54.0<br />
52.0<br />
50.0<br />
48.0<br />
46.0<br />
Table 1.1: <strong>Productivity</strong> Level and Growth, 2010<br />
Economic Activities<br />
Level<br />
RM<br />
Growth<br />
(%)<br />
Agriculture 27,680 1.82<br />
Mining 948,181 0.13<br />
Manufacturing 54,392 9.42<br />
Construction 23,898 4.64<br />
Services 50,967 4.74<br />
Utilities 163,423 5.55<br />
Wholesale and Retail 42,209 5.18<br />
Accommodation and Restaurant 16,868 3.81<br />
Transport and Storage 41,887 5.73<br />
Communication 130,459 6.63<br />
Finance and Insurance 95,436 4.25<br />
Real Estate and Business Services 203,718 5.89<br />
Other Services 26,112 1.67<br />
Malaysia 51,591 5.78<br />
Computed from : - Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Figure 1.3: <strong>Productivity</strong> Level & Growth of the<br />
Manufacturing Sector, 2006-2010<br />
4.42<br />
2.29<br />
1.99<br />
-11.94<br />
9.42<br />
2006 2007 2008 2009 2010<br />
Computed from : - Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
15.0<br />
10.0<br />
5.0<br />
0<br />
-5.0<br />
-10.0<br />
-15.0<br />
Percent<br />
<strong>Productivity</strong> Report 2010/2011<br />
23
Services Sector<br />
• The services sector recorded a productivity<br />
growth of 4.7% amounting to RM50,967<br />
(Figure 1.4). The growth was attributed to the<br />
favourable performance of most of the services<br />
sub-sectors such as communication (6.6%), real<br />
estate and business services (5.9%), transport<br />
and storage (5.7%) and utilities (5.6%) (Figure<br />
1.5).<br />
• The high growth rate was due to adopting<br />
innovative service business models, upgrading<br />
services information and performance system,<br />
adjusting service delivery processes and high<br />
utilisation of ICT.<br />
RM Thousand<br />
52.0<br />
50.0<br />
48.0<br />
46.0<br />
44.0<br />
42.0<br />
40.0<br />
38.0<br />
Computed from :<br />
Figure 1.4: <strong>Productivity</strong> Level & Growth<br />
of the Services Sector, 2006-2010<br />
3.56<br />
7.32<br />
4.98<br />
1.67<br />
4.74<br />
2006 2007 2008 2009 2010<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
8.0<br />
7.0<br />
6.0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
Percent<br />
Figure 1.5: <strong>Productivity</strong> Growth of the Services Sectors, 2006-2010<br />
Percent<br />
12.0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0.0<br />
-2.0<br />
-4.0<br />
-6.0<br />
-8.0<br />
Utilities<br />
Wholesale and Retail Trade<br />
Accom. and Restaurant<br />
Transport and Storage<br />
Communication<br />
Finance and Insurance<br />
Real Estate and Business Services<br />
Other Services<br />
2006 2007 2008 2009 2010<br />
2.64 2.05 0.47 -1.22 5.55<br />
5.03 10.09 8.67 1.03 5.18<br />
-1.65 4.63 4.15 0.59 3.81<br />
7.92 6.05 2.22 -3.31 5.73<br />
-5.30 10.14 9.52 6.01 6.63<br />
3.44 9.35 6.43 3.84 4.25<br />
4.29 3.10 0.01 3.91 5.89<br />
1.59 2.69 3.14 2.39 1.67<br />
Computed from :<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
24 <strong>Productivity</strong> Report 2010/2011
Chapter 1<br />
• The productivity of the communication subsector<br />
continued to register a commendable<br />
growth of 6.6% during the year to RM130,459.<br />
The performance was supported by higher<br />
activities in telecommunication industry<br />
especially in the broadband segment. The<br />
Government’s continuous efforts to encourage<br />
the use of broadband through various<br />
initiatives had further strengthened the<br />
productivity of the sub-sector (Figure 1.6).<br />
• The real estate and business services subsector<br />
productivity growth increased by 5.9%<br />
to RM203,718 in 2010. The growth was mainly<br />
attributed by higher real estate activities as well<br />
as growth in shared services and outsourcing<br />
industry (Figure 1.7).<br />
• The transport and storage sub-sector recorded<br />
a productivity growth of 5.7% to RM41,887. The<br />
significant growth was due to robust demand<br />
in transport-related services especially in the<br />
air transport segment. Improving economic<br />
conditions further enhanced the demand for air<br />
transport supported by attractive products and<br />
services offered by local airlines at affordable<br />
rates (Figure 1.8).<br />
• The utilities sub-sector productivity grew by<br />
5.6% to a level of RM163,423. The growth was<br />
mostly driven by higher demand of electricity<br />
from the industrial and commercial segments<br />
(Figure 1.9).<br />
RM Thousand<br />
Figure 1.6: <strong>Productivity</strong> Level & Growth<br />
of the Communication Sub-sector, 2006-2010<br />
140.0<br />
12.0<br />
120.0<br />
10.14<br />
10.0<br />
9.52<br />
8.0<br />
100.0<br />
6.0<br />
6.01 6.63<br />
80.0<br />
4.0<br />
2.0<br />
60.0<br />
0<br />
40.0<br />
-2.0<br />
-4.0<br />
20.0<br />
-5.30<br />
-6.0<br />
0<br />
-8.0<br />
2006 2007 2008 2009 2010<br />
Computed from :<br />
RM Thousand<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Figure 1.7: <strong>Productivity</strong> Level & Growth of the<br />
Real-Estate & Business Services Sub-sector, 2006-2010<br />
210.0<br />
205.0<br />
200.0<br />
195.0<br />
190.0<br />
185.0<br />
180.0<br />
175.0<br />
170.0<br />
165.0<br />
Computed from :<br />
RM Thousand<br />
43.0<br />
42.0<br />
41.0<br />
40.0<br />
39.0<br />
38.0<br />
37.0<br />
36.0<br />
35.0<br />
Computed from :<br />
4.29<br />
3.10<br />
0.01<br />
3.91<br />
5.89<br />
2006 2007 2008 2009 2010<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Figure 1.8: <strong>Productivity</strong> Level & Growth of the<br />
Transport & Storage Sub-sector, 2006-2010<br />
7.92<br />
6.05<br />
2.22<br />
-3.31<br />
5.73<br />
2006 2007 2008 2009 2010<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
7.0<br />
6.0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
-4.0<br />
Percent<br />
Percent<br />
Percent<br />
<strong>Productivity</strong> Report 2010/2011<br />
25
Figure 1.9: <strong>Productivity</strong> Level & Growth<br />
of the Utilities Sub-sector, 2006-2010<br />
Figure 1.10: <strong>Productivity</strong> Level & Growth of the<br />
Wholesale and Retail Trade Sub-sector, 2006-2010<br />
RM Thousand<br />
166.0<br />
164.0<br />
162.0<br />
160.0<br />
158.0<br />
156.0<br />
154.0<br />
152.0<br />
150.0<br />
148.0<br />
146.0<br />
2.64<br />
2.05<br />
0.47<br />
-1.22<br />
5.55<br />
2006 2007 2008 2009 2010<br />
6.0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
-1.0<br />
-2.0<br />
Percent<br />
RM Thousand<br />
45.0<br />
40.0<br />
35.0<br />
30.0<br />
25.0<br />
20.0<br />
15.0<br />
10.0<br />
5.0<br />
0<br />
5.03<br />
10.09<br />
8.67<br />
1.03<br />
5.18<br />
2006 2007 2008 2009 2010<br />
12.0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
Percent<br />
Computed from :<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Computed from :<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
• The wholesale and retail trade sub-sector<br />
recorded a productivity growth of 5.2% to a<br />
level of RM42,209. The resilient performance<br />
was supported by increased wholesale and retail<br />
activities especially during holiday and festive<br />
seasons throughout the year (Figure 1.10)<br />
• The productivity of the finance and insurance<br />
sub-sector grew by 4.3% to RM95,436 as a result<br />
of higher loan lending activities to households<br />
and businesses. In addition, the growth was also<br />
supported by the improved performance from<br />
the insurance industry (Figure 1.11).<br />
• The accommodation and restaurant sub-sector<br />
registered a stronger growth of 3.8% in 2010 to a<br />
level of RM16,868. The growth was attributed by<br />
higher tourism-related activities and improved<br />
domestic consumption especially during yearend<br />
holidays (Figure 1.12).<br />
• Sustained private health and education activities<br />
had resulted in the improved performance of<br />
the other services sub-sector which grew by<br />
1.7% in 2010. The productivity performance of<br />
the sub-sector recorded a level of RM26,112 as<br />
compared to RM25,684 in 2009 (Figure 1.13).<br />
RM Thousand RM Thousand<br />
125.0<br />
100.0<br />
75.0<br />
50.0<br />
25.0<br />
0<br />
Computed from :<br />
Figure 1.12: <strong>Productivity</strong> Level & Growth of the<br />
Accommodation & Restaurant Sub-sector, 2006-2010<br />
17.5<br />
17.0<br />
16.5<br />
16.0<br />
15.5<br />
15.0<br />
14.5<br />
14.0<br />
13.5<br />
Computed from :<br />
Figure 1.11: <strong>Productivity</strong> Level & Growth of the<br />
Finance and Insurance Sub-sector, 2006-2010<br />
3.44<br />
9.35<br />
6.43<br />
3.84<br />
4.25<br />
2006 2007 2008 2009 2010<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
1.65<br />
4.63<br />
4.15<br />
0.59<br />
3.81<br />
2006 2007 2008 2009 2010<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
10.0<br />
9.0<br />
8.0<br />
7.0<br />
6.0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
-1.0<br />
-2.0<br />
Percent Percent<br />
26 <strong>Productivity</strong> Report 2010/2011
Chapter 1<br />
Construction Sector<br />
• The construction sector registered a productivity<br />
growth of 4.6% to RM23,898 in 2010 (Figure 1.14).<br />
• The growth was driven by high activities in<br />
the civil engineering and special trade. It was<br />
further enhanced by the implementation of<br />
Industrialised Building System (IBS) in the sector.<br />
Agriculture Sector<br />
RM Thousand<br />
26.5<br />
26.0<br />
25.5<br />
25.0<br />
24.5<br />
24.0<br />
23.5<br />
23.0<br />
22.5<br />
22.0<br />
Figure 1.13: <strong>Productivity</strong> Level & Growth of<br />
the Other Services Sub-sector, 2006-2010<br />
1.59<br />
2.69<br />
3.14<br />
2.39<br />
1.67<br />
2006 2007 2008 2009 2010<br />
3.5<br />
3.0<br />
2.5<br />
2.0<br />
1.5<br />
1.0<br />
0.5<br />
0<br />
Percent<br />
• <strong>Productivity</strong> of the sector grew by 1.8% to<br />
RM27,680 in 2010. The growth in productivity<br />
was attributed mainly to high commodity prices<br />
in 2010 (Figure1.15).<br />
• The high commodity prices experienced in 2010<br />
had not much of an impact on the productivity<br />
growth in the agricultural sector. Although the<br />
commodities sub-sectors were enjoying high<br />
commodity prices, the output from the crop subsectors<br />
were affected by unfavourable weather<br />
condition which lowered farm yield. The net effect<br />
was that productivity growth was lower than<br />
anticipated despite the increase in commodity<br />
prices.<br />
Computed from :<br />
RM Thousand<br />
25.0<br />
20.0<br />
15.0<br />
10.0<br />
5.0<br />
0<br />
Computed from :<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Figure 1.14: <strong>Productivity</strong> Level & Growth of<br />
the Construction Sector, 2006-2010<br />
0.27<br />
7.00<br />
4.20<br />
5.68<br />
4.64<br />
2006 2007 2008 2009 2010<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
8.0<br />
7.0<br />
6.0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
Percent<br />
Mining Sector<br />
• The mining sector recorded a productivity<br />
growth of 0.1% which was the lowest among all<br />
the economic sectors eventhough it accounted<br />
for the highest productivity level of RM948,181<br />
RM Thousand<br />
28.0<br />
27.0<br />
26.0<br />
25.0<br />
24.0<br />
23.0<br />
22.0<br />
Figure 1.15: <strong>Productivity</strong> Level & Growth of<br />
the Agriculture Sector, 2006-2010<br />
2.89<br />
-2.29<br />
9.27<br />
1.54 1.82<br />
2006 2007 2008 2009 2010<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
-4.0<br />
Percent<br />
Computed from :<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
27
despite the continuous decline in crude oil<br />
production amidst a moderation in natural gas<br />
production (Figure 1.16).<br />
International <strong>Productivity</strong><br />
Comparison<br />
• In 2010, Malaysia registered a productivity<br />
growth of 5.8%, a significant improvement from<br />
the previous year (2009: -1.9%). This favourable<br />
achievement was due to the strong rebound<br />
in economic performance at 7.2% which also<br />
exceeded the targeted growth of 6%. Malaysia<br />
registered the highest productivity growth<br />
compared with 15 Organisation of Economic<br />
Cooperation Development (OECD) countries<br />
(Figure 1.17).<br />
• Republic of Korea and Japan experienced<br />
high productivity growth of 4.9% and 4.1%<br />
respectively. The Republic of Korea registered<br />
RM Thousand<br />
1010.0<br />
1000.0<br />
990.0<br />
980.0<br />
970.0<br />
960.0<br />
950.0<br />
940.0<br />
930.0<br />
920.0<br />
Computed from :<br />
Figure 1.16: <strong>Productivity</strong> Level & Growth<br />
of the Mining Sector, 2006-2010<br />
-0.81<br />
1.08<br />
-1.99<br />
-3.11<br />
0.13<br />
2006 2007 2008 2009 2010<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
1.5<br />
1.0<br />
0.5<br />
0<br />
-0.5<br />
-1.0<br />
-1.5<br />
-2.0<br />
-2.5<br />
-3.0<br />
-3.5<br />
Percent<br />
remarkable economic growth of 6.2% while<br />
Japan 3.7%. These countries benefitted from<br />
robust domestic demand in the Asian region.<br />
Figure 1.17: <strong>Productivity</strong> Growth of Malaysia and Selected OECD Countries, 2010<br />
6.0<br />
5.78<br />
5.0<br />
4.0<br />
4.94<br />
4.12<br />
3.97<br />
Percent<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
3.37 3.29<br />
3.22<br />
3.01<br />
Malaysia Korea Japan Denmark Sweden Germany USA Finland Ireland United New Italy France Canada Australia Norway<br />
Kingdom Zealand<br />
2.89<br />
1.80<br />
1.69<br />
1.61<br />
1.30 1.28<br />
0.98<br />
0.50<br />
Computed from :<br />
- Economic Report, Ministry of Finance, Malaysia, various issues<br />
- OECD Economic Outlook, Vol. 86 Database<br />
- National Account of OECD Countries, Detailed Tables, Vol. ii 2009<br />
28 <strong>Productivity</strong> Report 2010/2011
Chapter 1<br />
• The selected OECD countries experienced<br />
productivity growth ranging from 0.5% to<br />
4.9%. In 2010, most of the OECD countries had<br />
gained the momentum in economic growth. For<br />
example, Sweden at 4.4%, Germany, 3.5%, USA,<br />
2.7% and Finland, 2.7%. The average productivity<br />
growth of the OECD countries was 2.8% in 2010.<br />
• USA managed to register a stable productivity<br />
growth of 3.2% with a GDP growth at 2.7%.<br />
USA was able to sustain their productivity<br />
performance during the economic crisis as<br />
their companies were highly sophisticated and<br />
innovative, characteristic of an innovation-driven<br />
economy. USA is also the biggest contributor to<br />
the world GDP at about 25%.<br />
• Among selected Asian countries which recorded<br />
a double-digit productivity growth in 2010<br />
were Singapore at 11.8% and China 10%. These<br />
achievements were in tandem with their doubledigit<br />
economic growth at 14.8% and 10.5%<br />
respectively.<br />
• In 2010, Singapore experienced tremendous<br />
productivity improvement (level: USD54,556;<br />
growth 11.8%) contributed by the surge in<br />
manufacturing output specifically in biomedical<br />
and electronic industries. Within Asian region,<br />
Singapore is recognised as the strongest<br />
economic performer and the fastest growing<br />
economy in 2010.<br />
• Taiwan emerged as a high productivity performer<br />
at 8.2% competing with India and China (Figure<br />
1.18). Taiwan had been acknowledged with a<br />
remarkable improvement in business efficiency<br />
environment, financial market and goods market<br />
efficiency that lead to its performance.<br />
Percent<br />
12.0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
Figure 1.18: <strong>Productivity</strong> Growth of Malaysia and<br />
Selected Asian Countries, 2010<br />
11.78<br />
Computed from :<br />
9.97<br />
8.23<br />
6.65<br />
5.95 5.94 5.78<br />
- Economic Report, Ministry of Finance, Malaysia, various issues<br />
- Country Data, The Economist Intelligent Unit<br />
- Market Indicator and Forecast, The Economist Intelligent Unit<br />
• Developed economies continue to register<br />
high productivity levels but registered lower<br />
productivity growth due to their matured<br />
economy such as Japan (level: USD80,307; growth:<br />
4.1%), the USA ( level: USD80,284; growth: 3.2%)<br />
and United Kingdom (level: USD59,276; growth:<br />
1.8%). <strong>Productivity</strong> levels of these three countries<br />
were four to six times higher than Malaysia’s level<br />
of USD13,577 (Figure 1.19).<br />
• In contrast, developing economies experienced<br />
higher productivity growth in line with their<br />
economic expansion and dynamism. For example,<br />
China (level: USD4,087; growth: 10%), India (level:<br />
USD2,736; growth: 6.7%) and Thailand (level:<br />
USD4,854; growth: 5.9%). In this regard, Malaysia’s<br />
productivity level of USD13,577 was higher than<br />
these countries.<br />
3.99<br />
2.81<br />
Singapore China Taiwan India Hong Kong Thailand Malaysia Philippines Indonesia<br />
<strong>Productivity</strong> Report 2010/2011<br />
29
Figure 1.19: <strong>Productivity</strong> Levels and Growth of Selected Countries, 2010<br />
90<br />
80<br />
80,307<br />
80,284<br />
70<br />
63,461<br />
60<br />
59,276<br />
54,556<br />
USD Thousand<br />
50<br />
40<br />
30<br />
43,010<br />
33,628<br />
20<br />
13,577<br />
10<br />
<strong>Productivity</strong> Growth (%)<br />
0<br />
4,854 4,087 3,324 2,895 2,895<br />
Japan USA Hong United Singapore Taiwan Korea Malaysia Thailand China Philippines Indonesia India<br />
Kong Kingdom<br />
4.12 3.22 5.96 1.80 11.78 8.23 4.94 5.78 5.94 9.97 3.99 2.81 6.65<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia, various issues<br />
- Country Data, The Economist Intelligent Unit<br />
- Market Indicator and Forecast, The Economist Intelligent Unit<br />
Way Forward<br />
• As highlighted in the New Economic<br />
Model’s eight Strategic Reform Initiatives, all<br />
stakeholders will need to work together to<br />
enhance productivity and competitiveness of<br />
the economy if Malaysia is to achieve a highincome<br />
status. The private sector needs to<br />
be re-energised in order to generate a more<br />
competitive domestic economy while the public<br />
sector needs to be strengthened so as to be more<br />
proficient in setting and implementing policies<br />
aimed at providing a more conducive business<br />
environment.<br />
• <strong>Productivity</strong> gains in the private sector will<br />
become more crucial because economic growth<br />
and development will be driven mainly by them.<br />
At the firm level, companies will need to focus<br />
among others, development of the workforce,<br />
effective management, clearer communication,<br />
and targeted training. To ensure effective<br />
targeted training, companies must re-orientate<br />
their training programmes to integrate learning<br />
into business operations.<br />
• The Government has put in place a Government<br />
Transformation Programme (GTP) to help<br />
it realises the change necessary to achieve<br />
Vision 2020. The rationale for GTP is that the<br />
Government needs a new way of doing things<br />
to both accelerate and sustain impact for higher<br />
productivity growth.<br />
30 <strong>Productivity</strong> Report 2010/2011
Chapter 1<br />
• Malaysia is placing a lot of emphasis on improving<br />
its investment climate because private sector<br />
investment is one of the important keys required<br />
to open the door to high-income status.<br />
• An important action plan to achieve Vision<br />
2020 is to shift towards an innovation-led<br />
economy strategy. This is important because<br />
empirical studies of OECD countries have shown<br />
that countries with higher output measures<br />
of fundamental innovation register higher<br />
productivity and incomes. One way to improve<br />
knowledge content is to put more emphasis on<br />
knowledge management.<br />
Outlook for 2011<br />
• A more optimistic global economic outlook has<br />
replaced concerns about the risk of a double-dip<br />
recession. Malaysia’s GDP growth in 2011 should<br />
stabilise to 5.5%. In 2011, export and domestic<br />
demand are expected to spur GDP growth due<br />
to supportive Government policies. Private<br />
consumption will increase due to demographic<br />
factors and investment will be bolstered by the<br />
implementation of projects under the Economic<br />
Transformation Programme (ETP).<br />
• With the Asian economies expected to be the<br />
main drivers of global economic growth in 2011,<br />
most economists are expecting them to continue<br />
driving global productivity growth. However, as<br />
cyclical effects fade away, global productivity<br />
growth is expected to grow moderately in 2011.<br />
• <strong>Productivity</strong> growth in Malaysia’s manufacturing<br />
sector which recorded a significant 9.4% growth<br />
in 2010, could ease to 5.3% in 2011 taking into<br />
consideration the softening of the global market<br />
which will have an impact on external demand<br />
for Malaysia’s manufactured exports (Table 1.2).<br />
• The services sector is expected to grow more<br />
than 4.3% in 2011 led by communication, utilities<br />
and transport & storage sub-sectors.<br />
• The agriculture sector is expected to register<br />
a productivity growth by more than 4.8%. The<br />
sector has been identified as one of the leading<br />
sectors in NKEA.<br />
• The construction sector is targeted to post<br />
a productivity growth of more than 3.5% in<br />
2011. The sector is to benefit from the projects<br />
implemented under the ETP amounting to<br />
RM200 billion.<br />
Table 1.2: <strong>Productivity</strong> Growth, 2011<br />
Economic Activities<br />
Growth<br />
(%)<br />
Agriculture 4.78<br />
Mining 2.13<br />
Manufacturing 5.33<br />
Construction 3.51<br />
Services 4.30<br />
Utilities 5.47<br />
Wholesale and Retail 4.17<br />
Accommodation and Restaurant 3.51<br />
Transport and Storage 5.37<br />
Communication 6.78<br />
Finance and Insurance 4.03<br />
Real Estate and Business Services 4.73<br />
Other Services 3.36<br />
Malaysia 4.65<br />
Computed from : - Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
31
Box 1.1 : Investment Climate and <strong>Productivity</strong><br />
A key challenge of the Tenth Malaysia Plan is to stimulate private sector investment to grow at<br />
12.8% or RM115 billion per annum during the period 2011 - 2015. As such, success in stimulating<br />
private sector investment is the key to achieving the targeted 6% per annum Gross Domestic<br />
Product (GDP) growth necessary to keep Malaysia on the path to high-income economy status.<br />
Investment climate is an important criterion in any effort to stimulate and attract private sector<br />
investment. An attractive investment climate is one that is most likely to ensure that investment<br />
is forth coming and used efficiently. It is synonymous with the term “business-enabling<br />
environment,” a broader term that covers structures and forces that shape investment decisions<br />
for example, macroeconomic, regulatory and governance issues.<br />
Investment climate should be tailored to the needs of the investors and given more publicity<br />
in the mass media. Investment climate has significant positive effects on productivity as it<br />
contributes significantly towards sustainable long-term economic growth.<br />
One key conclusion of a recent World Bank report that examined the quality of Malaysia’s<br />
investment climate was that investment climate constraints significantly reduce the productivity<br />
of firms operating in Malaysia 1 . For example, skills shortage forces firms to hire workers without<br />
the appropriate skill and reduced innovative capacities in firms.<br />
One of the Tenth Malaysia Plan’s five strategic thrusts is “creating a conducive environment for<br />
unleashing economic growth”. Hence the Government is working hard on improving Malaysia’s<br />
investment climate. What many people do not realise is that the private sector too has an<br />
important role to play in such efforts.<br />
The private sector should leverage on public-private sector consultation exercises by providing<br />
quality feedback, ideas and proposals. It should also realise the need to improve among other<br />
things, its service delivery just like what the public sector is striving to do. For example, ICT<br />
companies can help enhance the service delivery environment by implementing solutions that<br />
enable greater cost control and improve the services and information available to users. This will<br />
go towards helping efforts to improve the investment environment in Malaysia.<br />
Contributed by : Mr. Quah Boon Huat<br />
Malaysian Institute of Economic Research (MIER)<br />
1 “Malaysia: <strong>Productivity</strong> and Investment Climate Assessment Update”, Report No. 49137-MY, Poverty Reduction and<br />
Economic Management Sector Unit, East Asia and Pacific Region, World Bank. August 2009. Available at: http://<br />
web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/MALAYSIAEXTN/0,,contentMDK:22515<br />
867~menuPK:3968191~pagePK:64027988~piPK:64027986~theSitePK:324488,00.html<br />
32 <strong>Productivity</strong> Report 2010/2011
Box 1.2 : Innovation and Knowledge Management<br />
Innovation is widely recognised as a source of wealth creation in firms and nations. According<br />
to the National Survey on Innovation carried out by the Malaysian Science and Technology<br />
Information Centre, “an innovation is a new or significantly improved product (goods or service)<br />
introduced to the market or a new or significantly improved process and is based on the results<br />
of new technological development, new combinations of existing technologies or the utilisation<br />
of other knowledge.”<br />
Innovation has become a critical building block of sustainable competitive advantage because<br />
the accumulated competence, skills, knowledge, product services and structure of the present<br />
are no longer adequate due to the emergence of a knowledge economy and the changing<br />
nature of the market.<br />
Empirically, knowledge is the dominating resource for producing added value and has become<br />
the decisive factor in global competition. Knowledge Management (KM) has been defined<br />
as “any process or practice of creating, acquiring, capturing, sharing and using knowledge<br />
wherever it resides, to enhance learning and performance in organisations” 1 . Many successful<br />
companies have found out that knowledge management strategies and practices are vital to<br />
ongoing innovation in their organisations.<br />
The Asian financial crisis of 1997-1998 had compelled Malaysia to restrategise it efforts towards<br />
attaining knowledge-driven competitiveness and to achieve it, all stakeholders in the economy<br />
must first pursue KM.<br />
There are a few different approaches and tools which organisations can use when designing<br />
a KM strategy. For example, through knowledge audits, it is able to reveal an organisation’s<br />
knowledge management needs, strengths, weaknesses, opportunities, threats and risks, and<br />
indicates what steps are needed to improve current practices.<br />
As KM can contribute significantly to both the innovative performance and productivity of<br />
firms 2 , it is imperative that all Malaysian companies should strive towards acquiring knowledge.<br />
Contributed by : Mr. Quah Boon Huat<br />
Malaysian Institute of Economic Research (MIER)<br />
1 Scarborough, H., J. Swann, and J. Preston (1999). Knowledge Management: A Literature Review, Institute of Personnel<br />
Development Report, London.<br />
2 Kremp, E., and J. Mairesse (2004). Knowledge Management, Innovation, and <strong>Productivity</strong>: A Firm Level Exploration<br />
Based on French Manufacturing CIS3 Data. NBER Working Paper No. 10237. Available at: http://www.nber.org/<br />
papers/w10237<br />
<strong>Productivity</strong> Report 2010/2011<br />
33
Box 1.3 : Sustaining Malaysia’s Competitiveness<br />
The International Management Development (IMD) World Competitiveness Yearbook 2010<br />
ranked Malaysia at 10 th position in overall performance out of 58 economies (2009:18 th out of 57<br />
economies). The overall index score for Malaysia improved to 87.228 as compared to 77.162 in<br />
the previous year. This is the highest index score recorded as Malaysia benefitted from strong<br />
demand in Asia as well as the implementation of efficient policies.<br />
Malaysia’s overall competitiveness performance and the four factors of Economic <strong>Performance</strong>,<br />
Government Efficiency, Business Efficiency and Infrastructure showed an improving trend in<br />
terms of both index scores and ranking over a five-year period as shown in the table below.<br />
The improvement reflected the strong fundamentals in the Malaysian economy as well as a<br />
positive change in perception among the respondents. The higher confidence level of the<br />
rakyat towards the Government is a testimony that the people-friendly initiatives as depicted in<br />
the “One Malaysia, People First, <strong>Performance</strong> Now” had been successful.<br />
Malaysia’s Competitiveness Ranking<br />
Overall<br />
Scoreboard<br />
Economic<br />
<strong>Performance</strong><br />
Government<br />
Efficiency<br />
Business<br />
Efficiency<br />
Infrastructure<br />
Rank<br />
Index<br />
R<br />
A<br />
N<br />
K<br />
WCY 2010<br />
58 Economies<br />
WCY 2009<br />
57 Economies<br />
WCY 2008<br />
55 Economies<br />
WCY 2007<br />
55 Economies<br />
WCY 2006<br />
53 Economies<br />
10 18 19 23 22<br />
87.228 77.162 73.199 74.091 70.080<br />
8 9 8 12 10<br />
9 19 19 21 19<br />
4 13 14 15 19<br />
25 26 25 26 27<br />
Malaysia had overtaken several developed countries such as Denmark 13 th (2009:5 th ), Netherland<br />
12 th (2009:10 th ) and Luxembourg which was ranked 11 th (2009:12 th ). Malaysia continues to<br />
be ahead of the United Kingdom ranked 22 nd position (2009:21 st ), Korea ranked 23 rd position<br />
(2009:27 th ) and Thailand 26 th (2009:26 th ). Singapore, Hong Kong, United States, Switzerland,<br />
Australia, Sweden, Canada, Taiwan, Norway and Malaysia were the top ten most competitive<br />
nations among the 58 economies.<br />
34 <strong>Productivity</strong> Report 2010/2011
For population greater than 20 million category, Malaysia improved its competitiveness<br />
ranking to 5 th position among 29 economies (2009: 6 th ). Among others, Malaysia was more<br />
competitive than Germany (6 th ), China Mainland (7 th ), the United Kingdom (8 th ) and Korea (9 th ).<br />
In the GDP per capita less than US$20,000 category, Malaysia was ranked second after Taiwan<br />
amongst 30 economies. Malaysia was ahead of China Mainland (3 rd ), Korea (4 th ), Thailand (5 th ),<br />
Chile (6 th ), and Czech Republic (7 th ), amongst others. Malaysia’s performance according to the<br />
four competitiveness input factors among the 58 economies showed that Malaysia recorded<br />
remarkable improvement in ranking for Government Efficiency at 9 th position (2009:19 th ) and<br />
Business Efficiency at 4 th (2009:13 th ). The Economic <strong>Performance</strong> and the Infrastructure factors<br />
improved to 8 th (2009: 9 th ) and 25 th (2009:26 th ) position respectively.<br />
Overall<br />
Global<br />
Ranking<br />
Countries<br />
with GDP<br />
per Capita<br />
less than<br />
USD20,000<br />
10/58<br />
2/29<br />
4 Factors 2010<br />
(By Overall) (n = 58)<br />
Economic 8<br />
<strong>Performance</strong><br />
Government 9<br />
Efficiency<br />
Business 4<br />
Efficiency<br />
Infrastructure 25<br />
Population<br />
greater than<br />
20 million<br />
5/30<br />
4 Factors 2010<br />
(By Population size) (n =29)<br />
Economic 5<br />
<strong>Performance</strong><br />
Asia-Pacific<br />
Region<br />
5/13<br />
Government 3<br />
Efficiency<br />
Business 2<br />
Efficiency<br />
Infrastructure 10<br />
<strong>Productivity</strong> Report 2010/2011<br />
35
For the first time since 1999, Malaysia participated in the WCY, both the Government Efficiency<br />
and Business Efficiency input factors achieved a remarkable top ten ranking. This indicates<br />
a clear link between these two input factors. The robust and inclusive private and public<br />
sector engagements were due to the close collaboration between both sectors to effect this<br />
achievement in competitiveness.<br />
Continuous innovative reforms by the Government such as the Government Transformation<br />
Programme (GTP) had resulted in an improved performance of the Government Efficiency input<br />
factor. The implementation of six National Key Results Areas(NKRAs) as identified through the<br />
lab methodology had led to a reduction in street crime rate by 35% in 2010. The perception<br />
on bribing and corruption had improved to 26 from 31 position in 2009 while there is less<br />
bureaucracy in business transactions as reflected in an improved ranking to 4 th position from<br />
16 th in 2009. The New Key Economic Activities (NKEAs) outlined in the New Economic Model<br />
(NEM) is expected to further accelerate Malaysia’s economic transformation.<br />
The ranking for Infrastructure was at 25 th placing (2009:26 th ). Infrastructure, being a longterm<br />
investment will only show results over a period of time. In 2001, Malaysia’s Infrastructure<br />
was ranked at 38 th position and had been improving over the years to 25 th position this<br />
year. Notwithstanding this scenario, the report indicated that innovative capacity of firms in<br />
generating new products and processes was ranked 12 th despite this being a new criteria.<br />
To enhance competitiveness, high level of R&D expenditure, availability of information<br />
technology skills, strong technological cooperation between companies, public and private<br />
ventures as well as strong collaborative research are imperative. To be an innovative and<br />
competitive nation, Malaysia needs to deliberate on the following factors:<br />
• Enhancement in Education;<br />
• Science in Schools;<br />
• Additional allocation in R&D expenditure;<br />
• Development & application of technology;<br />
• Access to capital, funding for technology development;<br />
• Re-look into scientific research legislation;<br />
• Talent management, specifically on attracting and nurturing scientists & researchers; and<br />
• Strengthening Intellectual Property.<br />
36 <strong>Productivity</strong> Report 2010/2011
<strong>Productivity</strong> Report 2010/2011<br />
37
CHAPTER 2<br />
Total Factor <strong>Productivity</strong>
TOTAL FACTOR PRODUCTIVITY<br />
Overview<br />
• Total Factor <strong>Productivity</strong> (TFP) is an important<br />
variable that must be taken into account in<br />
determining the economic growth. Factors such<br />
as capital and labour are important for a country’s<br />
economic development. Equally important<br />
in driving economic progress is continuous<br />
innovation and productivity enhancement. TFP<br />
reflects initiatives undertaken by firms among<br />
others, include business process innovations<br />
such as management techniques, effective<br />
plant layout, pricing structure, branding and<br />
advancement in technologies.<br />
• TFP is becoming more important in an<br />
innovation-led growth with emphasis on<br />
creativity, innovation and better management<br />
practices as well as selective higher added value<br />
investment.<br />
Figure 2.1: TFP Contribution to <strong>Productivity</strong> Growth,<br />
2006-2010<br />
TFP<br />
1.65%<br />
Quality of<br />
Human<br />
Capital<br />
Computed from :<br />
<strong>Productivity</strong><br />
2.94%<br />
GDP<br />
4.56%<br />
Capital<br />
Intensity<br />
1.3%<br />
Quality of<br />
Capital<br />
Input<br />
Employment<br />
1.62%<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Figure 2.2: Growth and Contribution of<br />
GDP, TFP, Capital and Labour (%)<br />
Total Factor <strong>Productivity</strong><br />
<strong>Performance</strong><br />
• During the period 2006-2010, the GDP growth of<br />
4.6% was supported by productivity growth of<br />
2.9% and 1.6% employment growth. The growth<br />
in productivity was derived from TFP growth of<br />
1.7% and capital intensity of 1.3% during the<br />
same period. (Figure 2.1).<br />
• For the 2001-2010 period, the contribution of<br />
TFP to national economic growth was 32.9%,<br />
derived mainly by higher contribution of TFP<br />
during the second sub-period 2006-2010<br />
(36.2%). Similarly, capital contributed 37.7%<br />
during the same period against 37.8% in the<br />
first sub-period (2001-2005). However, labour<br />
declined from 32.6% during 2001-2005 to 26.1%<br />
during 2006-2010 (Figure 2.2).<br />
Percent<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
Computed from :<br />
26.06<br />
37.70 32.58 37.77<br />
29.37 37.73<br />
36.24 29.66<br />
32.90<br />
1.65<br />
1.72<br />
1.19<br />
1.39<br />
1.77<br />
1.53<br />
1.52<br />
1.75<br />
1.36<br />
2006-2010 2001-2005 2001-2010<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Labour<br />
Capital<br />
TFP<br />
TFP<br />
Capital<br />
Labour<br />
40 <strong>Productivity</strong> Report 2010/2011
Chapter 2<br />
Sources of Total Factor<br />
<strong>Productivity</strong> Growth<br />
Figure 2.3: Components of TFP Growth<br />
• Growth in TFP is determined by economic<br />
restructuring, human capital, intensity of<br />
demand, capital structure and technical<br />
progress.<br />
2001-2010<br />
Total<br />
Factor<br />
<strong>Productivity</strong><br />
1.52%<br />
• Human Capital Development is one of the most<br />
critical drivers for transformation from middle<br />
to higher income economy. It facilitates skill<br />
upgrading and knowledge enhancement. For<br />
the period 2001-2010, human capital grew by<br />
0.4% and contributed 26% to TFP growth. During<br />
the sub-period 2001-2005, human capital<br />
contributed 24.7% and increased to 27.2%<br />
during the sub-period 2006-2010 (Figure 2.3).<br />
Total enrolment in higher education institutions<br />
had increased from 747,916 students in 2006<br />
to 1,103,963 students in 2010. Most of the<br />
enrolment was for first degree programmes<br />
(Table 2.1). This shows that the contribution of<br />
TFP growth provides the right foundation for<br />
the economy to become high income economy<br />
by 2020.<br />
Economic<br />
Restructuring<br />
0.25%<br />
Economic<br />
Restructuring<br />
0.36%<br />
Human<br />
Capital<br />
0.40%<br />
2001-2005<br />
Human<br />
Capital<br />
0.34%<br />
2006-2010<br />
Capital<br />
Structure<br />
0.31%<br />
Total<br />
Factor<br />
<strong>Productivity</strong><br />
1.39%<br />
Capital<br />
Structure<br />
0.32%<br />
Total<br />
Factor<br />
<strong>Productivity</strong><br />
1.65%<br />
Demand<br />
Intensity<br />
0.38%<br />
Demand<br />
Intensity<br />
0.20%<br />
Technical<br />
Progress<br />
0.19%<br />
Technical<br />
Progress<br />
0.17%<br />
• Demand Intensity indicates the extent of the<br />
productive capacity utilisation of the economy.<br />
Demand intensity achieved a growth rate of<br />
0.4% from 2001-2010 and contributed 25.1% to<br />
TFP growth. This shows that there was higher<br />
demand over the period thus resulting in better<br />
capacity utilisation. During the period from 2006-<br />
2010, the largest contributor to TFP came from<br />
demand intensity, accounting for 34% of the total<br />
contribution as compared to 14.5% during the<br />
period 2001-2005.<br />
• The increase in contribution was due to the<br />
successful implementation of programmes and<br />
activities initiated by the Government including<br />
expanding into the fast growing markets,<br />
certification and compliance to standards,<br />
Economic<br />
Restructuring<br />
0.15%<br />
Computed from :<br />
Human<br />
Capital<br />
0.45%<br />
Capital<br />
Structure<br />
0.29%<br />
Demand<br />
Intensity<br />
0.56%<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Technical<br />
Progress<br />
0.20%<br />
Table 2.1: Enrolment in Higher Education Institutions<br />
by Level of Study, 2006-2010<br />
Level of Study 2006 2007 2008 2009 2010<br />
Certificate 112,922 124,225 111,125 122,260 126,089<br />
Diploma 240,189 271,918 296,296 350,873 375,699<br />
First Degree 348,369 388,580 427,083 478,221 515,118<br />
Masters 36,824 34,755 44,634 58,252 66,822<br />
PhD 9,612 11,124 13,574 16,947 20,235<br />
Total 747,916 830,602 892,712 1,028,553 1,103,963<br />
Source: Malaysia Plan, Various Issues<br />
<strong>Productivity</strong> Report 2010/2011<br />
41
adoption of best practices and branding<br />
exercises. These initiatives contributed to the<br />
growth of Malaysia’s export from RM334.3 billion<br />
in 2001 to RM639.4 billion in 2010 (Table 2.2).<br />
• Capital Structure reflects appropriate capital<br />
investment which will improve production<br />
efficiency. For the period 2001-2010, capital<br />
structure registered a growth of 0.3% and<br />
contributed 20.1% to TFP growth of 1.5% (Figure<br />
2.3). In the sub-period 2001-2005 and 2006-2010,<br />
capital structure contributed 23% and 17.6%<br />
respectively. Total investment approved in the<br />
manufacturing sector grew from RM21.3 billion<br />
in 2001 to RM47.2 billion in 2010. This indicates<br />
that the industries were investing in selective<br />
new capital intensive technologies (Table 2.3).<br />
• Economic Restructuring measures the efficiency<br />
in resources allocation among the economic<br />
sectors. Economic restructuring grew at 0.3%<br />
and contributed 16.5% to TFP growth during<br />
the period 2001-2010. In the first sub-period,<br />
economic restructuring contributed 25.7% and<br />
8.9% for the second sub-period 2006-2010. The<br />
lower contribution was due to lesser mobility<br />
of the workforce from low to higher value<br />
added activities in the various economic sectors<br />
especially in the construction, agriculture and<br />
mining sectors. The share of employment in<br />
the services and manufacturing sectors rose to<br />
52.5% and 28.4% during the period 2006-2010<br />
as compared with 50.4% and 27.6% during the<br />
period 2001-2005 respectively. On the contrary,<br />
the share of employment in the agriculture sector<br />
declined to 12.1% in 2006-2010 as compared<br />
with 14% in 2001-2005 (Table 2.4).<br />
• Technical Progress indicates the efficient and<br />
effective utilisation of technologies, innovative<br />
practices and management systems towards<br />
organisational excellence. For the period<br />
2001-2010, technical progress contributed<br />
12.2% to TFP growth. To further improve its<br />
contribution towards TFP growth required<br />
Table 2.2: Malaysia’s External Trade, 2001-2010<br />
Year Total Export<br />
(RM Billion)<br />
Total Import<br />
(RM Billion)<br />
Trade Balance<br />
(RM Billion)<br />
2001 334.28 280.23 54.05<br />
2005 536.23 432.87 103.36<br />
2006 588.97 480.77 108.19<br />
2010 639.43 529.19 110.23<br />
Sources: Malaysia External Trade Development Corporation<br />
Table 2.3: Approved Investment in the Manufacturing Sector<br />
Foreign Direct Domestic Total<br />
Investment Investment Investment<br />
(RM Billion) (RM Billion) (RM Billion)<br />
2001 16.02 5.24 21.26<br />
2005 17.88 13.17 31.05<br />
2006 20.22 25.77 45.99<br />
2010 29.06 18.12 47.18<br />
Sources: Malaysian Industrial Development Authority<br />
Table 2.4: Employment Share by Economic Sectors (%)<br />
Agriculture Mining Manufacturing Construction Services<br />
2001<br />
- 14.02 0.40 27.58 7.62 50.36<br />
2005<br />
2006<br />
- 12.10 0.40 28.40 6.62 52.54<br />
2010<br />
Computed from :<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
the implementation of P&Q initiatives such<br />
as quality assurance, standardisation, total<br />
quality management, productivity-linked wage<br />
system, benchmarking and best practices. Good<br />
management practices coupled with creative,<br />
innovative and positive mindset are crucial for<br />
creating high value added products and services<br />
that will contribute to TFP growth.<br />
42 <strong>Productivity</strong> Report 2010/2011
Chapter 2<br />
TFP of Selected Economic Sectors<br />
• Wholesale & retail trade was one of the fastest<br />
growing sectors. Its TFP grew by 2% for the<br />
period 2001-2010 while labour in the sector<br />
grew by 1.8% and capital grew by 2.6% during<br />
the same period. For the sub-period 2001-2005<br />
and 2006-2010, TFP contribution was 18.3% and<br />
40.6% respectively (Tables 2.5 & 2.6). Similarly,<br />
capital and labour contributed 44.9% and 14.2%,<br />
in the second sub-period as compared to 33.4%<br />
and 48.2% respectively to the GDP growth during<br />
the first sub-period.<br />
• The high capital and TFP contributions in the<br />
second sub-period were attributed by the<br />
expansion of large hypermarkets and superstores<br />
and supported by demand factors such as<br />
the push for higher domestic consumption to<br />
buffer the effects of the global slowdown. TFP<br />
was further enhanced with the adoption of<br />
sophisticated management systems emphasising<br />
on quality, speed, reliability and customer<br />
satisfaction in terms of price and service quality.<br />
• The finance sector recorded a commendable TFP<br />
growth rate of 2% and accounted for an output<br />
growth of 7.1% during the period 2001-2010.<br />
This growth was led by employment growth<br />
(2.7%) and capital growth (2.4%). For the second<br />
sub-period 2006-2010, TFP contributed 37.3%<br />
to the output growth of 8.1% while capital and<br />
labour contributed 47.5% and 15.2% respectively<br />
(Table 2.7). The higher TFP growth (3%) during<br />
2001-2005 (Table 2.6) was attributed by the<br />
entry of new service providers and expansion of<br />
branches including foreign banks in both Islamic<br />
and conventional institutions. Technological<br />
innovations had contributed to higher TFP as a<br />
result of significant usage of electronic payment<br />
transactions. The initiatives undertaken by the<br />
Government such as reduction in interest rate,<br />
liberalisation of financial sector had been the key<br />
factors towards the increase in TFP growth.<br />
• For the period 2001-2010, the transport sector<br />
recorded a TFP growth of 1.7% and contributed<br />
26.7% to an output growth of 6%. Labour in the<br />
transport sector grew by 2.5% whereas the capital<br />
grew by 1.8%. For the second sub-period 2006-<br />
Table 2.5: TFP of the Economic Sectors, 2001-2010 (%)<br />
Agriculture Mining Manufacturing Construction Utilities Transport<br />
Wholesale and<br />
Retail Trade<br />
Finance<br />
Other<br />
Services<br />
GDP<br />
2.89 0.75 3.65 2.73 4.68 6.02 6.39 7.09 4.40<br />
Labour<br />
0.77 0.32 0.95 0.09 1.52 2.50 1.79 2.65 1.90<br />
Capital<br />
0.75 0.25 1.77 1.85 1.84 1.83 2.58 2.44 1.50<br />
TFP<br />
1.38 0.18 0.91 0.79 1.32 1.70 2.03 1.99 1.00<br />
Computed from :<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
43
2010, TFP growth of the transport sub-sector was<br />
2.5% and contributed 38.8% to an output growth<br />
of 6.3% (Table 2.7).<br />
• The improvement in TFP growth was due to<br />
increasing capacity expansion and raising<br />
demand for sea, air and land transport. During<br />
2006-2010, capital contributed 44.5% due to<br />
acquisition of capital intensive transportation<br />
vehicles, machineries and ancillary equipment.<br />
• The utilities sector experienced a 1.3% growth in<br />
TFP and contributed 28.2% to an output growth<br />
of 4.7% during the period 2001-2010. The sector<br />
was experiencing higher capital growth (1.8%)<br />
as compared with employment growth (1.5%)<br />
which contributed 39.2% and 32.5% to output<br />
growth respectively. This was justifiable as<br />
utilities services is a capital intensive operation<br />
(Table 2.5).<br />
• For the period 2001-2010, the agriculture sector<br />
recorded a TFP growth of 1.4% while the output<br />
growth was 2.9% and both capital and labour<br />
grew by 0.8% respectively. TFP contributed 47.6%<br />
to the output growth while labour and capital<br />
contributed 26.5% and 25.9% respectively(Table<br />
2.5). During the sub-period 2001-2005 and 2006-<br />
2010, TFP contributions for the sector were<br />
54.2% and 39.5% respectively. The sector had<br />
benefited from continuous adoption of modern<br />
farming systems and the usage of labour saving<br />
technologies such as fertilisation application and<br />
mechanised harvesting systems.<br />
• The manufacturing sector registered an output<br />
growth of 3.7%, TFP 0.9%, labour 1.0% and capital<br />
1.8%. Capital contributed 48.6% to output growth<br />
while labour and TFP contributed 26.0% and<br />
25.4% respectively. However, TFP contribution<br />
to the output growth increased from 22.7% for<br />
the sub-period 2001-2005 to 30.6% during the<br />
second sub-period 2006-2010. Similarly, capital<br />
contributed 61.1% during the second sub-period<br />
as against 41.9% in the first sub-period. The<br />
improvement in capital contribution over the<br />
decade was due to continuous technological<br />
upgrading during the period. This was reflected<br />
by an increasing trend in capital-intensity (as<br />
measured by the capital investment per employee<br />
or CIPE ratio). The CIPE ratio based upon projects<br />
approved in 2010 was RM484,767 as compared<br />
Table 2.6: TFP of the Economic Sectors, 2001-2005 (%)<br />
Agriculture Mining Manufacturing Construction Utilities Transport<br />
Wholesale and<br />
Retail Trade<br />
Finance<br />
Other<br />
Services<br />
GDP<br />
3.19 2.32 4.75 0.95 5.42 5.72 5.10 6.05 4.10<br />
Labour<br />
1.05 0.39 1.69 0.10 2.48 3.94 2.46 4.07 2.26<br />
Capital<br />
0.41 0.44 1.99 0.74 1.74 0.84 1.70 1.03 1.29<br />
TFP<br />
1.73 1.49 1.08 0.11 1.20 0.94 0.94 0.96 0.54<br />
Computed from :<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
44 <strong>Productivity</strong> Report 2010/2011
Chapter 2<br />
to RM376,101 in 2003. This indicated general<br />
investment trend towards more capital-intensive,<br />
high value-added and sophisticated technology<br />
projects.<br />
• The performance of the construction and mining<br />
sectors were nominal during the years spanning<br />
2001-2010. TFP growth for the construction<br />
sector was 0.8%. The low TFP growth for the<br />
construction sector was due to lack of innovation<br />
in the sector. The construction sector continues<br />
to use conventional construction methods. It had<br />
been noted that Malaysia recorded a low score<br />
of 15 on the Industrialised Building System (IBS)<br />
score. The labour growth in the construction<br />
sector was 0.1% which was due to limited<br />
opportunities for employment in recent years<br />
especially after the 2008 crisis. However, capital<br />
grew by 1.9%, indicating that the growth was<br />
due to injection of new capital as the result of<br />
the impact of the stimulus package launched by<br />
the Government in 2009 to revive the economy<br />
(Table 2.5).<br />
• For the mining sector, TFP growth was 0.2%<br />
during the period 2001-2010. This sector<br />
over the reference period demonstrated an<br />
employment growth that exceeded capital<br />
growth. Employment growth in mining was 0.3%<br />
while capital growth was 0.3%. This was because<br />
following an increase in investment in capital<br />
especially in the oil and gas sector, there had<br />
been a corresponding increase in employment of<br />
relevant professionals in tandem with the capital<br />
injection.<br />
International Total Factor<br />
<strong>Productivity</strong> Comparison<br />
• Total Factor <strong>Productivity</strong> (TFP) growth which<br />
encompasses major drivers of efficiency like<br />
technological and managerial improvements had<br />
accounted for a quarter of total output growth in<br />
most of the Asian countries in recent years. The<br />
trend of TFP growth in selected countries had<br />
improved between 2003 and 2010 with China<br />
recording the highest TFP growth of 4.2% in<br />
the sub-period of 2003-2006. The trend of TFP<br />
growth in most of the advanced countries such<br />
as United State of America (USA), Australia, Japan<br />
and Hong Kong has continuously weakened since<br />
Table 2.7: TFP of the Economic Sectors, 2006-2010 (%)<br />
Agriculture Mining Manufacturing Construction Utilities Transport<br />
Wholesale and<br />
Retail Trade<br />
Finance<br />
Others<br />
GDP<br />
2.59 -0.82 2.55 4.51 3.94 6.32 7.68 8.13 4.73<br />
Labour<br />
0.48 0.24 0.21 0.08 0.56 1.05 1.11 1.24 1.60<br />
Capital<br />
1.09 0.06 1.56 2.96 1.93 2.81 3.45 3.86 1.72<br />
TFP<br />
1.03 -1.12 0.78 1.47 1.44 2.45 3.12 3.03 1.42<br />
Computed from :<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
45
the end of 2008.Hong Kong recorded 4.1% in the<br />
sub-period 2003-2006 but a decline to less than<br />
0.5% in the second sub-period 2007-2010. During<br />
the second sub-period (2007-2010), TFP growth<br />
rates were higher in emerging and developing<br />
economies than those advanced economies. For<br />
the second sub-period 2007-2010, Singapore,<br />
Japan and USA recorded a decline in TFP growth<br />
of 1.9%, 1.1% and 0.3% as compared with growth<br />
of 3.2%, 1.2% and 0.9% respectively during 2003-<br />
2006 (Table 2.8).<br />
• TFP growths in South Korea and Malaysia were<br />
comparable in the first sub-period at 2.3% and<br />
2.9% and second sub-period at 2.2% and 1.6%<br />
respectively. These economies were not adversely<br />
affected during the global economic slowdown<br />
as compared with the rest of the world. TFP<br />
growth followed an identical pattern in Thailand<br />
and India during sub-period 2003-2006 but had<br />
diverged in the second sub-period (0.7% and<br />
1.9%, respectively, in 2007-2010).<br />
Sources of TFP Growth in<br />
Selected Countries<br />
• TFP growth accounts for the changes in output<br />
not caused by changes in labour and capital<br />
inputs. TFP growth is the outcome of the effect<br />
of technological change, efficiency improvement<br />
and technical progress. During the sub-period<br />
2007-2010, Malaysia recorded TFP growth of<br />
2.2% which was higher than India 1.9%, South<br />
Korea 1.6%, Thailand 0.7% and Hong Kong 0.5%.<br />
However China registered higher growth at 4%<br />
while most of the selected countries recorded<br />
lower growth in TFP caused mainly by the global<br />
financial crisis and lower external demand (Table<br />
2.8).<br />
• Non-ICT capital services growth refers to the<br />
change in the flow of productive services provided<br />
by non-ICT assets. There are three types of non-<br />
ICT assets which include transport equipment,<br />
plant, machinery, other non-ICT equipment<br />
and construction and finally building and other<br />
structures. The acceleration in economic growth<br />
in all the countries was mainly derived by non-<br />
ICT capital services and followed by ICT capital<br />
services except Singapore where the second<br />
highest contributor was labour composition<br />
instead of ICT capital services. Comparison over<br />
the two periods indicated China, India, Australia,<br />
Thailand and Malaysia recorded the highest<br />
contribution from non-ICT capital of 5.7%, 3.8%,<br />
2.0%, 1.7% and 1.5% respectively while the<br />
contributions of non-ICT capital services in USA<br />
and Japan were the lowest at 0.5% and 0.3%<br />
respectively (Table 2.9).<br />
• ICT capital services growth refers to the change<br />
in the flow of productive services provided<br />
by ICT assets. The three types of ICT assets<br />
are computer hardware and equipment,<br />
telecommunication equipment and computer<br />
software and services. During the second subperiod<br />
2007-2010, China and Australia recorded<br />
the highest contributions of ICT capital services<br />
at 1.1% and 1% respectively. Among selected<br />
Asean countries, Malaysia registered higher<br />
Table 2.8: Total Factor <strong>Productivity</strong> Growth<br />
of the Selected Countries (%)<br />
2003-2010 2003-2006 2007-2010<br />
USA 0.28 0.88 -0.31<br />
Australia -1.25 -0.62 -1.88<br />
China 4.11 4.20 4.03<br />
Hong Kong 2.27 4.07 0.46<br />
India 2.58 3.24 1.92<br />
Japan 0.07 1.21 -1.06<br />
Malaysia 2.56 2.89 2.22<br />
Singapore 0.65 3.16 -1.86<br />
South Korea 1.95 2.25 1.64<br />
Thailand 1.63 2.59 0.68<br />
Source: The Conference Board Total Economy Database, January 2011<br />
46 <strong>Productivity</strong> Report 2010/2011
Chapter 2<br />
contribution of ICT capital services contributing<br />
0.6% to the output growth of 4.1% during the<br />
same period. ICT capital services investment<br />
were necessary to improve TFP in several sectors<br />
but it also required corresponding business<br />
process improvement. ICT capital services<br />
investment must be integrated with innovative<br />
supply chain management, business model and<br />
advanced merchandise management in order to<br />
have a significant impact to TFP growth. In some<br />
sectors, ICT capital services investment were<br />
not achieving the required returns due to under<br />
utilisation of their services.<br />
• Labour input is measured in terms of total<br />
employment and total hours worked. The labour<br />
composition index is compiled based upon<br />
weighted measures of different skill-level groups<br />
in the labour force. During the second sub-period<br />
2007-2010, Singapore recorded the highest<br />
contribution of labour composition contributing<br />
0.6% to the output growth of 6%. Malaysia’s<br />
contribution was the same at 0.2% during both<br />
periods. Most advanced countries such as USA,<br />
Australia Japan and South Korea recorded a<br />
smaller contribution of labour composition at<br />
0.1%, 0.2%, 0.2%, and 0.3% respectively during<br />
the second period as compared to 0.3%, 0.2%,<br />
0.3% and 0.5% respectively during the first<br />
period. To sustain economic growth, investment<br />
in inputs must be from both human capital and<br />
technological enhancement.<br />
Table 2.9: Contribution of TFP, Labour, Non-ICT Capital Services and ICT Capital Services to the Economic Growth (%)<br />
USA Australia China Hong Kong India Japan Malaysia Singapore South Korea Thailand<br />
GDP<br />
2003-2010 1.75 2.89 11.42 4.68 8.32 0.95 4.99 6.16 3.80 4.51<br />
2003-2006 2.95 3.46 12.08 6.40 8.80 2.03 5.94 6.32 4.14 5.83<br />
2007-2010 0.55 2.32 10.75 2.96 7.85 -0.13 4.05 6.00 3.45 3.19<br />
TFP<br />
2003-2010 0.28 -1.25 4.11 2.27 2.58 0.07 2.56 0.65 1.95 1.63<br />
2003-2006 0.88 -0.62 4.20 4.07 3.24 1.21 2.89 3.16 2.25 2.59<br />
2007-2010 -0.31 -1.88 4.03 0.46 1.92 -1.06 2.22 -1.86 1.64 0.68<br />
Contribution of Non-ICT Capital Services Growth in GDP Growth<br />
2003-2010 0.52 1.73 5.64 0.72 3.43 0.33 1.34 0.47 1.06 1.55<br />
2003-2006 0.52 1.46 5.55 0.71 3.04 0.33 1.15 -0.13 1.05 1.41<br />
2007-2010 0.52 2.00 5.72 0.73 3.81 0.34 1.53 1.07 1.07 1.69<br />
Contribution of ICT Capital Services Growth in GDP Growth<br />
2003-2010 0.45 1.03 1.09 0.24 0.85 0.22 0.64 0.37 0.29 0.33<br />
2003-2006 0.42 1.03 1.09 0.26 0.78 0.18 0.63 0.40 0.24 0.31<br />
2007-2010 0.48 1.04 1.08 0.22 0.92 0.25 0.64 0.34 0.34 0.35<br />
Contribution of Labour Composition Growth in GDP Growth<br />
2003-2010 0.21 0.19 0.14 0.17 0.15 0.23 0.17 0.60 0.40 0.43<br />
2003-2006 0.28 0.20 0.14 0.18 0.14 0.30 0.17 0.58 0.54 0.39<br />
2007-2010 0.14 0.18 0.14 0.17 0.15 0.15 0.17 0.63 0.27 0.46<br />
Source: The Conference Board Total Economy Database, January 2011<br />
<strong>Productivity</strong> Report 2010/2011<br />
47
Box 2.1: Labour <strong>Productivity</strong> and Total Factor <strong>Productivity</strong><br />
<strong>Productivity</strong> is a measure of how efficient the resources are being utilised. It is an important<br />
determinant of long-term economic growth. As such, Malaysia’s future productivity performance<br />
will depend upon how fast the economy recovered from the global financial crisis of 2008-2009<br />
as well as its capabilities to address global issues and climatic change.<br />
Labour productivity is a measure of the amount of output produced by each worker and is<br />
generally computed as value added divided by total number of workers. However, as value<br />
added reflects the return to both labour and capital, it is more appropriate to consider the ratio<br />
of value added as a combination of both capital and labour. Total Factor <strong>Productivity</strong> (TFP) is a<br />
measure of efficiency in the utilisation of both capital and labour. Better quality inputs generate<br />
more output when these inputs are utilised effectively and efficiently.<br />
Labour productivity growth is equal to the sum of TFP growth and a term proportionate to<br />
the growth in the ratio of capital to labour (capital intensity). Occasionally, growth in labour<br />
productivity could also arise from increase in capital intensity rather than TFP where the additional<br />
capital is the source of the additional output. As capital is a scarce resource, this capital intensity<br />
comes at a cost which must be offset against the value of the additional output. However, if the<br />
additional (relative) capital cost is more than the increase in value added generated, then in net<br />
terms, the company is no better off even though there was an increase in labour productivity<br />
growth. It is this lack of explicit accounting in labour productivity for the additional (relative)<br />
resource cost of capital that can lead to labour productivity being a misleading indicator of<br />
changes in the productive efficiency of the economy. In contrast, TFP accounts fully for both<br />
capital and labour resource costs.<br />
Sources of Total Factor <strong>Productivity</strong> Growth<br />
Growth in TFP is derived mainly from human capital development, capital structure, demand<br />
intensity, economic restructuring and technical progress. Investment in human capital enhances<br />
the capacities and the capabilities of the workforce in producing more quality products and<br />
services. Capital structure represents the productive capital investment in the economy<br />
which will further improve economic efficiency. Demand intensity can be improved through<br />
an increase in internal and external demand for products and services which lead to higher<br />
capacity utilisation.<br />
Economic restructuring involves the allocation of resources among economic sectors and<br />
industries. More resources should be allocated to productive industries or sectors which<br />
ultimately, contribute to higher TFP growth. Technical progress involves activities such as<br />
improvement in innovation, R&D, positive work attitudes, management and organisational<br />
system, supply chain management and benchmarking of best practices.<br />
48 <strong>Productivity</strong> Report 2010/2011
<strong>Productivity</strong> Framework<br />
BETTER<br />
QUALITY<br />
OF LIFE<br />
HIGHER<br />
STANDARD<br />
OF LIVING<br />
HIGHER<br />
GROSS<br />
DOMESTIC<br />
PRODUCT<br />
HIGHER<br />
PRODUCTIVITY<br />
HIGHER<br />
TOTAL FACTOR<br />
PRODUCTIVITY<br />
HIGHER<br />
CAPITAL<br />
INTENSITY<br />
Human<br />
Capital<br />
Demand<br />
Intensity<br />
Capital<br />
Structure<br />
Economic<br />
Restructuring<br />
Technical<br />
Progress<br />
<strong>Productivity</strong> Report 2010/2011<br />
49
Box 2.2 : Driving Towards Innovation<br />
Driven Stage of Development<br />
The Global Competitiveness Report (GCR) 2010-2011 by World Economic Forum (WEF) had<br />
identified Malaysia in the Efficiency-Driven Stage of Development and is moving towards an<br />
innovative stage. In the innovative stage of development, the focus will be towards creativity and<br />
innovation in order to lift the country into the rank of high income economy. Innovation holds<br />
the key to national competitiveness while the ability to leverage on leading edge technologies<br />
will be the forefront of our innovation-led strategy.<br />
Malaysia is on the right path towards Innovation Driven Stage of Development as the country<br />
has made great strides in poverty eradication and enhancing the living standards of Malaysians.<br />
This is reflected in the Global Competitiveness Report (GCR) 2010-2011 where Malaysia has<br />
performed well in business sophistication and innovation which augurs well for the future.<br />
These include criteria such as state of cluster development, control of international distribution,<br />
willingness to delegate authority, value chain creation, Government procurement of advanced<br />
technology products and company spending on R&D.<br />
Some of the characteristics of Innovation-Driven Economies are as below:<br />
i. Excellent capacity for innovation;<br />
ii. Highly sophisticated and innovative companies;<br />
iii. Business sophistication and innovation;<br />
iv. High levels of technology adoption and innovation;<br />
v. Strong collaboration between academia and business sectors;<br />
vi. Strong focus on education; and<br />
vii. Highly skilled workforce who are passionate to adopting the latest technologies<br />
The innovative performance of Malaysia as reported in the “Global Innovation Index 2009-2010”<br />
published by the Institute of European Administration and Development (INSEAD) ranked<br />
Malaysia at 52 nd position among 132 economies with a score of 3.48. Ireland is the global leader<br />
in innovation despite the tough economic situation it faced during the last two years. Sweden<br />
and Hong Kong followed in the second and third positions respectively. Switzerland was in the<br />
fourth position, Denmark (fifth), Finland (sixth), Singapore (seventh), Netherlands (eighth), New<br />
Zealand (ninth) and Norway (tenth). It would augur well for Malaysia to benchmark the best<br />
practices of these top innovative economies.<br />
50 <strong>Productivity</strong> Report 2010/2011
Best Practices of the World’s Top Innovative Economies (Global Innovation Index 2009-2010)<br />
Ireland<br />
Ireland which achieved number one position in the overall rank was attributed for its<br />
top ranking in the Infrastructure and ICT pillar. When it came to the enabler ‘Human<br />
Capacity’, it again performed very well, notching up fourth position among all countries.<br />
It also scored high in the sub-pillars of Innovation Potential and Investment in Education<br />
achieving the second and fourth slots respectively. In the final analysis, the clincher was<br />
the high rank it obtained in Human Capacity and both Scientific Output and Creative<br />
Output Well-Being.<br />
Its Government policy initiatives have emphasised establishing strong research teams<br />
for working in an international environment by giving priority to the most competent<br />
individuals, institutions and firms. It also made research and development attractive to<br />
business enterprises, supporting the emergence of high-technology firms which to a<br />
large extent, rely on research for their growth.<br />
Sweden<br />
Hong Kong<br />
Innovation has been one of the areas of prime concern for the Swedish Government<br />
and it has had a defined policy to strengthen innovation. The main responsibility of<br />
driving innovation lies with both the Ministry of Industry and Communication and the<br />
Ministry of Education and Culture. In order to focus particularly on the coordination<br />
of economic and research policy, the Swedish Government Agency for Innovation<br />
Systems (VINNOVA) was set up with the aim of promoting growth and prosperity in<br />
the Swedish economy. The main aim of this agency is to fund the relevant research<br />
required by the competitive industries. A high ranking achieved by the institution is a<br />
reflection of the high level of Government commitment to innovation. Sweden is also<br />
a strong knowledge based economy with good international linkages. Its strong R&D is<br />
reflected in the work of a number of its global companies like Ericsson, Volvo, ABB, and<br />
AstraZeneca. Another plus point of the Swedish economy with regard to innovation is<br />
its strong base of talented workforce. Bulk of the investment in R&D in the country is by<br />
the industries followed by universities and then by both public research and industrial<br />
research institutions. Sweden’s long-term strategy in taking initiatives in education, skills<br />
development and research & development combined with substantial IT investment<br />
aimed at involving all members of societies have gone a long way to create a climate of<br />
innovation coupled with a strong and sound economy.<br />
Hong Kong obtained the third position in the overall innovation index. Not surprisingly,<br />
Hong Kong is one of the leading financial centers in the world and has been ranked as<br />
the most liberal in the world by the Index of Economic Freedom for 15 consecutive years.<br />
The Hong Kong Stock Exchange is also the sixth largest in the world. The Innovation<br />
and Technology Commission (ITC) was set up by the Government in 2000 to boost<br />
innovation and works closely with other Government departments, the industrial and<br />
business sectors, tertiary institutions and industrial support organisations to promote<br />
applied R&D in different technology areas as well as in the upgrading of foundation<br />
industries. The irony of Hong Kong economy is that although it has significant income<br />
inequality, it has one of the highest per capita GDP in the world.<br />
<strong>Productivity</strong> Report 2010/2011<br />
51
Box 2.3 : Global Innovation Index<br />
Innovation is one of the key drivers of economics growth and development. It provides the<br />
springboard which determines the direction and speed in which a country developed.<br />
Innovation provides an avenue for business success. The main challenge to remain competitive<br />
is through continuous innovation. Under the New Economic Model (NEM), innovation will be<br />
the core in propelling the nation to greater height and become a high income economy.<br />
Realising its importance, the Government is committed in ensuring that innovation is carried<br />
out holistically in both private and public sectors as this will boost the economy to the next level.<br />
Innovative measures being pursued in some major programmes launched by the Government<br />
include improving the innovative work processes by identifying the relevant Entry Project Point<br />
(EPP) in each of the 12 NKEAs listed in the ETP.<br />
The innovative ranking of Malaysia in some of the variables such as human capacity, institutions,<br />
ICT and uptake of infrastructure, market sophistication, science output, creative output and<br />
business sophistication according to Global Innovation Index 2009-2010 published by the<br />
Institute of European Administration and Development (INSEAD) is shown below.<br />
At the international level, Malaysia was ranked 28 out of 138 countries in overall ranking.<br />
Compared with some of the selected countries such as Singapore, Japan and Korea, Malaysia<br />
fared favorably in market sophistication as compared with the other three countries.<br />
60<br />
Global Innovation Index<br />
50<br />
52<br />
Institutions<br />
40<br />
30<br />
20<br />
42<br />
33<br />
43<br />
23<br />
26<br />
Human Capacity<br />
ICT & Uptake of Infrastructure<br />
Market Sophistication<br />
Science Output<br />
10<br />
0<br />
5<br />
Creative Output<br />
Business Sophistication<br />
52 <strong>Productivity</strong> Report 2010/2011
60.0<br />
Global Innovation Index of Malaysia, Singapore, Japan and South Korea.<br />
50.0<br />
40.0<br />
30.0<br />
20.0<br />
10.0<br />
0<br />
60.0<br />
50.0<br />
28<br />
7<br />
13<br />
Overall<br />
Ranking<br />
20<br />
29<br />
3<br />
17<br />
23<br />
Innovation Input<br />
Index<br />
42<br />
1<br />
19<br />
39<br />
33<br />
Institutions Human Capacity ICT & Uptake of<br />
Infrastructure<br />
52<br />
11<br />
17<br />
23<br />
43<br />
11<br />
23<br />
19<br />
Malasysia<br />
Singapore<br />
40.0<br />
Japan<br />
30.0<br />
20.0<br />
10.0<br />
0<br />
5 6<br />
14<br />
Market<br />
Sophistication<br />
25<br />
30<br />
12<br />
9<br />
Innovation Output<br />
Index<br />
14<br />
23<br />
13<br />
11<br />
6<br />
Science Output<br />
13<br />
7<br />
Creative Output<br />
24 26<br />
3<br />
7<br />
Business<br />
Sophistication<br />
18<br />
Korea<br />
Source: Global Innovation Index, 2009-2010<br />
* Note : Ranking from 138 countries, lower ranking denotes better performance<br />
Innovation In Organisations<br />
In this highly competitive business environment, innovation is the key for organisational<br />
survival. The ability to think outside the box has become an organisational norm. Some of the<br />
traits of a first-class organisation include being pro-active, innovative, creative, ready for change<br />
and providing value added services.<br />
Very often, the implementation of innovative ideas ends up in failure. This is mainly attributed<br />
to the inability of the organisation to meet with the requirements of change. As such, declaring<br />
2010 as the “Year of Creativity and Innovation” was a starting point of the Government’s effort<br />
to institutionalise innovation as a way of life. Its understanding encompasses a wider scope than<br />
merely slogans or plain declaration. Innovation must be disseminated in all aspects in order to<br />
create and develop an innovative eco-system.<br />
Innovation is not only limited to one group. Innovation must be fully understood and practised<br />
by all levels of society in their specific fields. Every individual must be involved in shaping the<br />
country to develop an economy which is helmed by innovation. As such, the launching of the<br />
NEM based on innovation will double the per capita income in the next ten years.<br />
<strong>Productivity</strong> Report 2010/2011<br />
53
PART 2<br />
Elevating the<br />
Economy to<br />
Greater Heights
CHAPTER 3<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
of the Services Sector
PRODUCTIVITY PERFORMANCE OF THE SERVICES SECTOR<br />
OVERALL SERVICES SECTOR<br />
Overview<br />
• The services sector has been the largest<br />
contributor to GDP in 2010. The sector was<br />
worth RM278.3 billion accounting for 48.5% of<br />
GDP (Figure 3.1). The increasingly prominent<br />
role expected of services is shown by the fact<br />
that seven of the twelve NKEAs announced in<br />
the ETP came from this sector.<br />
• Output of services sector grew by 6.9% in<br />
2010 (Figure 3.2). However, the unfavourable<br />
economic conditions in 2008 and 2009 required<br />
caution although recovery in the services sector<br />
occurred in 2010. Much of the rebound was<br />
attributed to quick policy intervention to ensure<br />
financial liquidity and sustained domestic<br />
demand.<br />
• Wholesale and retail trade services remained the<br />
largest single sub-sector accounting for 13.1% of<br />
GDP in 2010. Finance and insurance sub-sector<br />
was second by size contributing 11.3% of GDP<br />
after encountering setback during the financial<br />
crisis (Figure 3.1).<br />
• The improvement of communication services,<br />
utilities services, wholesale and retail trade<br />
services, and real estate and business services<br />
from the year before were significant, with<br />
output growth recording 8.6%, 8.2%, 7.9% and<br />
7.8% respectively in 2010. These sub-sectors<br />
were responsible for the overall services sector<br />
growth of 6.9% for 2010 (Figure 3.2).<br />
Figure 3.1: Contribution of Services Sector to GDP<br />
Percent<br />
60.0<br />
50.0<br />
40.0<br />
30.0<br />
20.0<br />
10.0<br />
0<br />
Utilities<br />
Wholesale and Retail Trade<br />
Accom. and Restaurant<br />
Transport and Storage<br />
Communication<br />
Finance and Insurance<br />
Real Estate and Business Services<br />
Other Services<br />
Services Sector<br />
2006 2007 2008 2009 2010<br />
2.97 2.90 2.84 2.89 2.92<br />
11.22 12.02 12.63 12.95 13.06<br />
2.19 2.27 2.33 2.42 2.38<br />
3.56 3.68 3.74 3.68 3.68<br />
3.64 3.65 3.75 4.03 4.09<br />
9.94 10.34 10.71 11.41 11.31<br />
4.64 5.21 5.09 5.28 5.31<br />
5.57 5.52 5.56 5.89 5.72<br />
43.73 45.60 46.65 48.55 48.45<br />
Computed from: - Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
56 <strong>Productivity</strong> Report 2010/2011
Chapter 3<br />
Figure 3.2: Output Growth of Services Sector<br />
Percent<br />
Utilities<br />
Wholesale and Retail Trade<br />
Accom. and Restaurant<br />
Transport and Storage<br />
Communication<br />
Finance and Insurance<br />
Real Estate and Business Services<br />
Other Services<br />
Services Sector<br />
20.0<br />
15.0<br />
10.0<br />
5.0<br />
Computed from: - Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
0<br />
-5.0<br />
2006 2007 2008 2009 2010<br />
4.85 4.01 2.14 0.38 8.22<br />
6.99 14.20 9.77 1.17 7.91<br />
5.60 10.34 7.28 2.76 4.95<br />
6.40 10.12 6.09 -2.85 6.90<br />
7.68 7.00 7.28 5.95 8.55<br />
7.73 10.74 8.27 5.10 6.12<br />
10.88 19.51 2.06 2.38 7.79<br />
4.49 5.52 5.27 4.39 3.97<br />
7.02 11.05 6.90 2.68 6.85<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
• <strong>Productivity</strong> grew by 4.7% to RM50,967 in<br />
2010 (Figures 3.3 & 3.4) for the services sector<br />
attested to the economic recovery from the<br />
global economic crisis. However, compared to<br />
the pre-crisis rate of 7.3% in 2007, the growth of<br />
services productivity for 2010 remained low due<br />
to uncertainties of sustainability of the recovery<br />
in Malaysia’s export market.<br />
Figure 3.3: <strong>Productivity</strong> Level of Services Sector<br />
250.0<br />
200.0<br />
RM Thousand<br />
150.0<br />
100.0<br />
50.0<br />
Utilities<br />
Wholesale and Retail Trade<br />
Accom. and Restaurant<br />
Transport and Storage<br />
Communication<br />
Finance and Insurance<br />
Real Estate and Business Services<br />
Other Services<br />
Services Sector<br />
Computed from: - Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
0<br />
2006 2007 2008 2009 2010<br />
152.87 156.01 156.74 154.83 163.42<br />
33.20 36.55 39.72 40.13 42.21<br />
14.82 15.51 16.15 16.25 16.87<br />
37.80 40.08 40.97 39.62 41.89<br />
95.67 105.37 115.41 122.35 130.46<br />
75.76 82.84 88.16 91.55 95.44<br />
179.57 185.14 185.15 192.39 203.72<br />
23.68 24.32 25.08 25.68 26.11<br />
42.48 45.59 47.86 48.66 50.97<br />
<strong>Productivity</strong> Report 2010/2011<br />
57
Figure 3.4: <strong>Productivity</strong> Growth of Services Sector<br />
Percent<br />
12.0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
-4.0<br />
-6.0<br />
-8.0<br />
Utilities<br />
Wholesale and Retail Trade<br />
Accom. and Restaurant<br />
Transport and Storage<br />
Communication<br />
Finance and Insurance<br />
Real Estate and Business Services<br />
Other Services<br />
Services Sector<br />
2006 2007 2008 2009 2010<br />
2.64 2.05 0.47 -1.22 5.55<br />
5.03 10.09 8.67 1.03 5.18<br />
-1.65 4.63 4.15 0.59 3.81<br />
7.92 6.05 2.22 -3.31 5.73<br />
-5.30 10.14 9.52 6.01 6.63<br />
3.44 9.35 6.43 3.84 4.25<br />
4.29 3.10 0.01 3.91 5.89<br />
1.59 2.69 3.14 2.39 1.67<br />
3.56 7.32 4.98 1.67 4.74<br />
Computed from: - Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
• The highest productivity growth rates were<br />
found in utilities, transportation and storage,<br />
and communication services. Their high growth<br />
rates were partly due to capital and knowledge<br />
intensity and technological innovations.<br />
• The productivity levels of services sub-sectors<br />
ranged from the lowest of RM16,868 for<br />
accommodation and restaurant services to the<br />
highest of RM203,718 for real estate and business<br />
services. This increasing heterogeneity range of<br />
services produced, transacted and consumed in<br />
the post-industrial phase of Malaysia’s economic<br />
development will continue.<br />
• The top three highest productivity levels were<br />
in real estate and business services, utilities<br />
and communication services. They involved<br />
heavy investment in costly physical capital,<br />
high skills and rapid changing technologies.<br />
On the other hand, consumer services such<br />
as accommodation and restaurants and other<br />
services such as education, training, health and<br />
domestic services where technology services<br />
production and delivery methods were relatively<br />
stable, had the lowest productivity levels.<br />
58 <strong>Productivity</strong> Report 2010/2011
Chapter 3<br />
Total Factor <strong>Productivity</strong><br />
• TFP growth attained by services sector during the<br />
period 2001-2010 was 1.6% (Table 3.1). Though<br />
affected by the global economic crisis towards<br />
the end of the decade, TFP’s contribution to<br />
output growth has increased relative to those of<br />
labour and capital.<br />
• Intense effort and expenditure on adopting<br />
innovative service business models, upgrading<br />
service information and performance systems,<br />
adjusting service delivery processes, improving<br />
soft skills and attitudes in many service<br />
businesses and sustained entrepreneurial spirit<br />
all helped to push standards and quality of<br />
services output.<br />
• Contribution to output growth is still evident<br />
from labour of 36.5%, capital with 35.8%<br />
whereas TFP only 27.8% (Table 3.1). The mobility<br />
of labour out of agriculture and to a lesser extent<br />
from manufacturing industries into services<br />
industries, though decreased from previous<br />
years, was still visible. The consequence of rapid<br />
increase in urbanisation caused by migration<br />
of workers into large towns and cities in the<br />
last three decades itself would have enlarged<br />
demand for the services sector.<br />
• The reliance on labour movement into the<br />
services sector for productivity growth is fast<br />
approaching to its limit. Labour dependence for<br />
productivity growth will not be sustainable in<br />
the future because the relocation of labour from<br />
primary industries especially agriculture and<br />
mining sectors had slowed significantly.<br />
• Wholesale and retail trade services recorded<br />
the highest TFP growth of 2% during the period<br />
2001-2010. It contributed 31.2% of output<br />
growth. The remaining contributions were<br />
from capital 40.6% and labour 28.1%. The high<br />
Trade<br />
Finance<br />
Transport<br />
Utilities<br />
Table 3.1: TFP Growth and Contributions, 2001-2010<br />
Services<br />
Sub-sectors<br />
Other Services<br />
Services Sector<br />
TFP<br />
Growth<br />
(%)<br />
Contribution to Output<br />
Growth (%)<br />
TFP Capital Labour<br />
2.0 31.2 40.6 28.1<br />
1.9 27.5 34.7 37.7<br />
1.6 27.4 30.7 41.9<br />
1.4 28.8 38.9 32.3<br />
1.0 22.6 33.9 43.5<br />
1.6 27.8 35.8 36.5<br />
Computed from: - Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
capital and TFP contributions were attributed<br />
by the expansion of large hypermarkets<br />
and superstores and supported by demand<br />
factors such as the push for higher domestic<br />
consumption to cushion the effects of the<br />
global slowdown. Supply factors that boosted<br />
productivity included the widespread adoption<br />
of more sophisticated management systems and<br />
methods that emphasised on quality, speed,<br />
reliability and customer satisfaction in terms<br />
of price and service quality. Regulatory factors<br />
that permitted expansion of large hypermarket<br />
chains after a five-year freeze on foreign related<br />
ones also contributed to the high TFP.<br />
• Financial services had the second highest TFP<br />
growth of 1.9% during the period 2001-2010 with<br />
entry of new service providers and expansion<br />
of branches including foreign banks in both<br />
Islamic and conventional banking. However,<br />
within financial services, labour contribution<br />
was 37.7% while capital was 34.7%. Other<br />
managerial systems, technological and process<br />
factors were of lesser significance as reflected by<br />
TFP contribution of only 27.5% (Table 3.1).<br />
<strong>Productivity</strong> Report 2010/2011<br />
59
• The transport and storage sub-sector comprises<br />
freight logistics for shipping goods and<br />
commodities and movement of passengers. It<br />
ranked third in TFP growth at 1.6% during the<br />
period (Table 3.1). Services providers require<br />
capital intensive transportation vehicles,<br />
machineries and ancillary equipment that<br />
would have resulted in upgrading of hardware<br />
technologies together with the capital<br />
investment. The sub-sector showed the lowest<br />
capital contribution to output growth among<br />
all services sub-sectors due to under-utilisation<br />
of capital. Notwithstanding the increase in<br />
passenger airlines especially by low cost carriers,<br />
capital contribution to growth in the subsector<br />
remained depressed because aircrafts<br />
are generally leased and were therefore not<br />
captured as capital investment expenditures in<br />
the computation of productivity ratios. Labour<br />
contribution to growth of transport and storage<br />
sub-sector was high at 41.9% compared to most<br />
services sub-sectors due to the high degree<br />
of personalised services required by these<br />
industries.<br />
• Utilities services registered only 1.4% TFP growth<br />
even though its TFP contribution to output<br />
growth was relatively significant accounting for<br />
28.8% to output growth (Table 3.1). Regulatory<br />
conditions and interference with energy prices<br />
would have restricted the scope for managerial<br />
changes that could have raised TFP growth.<br />
• Other services comprises consumer services<br />
namely, health, education, business and<br />
professional services. These sub-sectors<br />
require proportionally higher skilled and<br />
knowledgeable personnel which explained<br />
for the highest labour contribution to their<br />
output at 43.5%. In addition, this sub-sector<br />
registered lowest TFP contribution of 22.6%<br />
to output growth of 1.0% during the period<br />
2001-2010 (Table 3.1). This indicates that the<br />
industries within this sub-sector were still in the<br />
stage of development in terms of technological<br />
capabilities and innovation. Significant<br />
improvements can be made to elevate<br />
productivity as there is substantial scope for<br />
potential changes in selected consumer services<br />
and business & professional services.<br />
Strategies and Outlook<br />
• As the economy further strengthens from the<br />
aftermath of the global financial and economic<br />
crisis, the services sector is expected to resume<br />
its growth path in contributing to GDP in the<br />
years ahead. The contribution of TFP will increase<br />
if properly supported by changes in policies,<br />
regulations and administrative processes.<br />
Hence, Government related public services are<br />
essential to complement the services sector<br />
development. They will affect the relocation<br />
of resources among sectors and the various<br />
services sub-sectors to further improve labour<br />
and capital productivity.<br />
• Measures to boost investment into the services<br />
sector must be accompanied by improvement in<br />
knowledge and understanding of the emerging<br />
issues in the services sector. The application of<br />
technology and new skills development calls for<br />
new demand in human resources development<br />
that will help drive up productivity. External<br />
trade aspects of services markets arising<br />
from further liberalisation within the newer<br />
trade agreements will also enhance services<br />
productivity.<br />
• This chapter also analyses performance of<br />
services sector at the sub-sector levels namely,<br />
logistics services, ICT services, wholesale and<br />
retail trade services, business and professional<br />
services, tourism services, private education<br />
services and health services.<br />
60 <strong>Productivity</strong> Report 2010/2011
Chapter 3<br />
LOGISTICS SERVICES<br />
Overview<br />
• In today’s highly competitive business<br />
environment, companies are aiming to gain<br />
a larger share of the global market by taking<br />
advantage of outsourcing services. However,<br />
the success of these business performances<br />
needs to be complemented by an efficient<br />
logistics function to ensure smooth movement<br />
of materials, output and information throughout<br />
the company’s supply chain.<br />
• The scope of logistics covered in this report is<br />
on activities of bus transport, road haulage, sea<br />
transport, cargo handling/stevedoring services,<br />
storage and warehouse services, port operation<br />
services, shipping/forwarding agencies, freight<br />
forwarding services and courier services.<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
RM Thousand<br />
96.0<br />
94.0<br />
92.0<br />
90.0<br />
88.0<br />
86.0<br />
84.0<br />
82.0<br />
80.0<br />
78.0<br />
76.0<br />
Figure 3.5: <strong>Productivity</strong> Level of the Logistics Services<br />
82.91<br />
87.02<br />
90.48<br />
2006 2007 2008 2009 2010<br />
Computed from: Department of Statistics, Malaysia<br />
89.50<br />
Figure 3.6: Growth of Labour Cost Competitiveness<br />
of the Logistics Services<br />
94.50<br />
• <strong>Productivity</strong> of logistics services in 2010<br />
recorded a growth of 5.6% at RM94,504 (Figures<br />
3.5 & 3.6). The labour cost competitiveness also<br />
registered similar trend of improvement with<br />
labour cost per employee increased by 0.7%<br />
whereas unit labour cost declined significantly<br />
by 5.2% (Figure 3.6). The favourable performance<br />
of this sub-sector was supported by the positive<br />
growth in the economy where export increased<br />
by 36.4% and import rose by 45.5%. The increase<br />
in export and import contributed tremendously<br />
to the growth of container handling and<br />
improved facilities at local ports such as North<br />
Port in Port Klang which is able to accommodate<br />
larger ships and consignments.<br />
Percent<br />
25.0<br />
20.0<br />
15.0<br />
10.0<br />
5.0<br />
0<br />
-5.0<br />
-10.0<br />
-15.0<br />
<strong>Productivity</strong><br />
Labour Cost per<br />
Employee<br />
Unit Labour Cost<br />
2006 2007 2008 2009 2010<br />
12.50 4.96 3.97 -1.09 5.60<br />
18.95 1.91 0.95 -0.99 0.66<br />
8.85 -10.05 -6.75 1.45 -5.19<br />
Computed from: Department of Statistics, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
61
Best Practices<br />
• In terms of airfreight performance in Malaysia,<br />
some of the best practices observed in the<br />
airline industry include a shorter turnaround<br />
time for aircraft landing and take-off to less than<br />
30 minutes per landing.<br />
• Processing time upon request for workers and<br />
equipment are vital for the services provided<br />
at ports. Best practices for reducing processing<br />
time among selected ASEAN countries is<br />
Thailand where the processing time ranged from<br />
five minutes to six days followed by Vietnam<br />
about eight hours, Philippines from one to 24<br />
hours and Malaysia is found to be about 17 to<br />
36 hours.<br />
• An effective tracking system to monitor the<br />
status and location of cargo is necessary<br />
and many ports utilised a computer-based<br />
system especially ports that handle containers<br />
and those handling substantial volumes of<br />
specialised cargo such as dry and liquid bulk.<br />
Among the computer software/programmes of<br />
choice are Export/Import Terminal Management<br />
System (ETMS), Computer Integrated Terminal<br />
Operating System (CITOS) and NAVIS-SPARCS<br />
Yard Planning Programme.<br />
Strategies and Outlook<br />
• The potential of logistics services can be further<br />
enhanced through the implementation of<br />
effective warehouse management, just-in-time<br />
and point-to-point deliveries, integration of<br />
various transport modes and services to provide<br />
seamless connection with latest technologies.<br />
• The future for logistics services requires<br />
investment in latest technology and equipment<br />
such as satellite tracking to facilitate movement<br />
of goods and services in international trade<br />
direction. This includes using automated<br />
tracking Global Positioning System (GPS) of<br />
consignments and deliveries, better utilisation<br />
of shared services, implementation and delivery<br />
of consignment services around the clock.<br />
• The logistics hub in all major economic corridors<br />
such as the Northern Corridor Economic Region<br />
(NCER), the East Coast Economic Region (ECER),<br />
Iskandar Malaysia (IM), Sabah Development<br />
Corridor (SDC) and Sarawak Corridor of<br />
Renewable Energy (SCORE) needs to be<br />
revitalised in view of increase in population and<br />
expansion in economic development activities<br />
in these regions.<br />
• The Integrated Transportation Terminal at<br />
Bandar Tasik Selatan (ITT-BTS) concept should<br />
be extended to other bus terminals nationwide.<br />
The used of e-ticketing system will enable<br />
passengers to have a wider choice of bus<br />
services at a click of a button. This allowed<br />
business transaction to be conducted in less<br />
than one minute. The boarding system is in-line<br />
with those practised by international airports.<br />
62 <strong>Productivity</strong> Report 2010/2011
Chapter 3<br />
INFORMATION AND<br />
COMMUNICATION TECHNOLOGY<br />
(ICT) SERVICES<br />
Overview<br />
• The information and communication technology<br />
(ICT) services consist of the computer and<br />
telecommunications services where computer<br />
services include hardware consultancy, software<br />
consultancy and supply, data processing<br />
services, database activities, maintenance and<br />
repair and other computer related services. The<br />
telecommunications services on the other hand<br />
comprise telephone broadcasting, telephone,<br />
internet and paging services.<br />
• Excluding hardware, the ICT services also<br />
include elements of shared services and<br />
outsourcing, the provision of e-services such<br />
as e-commerce, e-Government and e-learning,<br />
software and hardware consultancy, repairs and<br />
maintenance services. ICT solutions including<br />
export and import of ICT services are anticipated<br />
to spearhead numerous activities within the<br />
services sector.<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
• ICT services recorded productivity growth of<br />
6.3% to RM301,789 in 2010 (Figures 3.7 & 3.8).<br />
Labour cost competitiveness of the industry<br />
improved with labour cost per employee which<br />
grew by 3.3% and unit labour cost declined<br />
by 1.3% (Figure 3.8). The improvement in<br />
productivity growth was mainly contributed by<br />
telecommunication services. The growth was<br />
due to higher usage of cellular, broadband and<br />
third generation (3G) services supported by<br />
improved operating environment and domestic<br />
recovery as well as aided by gradual economic<br />
recoveries in the United States, Singapore, Japan<br />
and China.<br />
RM Thousand<br />
Figure 3.7: <strong>Productivity</strong> Level of the Information and<br />
Communication Technology (ICT) Services<br />
310.0<br />
300.0<br />
290.0<br />
280.0<br />
270.0<br />
260.0<br />
250.0<br />
240.0<br />
230.0<br />
Computed from: Department of Statistics, Malaysia<br />
Percent<br />
266.99<br />
<strong>Productivity</strong><br />
Labour Cost per<br />
Employee<br />
Unit Labour Cost<br />
259.55<br />
271.29<br />
283.84<br />
301.79<br />
2006 2007 2008 2009 2010<br />
Figure 3.8: Growth of Labour Cost Competitiveness of the<br />
Information and Communication Technology (ICT) Services<br />
20.0<br />
15.0<br />
10.0<br />
5.0<br />
0<br />
-5.0<br />
2006 2007 2008 2009 2010<br />
3.18 -2.79 4.53 4.62 6.32<br />
16.15 -0.35 7.48 2.12 3.29<br />
11.73 -0.14 8.07 -1.48 -1.30<br />
Computed from: Department of Statistics, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
63
Best Practices<br />
• In the ICT services, leading companies are those<br />
capable of providing a software-based mobility<br />
platform that takes existing content and<br />
applications and transport them seamlessly to<br />
mobile devices. This allows businesses to deliver<br />
customised information to a complete array of<br />
wireless, broadband and voice communication<br />
devices like Personal Digital Assistants (PDAs),<br />
second generation (2G) and third generation<br />
(3G) mobile phones and personal computers.<br />
The development of the applications is based<br />
on the open source concept in order to keep<br />
operational cost at a minimal level. The open<br />
source concept has free source code that<br />
enriched the e-community.<br />
• The interactive media is seen as one of the<br />
possible avenues for expansion as more and<br />
more people are now on the internet and have<br />
mobile hardware. Hence more companies are<br />
using the interactive media as their marketing<br />
tools. Moreover those within the 25-35 years<br />
age group who were originally receptive to<br />
technologies have now entered into the labour<br />
force market.<br />
Strategies and Outlook<br />
• The ICT services has been identified as one of<br />
the potential growth areas for Malaysia. The<br />
increase in growth is attributed to the demand<br />
in computer and telecommunication services<br />
from other sectors such as Islamic finance and<br />
distance learning education. This is facilitated<br />
by Government initiatives such as infrastructure<br />
(networks and broadband), grants and tax<br />
exemption for the companies to flourish<br />
and increase their productivity. Successful<br />
ICT companies must offer well-packaged,<br />
value added products and services to remain<br />
competitive.<br />
• As the local market would be saturated in the<br />
next few years, ICT companies must actively<br />
source for new markets within the Asian region<br />
such as Vietnam. The forming of strategic<br />
alliance with local and external collaborators is<br />
a way forward to penetrate new market.<br />
• ICT services companies are very dependent on<br />
human intellectual capital. Adequate training<br />
must be given to new ICT graduates so that<br />
they possess the right knowledge and skills.<br />
Graduates must possess the right attitude and<br />
develop critical thinking and innovativeness.<br />
Malaysian ICT players need to be innovative and<br />
creative in order to be world class ICT providers.<br />
• ICT services are expected to increase particularly<br />
in the mobile applications as the e-commerce<br />
traffic is finally integrated into the mobile phones<br />
and convergences technology. The performance<br />
of ICT services can be further enhanced through<br />
heavy investment in the telecommunication<br />
sector targeted towards the provision of high<br />
speed broadband services, up-taking of internet<br />
and mobile banking in the financial services<br />
sector, continuing efforts in e-Government and<br />
e-commerce activities, increasing investment in<br />
ICT-driven outsourcing businesses, expansion<br />
of online and computer-aided distance learning<br />
programmes.<br />
64 <strong>Productivity</strong> Report 2010/2011
Chapter 3<br />
WHOLESALE AND RETAIL TRADE<br />
SERVICES<br />
Overview<br />
• Wholesale and retail trade services together<br />
with the distribution of motor vehicles are key<br />
components of the distributive trade sub-sector.<br />
They are crucial for bringing input materials<br />
from their sources for all sectors of the economy.<br />
• Wholesale generally includes those engaged<br />
in certain minor value-add activities such as<br />
repackaging, labelling and those providing<br />
storage and intermediating functions without<br />
changing the form and nature of what they<br />
acquire and what they sell.<br />
• Retail trade covers reselling of goods in smaller<br />
quantities without changing their form or<br />
characteristics upon receiving from wholesalers<br />
or other agents. Retailers often complement<br />
transactions with other services such as<br />
franchising, online e-commerce and commercial<br />
banking with cafe service to facilitate the<br />
business and to ensure repeat patronage.<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
• The analysis on performance ratio for wholesale<br />
and retail trade excludes the motor vehicle<br />
industry. In 2010, sales value per employee in<br />
wholesale and retail trade services grew by 6%<br />
to RM738,691 (Figures 3.9 & 3.10). Wholesale<br />
trade registered four times higher in sales value<br />
per employee of RM1.8 million as compared to<br />
retail trade of RM0.4 million.<br />
RM Thousand<br />
800.0<br />
700.0<br />
600.0<br />
500.0<br />
400.0<br />
300.0<br />
200.0<br />
100.0<br />
0<br />
Percent<br />
Figure 3.9: Sales Value per Employee of the<br />
Wholesale and Retail Trade Services<br />
590.98<br />
2006 2007 2008 2009 2010<br />
35.0<br />
30.0<br />
25.0<br />
20.0<br />
15.0<br />
10.0<br />
5.0<br />
0<br />
-5.0<br />
-10.0<br />
Sales Value per<br />
Employee<br />
Labour Cost per<br />
Employee<br />
Unit Labour Cost<br />
676.03<br />
735.84<br />
Computed from: Department of Statistics, Malaysia<br />
696.79<br />
Figure 3.10: Growth of Labour Cost Competitiveness<br />
of the Wholesale and Retail Trade Services<br />
738.69<br />
2006 2007 2008 2009 2010<br />
29.18 14.39 8.85 -5.31 6.01<br />
22.43 12.94 5.25 6.02 3.71<br />
-5.23 -1.27 -3.30 11.96 -2.17<br />
Computed from: Department of Statistics, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
65
• Although the number of employees within the<br />
sub-sector increased, the share of labour input<br />
to sales value in 2010 declined by 2.2% (Figure<br />
3.10). This shows competency of the workforce<br />
and a shift towards the use of electronic<br />
technology driven innovations particularly in<br />
information and communication digitisation<br />
and computerisation. These improvements start<br />
from source of goods, warehousing, logistics<br />
and tracking chains to final retail sale points. This<br />
is in line with Government policies to reduce<br />
dependency on foreign workers.<br />
• Wholesale and retail trade is highly dependent<br />
on development of infrastructure such as<br />
commercial complexes, shopping centres and<br />
information technology to perform effective<br />
delivery and efficient services. The unabated<br />
growth of real estate and business services,<br />
communication, transport and storage services<br />
provide both backward and forward support for<br />
their supply and distributive value chains.<br />
Best Practices<br />
• Best practices in business management are<br />
observed among those closely connected<br />
with logistics chains and those engaged<br />
in concentrated distribution in the form<br />
of wholesale centres or shopping centres.<br />
Appropriate choice of location and sites for<br />
wholesalers and for shopping outlets to link to<br />
logistics supply chain and to final consumers is<br />
also a key success factor among the best service<br />
providers.<br />
• To achieve higher productivity and<br />
effectiveness, leading distributors have in<br />
place highly sophisticated backroom services<br />
providing backup to store front activities. This<br />
includes stock ordering, warehousing, packing<br />
and repacking, shipping, billing and payments,<br />
security, customer servicing, complaints and<br />
return systems. Leading distributors also invest<br />
heavily in satellite tracking and most up-to-date<br />
information system. These good management<br />
practices enabled them to cater demand<br />
beyond the borders and to optimise workforce<br />
requirements.<br />
• Top retailers practise concentrated retailing<br />
which provides facilitative services such as joint<br />
promotion, parking, packaging, transportation,<br />
delivery, online ordering, financing services<br />
and customer support services such as areas for<br />
recreation, café or food court and conducive and<br />
homely environment. Leading retail distributors<br />
have adopted practices such as return and<br />
refund and have cooperated with banks to<br />
provide credit for easy payment, incentives and<br />
guarantees.<br />
• Most successful distribution firms, which are<br />
mainly foreign-Malaysian joint ventures and<br />
large local distributors, have introduced systems<br />
and process improvements. This will provide<br />
smoother, faster and error-free procedures in<br />
their core transactional functions which are<br />
to support the service providers in wholesale<br />
or retail businesses. These will bring greater<br />
reliability, dependability and trust to achieve<br />
higher service quality levels for meeting<br />
customers’ expectations.<br />
Strategies and Outlook<br />
• Forward linkage to market and backward linkage<br />
to suppliers, human and financial resources<br />
must be well adjusted to the changing economic<br />
environment of global needs and innovation as<br />
this is vital for the future success of wholesale<br />
and retail trade. Innovation depends on global<br />
trends, market demand and preference changes,<br />
demographic, values, lifestyle and taste changes.<br />
66 <strong>Productivity</strong> Report 2010/2011
Chapter 3<br />
• Public policies, regulations and guidelines to<br />
provide incentives for further investment and<br />
growth of distributive services. They are crucial<br />
factors to consider for businesses to take risks.<br />
The lifting of the five-year freeze on foreign<br />
hypermarket entry coupled with tendency<br />
towards selective liberalisation of markets and<br />
equity conditions have given impetus to future<br />
growth and higher productivity in distributive<br />
services.<br />
• The balance between small local distributors<br />
and large foreign related ones is important for<br />
future growth in view of increasing complexities<br />
in global, regional and bilateral trading<br />
arrangements on services. The trade agreements<br />
of General Agreement on Trade in Services<br />
(GATS), ASEAN Framework Agreement of<br />
Services (AFAS), Trans-Pacific Partnership (TPP)<br />
agreement and other bilateral agreements are<br />
already pushing for liberalisation of distributive<br />
trade services beyond the region.<br />
BUSINESS AND PROFESSIONAL<br />
SERVICES<br />
Overview<br />
• The business and professional services is one of<br />
the fastest growing sub-sectors with increasing<br />
contribution to the economy. Business and<br />
professional services comprise a wide range<br />
of professions which are broadly categorised<br />
into two types: accredited and non-accredited<br />
professions. Accredited profession is governed<br />
by particular standards and regulatory/<br />
legislative bodies such as the accounting<br />
profession which is governed by the Malaysian<br />
Institute of Accountants (MIA) under the<br />
Accountants Act 1967. Accredited professions<br />
include activities of accounting, auditing and<br />
tax services, construction services, medical and<br />
legal services while non-accredited professions<br />
can be found in management, consulting, oil<br />
and gas, research, lab-testing and advertising<br />
industries. The three most important segments<br />
of business and professional services that<br />
increasingly contribute to the economy are<br />
construction services, accounting and legal.<br />
• The accredited profession such as accounting<br />
and legal services are domestic oriented.<br />
Demand for accounting services is<br />
predominantly driven by audit, accounting<br />
and tax services. For legal services, the greatest<br />
demand comes from the litigation services. The<br />
construction services are matured and globally<br />
recognised where engineers, architects and<br />
surveyors are highly in demand both locally<br />
and in overseas markets.<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
• The analysis on productivity covers only lawyers,<br />
accountants, architects, building draughtsman,<br />
engineers and surveyor services. In 2010, the<br />
business and professional services recorded<br />
productivity growth of 5.9% amounting to<br />
RM60,854 (Figures 3.11 & 3.12). Labour cost<br />
competitiveness of this sub-sector improved<br />
with labour cost per employee which grew by<br />
1.7% and unit labour cost declined by 2.0%.<br />
RM Thousand<br />
62.0<br />
61.0<br />
60.0<br />
59.0<br />
58.0<br />
57.0<br />
56.0<br />
55.0<br />
54.0<br />
53.0<br />
52.0<br />
51.0<br />
Figure 3.11: <strong>Productivity</strong> Level of the<br />
Business and Professional Services<br />
54.71<br />
55.25<br />
56.05<br />
2006 2007 2008 2009 2010<br />
Computed from: Department of Statistics, Malaysia<br />
57.47<br />
<strong>Productivity</strong> Report 2010/2011<br />
60.85<br />
67
• Increasing demand for differentiated and timely<br />
delivery of designs and services is the main<br />
reason for the improvement in the productivity<br />
performance of this sub-sector. Demand<br />
increased as the range of services provided has<br />
broadened while the delivery methods and<br />
internal business processes have significantly<br />
improved due to advancement in technology<br />
particularly in information and communication<br />
technology. Legal services have seen an<br />
improvement in the final case submission of<br />
litigating parties and delivery of judgement due<br />
to enforcement and advancement in technology.<br />
• Innovativeness in offering a wide range of<br />
services had enabled this sub-sector to achieve<br />
competitive advantage. Lower unit labour<br />
cost can be obtained through the skilled<br />
talent of these professionals together with<br />
right investment in technology. Effective and<br />
adequate training programs are essential in<br />
producing high skilled and trained professionals.<br />
The use of technology is particularly important<br />
to provide administrative and technical supports<br />
that improve quality of services which in turn<br />
increase the level of customer satisfaction.<br />
Best Practices<br />
• Service innovation is the key factor in all<br />
successful business and professional services<br />
firms. Leading firms are actively pursuing<br />
differentiation through innovations as a means<br />
to establish, rebuild or maintain a competitive<br />
advantage. As services offered by these firms are<br />
easy to replicate, innovation is very important<br />
to protect and expand their market share. Most<br />
service ideas (other than processes) cannot be<br />
protected through copyright or patent and firms<br />
need to innovate to continuously stay ahead.<br />
Figure 3.12: Growth of Labour Cost Competitiveness<br />
of the Business and Professional Services<br />
Percent<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
-4.0<br />
-6.0<br />
-8.0<br />
<strong>Productivity</strong><br />
Labour Cost per<br />
Employee<br />
Unit Labour Cost<br />
2006 2007 2008 2009 2010<br />
5.16 0.97 1.46 2.53 5.88<br />
2.38 -0.53 0.47 0.73 1.71<br />
-5.53 -4.67 -0.59 -1.35 -2.01<br />
Computed from: Department of Statistics, Malaysia<br />
• As a result of the emergence and rapid expansion<br />
of ICT worldwide, most successful firms have<br />
improved productivity through multiple service<br />
distribution channels such as e-channels, mobile<br />
channels apart from the conventional face-toface<br />
service delivery. Majority of the firms adopt<br />
Bricks-and-Clicks as their business model by<br />
integrating both offline and online processes.<br />
Hence firms must address previously unfulfilled<br />
needs such as e-service delivery, e-valuation,<br />
e-filing, e-booking, e-payment which can be<br />
delivered via internet or mobile channels. Many<br />
customers are willing to pay any premium for<br />
convenient services obtained from alternative<br />
channels.<br />
• Leading business and professional service<br />
firms tend to establish good relationships with<br />
other businesses regardless of the sectors. For<br />
instance, legal service and construction firms<br />
68 <strong>Productivity</strong> Report 2010/2011
Chapter 3<br />
are working together for property sales and<br />
marketing. Networking between businesses can<br />
support each other to obtain their contacts for<br />
advice, technical or even financial assistance.<br />
• The use of secondary data analysis and marketing<br />
skills are important for the professional business<br />
success. The marketing mix will determine the<br />
profit growth, market share and competitive<br />
advantage. Most of the businesses did well<br />
in realising their services through effective<br />
marketing campaigns such as event and<br />
sponsorships, societal marketing approach as<br />
well as joint promotion with media company<br />
activities.<br />
Strategies and Outlook<br />
• Business and professional services such as<br />
accounting, legal, architectural and engineering<br />
firms are facing a more complex and crowded<br />
market place than ever before. The combination<br />
of increased competition, labour cost,<br />
commercialised services is more demanding<br />
and has placed new strains on firms.<br />
• Developing new markets is one of the most<br />
challenging tasks for business and professional<br />
services. Businesses have to continuously be<br />
more creative in utilising resources and ideas to<br />
gain competitive advantages. Most companies<br />
offer quite heterogeneous products and services<br />
where customers can have wider choice. It is<br />
crucial for firms in this sub-sector to find a niche<br />
market for their products and services where<br />
customisation and personalisation of services<br />
are paramount.<br />
• The firms should capitalise on cross border<br />
trading to take advantage of the cheaper raw<br />
materials. Tapping on global markets as one way<br />
to build volume, firms should establish business<br />
networking with their overseas counterparts.<br />
Likewise, firms should also take the initiatives<br />
to have their business information and contacts<br />
available at the offices of Malaysian embassies,<br />
consulates and high commissions.<br />
TOURISM SERVICES<br />
Overview<br />
• Tourism services is one of the fastest growing<br />
industries in the global economy and one of<br />
the drivers of growth in the services sector. It<br />
continues to be a key foreign exchange earner<br />
thus strengthening the services account of<br />
the balance of payment as well as attracting<br />
investment and providing employment<br />
opportunities. It also acts as an important<br />
growth catalyst resulting in a multiplier effect<br />
due to its spin-off to other industries such as<br />
accommodation, restaurants, banking, local<br />
transportation, shopping and entertainment.<br />
Some of the core products of tourism services<br />
include eco-tourism, agro-tourism, edu-tourism,<br />
health tourism, sports tourism and Meetings,<br />
Incentives, Convention and Exhibition (MICE).<br />
• Malaysia recorded tourists arrival of 24.6 million<br />
in 2010 with total receipts of RM56.5 billion.<br />
The country remains an attraction for regional<br />
tourists. Among the top five were Singapore,<br />
Indonesia, Thailand, China and Brunei, all of<br />
which constituted 78.4%. The strongest growth<br />
of tourists in 2010 came from India (17.1%),<br />
South Korea (16.2%), United Arab Emirates (16%)<br />
and Iran (14.3%). The high growth of tourists<br />
from India was facilitated by the opening of new<br />
air routes to several major cities in the country.<br />
<strong>Productivity</strong> Report 2010/2011<br />
69
• Malaysia’s strong growth in tourism can be<br />
attributed to six key factors. These are strong<br />
economic growth in Asian countries, higher<br />
global brand awareness, increasing income<br />
of Malaysian families, strong promotion of<br />
domestic travel, excellent growth of local<br />
aviation and better connectivity as well as travel<br />
market liberalisation.<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
• The analysis on productivity covers only<br />
accommodation and travel agencies and tour<br />
operators services. The productivity of tourism<br />
services increased by 4% to RM56,246 in<br />
2010 (Figures 3.13 & 3.14). The sector remains<br />
competitive as reflected by a high growth in<br />
productivity and complemented by growth of<br />
0.8% in labour cost per employee and a drop<br />
of unit labour cost at 1.5% (Figure 3.14). This<br />
was due to the improvement in service delivery<br />
coupled with technology enhancement such<br />
as automation and ICT. The hotel industry also<br />
registered high occupancy rate of 64.3% in 2010<br />
with Pahang which recorded the highest rate<br />
of 89%. The industry should expand further its<br />
operations to cater for high-spending and long<br />
stay tourists due to the availability of apartment<br />
hotels. Some of the popular tourism programmes<br />
include homestay and eco-tourism.<br />
Best Practices<br />
• Best practices in tourism services observed in<br />
one of the leading hotel were contributed by<br />
two crucial elements. The first element is the<br />
ability to anticipate the needs of the guests and<br />
obliged them with excellent service delivery.<br />
The second element is the ability to choose the<br />
right human resources and provide a conducive<br />
RM Thousand<br />
Figure 3.13: <strong>Productivity</strong> Level of the Tourism Services<br />
60.0<br />
50.0<br />
40.0<br />
30.0<br />
20.0<br />
10.0<br />
0<br />
Computed from: Department of Statistics, Malaysia<br />
Figure 3.14: Growth of Labour Cost Competitiveness<br />
of the Tourism Services<br />
Percent<br />
44.85<br />
2006 2007 2008 2009 2010<br />
12.0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
-4.0<br />
<strong>Productivity</strong><br />
Labour Cost per<br />
Employee<br />
Unit Labour Cost<br />
49.36<br />
53.07 54.10<br />
2006 2007 2008 2009 2010<br />
2.62 10.06 7.50 1.95 3.96<br />
2.80 7.34 7.33 0.61 0.80<br />
-3.04 -0.07 -2.13 -0.52 -1.47<br />
Computed from: Department of Statistics, Malaysia<br />
56.25<br />
working environment where diversity is<br />
valued, quality of life is enhanced, individual<br />
aspirations are fulfilled and the hotel’s mystique<br />
is strengthened.<br />
70 <strong>Productivity</strong> Report 2010/2011
Chapter 3<br />
• Hotels need to strive for excellence and<br />
continuously offer innovative products and<br />
services guided by the ever-changing needs<br />
of the guests. Some of the innovative services<br />
provided by the hotel are the provision of<br />
personalised services which include airport<br />
transfer by high speed train, introduction of<br />
private butler and registration within the same<br />
hotel floor.<br />
• To achieve higher occupancy rate during<br />
weekends for the business hotels, special<br />
family packages can be introduced. This could<br />
possibility increase occupancy rate of 10% to<br />
20%. The emphasis towards excellent service<br />
delivery is continuously adding more value to<br />
the customers.<br />
• Hotel staffs are assets due to their strong<br />
commitment with the guests and this must be<br />
reflected by a high level of professionalism. To<br />
the employees, the hotel is their home and the<br />
guests are treated like in their own home. The<br />
hotel emphasises on recruiting people who love<br />
to interact with others. Once they are recruited,<br />
the skill required for daily jobs can be trained.<br />
Strategies and Outlook<br />
• The tourism services will continue to be at the<br />
forefront of Malaysia’s economic development.<br />
The sector has been identified as one of the 12<br />
National Key Economic Areas (NKEAs). Malaysia<br />
is targeting to attract 36 million tourists who<br />
would contribute RM168 billion to the economy<br />
in 2020.<br />
• Malaysia attracts mainly budget travellers<br />
compared to the more affluent tourists recorded<br />
by neighbouring countries. Targeting high yield<br />
tourists requires the provision of high quality<br />
accommodation, excellent service quality<br />
and attractive tourism packages. Improved<br />
international connectivity and taxi services will<br />
further add value to these packages. Service<br />
providers need to improve the content of its<br />
service delivery emphasising on cleanliness,<br />
maintenance and safety.<br />
• Malaysia should promote more heritage<br />
monuments. Besides being rich in traditional<br />
performances and music, cultural festivals, food<br />
and cuisines, handicrafts are among others<br />
could be further developed and promoted<br />
as tourism products. Many of our excellent<br />
traditional performances such as Mak Yong,<br />
Wayang Kulit and Kuda Kepang should be<br />
encouraged and supported. Cultural products<br />
should be revitalised and developed as tourism<br />
offerings. Tourists appreciate the varieties of<br />
culture as part of travel experiences.<br />
PRIVATE EDUCATION SERVICES<br />
Overview<br />
• The private education service is defined as “all<br />
private providers involved in the provision of<br />
education or education-related services”. The<br />
private education services consist of private<br />
universities and colleges, education training<br />
centres, international schools, private teacher’s<br />
training centres, education and associated<br />
training centres and quasi-private training<br />
centres (training centres associated with<br />
Government-linked companies).<br />
• In 2010, there are 20 public higher education<br />
institutions, 43 private universities and<br />
universities colleges, 5 foreign university<br />
branches, 429 private colleges, 53 Chinese<br />
independent secondary schools, 118 private<br />
secondary schools and 20 international schools<br />
that cater primarily to the children of expatriate<br />
<strong>Productivity</strong> Report 2010/2011<br />
71
workers. The foreign student population in<br />
Malaysia exceeded 90,000. Malaysia was ranked<br />
11 th in the world by United Nations Educational,<br />
Scientific and Cultural Organisation (UNESCO) in<br />
2010 for quality of educational services.<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
• <strong>Productivity</strong> of private education services<br />
registered a 4.9% growth to RM50,266 in 2010<br />
(Figures 3.15 & 3.16). The private education<br />
services continued to strengthen its labour<br />
cost competitiveness in 2010 where labour cost<br />
per employee grew by 1.3% and supported by<br />
a corresponding decline in unit labour cost at<br />
0.9% (Figure 3.16).<br />
• This productivity growth was high as Malaysia<br />
has been gaining worldwide recognition<br />
as a preferred destination for tertiary and<br />
higher education through deregulation of<br />
the education services sector. The increase<br />
in productivity was contributed by effective<br />
Government promotion of Malaysia as a<br />
centre for all levels of education. These include<br />
establishing Malaysia as a higher education<br />
mobility hub for international students,<br />
developing effective marketing strategies,<br />
establishing of the Malaysian Higher Education<br />
Centre in selected cities worldwide and forging<br />
collaboration with international public and<br />
private institutions of higher learning.<br />
Best Practices<br />
• Middle-income parents and students are<br />
now more well-informed about the relatively<br />
sophisticated private education services and<br />
they are prepared to pay for quality education.<br />
Their purchasing decisions are based on their<br />
assessment of programme offering, institution<br />
RM Thousand<br />
60.0<br />
50.0<br />
40.0<br />
30.0<br />
20.0<br />
10.0<br />
0<br />
Figure 3.15: <strong>Productivity</strong> Level of the<br />
Private Education Services<br />
Figure 3.16: Growth of Labour Cost Competitiveness<br />
of the Private Education Services<br />
Percent<br />
16.0<br />
14.0<br />
12.0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
-4.0<br />
-6.0<br />
<strong>Productivity</strong><br />
Labour Cost per<br />
Employee<br />
Unit Labour Cost<br />
39.82<br />
43.83<br />
2006 2007 2008 2009 2010<br />
Computed from: Department of Statistics, Malaysia<br />
2006 2007 2008 2009 2010<br />
13.51 10.06 5.07 4.03 4.93<br />
7.21 5.91 1.74 0.55 1.30<br />
-3.40 -3.74 -0.55 -1.00 -0.90<br />
Computed from: Department of Statistics, Malaysia<br />
46.05 47.91<br />
50.27<br />
reputation and quality of teaching profession.<br />
This can be seen with many high-profile<br />
international universities from Australia and<br />
the United Kingdom establishing their branch<br />
campuses in Malaysia.<br />
• In order to improve accessible and affordable<br />
education, it is critical for the Government and<br />
72 <strong>Productivity</strong> Report 2010/2011
Chapter 3<br />
financial institutions as well as philanthropic<br />
trusts to provide financial assistance in the form<br />
of student loans, grants or scholarships.<br />
• To encourage more established foreign<br />
universities to set up their campuses in<br />
Malaysia, regulation of education policies will<br />
be simplified to make it more investor friendly.<br />
• To support healthy private education services,<br />
the education institutions should focus on<br />
both input and outcomes. In Malaysia, the<br />
process of developing and establishing an<br />
outcome-focused quality standard accredited<br />
by Malaysian Qualifications Agency (MQA)<br />
has been applied to both private and public<br />
institutions.<br />
Strategies and Outlook<br />
• Growth areas in private education services are<br />
mainly in the areas of competition, public sector<br />
focus, efficiency gain, innovation, supplementary<br />
capacity and economic contribution. Private<br />
education service providers should provide<br />
wider choice of services to ensure greater<br />
competitions. Both private and public education<br />
providers should compete with each other in<br />
terms of efficiency gain. A culture of autonomy<br />
innovation should be inculcated by all education<br />
providers. Under supplementary capacity,<br />
private education service providers tend to<br />
be more flexible in reaching areas that public<br />
institutions are unable to serve. Education will<br />
still be viewed by the Government as a driver of<br />
economic growth.<br />
• The evaluation system can be improved by<br />
hiring qualified staff, regular analysis of data for<br />
decision-making and adoption of best practises<br />
for modelling purposes. Furthermore, pilot<br />
tests prior to implementation of procedures,<br />
establishment of a grievance procedure,<br />
the building of a database of institutional<br />
information to serve the needs of all stakeholders<br />
and regular evaluation of the evaluation system<br />
should be carried out.<br />
• The private education services sector is expected<br />
to accelerate its productivity growth in future in<br />
tandem with the global economic recovery. With<br />
modern facilities and the widespread use of<br />
innovative teaching and learning technologies,<br />
Malaysia offers a broad range of high quality<br />
yet affordable courses that are internationally<br />
recognised.<br />
• Although Malaysia is regarded as having one of<br />
the most progressive private education services<br />
in the region, Malaysia should continuously<br />
improve and enforce its high impact initiatives<br />
in order not to fall short of targets and runs<br />
the risk of being overtaken by neighbouring<br />
countries.<br />
HEALTHCARE SERVICES<br />
Overview<br />
• Growth in the private healthcare services<br />
is dependent on the economic growth of a<br />
country. It is concentrated mainly in the urban<br />
areas with corporate clients being their main<br />
customers.<br />
• The healthcare services comprises private<br />
hospitals and maternity homes, medical<br />
services and dental services. Private hospitals<br />
and maternity homes are the largest healthcare<br />
providers within the healthcare services<br />
followed by medical and dental services.<br />
• In Malaysia, the public hospitals or public<br />
healthcare centres are still the preferred<br />
<strong>Productivity</strong> Report 2010/2011<br />
73
healthcare providers because of low charges<br />
and much improved facilities such as new<br />
hospitals and the new “1Malaysia Clinics”.<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
• The private healthcare services registered<br />
productivity growth of 3.6% at RM56,680 in<br />
2010 (Figures 3.17 & 3.18). The growth was<br />
due to higher demand for private healthcare<br />
services as Malaysia experienced lower infant<br />
mortality rate, increased life expectancy, rapid<br />
urbanisation and higher disposable household<br />
income resulting from improved economic<br />
performance registered in 2010.<br />
• Labour cost competitiveness of the healthcare<br />
services improved as shown by a productivity<br />
growth of 3.6% which was higher than the<br />
growth of labour cost per employee of 1.4%<br />
and decline in unit labour cost by 1.3% (Figure<br />
3.18). The improvement was due to the increase<br />
in the supply of skilled staff resulting from<br />
increasing number of nursing programmes<br />
offered by various public and private colleges.<br />
To ensure a consistent supply of trained staff,<br />
a number of private hospitals have taken the<br />
initiatives to set up their own nursing colleges.<br />
In addition, increased investment in modern<br />
medical technologies by the private healthcare<br />
providers also contributed to improved labour<br />
cost competitiveness.<br />
• The growth of the private healthcare services is<br />
also contributed by the Government’s efforts in<br />
health tourism. Among the services identified<br />
for health tourism are medical screening<br />
services, diagnostic services and cosmetic<br />
surgery. Currently, there are 35 private hospitals<br />
which are recognised by the Government as<br />
health tourism hospitals.<br />
RM Thousand<br />
Figure 3.17: <strong>Productivity</strong> Level of the Healthcare Services<br />
60.0<br />
50.0<br />
40.0<br />
30.0<br />
20.0<br />
10.0<br />
Figure 3.18: Growth of Labour Cost Competitiveness<br />
of the Healthcare Services<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
-4.0<br />
-6.0<br />
Percent<br />
0<br />
47.13<br />
Best Practices<br />
2006 2007 2008 2009 2010<br />
-8.0<br />
<strong>Productivity</strong><br />
Labour Cost per<br />
Employee<br />
Unit Labour Cost<br />
50.47<br />
Computed from: Department of Statistics, Malaysia<br />
53.02 54.73<br />
2006 2007 2008 2009 2010<br />
-1.65 7.10 5.05 3.21 3.57<br />
7.20 2.18 1.70 1.05 1.41<br />
3.33 -6.08 -2.03 -1.75 -1.26<br />
Computed from: Department of Statistics, Malaysia<br />
56.68<br />
• One of the leading private healthcare providers<br />
has established a network of 21 hospitals to<br />
meet not only domestic demand but also<br />
international demand. To sustain long-term<br />
value creation, this leading hospital emphasises<br />
on continuous improvement and nurturing of<br />
human and intellectual capital. As part of its<br />
continuous improvement efforts, the leaders in<br />
74 <strong>Productivity</strong> Report 2010/2011
Chapter 3<br />
the industry had embarked on quality initiatives<br />
such as accreditation from the Malaysian<br />
Society for Quality in Health (MSQH) and<br />
quality certifications by international bodies<br />
for Integrated Management System (IMS) that<br />
integrat and emphasise on Quality Management<br />
System (MS ISO 9001:2000), Environment (MS<br />
ISO 14001:2004) and Occupational Safety and<br />
Health (OSHAS 18001:1999).<br />
• In order to tap the health tourism market, some<br />
of the successful hospitals have created a niche<br />
for themselves by providing the latest treatment<br />
incorporating the cutting edge technology and<br />
excellent customer care. They strive to improve<br />
the quality of services and facilities through<br />
continuous investment in new technologies and<br />
upgrading of facilities.<br />
• To enhance their services and to control costs,<br />
top service providers have diversified their<br />
businesses to enable them to be “self-sustained”<br />
and provide seamless services such as laboratory,<br />
ambulance services, home nursing and food<br />
preparation. In managing the rising cost of<br />
medical supplies, they had implemented various<br />
cost control measures including bulk purchases<br />
of medical supplies, just-in-time inventory<br />
management and consignment purchases for<br />
medical supplies. The consignment inventories<br />
of these supplies will be kept at the purchaser’s<br />
premises and the cost of the medical supplies<br />
will be charged only after they are used. Both<br />
the suppliers and purchasers will keep a record<br />
of the inventories.<br />
Strategies and Outlook<br />
• Malaysia is the top three destinations for health<br />
tourism. Foreign patients are attracted to<br />
Malaysia’s favourable exchange rate, political<br />
and economic stability and its high literacy rate.<br />
To enhance the promotion of health tourism,<br />
special privileges for health tourists such as<br />
fast track immigration clearance and extended<br />
visa were introduced. With its support, the<br />
Government aims to accelerate the growth in<br />
the health tourism industry which will generate<br />
RM4.4 billion of revenue in 2012.<br />
• The private healthcare services are expected to<br />
lead the development of healthcare tourism, in<br />
order to make Malaysia a preferred choice in the<br />
region for health treatment. The Government is<br />
targeting more than 10% per annum revenue<br />
growth for 2011-2015 for the healthcare<br />
industry.<br />
• With modern facilities, state-of-the-art<br />
technologies and equipment, well trained staff<br />
and competitive yet affordable pricing, Malaysia<br />
will be internationally recognised as a provider<br />
of a broad range of high quality yet affordable<br />
competitive healthcare services. Favourable<br />
cultural and religious factors are also expected<br />
to attract health tourists from Indonesia and the<br />
Middle East countries.<br />
• Among the most critical challenges in sustaining<br />
the growth of the industry are adequate supply<br />
and retaining trained personnel, increasing<br />
number of litigations and managing the<br />
changes in Government policies. As the<br />
level of education of the general population<br />
increases, the number of litigations is expected<br />
to increase as patients are more aware of their<br />
rights and thus would demand for higher level<br />
of services. This will also result in changes in<br />
the Government policies which will lead to<br />
more regulations or requirements imposed<br />
on the healthcare providers. To manage<br />
these challenges, healthcare providers must<br />
adopt appropriate strategies including more<br />
attractive employment packages, continuous<br />
improvement in service delivery as well as<br />
continuous dialogues and communication with<br />
policy makers.<br />
<strong>Productivity</strong> Report 2010/2011<br />
75
Box 3.1 : <strong>Productivity</strong> of the Hotel Industry by Region<br />
Hotel is the major hospitality service in the tourism industry. In 2009, there were 2,373<br />
establishments operating in the accommodation services industry with total number of 168,844<br />
rooms available for occupancy. Pahang registered the highest number of hotels with 285<br />
establishments, Sarawak with 276 establishments, Johor with 266 establishments, Sabah with<br />
235 establishments, Kuala Lumpur with 234 establishments and all other states with less than<br />
200 establishments. However, 90% of the hotel establishments are SMEs comprising budget<br />
hotels, chalets, rest/guest houses/ hostels and bed & breakfast (B&B).<br />
Value Levels and Growth of <strong>Productivity</strong> by Region<br />
Region 2007 2008<br />
2009<br />
Annual Growth (%)<br />
2008<br />
2009<br />
Northern Region 37,653 37,704 37,772 0.14 0.18<br />
Central Region 28,127 29,024 29,195 3.19 0.59<br />
Eastern Region 16,413 16,425 16,478 0.08 0.32<br />
Southern Region 18,920 18,978 19,050 0.31 0.38<br />
Overall, the hotel industry recorded marginal productivity growth in 2009. Central region<br />
registered the highest productivity growth of 0.6% followed by southern region with 0.4%<br />
as shown in the table above). Likewise, Kuala Lumpur recorded the highest total number of<br />
hotel guests (15.7 million) in 2009. On the other hand, northern region registered the lowest<br />
productivity growth of 0.2% in 2009 with Perlis recording the highest decline in hotel occupancy<br />
rate from 62% in 2008 to 45.9% in 2009.<br />
Labour Competitiveness of the Hotel Industry by Region<br />
Labour cost competitiveness measures the efficiency and effectiveness in managing labour cost<br />
and generating higher added value. Favourable labour cost competitiveness is realised when<br />
productivity grew faster than the increase in labour cost per employee which is supported by a<br />
reduction in unit labour cost.<br />
76 <strong>Productivity</strong> Report 2010/2011
Generally, the hotel industry maintained its labour cost competitiveness when productivity<br />
growth was higher than growth in labour cost per employee. Furthermore, unit labour cost by<br />
regions declined between 2% to 4% in 2009 as shown in the table below.<br />
Labour cost per employee or wage rate growth of the hotel industry by regions ranged from 4%<br />
to 6%. The southern region registered the highest growth in wage rate of 5.6% in 2009, followed<br />
by the northern region with 5.5% whereas the central and eastern regions registered 5.2%<br />
and 3.9% respectively. In terms of value level, in 2009 the central region recorded the highest<br />
wage rate of RM24,964 followed by the northern region with RM22,471, the southern region<br />
with RM20,969 and eastern region of RM16,305. Each hotel employee in the central region, on<br />
average received a remuneration of around RM2,080 per month as compared to an employee<br />
in the northern region who received around RM1,872, while in the southern and eastern regions<br />
received RM1,747, and around RM1,359 respectively.<br />
Labour Cost Competitiveness Growth of Hotel Industry by Region<br />
Region<br />
<strong>Productivity</strong> Labour Cost per Employee Unit Labour Cost<br />
2007 2008 2008 2009 2008 2009<br />
Northern Region 0.14 0.18 5.29 5.48 -1.55 -2.04<br />
Central Region 3.19 0.59 4.98 5.20 -1.84 -2.30<br />
Eastern Region 0.08 0.32 4.18 3.90 -2.58 -3.51<br />
Southern Region 0.31 0.38 5.08 5.56 -1.75 -1.97<br />
<strong>Productivity</strong> Report 2010/2011<br />
77
78 <strong>Productivity</strong> Report 2010/2011
CHAPTER 4<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
of the Manufacturing Sector<br />
<strong>Productivity</strong> Report 2010/2011<br />
79
PRODUCTIVITY PERFORMANCE OF THE MANUFACTURING SECTOR<br />
Overview<br />
• In 2010, the manufacturing sector registered<br />
a growth of 11.4% with 27.7% contribution<br />
to GDP, second after the services sector. The<br />
sector also recorded significant increase in the<br />
manufacturing index from 101.0 in 2009 to<br />
112.2 in 2010, registering a growth of 11.1%.<br />
The significant role of the manufacturing sector<br />
is justified by the fact that three of the twelve<br />
NKEAs announced under the ETP originated<br />
from this sector. The three NKEAs are electrical<br />
and electronics, refined petroleum products and<br />
palm oil based products. They were selected due<br />
to their potential contributions to GNP which<br />
will help Malaysia achieve high income status.<br />
• The electrical and electronics sub-sector (E&E) is<br />
an important engine of growth to the national<br />
economy. It was the largest contributor to the<br />
manufacturing sector accounting for 26.1% of<br />
manufacturing output. It was also the largest<br />
employer employing more than 40% of total<br />
manufacturing labour. In 2009, output from<br />
this sub-sector contributed 41% of total export<br />
and generated RM37 billion in GNI (6% of<br />
GNI). Under the ETP, specific strategies will be<br />
formulated to enable the sub-sector to sustain<br />
growth in the face of competition from China,<br />
Taiwan, Singapore and other Asian countries.<br />
• Refined petroleum products which fall under oil<br />
and gas industry has been identified as another<br />
key industry that had significant contribution<br />
to national economic growth. In 2009, the<br />
industry contributed a total of RM68.3 billion<br />
or 13.1% of GDP of which upstream activities<br />
including petroleum and gas accounted for<br />
RM39.5 billion or 7.6% of GDP and downstream<br />
activities including the petrochemical industry<br />
contributed RM28.8 billion or 5.5% of GDP. The<br />
contribution of this industry is expected to<br />
further increase due to continuous rise in the<br />
global energy demand and economic growth.<br />
Malaysia has distinctive advantage to focus<br />
on oil and gas due to the availability of these<br />
national reserves.<br />
• Palm oil industry is selected as Malaysia is<br />
the main producer for palm oil and basic<br />
oleochemical products. Within the economy, the<br />
industry is listed as the fourth largest contributor<br />
to the national income. The industry contributed<br />
RM17 billion or 3.3% to GDP and accounted for<br />
RM49.6 billion in export in 2009. Under the ETP,<br />
specific strategies were formulated to further<br />
enhance the industry especially in downstream<br />
industries that could generate high value added<br />
activities. Palm oil industry will remain a major<br />
contributor to the economy over the next 10<br />
years due to the increasing trend in global<br />
demand relative to substitute products.<br />
• Total trade for major products in 2010 was<br />
RM1,168.6 billion, an improvement of 18.5%<br />
compared to the previous year. Export for<br />
manufactured products in 2010 increased by<br />
13% to RM486.7 billion. Major export products<br />
were electrical & electronic products, palm oil,<br />
liquified natural gas (LNG), crude petroleum,<br />
refined petroleum products, chemicals &<br />
chemical products, machinery, appliances &<br />
parts and basic metals.<br />
• Electrical & electronic products remained as<br />
Malaysia’s leading export earner valued at<br />
RM271.3 billion or representing 42.4% of total<br />
export amongst the major products. The E&E<br />
sub-sector experienced an increase of 9.9%<br />
compared to the volume exported during 2009.<br />
Principal export markets for electronic products<br />
were China (19.7%), Singapore (16.5%), United<br />
States (12.7%) and Hong Kong (11.6%). For<br />
electrical products, the principal market<br />
80 <strong>Productivity</strong> Report 2010/2011
Chapter 4<br />
comprised United States (16.3%), European<br />
Union (12.1%), Japan (12.0%) and Singapore<br />
(11.0%). During the last decade, Malaysia’s<br />
share of export had declined due to excessive<br />
competition especially among Asian countries in<br />
particular, China and the transitional economies.<br />
Malaysia can no longer rely on assembly-based<br />
and lower value-added segments but should<br />
move towards higher value-added activities in<br />
design and manufacturing as well as research<br />
and development. The strategy should be<br />
geared towards attracting more leading<br />
multinational companies to operate in Malaysia<br />
and creating more new products through<br />
efficient technological progress and innovation.<br />
• The oil and gas industry was the second<br />
largest contributor to Malaysia’s export in 2010<br />
contributing RM72.8 billion or 11.4% of the<br />
total export share. The industry experienced<br />
significant growth of 23.4% compared to the<br />
previous year (2009: RM59.0 billion). Malaysia’s<br />
main export market for crude oil were Australia<br />
(33.4%), India (14%), Thailand (13.8%) and<br />
China (8.5%), whilst for LNG, the export market<br />
were Japan (60.2%), Korea (21.1%) and Taiwan<br />
(12.3%). Apart from oil and gas, there were also<br />
petrochemical products which contributed<br />
RM29.2 billion and representing 4.6% of the<br />
total manufacturing export. This industry<br />
experienced high growth of 33.2% compared to<br />
the previous year (2009: RM21.9 billion).<br />
• Palm oil was the third largest contributor to<br />
export income in 2010 amounting to RM45.6<br />
billion with an export share of 7.1%. The industry<br />
recorded a substantial increase of 25.4% growth<br />
of export compared to the previous year (2009<br />
: RM36.3 billion). Major export markets were<br />
China (21%), Pakistan (12.6%), Middle East<br />
(10.9%) and European Union (10.6%). Although<br />
the industry played an important role to<br />
Malaysia’s export, it continues to face issues<br />
related to low productivity among smallholders,<br />
rising cost of production and dependency on<br />
foreign labour in upstream activities whilst<br />
the downstream activities are confined to<br />
intermediate processing. With limited land<br />
available to expand plantations, the future<br />
strategy is to enhance upstream productivity<br />
and optimise the full potential of existing<br />
downstream opportunities to sustain growth in<br />
this industry.<br />
• Total import in 2010 amounted to RM529.2<br />
billion, increased by 21.7% compared to the<br />
previous year. Major import products were<br />
electrical & electronic products, chemicals<br />
& chemical products, machinery, appliances<br />
& parts, basic metals, transport equipment,<br />
refined petroleum products, iron & steel<br />
products and crude petroleum. Intermediate<br />
goods represented the highest proportion<br />
accounting for 68.6%, followed by capital goods<br />
(14.4%) and consumption goods (6.9%). For<br />
electrical & electronic sub-sector, intermediate<br />
goods imported were electrical machinery,<br />
apparatus and appliances and parts as well as<br />
parts for electronic integrated circuits. For oil,<br />
gas and petroleum industry, intermediate goods<br />
imported were refined petroleum products<br />
and petrochemical products while for palm oil<br />
industry, the intermediate goods imported were<br />
palm oil and palm kernel oil.<br />
• Total capital investment based upon 910<br />
projects approved in 2010 amounted to RM47.2<br />
billion. The biggest investment was contributed<br />
by electrical & electronic sub-sector (RM13.3<br />
billion), basic metal products (RM5.2 billion) and<br />
transport equipment (RM3.5 billion).<br />
• Added value in the manufacturing sector<br />
registered a positive growth of 10.5% to RM102.1<br />
<strong>Productivity</strong> Report 2010/2011<br />
81
illion (Figure 4.1) as compared to RM92.4 billion<br />
in 2009. The growth in added value was largely<br />
due to significant increase in the manufacturing<br />
of transport equipment and motor vehicles<br />
industries which registered 27.4% and 25.4%<br />
respectively.<br />
• Both domestic and export oriented industries<br />
recorded added value growth in 2010 as<br />
compared to 2009. The favourable performance<br />
of the Ringgit against the US currency had<br />
reduced the cost of imported raw materials<br />
which had increased the overall performance<br />
of the manufacturing sector in 2010. Although<br />
Malaysian export of manufactured products<br />
is relatively expensive abroad due to the<br />
accelerating Ringgit, the reduction in production<br />
cost due to cheaper imported raw materials had<br />
enabled most industries to reduce their product<br />
prices. Subsequently, this had positive impact<br />
on the product demand in both domestic as<br />
well as export market.<br />
Figure 4.1: Added Value Growth of the Manufacturing Sub-sectors, 2010<br />
Electrical & Electronics Products,<br />
Publishing, Printing and Reproduction of Recorded Media<br />
Paper and Paper Products<br />
7.10<br />
7.28<br />
8.00<br />
Manufacturing<br />
Food Products and Beverages<br />
Chemicals and Chemical Products<br />
Basic Metals<br />
Refined Petroleum Products<br />
Rubber and Plastic Products<br />
10.53<br />
11.12<br />
12.24<br />
12.29<br />
13.96<br />
15.48<br />
Machinery and Equipment<br />
18.88<br />
Medical, Precision and Optical Instruments<br />
20.70<br />
Motor Vehicles, Trailers and Semi-Trailers<br />
25.38<br />
Other Transport Equipment<br />
27.40<br />
Computed from: Annual Survey of Manufacturing Industries, Department of Statistics, Malaysia<br />
0 5.0 10.0 15.0 20.0 25.0 30.0<br />
Percent<br />
82 <strong>Productivity</strong> Report 2010/2011
Chapter 4<br />
• In terms of contribution, electrical & electronic<br />
products (E&E) remained the largest contributor<br />
to added value accounting for 24.1% of total<br />
manufacturing added value in 2010. The<br />
chemicals and chemical products was the<br />
second largest contributor accounting for 13.3%<br />
followed by food & beverages of 11% and rubber<br />
and plastic products of 8.1% (Figure 4.2). As<br />
export-oriented industries, the E&E, chemicals<br />
& chemical products as well as rubber & plastic<br />
products remained competitive at the global<br />
market although Ringgit was strengthening.<br />
For food & beverages, the sub-sector remained<br />
competitive through cheaper imported<br />
intermediate goods due to the stronger Ringgit<br />
and fully capitalised domestic market.<br />
Figure 4.2: Added Value Contributions of the Manufacturing Sub-sectors, 2010<br />
Electrical & Electronics Products<br />
24.1<br />
Chemicals and Chemical Products<br />
13.3<br />
Food Products and Beverages<br />
11.0<br />
Rubber and Plastic Products<br />
8.1<br />
Publishing, Printing and Reproduction of Recorded Media<br />
6.3<br />
Machinery and Equipment<br />
Basic Metals<br />
Motor Vehicles, Trailers and Semi-Trailers<br />
Refined Petroleum Products<br />
4.9<br />
4.7<br />
4.0<br />
3.3<br />
Other Transport Equipment<br />
Medical, Precision and Optical Instruments<br />
Paper and Paper Products<br />
1.3<br />
2.2<br />
1.9<br />
0 5.0 10.0 15.0 20.0 25.0 30.0<br />
Percent<br />
Computed from: Annual Survey of Manufacturing Industries, Department of Statistics, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
83
<strong>Productivity</strong> <strong>Performance</strong><br />
• Figure 4.3 shows that there was significant<br />
improvement in the productivity growth in<br />
majority of the sub-sectors and industries in<br />
2010. This was due to strong demand from<br />
the domestic as well as export markets of the<br />
manufacturing products. The manufacturing<br />
sector productivity had increased significantly<br />
in 2010 to 9.4% which reflected positive<br />
performance of the sector during that period.<br />
Other transport equipment sub-sector and<br />
motor vehicles industry recorded the highest<br />
productivity growth which was 23.6% and<br />
21.8% respectively due to their adoption of<br />
new technologies as well as efficient work<br />
processes. This was reflected by the nature of<br />
their businesses which had recently focused<br />
on exporting completely knocked-down (CKD)<br />
passenger cars, commercial vehicles and<br />
motorcycles that required enhanced production<br />
technologies.<br />
• Other sub-sectors and industries which<br />
experienced double-digit increase in<br />
productivity performance were basic metals<br />
(15.5%), rubber & plastic products (14.6%),<br />
machinery equipment (13.6%), chemicals &<br />
Figure 4.3: <strong>Productivity</strong> Growth of Manufacturing Sub-sectors and Industries, 2010<br />
Other Transport Equipment<br />
23.57<br />
Motor Vehicles, Trailers and Semi-Trailers<br />
21.76<br />
Basic Metals<br />
Medical, Precision and Optical Instruments<br />
Rubber and Plastic Products<br />
Machinery and Equipment<br />
Chemicals and Chemical Products<br />
Food Products and Beverages<br />
15.51<br />
14.75<br />
14.59<br />
13.64<br />
13.01<br />
12.74<br />
Manufacturing<br />
Paper and Paper Products<br />
Refined Petroleum Products<br />
9.42<br />
9.11<br />
9.00<br />
Electrical & Electronics Products<br />
Publishing, Printing And Reproduction of Recorded Media<br />
6.40<br />
5.81<br />
0 5.0 10.0 15.0 20.0 25.0<br />
Percent<br />
Computed from: Annual Survey of Manufacturing Industries, Department of Statistics, Malaysia<br />
84 <strong>Productivity</strong> Report 2010/2011
Chapter 4<br />
chemical products (13%) and food & beverages<br />
(12.7%) as well as medical, precision & optical<br />
(14.8%) sub-sectors. In 2009, majority of these<br />
sub-sectors (in particular chemicals & chemical<br />
products and iron & steel experienced doubledigit<br />
declines in productivity growth due to<br />
global economic slowdown and fuel crisis.<br />
• Although the productivity growth for E&E<br />
sub-sector, refined petroleum products, as<br />
well as publishing, printing & reproduction of<br />
recorded media industries experienced lower<br />
productivity growth, the productivity level of<br />
these sub-sectors and industries were higher<br />
than the manufacturing average of RM73,450 as<br />
reflected in Figure 4.4.<br />
• Other sub-sectors which recorded high<br />
productivity level were chemicals and chemical<br />
products (RM212,900), basic metals (RM103,730)<br />
and other transport equipment (RM100,310),<br />
machinery & equipment (RM78,520) and<br />
food products & beverages (RM75,520) which<br />
surpassed the manufacturing average.<br />
Figure 4.4: <strong>Productivity</strong> Level of Manufacturing Sub-sectors and Industries, 2010<br />
Paper and Paper Products<br />
Rubber and Plastic Products<br />
Medical, Precision And Optical Instruments<br />
Motor Vehicles, Trailers and Semi-Trailers<br />
Manufacturing<br />
Food Products and Beverages<br />
Machinery and Equipment<br />
Electrical & Electronics Products<br />
Other Transport Equipment<br />
Basic Metals<br />
Publishing, Printing And Reproduction of Recorded Media<br />
45.94<br />
48.61<br />
51.03<br />
72.61<br />
73.45<br />
75.52<br />
78.52<br />
80.06<br />
100.31<br />
103.73<br />
121.99<br />
Chemicals and Chemical Products<br />
212.90<br />
Refined Petroleum Products<br />
490.94<br />
0 200 400 600<br />
RM Thousand<br />
Computed from: Annual Survey of Manufacturing Industries, Department of Statistics, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
85
• In 2010, most of the manufacturing sub-sectors<br />
and industries experienced a major reduction<br />
in their unit labour cost. This reflected national<br />
labour market competitiveness which had<br />
significant effect on the rate of investment and<br />
industrial development within the country.<br />
• Figure 4.5 shows that the manufacturing<br />
sector continued to strengthen its labour cost<br />
competitiveness as reflected by a decline in<br />
unit labour cost of 3%. In 2009, the unit labour<br />
cost declined marginally at only 0.28%. Highest<br />
reduction in unit labour cost were experienced<br />
by other transport equipment sub-sector<br />
(-12.9%), motor vehicles, trailers & semi-trailers<br />
(-11.8%) and medical, precision & optional<br />
instruments industries (-10.7) while the other<br />
sub-sectors experienced a single digit reduction<br />
in unit labour cost.<br />
• Labour cost competitiveness of the sector<br />
was enhanced with an achievement of higher<br />
productivity growth of 9.4% as compared<br />
with growth in the labour cost per employee<br />
Figure 4.5: Changes in Unit Labour Cost of the Manufacturing Sub-sectors and Industries, 2010<br />
-12.91<br />
-11.83<br />
-10.67<br />
-5.77<br />
-4.17<br />
-4.19<br />
-4.29<br />
-2.42<br />
-2.96<br />
-3.00<br />
-3.09<br />
-1.58<br />
-0.34<br />
Publishing, Printing and Reproduction of Recorded Media<br />
Electrical & Electronics Products<br />
Food Products and Beverages<br />
Manufacturing<br />
Refined Petroleum Products<br />
Paper and Paper Products<br />
Machinery and Equipment<br />
Basic Metals<br />
Chemicals and Chemical Products<br />
Rubber and Plastic Products<br />
Medical, Precision and Optical Instruments<br />
Motor Vehicles, Trailers and Semi-Trailers<br />
Other Transport Equipment<br />
-14.0 -12.0 -10.0 -8.0 -6.0 -4.0 -2.0 0<br />
Percent<br />
Computed from: Annual Survey of Manufacturing Industries,Department of Statistics, Malaysia<br />
86 <strong>Productivity</strong> Report 2010/2011
Chapter 4<br />
of 3% (Figure 4.6). To sustain labour cost<br />
competitiveness, some companies had adopted<br />
the <strong>Productivity</strong>-Linked Wage System which<br />
linked worker’s salary with the performance of<br />
the industry. In addition, Malaysia has also given<br />
strong emphasis on education and training<br />
which enhanced the workers’ knowledge and<br />
skills to ease the process of automation and<br />
utilisation of efficient production techniques<br />
throughout various industries. The Ministry of<br />
Human Resource under its Department of Skills<br />
Development (DSD) has also implemented a<br />
comprehensive national training programme<br />
to increase Malaysia’s skilled workforce to at<br />
least 40% by 2020. These efforts are expected<br />
to further increase the productivity of the<br />
manufacturing sector in the future.<br />
• Labour compensation as measured by labour<br />
cost per employee (LCE) in the manufacturing<br />
sector increased by 2.9% (2010), higher than the<br />
previous year which recorded only 1.8% growth.<br />
Those which recorded higher compensation<br />
above the manufacturing average were basic<br />
Figure 4.6: Growth in Labour Cost per Employee of the Manufacturing Sub-sectors and Industries, 2010<br />
Medical, Precision and Optical Instruments<br />
0.67<br />
Machinery and Equipment<br />
Electrical & Electronics Products<br />
Refined Petroleum Products<br />
1.15<br />
1.25<br />
1.34<br />
Other Transport Equipment<br />
2.17<br />
Motor Vehicles, Trailers and Semi-Trailers<br />
Manufacturing<br />
Publishing, Printing and Reproduction of Recorded Media<br />
2.67<br />
3.00<br />
3.61<br />
Rubber and Plastic Products<br />
Chemicals and Chemical Products<br />
4.72<br />
4.98<br />
Food Products and Beverages<br />
Paper and Paper Products<br />
Basic Metals<br />
5.63<br />
6.14<br />
8.22<br />
0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0<br />
Percent<br />
Computed from: Annual Survey of Manufacturing Industries,Department of Statistics, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
87
metals (8.2%), paper & paper products (6.1%),<br />
food products & beverages (5.6%), chemicals<br />
& chemical products (5%) and rubber & plastic<br />
products (4.7%) as well as publishing, printing &<br />
reproduction of media (3.6%).<br />
• However, the wage increase was compensated<br />
by relatively higher productivity growth<br />
which reflected positive developments of the<br />
respective sub-sectors and industries (Table 4.1).<br />
This was particularly observed in other transport<br />
equipment sub-sector, motor vehicles, trailers &<br />
semi-trailers, medical, and precisions & optical<br />
instruments industries as well as machinery &<br />
equipment sub-sector.<br />
NKEAs Sub-sectors and Industries <strong>Performance</strong><br />
Analysis<br />
a) Electrical and Electronic Sub-sector<br />
• The contribution of the sub-sector in terms of<br />
output and added value as well as employment<br />
opportunity was high. In terms of sub-sector<br />
Table 4.1: Labour Cost Competitiveness of the Manufacturing Sub-sectors and Industries, 2010<br />
Sub-sectors<br />
Labour Cost<br />
Per Employee<br />
Growth Rate (%)<br />
Unit Labour Cost<br />
Changes (%)<br />
<strong>Productivity</strong><br />
Growth (%)<br />
Other Transport Equipment 2.17 -12.91 23.57<br />
Motor Vehicles, Trailers and Semi- Trailers 2.67 -11.83 21.76<br />
Medical, Precision and Optical Instruments 0.67 -10.67 14.75<br />
Rubber and Plastic Products 4.72 -5.77 14.59<br />
Chemicals and Chemical Products 4.98 -4.29 13.01<br />
Basic Metals 8.22 -4.19 15.51<br />
Machinery and Equipment 1.15 -4.17 13.64<br />
Paper and Paper Products 6.14 -3.09 9.11<br />
Refined Petroleum Products 1.34 -3.00 9.00<br />
Manufacturing 3.00 -2.96 9.42<br />
Food Products and Beverages 5.63 -2.42 12.74<br />
Electrical & Electronics Products 1.25 -1.58 6.40<br />
Publishing, Printing and Reproduction of Recorded Media 3.61 -0.34 5.81<br />
Computed from: Annual Survey of Manufacturing Industries, Department of Statistics, Malaysia<br />
88 <strong>Productivity</strong> Report 2010/2011
Chapter 4<br />
breakdown, manufacture of radio, television<br />
& communication equipment and apparatus<br />
contributed the highest rate at 69.4% of<br />
the total added value amounting to RM17.1<br />
billion in 2010. The total output recorded for<br />
this category of products was RM105.8 billion<br />
representing 65.7% of total E&E output. In terms<br />
of employment, this industry employed 200,278<br />
workers representing 65.1% of total employment<br />
in E&E sub-sector. However in terms of added<br />
value growth, electrical machinery & apparatus<br />
experienced the highest growth of 15.1% as<br />
compared to the other two industries (Figure<br />
4.7).<br />
• <strong>Productivity</strong> level of the three main industries<br />
of E&E were relatively comparable, registering<br />
a value between RM60,000-RM85,000 of added<br />
value per worker per year (Figure 4.8). Although<br />
office, accounting & computing machinery<br />
experienced a decline in the productivity growth<br />
of 1.0% in 2010, it had significantly improved<br />
from the previous year which experienced a<br />
decline by 9.9% (2009).<br />
• The productivity growth in manufacture of<br />
office, accounting & computing machinery was<br />
affected mainly due to increase in the unit labour<br />
cost experienced by this E&E industry (Figure<br />
4.9). The relatively high unit labour cost and a<br />
decrease in productivity growth can be related<br />
to labour intensive techniques and medium<br />
technology employed in the production line.<br />
It also reflected a high spending on less skilled<br />
and efficient labour within the industry. This is<br />
an indication for this industry to move to more<br />
capital-intensive production techniques which<br />
is in tandem with the national envisage towards<br />
being an industrial developed nation and<br />
relying less on foreign labour. As the E&E subsector<br />
constituted the majority of foreign direct<br />
investment (FDI) and more than 80% of total<br />
RM Million<br />
Figure 4.7: Added Value (Level and Growth)<br />
of the E&E Industry, 2010<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
Percent RM Thousand<br />
90<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
18,000<br />
16,000<br />
14,000<br />
12,000<br />
10,000<br />
8,000<br />
6,000<br />
4,000<br />
2,000<br />
0<br />
Figure 4.8: <strong>Productivity</strong> (Level and Growth)<br />
of the E&E Industry, 2010<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
-1.0<br />
-2.0<br />
-3.0<br />
-4.0<br />
-1.01<br />
4,260.60<br />
0.09<br />
Office, Accounting<br />
& Computing<br />
Machinery<br />
80.97 60.18 85.23<br />
Office, Accounting<br />
& Computing<br />
Machinery<br />
Figure 4.9: Changes in Unit Labour Cost<br />
of the E&E Industry, 2010<br />
2.00<br />
Office, Accounting<br />
& Computing<br />
Machinery<br />
15.14<br />
3,281.39<br />
Electrical<br />
Machinery<br />
& Apparatus<br />
Electrical Machinery<br />
& Apparatus<br />
-2.04<br />
17,070.34<br />
7.53<br />
Radio, Television &<br />
Communication<br />
Equipment /<br />
Apparatus<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
16.0<br />
14.0<br />
12.0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.90<br />
Percent<br />
12.0<br />
10.80<br />
10.0<br />
8.0<br />
7.87 6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
Electrical Machinery Radio, Television &<br />
& Apparatus Communication<br />
Equipment / Apparatus<br />
Percent<br />
Radio, Television &<br />
Communication<br />
Equipment / Apparatus<br />
Level<br />
Growth<br />
Level<br />
Growth<br />
<strong>Productivity</strong> Report 2010/2011<br />
89
export, it is the backbone for the manufacturing<br />
sector and therefore all its pertinent issues must<br />
be resolved immediately.<br />
• In addition, the growth in labour cost per<br />
employee in all three industries of the E&E subsector<br />
was still below the manufacturing average<br />
which was 3% (Figures 4.6 & 4.10). This indicated<br />
that these industries experienced relatively<br />
lower wage increase compared with other<br />
manufacturing sub-sectors. It also indicated<br />
that the three industries relied heavily on low<br />
or medium skilled workers in their production<br />
activities.<br />
• Under the Tenth Malaysia Plan, efforts will be<br />
intensified to move the sub-sectors up along<br />
the value chain through effective public-private<br />
partnerships to further develop domestic<br />
capabilities particularly in R&D and increase<br />
Malaysia’s share of higher value added activities.<br />
Training programme will be designed with<br />
specific focus towards upgrading and increasing<br />
supply of relevant talent, strengthening the R&D<br />
ecosystem, expanding the domestic vendor<br />
base and establishing new infrastructure.<br />
b) Refined Petroleum Industry<br />
• The refined petroleum industry had positioned<br />
itself strongly through its upstream and<br />
downstream activities. The industry has been<br />
selected as another NKEA due to its potential<br />
growth and significant contribution to the<br />
national economy. The industry analysis at five<br />
digit level showed that the industry had fully<br />
recovered from the global economic slowdown<br />
and recorded an added value growth of 14%<br />
valued at RM3.3 billion in 2010 (Figure 4.11).<br />
Percent<br />
Figure 4.10: Growth in Labour Cost per Employee<br />
of the E&E Industry, 2010<br />
2.5<br />
2.0<br />
1.5<br />
1.0<br />
0.5<br />
0<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
RM Million<br />
Figure 4.11: Added Value (Level and Growth)<br />
of the Refined Petroleum Products, 2008-2010<br />
3,500<br />
3,000<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
0<br />
1.44<br />
Office, Accounting<br />
& Computing<br />
Machinery<br />
3,279.70<br />
-30.28<br />
Electrical Machinery<br />
& Apparatus<br />
2,938.19<br />
-10.41<br />
3,348.50<br />
13.96<br />
2008 2009 2010<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
20.0<br />
10.0<br />
0<br />
-10.0<br />
-20.0<br />
-30.0<br />
-40.0<br />
Percent<br />
• <strong>Productivity</strong> growth had also upsurged from<br />
negative growths in 2008 and 2009 to 9.0%<br />
increase in 2010. The industry registered the<br />
highest productivity level compared with other<br />
manufacturing sub-sectors. The productivity<br />
level stood at RM490,940 which was six times<br />
higher then the manufacturing average (Figure<br />
4.12).<br />
1.91<br />
1.09<br />
Radio, Television &<br />
Communication<br />
Equipment /<br />
Apparatus<br />
Added Value<br />
Growth<br />
90 <strong>Productivity</strong> Report 2010/2011
Chapter 4<br />
• The substantial increase in the productivity<br />
level and growth in refined petroleum industry<br />
was mainly due to substantial decrease in the<br />
unit labour cost experienced by the industry<br />
since 2008. In 2010, the industry experienced<br />
further decline in its unit labour cost at 3%<br />
(Figure 4.13). The relatively lower unit labour<br />
cost and a significant growth in the productivity<br />
level can be related to labour efficiency due to<br />
education as well as skills enhancement within<br />
the industry.<br />
• At the downstream level, refined petroleum<br />
industry fell under chemicals & chemical<br />
products producing mainly petroleum and<br />
petrochemical products. Figure 4.14 shows<br />
that the industry experienced an increase in its<br />
labour cost per employee.<br />
RM Thousand<br />
Figure 4.12: <strong>Productivity</strong> (level and Growth)<br />
of the Refined Petroluem Products, 2008-2010<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
534.94<br />
-15.80<br />
450.41<br />
9.00<br />
490.94<br />
-64.35<br />
2008 2009 2010<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
20.0<br />
10.0<br />
0<br />
-10.0<br />
-20.0<br />
-30.0<br />
-40.0<br />
-50.0<br />
-60.0<br />
-70.0<br />
Percent<br />
Figure 4.13: Changes in Unit Labour Cost<br />
of the Refined Petroluem Products, 2008-2010<br />
Level<br />
Growth<br />
• Under the NKEAs initiatives, the petroleum<br />
industry is expected to create an additional<br />
52,300 jobs. A significant proportion of these<br />
jobs will be highly-skilled jobs with an estimated<br />
21,000 jobs for qualified professionals such as<br />
engineers and geologists with monthly salaries<br />
in the range of RM5,000 to RM10,000. This would<br />
likely increase the labour cost per employee<br />
within the industry.<br />
Percent<br />
80.0<br />
70.0<br />
60.0<br />
50.0<br />
40.0<br />
30.0<br />
20.0<br />
10.0<br />
0<br />
-10.0<br />
-20.0<br />
75.00<br />
20.12<br />
-3.00<br />
2008 2009 2010<br />
c) Palm Oil Industry<br />
• Palm oil industry is another NKEA which falls<br />
under the manufacturing sector. The industry<br />
extends over the value chain from upstream<br />
plantations to downstream processing. Within<br />
the manufacturing sector, palm oil products<br />
existed in chemicals & chemical products as well<br />
as in food industries. The industry analysis at five<br />
digit level showed that the industry recorded<br />
a steady and consistent level of added value<br />
amounting between RM2.2 billion to RM2.4<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
Percent<br />
Figure 4.14: Growth in Labour Cost per Employee<br />
of the Refined Petroleum Products, 2008-2010<br />
5.0 2008 2009 2010<br />
0<br />
-5.0<br />
-0.51<br />
1.34<br />
-10.0<br />
-15.0<br />
-20.0<br />
-25.0<br />
-30.0<br />
-35.0<br />
-40.0<br />
-36.34<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
91
illion for the last three year periods (Figure 4.15).<br />
The industry recorded a negative added value<br />
growth in 2009 due the global economic crises<br />
but had recovered in 2010 with 8.0% growth.<br />
• The productivity growth had also rebounded<br />
from a negative growth rate in 2009 to a positive<br />
growth rate of 9.1% in 2010. This growth rate<br />
was comparable with the average growth rate of<br />
9.4% experienced by the manufacturing sector.<br />
However, the productivity level of the palm oil<br />
industry was twice as much than the overall<br />
manufacturing sector (Figures 4.4 & 4.16).<br />
• The competitiveness of palm oil industry was<br />
further reflected by 2.7% decline in its unit labour<br />
cost in 2010 (Figure 4.17). The industry was<br />
able to sustain its labour cost competitiveness<br />
through higher productivity growth achieved<br />
during this period. Although at the upstream, the<br />
industry continues to face issues related to low<br />
productivity among smallholders, rising cost of<br />
production and dependency on foreign labour,<br />
there are still vast untapped opportunities for<br />
this industry to grow particularly in downstream<br />
activities that generate high value added<br />
products.<br />
• In 2010, the industry experienced only slight<br />
increase in its labour cost per employee reflecting<br />
a small increase in wage among workers (Figure<br />
4.18). This was in tandem with the productivitylinked<br />
wage system which has been promoted<br />
in the manufacturing sector. A wage increase<br />
can also be viewed that the productivity growth<br />
experienced by this industry was driven by<br />
relatively better skilled and efficient workforce.<br />
RM Million<br />
Figure 4.15: Added Value (Level and Growth)<br />
of the Palm Oil Products, 2008-2010<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
RM Thousand<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
-4.0<br />
-6.0<br />
-8.0<br />
Figure 4.16: <strong>Productivity</strong> (Level and Growth)<br />
of the Palm Oil Products, 2008-2010<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
-4.0<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
Percent<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
-1.0<br />
-2.0<br />
-3.0<br />
2,220.62<br />
-6.08<br />
2009 2010<br />
105.01<br />
-2.60<br />
2009 2010<br />
Figure 4.17: Changes in Unit labour Cost<br />
of the Palm Oil Products, 2009-2010<br />
2009<br />
2.07<br />
2,398.70<br />
8.02<br />
114.60<br />
9.13<br />
2010<br />
Percent Percent<br />
-2.73<br />
Level<br />
Growth<br />
Level<br />
Growth<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
92 <strong>Productivity</strong> Report 2010/2011
Chapter 4<br />
• Through NKEA programme, palm oil will remain<br />
a major contributor to the economy. However,<br />
with limited land available to expand plantations,<br />
Malaysia will need to enhance upstream<br />
productivity and capture the full potential of<br />
existing downstream opportunities to sustain<br />
growth in this industry.<br />
International Comparison<br />
• The Malaysian manufacturing sector recorded<br />
negative productivity growth of 6.3% in 2009<br />
along with majority of selected developed<br />
economies. In fact, Japan, Germany, Italy and<br />
Finland witnessed double digit reduction in their<br />
productivity growth. Developed economies such<br />
as the United States, Australia, Taiwan, Spain<br />
and Republic of Korea, registered an increase in<br />
productivity ranging from 1.2% to 5.7% (Figure<br />
4.19).<br />
• Notwithstanding this, the manufacturing sector<br />
had recovered drastically in 2010 to record a<br />
relatively higher productivity growth of 9.4%.<br />
The productivity growth was mainly contributed<br />
by domestic-oriented industries in particular,<br />
transport equipment as well as construction-<br />
Figure 4.18: Growth in Labour Cost per Employee<br />
of the Palm Oil Industry, 2009-2010<br />
Percent<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
3.78<br />
3.84<br />
2009 2010<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
Figure 4.19: International Comparison of <strong>Productivity</strong> Growth, 2009<br />
MALAYSIA, -6.3<br />
United States, 5.7<br />
Australia, 1.9<br />
Taiwan, 1.7<br />
Spain, 1.2<br />
Korea, 1.2<br />
Canada, -1.3<br />
Norway, -1.6<br />
Singapore, -1.9<br />
Denmark, -2.4<br />
Belgium, -4.2<br />
United Kingdom, -4.9<br />
Netherland, -5.7<br />
Czech Republic, -6.4<br />
France, -7.2<br />
Sweden (1) -8.9<br />
Finland, -10.9<br />
Italy, -11.7<br />
Germany, -15.9<br />
Japan, -16.8<br />
-20.0 -15.0 -10.0 -5.0 Percent 0. 5.0 10.0<br />
Source : - Malaysia’s productivity measures are based on national basis<br />
- Bereau of Labor Statistics (http://www.bls.gov/fls/#productivity)<br />
<strong>Productivity</strong> Report 2010/2011<br />
93
elated industries such as basic metals which<br />
recorded productivity growth between 15.5%<br />
to 23.6%. These industries which relied heavily<br />
on imported intermediate goods, benefited in<br />
terms of cheaper input prices due to favourable<br />
performance of the Ringgit against the US<br />
currency.<br />
• The Malaysian manufacturing sector was<br />
still capable of sustaining its labour cost<br />
competitiveness as unit labour cost experienced<br />
only slight increase in the growth, which was 0.3%<br />
as compared with most countries (Figure 4.20).<br />
In contrast, majority of the selected developed<br />
economies experienced an increase in unit labour<br />
cost in particular, Germany, Finland, Sweden, Italy<br />
and Japan which recorded double-digit growth<br />
in their unit labour cost. Only Taiwan, Singapore,<br />
United States and Canada recorded a negative<br />
growth rate for their unit labour cost.<br />
Total Factor <strong>Productivity</strong> (TFP)<br />
of Selected Manufacturing Subsectors,<br />
2006 - 2010<br />
• Total Factor <strong>Productivity</strong> (TFP) measures the<br />
effects in total output which are not directly<br />
attributed to growth in the inputs. Therefore,<br />
growth in TFP represents output growth<br />
contributed by intangible inputs ranging<br />
from technological progress to knowledge of<br />
workers, skills and management system which<br />
subsequently increases the production efficiency.<br />
• Malaysia has recognised the importance of<br />
human capital investment which was reflected<br />
by substantial Government resources devoted<br />
to education and training programmes. The<br />
knowledge and skills upgrading efforts should<br />
be in tandem with the technological progress<br />
and complemented by effective management<br />
Figure 4.20: Percentage Change in Manufacturing Unit Labour Cost, 2009<br />
Canada (1), -1.2<br />
United States, -2.3<br />
Singapore (1), -4<br />
Taiwan, -7.4<br />
MALAYSIA, 0.3<br />
Germany, 15.8<br />
Finland (1),13.9<br />
Sweden (1) 12.2<br />
Italy, 12<br />
Japan, 11.8<br />
France, (1) 9.7<br />
Netherland, 8.4<br />
United Kingdom, (1), 6.3<br />
Belgium, 5<br />
Australia (1), 4.9<br />
Norway, 4.7<br />
Denmark, 4.3<br />
Korea, 3.8<br />
Spain, 2.9<br />
Czech Republic (1), 2.2<br />
-10 5 0 5 Percent 10 15 20<br />
Source: - Malaysia’s productivity measures are based on national basis<br />
- Bereau of Labor Statistics (http://www.bls.gov/fls/#productivity)<br />
94 <strong>Productivity</strong> Report 2010/2011
Chapter 4<br />
Figure 4.21: TFP Growth of the Manfufacturing Industries, 2006-2010<br />
Textiles & Apparel<br />
Fabricated Metal<br />
Electrical & Electronices Products<br />
Non-Metallic Mineral Products<br />
Wood & Wood Products<br />
Rubber Products<br />
Plastic Products<br />
Machinery & Equipment<br />
Processed Food & Beverages<br />
Chemicals and Chemical Products<br />
Iron & Steel<br />
Transport Equipment<br />
0.2<br />
0.3<br />
0.5<br />
0.7<br />
0.7<br />
1.8<br />
1.9<br />
2.5<br />
2.8<br />
3.1<br />
3.2<br />
4.7<br />
0 1.0 2.0 Percent 3.0 40 5.0<br />
Computed from: Annual Survey of Manufacturing Industries, Department of Statistics, Malaysia<br />
system. It is crucial to report the effects of these<br />
efforts towards productivity enhancement,<br />
hence TFP within sub-sectors.<br />
• Manufacturing sub-sectors which registered high<br />
TFP growth were transport equipment (4.7%),<br />
iron & steel (3.2%), chemicals & chemical products<br />
(3.1%), food & beverages (2.8%), machinery &<br />
equipment (2.5%) and plastic products (1.9%).<br />
This was due to better technological adoption<br />
via technological transfer or technological<br />
development as well as skilled enhancement<br />
gained from training programmes. A high TFP<br />
growth in the transport equipment was also<br />
reflected by a significant reduction in its unit<br />
labour cost resulting in growth of 4.7% in 2010<br />
(Figure 4.21).<br />
• Sub-sectors which registered lower TFP growth<br />
include wood & wood products (0.7%), nonmetallic<br />
mineral products (0.7%), electrical &<br />
electronic products (0.5%), fabricated metal<br />
(0.3%), and textiles & apparel (0.2%). These<br />
sub-sectors in particular, the electrical &<br />
electronic products would need to adopt more<br />
sophisticated technologies, employed relatively<br />
more skilled workers and utilised a more<br />
efficient management system to enhance TFP.<br />
A substantial increase in unit labour cost which<br />
was related to inefficiency in labour usage in the<br />
E&E sub-sector could partly explain its lower TFP<br />
growth.<br />
Best Practices<br />
• <strong>Productivity</strong> is about working smarter, finding<br />
more efficient and effective ways to produce<br />
goods and services with available resources. It<br />
is not about working longer or increasing work<br />
intensity. The more productive the company is,<br />
the more it can produce with the same material<br />
and effort.<br />
<strong>Productivity</strong> Report 2010/2011<br />
95
• <strong>Productivity</strong> is achieved through various<br />
methods. The implementation of Total Quality<br />
Management (TQM), Innovative Creative Circle<br />
(ICC) and other productivity improvement<br />
approaches continue to yield benefits and<br />
boost productivity in manufacturing where the<br />
best-in-class companies aim to drive bottom<br />
line growth in seven different business areas:<br />
quality improvement, cost reduction, cycle<br />
time reduction, cash flow improvement, human<br />
effectiveness improvement, new products &<br />
innovations, and sales & market growth.<br />
<strong>Productivity</strong>-Linked Wage System<br />
• Attaining optimum productivity is the aspiration<br />
of all organisations especially those whose<br />
positions in the industry are dependent<br />
on credentials of excellence. One leading<br />
company which won numerous accolades in<br />
linking PLWS is a clear example of its efforts to<br />
induce productivity through the efforts of its<br />
most valued resources; the employees. PLWS<br />
recognises that productivity can be linked to the<br />
efforts of the employees through wage systems<br />
that are tied to productivity. The company had<br />
successfully implemented PLWS in which the<br />
productivity of the company is clearly displayed<br />
through the efforts of the employees. It is a step<br />
which others can emulate and possibly gain the<br />
same productivity achievements given that the<br />
right emphasis is given to the employees for their<br />
efforts towards the attainment of productivity.<br />
• Benefits of the system to the company and<br />
employees include ensuring employees receive<br />
fair gains from performance improvements,<br />
recognises employees’ contribution to<br />
productivity, creating better synergy and<br />
teamwork, opportunities for continuous<br />
improvement and enhanced career paths,<br />
creating a sense of belonging and motivating<br />
them to achieve company’s goals.<br />
Innovation through Innovative and Creative<br />
Circle (ICC)<br />
• A leading manufacturer in E&E has adopted ICC<br />
as a problem solving tool to address technical<br />
issues on production line. Initial production<br />
of this company was for four lines but their<br />
customer’s demands were sufficient only to meet<br />
3.5 lines of production. Failure to address this<br />
problem will result in over- produced stock of 0.5<br />
times or waste amounting to RM2.4mil. Through<br />
innovative teamwork, the company managed to<br />
run only three lines of production but yet, still<br />
produce 3.5 lines of output.<br />
• The innovation had allowed the production line<br />
to be flexible in producing multi size products<br />
as well as increasing the manufacturing speed<br />
in meeting customer’s request. This flexibility<br />
enables the manufacturer to deliver the products<br />
two months earlier than targeted. The overall<br />
cost saving from this project was RM4.3million.<br />
Total Quality Management<br />
• Total Quality Management (TQM) is a tool that<br />
strives to generate excellent impact on the quality<br />
of products and services to enhance productivity<br />
and competitiveness. The main objective of this<br />
programme is to sustain customer satisfaction<br />
through continuous improvement which is<br />
accomplished by systematic methods for<br />
problem solving, breakthrough achievements<br />
and sustenance of good standardisation. TQM<br />
Demonstration Project or the TQM Model<br />
Company Project enables enterprises to adopt<br />
TQM best practices in the development of a<br />
quality system.<br />
• TQM practices observed in an automotive parts<br />
of a manufacturing company revealed that this<br />
company had benefited in many areas such as<br />
96 <strong>Productivity</strong> Report 2010/2011
Chapter 4<br />
Figure 4.22: Benefits of TQM in an Automotive Parts Manufacturer<br />
Reduction in Customer Complaint<br />
Customer Complaint (2009 and 2010)<br />
Reduction in Raw Material Inventory<br />
Raw Material Status (RM Million)<br />
8<br />
6<br />
4<br />
2<br />
0<br />
JAN FEB MAR APR MAY<br />
2009 2010<br />
1.6<br />
1.2<br />
0.8<br />
0.4<br />
0.0<br />
1.3<br />
0.9<br />
JUN 2009 JUN 2010<br />
Improvement in production scheduling the timely build up inventory<br />
has increased delivery efficiency and quality. As a result,<br />
customers has responded positively in delivery performance.<br />
Reduction in inventory is due to improvement in vendor delivery<br />
scheduling and implementation of the appropriate visual control of stock.<br />
Increase in <strong>Productivity</strong><br />
Result of <strong>Productivity</strong> Improvement for Major Products<br />
Increase in Workers Satisfaction Level<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Front Quater Head Lamp Support<br />
Piller Inner Suspension<br />
Before After % Increase<br />
30.0<br />
25.0<br />
20.0<br />
15.0<br />
10.0<br />
5.0<br />
0.0<br />
100.0<br />
80.0<br />
60.0<br />
40.0<br />
20.0<br />
0.0<br />
60.0<br />
2009<br />
80.0<br />
2010<br />
The improvements were achievement after considering<br />
production requirement based on Production Control activity<br />
Improvement in workers satisfaction is recorded after salary benefit package<br />
improvement was approved by the management.<br />
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97
eduction in customer complaints, reduction in<br />
raw materials inventory, increase in productivity<br />
and increase in worker’s satisfaction level (Figure<br />
4.22).<br />
Quality Management Practices<br />
• Quality management practices observed in one<br />
of the award winning manufacturer of healthcare<br />
products under the Quality Management<br />
Excellence Award showed outstanding leadership<br />
qualities, planning strategy, information<br />
infrastructure, customer acceptance, people<br />
management, process reliability including the<br />
introduction and adoption of a home-grown<br />
robotic system which was developed in-house by<br />
its employees. The adoption of this technology<br />
was to relieve manpower on a particular job and<br />
the impact was a reduction in cycle time by 40%.<br />
In addition, product defects through scratches<br />
and dents were minimised resulting in reduced<br />
customer rejects. Other innovation included the<br />
installation of a conveyor system to transport<br />
materials and products from machines to the<br />
clean room in order to reduce contamination due<br />
to dust, bacteria and insects.<br />
Strategies and Outlook<br />
• Malaysia’s GDP is anticipated to continue its high<br />
growth in 2011 due to significant improvement<br />
in productivity particularly the manufacturing<br />
sector coupled with its strong currency. The<br />
manufacturing sector will remain the second<br />
largest contributor to Malaysia’s GDP in 2011<br />
viewing from its high productivity growth<br />
and the Government’s emphasis on both<br />
the manufacturing and services sectors. The<br />
continuous increase in construction and services<br />
industries such tourism, hospitality as well the<br />
health sector will stimulate output growth of<br />
the manufacturing sector through backward<br />
linkages.<br />
• The contribution of TFP to Malaysia’s GDP growth<br />
and the manufacturing growth is anticipated to<br />
increase due to improvement in quality of human<br />
resources. Government’s emphasis on education<br />
and training through its large budget allocation to<br />
these sectors will enhance skills among workers.<br />
A high quality of labour coupled with innovation,<br />
ICT and marketing capability will subsequently<br />
contribute to high TFP growth. Apart from this,<br />
labour productivity will be improved through<br />
accelerated increase in the number of skilled<br />
labour.<br />
• Malaysian currency will remain strong and<br />
this will boost manufacturing export through<br />
relatively lower price. The manufacturing import<br />
for inputs will remain high but a lower import<br />
price as a result of export value supersedes the<br />
import value will contribute to further growth of<br />
the manufacturing sector.<br />
• Within the manufacturing sector, the E&E will<br />
remain the most important sub-sector in 2010<br />
even though its lower productivity growth was<br />
lower than other industries. Its great contribution<br />
to export and foreign direct investment were two<br />
main reasons why this sector must be emphasised<br />
and remain important.<br />
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Chapter 4<br />
• Other NKEA industries such as refined petroleum<br />
products will remain important in 2011 due<br />
to overwhelming expansion of transportation<br />
related industries and increasing demand for<br />
energy. Export market diversification through<br />
greater international networkings would<br />
definitely help these industries to expand<br />
further. Another promising industry is transport<br />
equipment which experienced high productivity<br />
as well as TFP growth in 2010.<br />
• Viewing from its high contribution to GDP<br />
and export income, the palm oil industry will<br />
remain as one of the important industries in the<br />
manufacturing sector in the coming years. A<br />
good performance of the chemicals & chemical<br />
products and food & beverages in term of<br />
productivity growth and TFP growth would<br />
justify the performance of the palm oil industry.<br />
In addition, Malaysia’s health sector that is very<br />
much related to the palm oil industry (especially<br />
for pharmaceutical products) is expected to<br />
continue its good performance.<br />
• To sustain the expansion of E&E sub-sector,<br />
focus should be given to areas with lower valueadded<br />
in each of the E&E industries. The five<br />
targeted industries are semiconductors, solar,<br />
light-emitting diodes, industrial electronics and<br />
electrical home appliances. Strategies to enhance<br />
the contribution of these industries include<br />
enhancing the technologies, expanding into<br />
advanced packaging and design of integrated<br />
circuits, enlarging the scale of production,<br />
and establish a strong international network<br />
for market diversification. There is also a need<br />
to enhance research and development (R&D)<br />
activities for new innovations in production and<br />
marketing.<br />
• The refined petroleum products industry will<br />
be sustained through continuous oil and gas<br />
production by further exploration of oil recovery.<br />
Other strategies include enhancing growth in<br />
downstream through international flows of crude<br />
oil and refined products by building a regional<br />
oil storage hub and developing a regasification<br />
terminal for imported LNG. Malaysia must<br />
also attract multinational corporations to joint<br />
venture with domestic companies to improve the<br />
value chain.<br />
• For the palm oil industry, the two main strategies<br />
include improving the upstream productivity<br />
and sustainability and downstream expansion<br />
and sustainability. The upstream activities<br />
include accelerating the replanting of aging oil<br />
palms and mechanising plantation best practices<br />
and quality control. The downstream activities<br />
include focusing on developing finished<br />
segments that generate high value, enhancing<br />
commercialisation and capturing the lucrative<br />
market segments that focus more on refined<br />
products such as oleo-derivatives, food, health<br />
products and bio-fuels.<br />
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Box 4.1 : On-The-Job Training (OJT) in Plastics Industry<br />
The plastics industry is one of the major contributors for the manufacturing sector contributing<br />
to 3.4% of the total manufacturing output and employing 112,886 employees in 2010. The<br />
industry had benefited from factors such as increasing export for plastic packaging, increased<br />
in indirect export for electrical and electronic appliances, increased in local demand for building<br />
and construction materials, higher demand from the local automotive sector as well as cheaper<br />
plastic resins arising from new petrochemical capacities coming into operation.<br />
Due to such advantages enjoyed by the industry, the plastics manufacturers need to train their<br />
employees with the right knowledge and skills to ensure these advantages can be synchronized<br />
with the resources available in the company. One approach of achieving this is through the<br />
adoption of on-the–job training (OJT). Through structured on-the- job training (OJT), blueprints<br />
and systematic coaching, companies can ensure that it can compete effectively with its highly<br />
skilled employees who are always ready to meet with the high demand and standard imposed<br />
by the customers.<br />
OJT in Plastics Companies<br />
<strong>MPC</strong> had compiled a case study on OJT implementation on four selected plastics companies.<br />
The purpose of this case study is to study the impact of OJT in these companies after going<br />
through three stages of OJT development programme namely, awareness training, OJT blueprint<br />
development and actual implementation of OJT.<br />
Before the OJT implementation in these companies, they shared the common experiences such<br />
as:-<br />
• Workers were complacent and hesitate to show any improvement;<br />
• Tasks carried out were based on own experience;<br />
• Re-work and troubleshooting were common;<br />
• Confusion due to different supervisors providing different style of training; and<br />
• No replacement for specific workers after resignation or moving to other department.<br />
Based upon the above experiences, all the companies decided to implement OJT to improve<br />
efficiency and productivity of their workers because of its cost effectiveness and ease of<br />
implementation.<br />
100 <strong>Productivity</strong> Report 2010/2011
After OJT implementation in these companies, the impact and benefits obtained by these<br />
companies can be felt namely:-<br />
• Workers had been trained to be more judgmental on quality inspection;<br />
• Workers were able to work independently;<br />
• Workers had more time to plan their work schedule accordingly;<br />
• Enables workers to gauge their respective level of expertise at anytime in terms of output;<br />
• Enables training to be carried out at the workplace itself with minimum disruption to any<br />
work schedule;<br />
• Availability of replacement by the new and existing workers ;<br />
• Reduce re-work and troubleshooting; and<br />
- Increase motivation of workers as they are able to earn more with lesser rejects.<br />
For structured and systematic OJT to be effective, a simple blueprint has to be developed by<br />
the supervisor at each department as a guide to train or coach their subordinate. With multiracial<br />
workers working at these companies, supervisors representing each race developed<br />
multi-lingual blueprint to overcome language barrier among the workers and their supervisor.<br />
Most of the companies are contemplating of implementing OJT in every department in the near<br />
future due to its successful implementation during the OJT development programme.<br />
OJT implementation is not only suitable to be implemented in manufacturing company but<br />
also to other companies in the services sector as well as government departments. Through OJT,<br />
the companies were able to nurture workers to be knowledgeable and skillful in a shorter time<br />
and push the productivity of the company towards a higher level.<br />
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101
Box 4.2 : Elements of <strong>Productivity</strong>-Linked Wage System (PLWS)<br />
in Collective Agreements<br />
Most companies are aware about the importance of linking wages to productivity. By linking<br />
wages to productivity, companies will be able to enhance labour cost competitiveness by<br />
improving labour productivity which commensurate with wage increase thus reducing unit<br />
labour cost. This is especially evident among the unionised sectors whereby in 2010, 75.5% of<br />
the collective agreements deposited and taken cognisance by Industrial Court had incorporated<br />
PLWS element sas shown below.<br />
Distribution of Collective Agreement (CA) with PLWS by Sectors-2008-2010<br />
Sector<br />
Total Number of<br />
Collective Agreement<br />
Number of CA / Percentage With PLWS<br />
2008 2009 2010<br />
2008 2009 2010<br />
No. % No. % No. %<br />
Manufacturing 153 159 195 108 70.6 116 72.9 144 73.85<br />
Services 112 108 116 81 72.3 80 74.1 88 75.86<br />
Agriculture 5 9 17 5 100 9 100 15 88.23<br />
Others - - 2 - - - - 2 100<br />
Total 270 276 194 71.85 205 74.27 249 75.45<br />
Elements of PLWS<br />
A total of 10 main elements had been identified in all collective agreements which are related<br />
to productivity or performance. A list of these elements and their numbers as well as their<br />
breakdown by sector as shown below. Among the elements that were widely adopted by both<br />
the manufacturing and services sectors were commitment incentives, salary increment based<br />
on merit, non-contractual bonus, service charge and profit based bonus.<br />
102 <strong>Productivity</strong> Report 2010/2011
Elements of <strong>Productivity</strong> Linkages by Sector<br />
No.<br />
Main Elements<br />
Manufacturing<br />
Services<br />
No. % No. %<br />
1 Commitment Incentives 62 31.8 7 6.1<br />
2 Salary Increment Based on Merit 69 35.4 31 26.7<br />
3 Non-Contractual Bonus 33 16.9 23 19.8<br />
4 Profit Based Bonus 23 11.8 29 25.0<br />
5 Fixed and Additional Bonus 28 14.4 12 10.3<br />
6 <strong>Performance</strong> Allowance 3 1.5 6 5.2<br />
7 Individual /Group Target 5 2.6 2 1.7<br />
8 Piece Rate 2 1.0 - -<br />
9 Skill Allowance 11 5.6 7 6.0<br />
10 Service Charge - - 25 21.6<br />
Some of the benefits obtained by the companies from PLWS implementation are as follows:<br />
• The system provides recognition for improved performance as the<br />
employees will be recognised and rewarded accordingly;<br />
• It is a system which requires openness and commitment from both<br />
employers and employees through dialogue and communication;<br />
• It is a fair and equitable system which enables employees to obtain their<br />
share of gain from their performance improvement;<br />
• The system allows for wages to be adjusted according to performance<br />
of the company and the country’s economic situation;<br />
• As the wages are linked to performance, the higher the performance,<br />
the higher the reward thus enhancing the standard of living; and<br />
• Such system which strives for continuous improvement will motivates<br />
employees to find new innovative ways to improve work processes.<br />
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Box 4.3 : ISO 9000 Practices and Management<br />
ISO 9000 is an international quality certification that specifies minimum requirements for<br />
an organization to comply with the Quality Management System (QMS). The development<br />
of standards on ISO 9000 series is mainly under the jurisdiction of Technical Committee (TC<br />
176) located in Geneva, Switzerland. The objectives of the ISO series are to help organisation<br />
be more effective and efficient in delivering their products and services. Currently, in Malaysia<br />
there are more than 7838 companies which have been registered as certified organisations. The<br />
certificates were issued by more than 23 certification bodies worldwide.<br />
ISO 9000 underlines quality management system requirements for organisation to demonstrate<br />
their abilities to consistently provide products that meet customers’ satisfaction in line with the<br />
regulatory requirement. In order to ensure the acceptance of organisations in the market, the<br />
ISO 9000 series will be revised every five years. The latest version in the market is ISO 9001:2008.<br />
This version was launched in November, 2008 by ISO Committee. Few changes were emphasised<br />
to highlight the ambiguity against the previous version for sustaining the universal factor on<br />
the system requirements.<br />
ISO 9000 is focusing on process approach on “set of inter-related or interacting activities which<br />
transform inputs into output”. Output from one process to another are typically inputs into other<br />
process. Its main focus is to add value by planning and controlling processes along the supply<br />
chain in order to remain effective and efficient to fulfill customer expectation. The development<br />
of the standard has been assisted through the guideline of eight Quality Management Principles.<br />
Independent confirmation that organisations meet the requirements of ISO 9001 may be<br />
obtained from third party certification bodies. Over a million organisations worldwide are<br />
independently certified making ISO 9001 as one of the most widely used management tools in<br />
the world today.<br />
The global adoption of ISO 9001 may be attributed to a number of factors. A number of major<br />
purchasers require their suppliers to posses ISO 9001 Certification. Besides stakeholders’<br />
benefits, financial gains were also achieved by organisations certified with ISO 9001. Certified<br />
organisations achieved superior return on assets compared to otherwise similar organisations<br />
without certification.<br />
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105
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CHAPTER 5<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
of the Agriculture Sector<br />
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107
PRODUCTIVITY PERFORMANCE OF THE AGRICULTURE SECTOR<br />
Overview<br />
• The agriculture sector plays an important role in<br />
Malaysia’s economic development in providing<br />
rural employment, uplifting rural incomes<br />
and ensuring national food security. With a<br />
productivity growth rate of 1.8%, amounting to<br />
RM27,680 (Figure 5.1), the sector registered a<br />
GDP contribution of 7.4%, amounting to RM4.4<br />
billion in 2010. The higher growth recorded in<br />
2010 (0.4% in 2009), was partly attributed to<br />
the higher production of major commodities<br />
such as crude palm oil (CPO) coupled with the<br />
favourable performance of the non-plantation<br />
sub-sectors comprising fisheries, livestock and<br />
other food crops. In line with the Ministry of<br />
Agriculture and Agro-based Industry’s (MOA)<br />
tag-line of ‘‘Agriculture is Business,” several<br />
measures were also undertaken to modernise<br />
and commercialise the agriculture sector. These<br />
include the implementation of High Impact<br />
Projects (HIPs) such as the Aquaculture Industrial<br />
Zones (AIZs) and Permanent Food Production<br />
Parks (PFPPs). At the end of 2010, a total of 29<br />
AIZs were established while 54 PFPPs covering<br />
an area of 4,690 hectares with 853 participants<br />
were implemented.<br />
• Recognising the importance of the agriculture<br />
sector, the Government is focusing greater<br />
emphasis on the sector as a National Key<br />
Economic Area (NKEA) in the Economic<br />
Transformation Programme (ETP). The<br />
agriculture NKEA aims to increase the economic<br />
contribution of the sector to Gross National<br />
Income (GNI) by focusing on selected subsectors<br />
which have high-growth potential<br />
namely, aquaculture, seaweed farming, swiftlet<br />
nests, herbal products, fruits and vegetables<br />
and premium processed food. Within these<br />
sub-sectors, several projects and initiatives will<br />
be undertaken to catalyse the establishment of<br />
RM Thousand<br />
28.0<br />
27.0<br />
26.0<br />
25.0<br />
24.0<br />
23.0<br />
22.0<br />
market-driven, industrial scale and integrated<br />
agriculture-related businesses.<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
• Farm productivity is assessed in terms of the<br />
output derived from the utilisation of the factors<br />
of production namely, land, labour and capital.<br />
Land productivity is a measurement of the<br />
output from the utilisation of a unit land area<br />
while labour productivity is the measurement<br />
of output per worker. Capital productivity<br />
measures the output per Ringgit investment.<br />
Land <strong>Productivity</strong><br />
Figure 5.1: <strong>Productivity</strong> Level & Growth<br />
of the Agriculture Sector, 2006-2010<br />
2.89<br />
-2.29<br />
9.27<br />
2006 2007 2008 2009 2010<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
-2.0<br />
-4.0<br />
Percent<br />
• Land productivity grew by 7.5% in 2010<br />
(Figure 5.2). The increase in land productivity<br />
was mainly attributed to the unprecendented<br />
increase in both the palm oil and rubber prices.<br />
Crude palm oil grew from RM2,456 per tonne<br />
to RM3,625 per tonne while rubber price grew<br />
from RM9,150 per tonne to RM14,156 per tonne.<br />
The sudden increase of the commodity prices<br />
was due to strong demand from the emerging<br />
economies such as China and India.<br />
1.54<br />
1.82<br />
Computed from: - Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
108 <strong>Productivity</strong> Report 2010/2011
Chapter 5<br />
Labour <strong>Productivity</strong><br />
• Labour productivity grew at a higher rate of<br />
1.8% in 2010 compared to 0.4% in 2009 (Figure<br />
5.3). The higher performance was attributed to<br />
the adoption of modern farming technologies<br />
such as fertigation systems in vegetable farming<br />
and the mechanisation of farm activities. The<br />
higher output of paddy, fruits and vegetables<br />
production in 2010 had also contributed to the<br />
higher labour productivity.<br />
Capital <strong>Productivity</strong><br />
• Capital productivity growth rebounded with an<br />
increase of 1.5% from a decline of 2.5% in 2009.<br />
The growth was supported by investment in<br />
farm machineries and equipment to modernise<br />
and reduce dependency on human labour to<br />
accelerate the agriculture sector development<br />
(Figure 5.4).<br />
International Agricultural<br />
<strong>Productivity</strong> Comparison<br />
• In 2009, the productivity capacity of Malaysian<br />
agricultural workers recorded an incremental<br />
growth of 2.5% from USD18,895 in 2008 to<br />
USD19,360. They continued to surpass the<br />
productivity levels of agricultural workers in<br />
ASEAN agriculture-based economies such as<br />
Philippines, Indonesia and Thailand, as shown in<br />
Figure 5.5. With the impetus provided under the<br />
Economic Transformation Programme to further<br />
accelerate the development of the agriculture<br />
sector, productivity is expected to further<br />
improve in the Tenth Malaysia Plan. In the Asian<br />
region, Japan with its continuous focus in the<br />
adoption of modern farming technologies has<br />
maintained its lead position with its agricultural<br />
workers’ productivity level at USD23,736<br />
Percent<br />
Percent<br />
Percent<br />
Figure 5.2: Growth in Land <strong>Productivity</strong>, 2006-2010<br />
8<br />
7<br />
6<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
Figure 5.4: Growth in Capital <strong>Productivity</strong>, 2006-2010<br />
1.50<br />
1.00<br />
0.50<br />
0.0<br />
-0.50<br />
-1.00<br />
-1.50<br />
-2.00<br />
-2.50<br />
5.53<br />
1.04<br />
3.68<br />
0.84<br />
7.52<br />
2006 2007 2008 2009 2010<br />
Computed from: Ministry of Agriculture and Agro-based Industry, Malaysia<br />
Figure 5.3: Growth in Labour <strong>Productivity</strong>, 2006-2010<br />
4<br />
3<br />
2<br />
1<br />
0<br />
3.40<br />
2.80<br />
Computed from: Ministry of Agriculture and Agro-based Industry, Malaysia<br />
0.12 0.33<br />
3.01<br />
0.36<br />
2006 2007 2008 2009 2010<br />
1.21<br />
1.21<br />
-2.47<br />
1.21<br />
1.46<br />
1.82<br />
2006 2007 2008 2009 2010<br />
Computed from: Ministry of Agriculture and Agro-based Industry, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
109
Figure 5.5: International <strong>Productivity</strong> Comparison for Selected Asian Countries (2009)<br />
25<br />
20<br />
23,736<br />
21,252 21,009<br />
19,360<br />
USD Thousand<br />
15<br />
10<br />
5<br />
3,998 3,485<br />
3,235<br />
2,945 2,913<br />
0<br />
Japan Korea Taiwan Malaysia Philippines Indonesia Thailand India China<br />
Source :<br />
World Competitiveness Yearbook, 2010, Institute Management Development, Switzerland<br />
Human Resource<br />
Capacity Development<br />
• Human capital is a critical success factor in<br />
enhancing productivity and in transforming the<br />
agriculture sector into an agribusiness sector.<br />
Recognising the importance of human resource<br />
capacity development, the MOA, through the<br />
National Agriculture Training Council (NATC),<br />
are conducting various training programmes<br />
to develop a pool of agricultural technicians<br />
and entreprenuers to operate farm business<br />
opportunities as well as projects.<br />
• Table 5.1 shows the number of trainees who<br />
attended the training programmes conducted<br />
by NATC. In 2010, a total of 919 participants were<br />
trained, with the majority of them (436) attaining<br />
the basic Level 1 in the Malaysian Skill Certificate<br />
(MSC) programme. The most popular programme<br />
MSC*<br />
MSD**<br />
MSAD***<br />
TOTAL<br />
Table 5.1: Number of Trainees, 2006 - 2010<br />
Enrolment<br />
Level 1<br />
Level 2<br />
Level 3<br />
Level 4<br />
Level 5<br />
Year<br />
2006 2007 2008 2009 2010<br />
393 402 445 225 436<br />
390 338 334 184 272<br />
225 244 129 103 133<br />
26 - 64 75 73<br />
- 1 - - 5<br />
1,034 985 972 587 919<br />
* MSC - Malaysian Skill Certificate<br />
** MSD - Malaysian Skill Diploma<br />
*** MSAD - Malaysian Skill Advanced Diploma<br />
Source: Ministry of Agriculture and Agro-based Industry, Malaysia<br />
110 <strong>Productivity</strong> Report 2010/2011
Chapter 5<br />
was the veterinary skills training module with<br />
79 trainees achieving the MSC and another 19<br />
achieving the MSD as shown in Table 5.2. This was<br />
followed by 52 trainees achieving the MSC and 14<br />
trainees achieving the MSD in food processing.<br />
The aquaculture and crops training programmes<br />
were also popular among trainees in 2010.<br />
• Besides the above NATC training programmes,<br />
the agriculture agencies and departments<br />
were also conducting various technical and<br />
entrepreneurship training programmes<br />
in preparing youths and entreprenuers to<br />
participate in the development of business<br />
opportunities in the agriculture sector.<br />
Table 5.2: Number of Trainees Completed Fields of Training<br />
Year<br />
Field of Training<br />
2008 2009 2010 TOTAL<br />
MSC MSD MSAD MSC MSD MSC MSD MSAD<br />
Aquaculture<br />
Fruits<br />
Marketing<br />
Food Processing<br />
Food Distribution<br />
Poultry<br />
Vegetables<br />
Crops<br />
Captured Fisheries<br />
Technology<br />
Veterinary<br />
TOTAL<br />
35 - - 15 10 39 16 - 115<br />
- - - - - - - - 0<br />
74 5 - 41 15 22 14 1 172<br />
31 7 - 54 - 52 14 1 159<br />
- - - - - 4 - - 4<br />
- - - - - - 1 - 1<br />
- - - - - - - - 0<br />
67 13 1 77 22 32 21 2 235<br />
19 - - 9 - 31 - - 59<br />
79 - - 45 8 79 19 1 231<br />
305 25 1 241 55 259 85 5 976<br />
* MSC - Malaysian Skill Certificate<br />
* MSD - Malaysian Skill Diploma<br />
* MSAD - Malaysian Skill Advanced Diploma<br />
Source: Ministry of Agriculture and Agro-based Industry, Malaysia<br />
<strong>Productivity</strong> Report 2010/2011<br />
111
Best Practices<br />
• To further enhance the productivity growth of<br />
the agriculture sector and to expand market<br />
access for the export of agriculture produce,<br />
several best practices have been initiated by the<br />
Government and are gradually being adopted<br />
by the farming community. These include:<br />
Good Agricultural Practices (GAP)<br />
• With the increasing demand for high quality,<br />
healthy, safe and fresh food products, agrifood<br />
producers are adopting a GAP-based<br />
production system in order to be competitive<br />
in the global market. These include farming in<br />
an environmentally friendly and sustainable<br />
way such as practising Integrated Pest and<br />
Crop Management with judicious chemical<br />
applications, use of quality irrigation water and<br />
being sensitive to workers’ welfare.<br />
The Department of Agriculture (DOA) has<br />
implemented the Malaysian Farm Certification<br />
Scheme for Good Agricultural Practices (SALM)<br />
in 2002 to accredit farms which adopted GAP as<br />
a pre-requisite to obtaining the internationally<br />
recognised GlobalGAP Certification. SALM<br />
certified producers are also eligible to use the<br />
“Malaysia’s Best” logo as a symbol of distinction<br />
conforming to safety standards. As of October<br />
2010, a total of 286 farms have been awarded<br />
the SALM Certification.<br />
Organic Farming Practices<br />
• In recent years, there is a growing consumer<br />
demand for food products which are organically<br />
produced without the use of synthetic chemical<br />
fertilisers or pesticides, hormones and growth<br />
promoters. Organic products are highly<br />
favoured by consumers’ concern on food safety<br />
and health care, albeit being priced at 30% to<br />
40% higher than those grown in conventional<br />
farming systems. Capitalising on this trend,<br />
retail outlets, supermarkets and hypermarkets<br />
in Malaysia have created dedicated shelves<br />
catering for organic fruits and vegetables.<br />
• In 2003, the DOA implemented the Malaysian<br />
Organic Scheme (SOM). This scheme enforces<br />
stringent regulations on production and<br />
handling including packaging, storage,<br />
transportation and sale of organic agricultural<br />
products. With effect from January 2011, any<br />
agriculture product labeled as organic must<br />
obtain a SOM Certificate issued by the DOA. At<br />
the end of November 2010, a total of 42 farms<br />
with a total land size of 2,000 hectares had been<br />
awarded the SOM Certificate.<br />
Contract Farming<br />
• Contract Farming is a system to organise<br />
small-scale farmers into effective commercial<br />
production units with linkages to the market.<br />
The Food and Agriculture Organisation<br />
(FAO) of United Nations has defined contract<br />
farming “as an agreement between farmers<br />
and marketing firms for the production and<br />
supply of agricultural products under a forward<br />
agreement, frequently at pre-determined prices.<br />
The arrangement often involves the purchaser<br />
in providing a degree of production support<br />
for example, the supply of inputs and technical<br />
advice”. In the Philippines and Thailand,<br />
contract farming arrangements are successfully<br />
practised by fruit and vegetable growers from<br />
both national and international corporations<br />
with international and domestic market access.<br />
• In Malaysia, there are contract farming<br />
arrangements between starfruit and papaya<br />
growers and fruit exporters. These exporters<br />
112 <strong>Productivity</strong> Report 2010/2011
Chapter 5<br />
also provide the growers with technical<br />
and production guidance that comply with<br />
international GAP standards. The Government,<br />
through Federal Agriculture Marketing Authority<br />
(FAMA’s) Contract Farming High Impact Project,<br />
has promoted contract farming arrangements<br />
with fruit and vegetable growers, livestock,<br />
fresh water-fish, coconut and other producers.<br />
Through this system, farmers are assured with<br />
an agreed price for their produce. Training<br />
in GAP accreditation schemes and extension<br />
programmes are provided to assist the contract<br />
farmers to produce quality products with food<br />
safety assurance. As at 2009, a total of 12,010<br />
farmers with 20,209 hectares of land were<br />
involved in contract farming with FAMA.<br />
Strategies and Outlook<br />
• In the Economic Transformation Programme<br />
(ETP), agriculture has been identified as a<br />
National Key Economic Area (NKEA) that would<br />
significantly contribute to the economic growth<br />
of the economy particularly to Gross National<br />
Income (GNI) to enable Malaysia to achieve<br />
high-income status in 2020. The strategies in<br />
accelerating the development of the agriculture<br />
sector are embodied in the Agriculture NKEA.<br />
• The Agriculture NKEA has been formulated with<br />
three main aspirations. They are:<br />
• To increase GNI by RM28.9 billion to reach<br />
RM49.1 billion in 2020;<br />
• To create 74,600 job opportunities, the bulk<br />
of which will be in rural areas; and<br />
• To increase the incomes of farmers<br />
participating in the transformation<br />
initiatives by two to four folds.<br />
• To achieve the aspirations of the Agriculture<br />
NKEA, several projects as shown in Table 5.3 have<br />
been identified that would further enhance the<br />
development and productivity growth of the<br />
agriculture sector. These projects will involve<br />
capturing higher value for farmers’ produce<br />
and improving productivity of the agriculture<br />
sector. To support the implementation of the<br />
Agriculture NKEA, the MOA was provided an<br />
allocation of RM1.6 billion for the period of two<br />
years (2011-2012) under the Tenth Malaysia<br />
Plan.<br />
• The projects under the Agriculture NKEA are<br />
grouped under four main thrusts:<br />
• Capitalising on Malaysia’s competitive<br />
advantages;<br />
• Tapping premium markets;<br />
• Ensuring food security objectives; and<br />
• Expanding participation in the regional<br />
agriculture value chain.<br />
Capitalising on Malaysia’s<br />
Competitive Advantage<br />
• To capitalise on Malaysia’s competitive<br />
advantage, development projects will focus on<br />
the exploitation of the vast biodiversity resources<br />
for herbal products, seaweed cultivation along<br />
the sheltered coast, suitable native birds for<br />
the production of edible bird’s nest and the<br />
potential utilisation of its 4.7 million hectares of<br />
oil palm plantation for cattle integration.<br />
• To transform Malaysia’s rich biodiversity into<br />
business opportunities, the production of highvalue<br />
herbal products to penetrate the global<br />
export markets will be enhanced. The focus<br />
will be on several popular herbs, including<br />
Tongkat Ali, Kacip Fatimah, Misai Kucing, Dukung<br />
Anak, Hempedu Bumi, Agar Wood and Lemon<br />
Myrtle. The global trade of natural products<br />
amounted to RM777 billion and is projected<br />
<strong>Productivity</strong> Report 2010/2011<br />
113
Table 5.3: Agriculture NKEA Entry Point Projects (EPPs)<br />
No. EPPs 2020 GNI (RM million) Jobs<br />
EPPs Capitalising on Malaysia’s Competitive Advantages<br />
1 Unlocking value from Malaysia’s biodiversity through herbal products 2,213.9 1,822<br />
2 Expanding the production of swiftlet nest 4,541.2 20,800<br />
3 Venturing into commercial scale seaweed farming in Sabah 1,410.6 12,700<br />
4 Farming through integrated cage aquaculture systems 1,383.0 10,072<br />
5 Rearing cattle in oil palm estates 150.0 3,600<br />
EPPs Tapping Premium Markets<br />
6 Replicating integrated aquaculture model (iZAQs) to tap market for premium shrimps 1,273.2 11,800<br />
7 Upgrading capabilities to produce fruit and vegetables for premium markets 1,571.5 9,075<br />
8 Strengthening the export capability of the processed food industry through an<br />
integrated processed food park 884.3 4,928<br />
9 Introducing fragrant rice variety for non-irrigated areas 100.1 N/A<br />
EPPs Ensuring Food Security<br />
10 Scaling up and strengthening productivity of paddy farming in Muda area 1,033.6 14,880<br />
11 Scaling up and strengthening productivity of paddy farming in other irrigated areas 1,370.3 9,618<br />
12 Strengthening current anchor companies in cattle feedlots 182.9 2,000<br />
13 Partnering with a large foreign dairy company to establish dairy clusters in Malaysia 326.3 761<br />
EPPs Expanding Participation in the Regional Value Chain<br />
14 Establishing a leadership position in regional breeding services 466.6 5,390<br />
15 Securing foreign direct investment in agriculture biotechnology 819.9 1,208<br />
16 Investing in foreign cattle farms 116.5 N/A<br />
Source : <strong>Performance</strong> Management and Delivery Unit (PEMANDU)<br />
114 <strong>Productivity</strong> Report 2010/2011
Chapter 5<br />
to triple to over RM2 trillion by 2020. The<br />
strategic direction is to establish Research and<br />
Development (R&D) centres in discovery, crop<br />
production and agronomy, standardisation and<br />
product development and pre-clinical studies.<br />
To ensure adequate and consistent supply of<br />
raw materials, herbal cultivation parks will be<br />
developed to undertake the herb cultivation<br />
on a commercial scale with out-growers based<br />
on a contract-farming system. New facilities will<br />
be built to supply the industry with reliable and<br />
premium quality extracts. To further support<br />
the herbal industry, the Malaysian Herbal<br />
Development Council comprising Government<br />
and private sector members will be established<br />
to coordinate and provide strategic directions,<br />
policies and regulations. The production of highvalue<br />
herbal products is expected to contribute<br />
an estimated RM2.2 billion to Gross National<br />
Income (GNI) by 2020 and the creation of 1,800<br />
job opportunities for 300 manufacturers.<br />
• The annual global market for swiftlet nests is<br />
estimated at RM10.2 billion of which Malaysia<br />
is currently the second largest producer with<br />
RM1.5 billion in sales. Malaysia will continue to<br />
further expand the production of swiftlet nests<br />
to capture 40% of the global edible swiftlet nests<br />
market by 2020 with increased production of<br />
870 tonnes and increased domestic processing<br />
into downstream products. Malaysia’s export<br />
of bird’s nest is projected to reach RM5 billion<br />
by 2020 with China as the largest importer.<br />
Comprehensive legislation and guidelines<br />
will be developed to ensure sustainability of<br />
harvesting, animal welfare, consumer health<br />
and safety and regulated premises. Current laws<br />
will be amended to regulate the production of<br />
edible bird’s nest and to promote industry’s best<br />
practices. An R&D programme on mechanising<br />
the de-feathering process will also be set up to<br />
reduce post-harvest loss and cost. Development<br />
of the edible swiftlet nest industry is expected<br />
to contribute RM4.5 billion to GNI and will<br />
generate 20,800 jobs by 2020.<br />
• The seaweed farming industry in Sabah will be<br />
transformed into a high-yielding and commercial<br />
scale business by leveraging on the available<br />
strength in R&D and strong downstream<br />
infrastructure. New areas of 7,500 hectares<br />
in Sabah have been designated for seaweed<br />
cultivation under the Aquaculture Industrial<br />
Zone (AIZ) and a further 20,500 hectares will be<br />
designated by 2020. Best practices in production<br />
value chain such as mechanical harvest will be<br />
developed to improve harvesting efficiency<br />
and in reducing the time at sea for cultivation.<br />
With the expansion of the seaweed industry, an<br />
additional 12,700 jobs will be created in Sabah<br />
and is expected to contribute RM1.4 billion to<br />
GNI by 2020.<br />
• Aquaculture cage-farming using the latest<br />
technology and anchor company-driven will be<br />
promoted on a large scale. It will focus on three<br />
species with high export value, namely grouper,<br />
sea bass and tilapia.<br />
• To capitalise on the large available oil palm<br />
plantation areas, cattle rearing on a structured,<br />
rotational grazing system will be implemented<br />
to ensure profitability and sustainability. The<br />
target is to increase the number of cattle in oil<br />
palm estates to 300,000 heads by 2020.<br />
Tapping Premium Markets<br />
• With increasing consumer awareness for<br />
healthy and safe food products coupled with<br />
an emerging middle-income society, there is<br />
an increase in the demand for agri-products<br />
with food safety certification and a variety of<br />
convenient food. Taking cognisance of this<br />
<strong>Productivity</strong> Report 2010/2011<br />
115
emerging trend, various projects have been<br />
formulated to capture this emerging premium<br />
niche market.<br />
• The first is to replicate Aquaculture Industrial<br />
Zone (AIZ) models to tap the market for<br />
premium shrimps and to position Malaysia as a<br />
country of origin for quality seafood to cater for<br />
the increasing global demand for fully-certified<br />
and traceable seafood products. A skills-training<br />
centre with linkage to public universities will be<br />
set up to develop workers’ skills and to enable<br />
certification. A credible on-site verification<br />
system meeting the highest international<br />
requirements will be established in the ZIAs.<br />
Training programmes to upgrade knowledge<br />
on standards and to increase number of<br />
certification auditors will be conducted. Anchor<br />
companies and Small Medium Enterprises<br />
(SMEs) will be involved in the leasing of pond<br />
modules through a contract farming concept.<br />
An R&D facility will be established to focus on<br />
developing shrimp breeding programmes as<br />
well as health, nutrition and aquaculture related<br />
technologies. Aquaculture export centres<br />
equipped with modern technologies will be set<br />
up near major airports to facilitate the export of<br />
live and chilled fish to major importing countries<br />
such as Hong Kong, Taiwan and Japan. With the<br />
development of ZIAs, 11,900 jobs will be created<br />
and generate a contribution of RM1.3 billion to<br />
GNI by 2020.<br />
• In the fruit and vegetable sub-sector, efforts<br />
will be made to increase the production of high<br />
quality products in compliance with global<br />
food safety standards in order to gain access to<br />
premium markets in the Middle East and Europe.<br />
Premium tropical fruits such as eksotika papaya,<br />
MD2 pineapple, KR1 rock melon, B10 starfruit,<br />
J32 jackfruit, Cavendish banana and highland<br />
vegetables such as tomato, capsicum and<br />
lettuce will be the core crops. Anchor companies<br />
will be invited to lead the implementation<br />
using an extended supply chain model. These<br />
anchor companies will manage contract farmers<br />
and coordinate production and distribution<br />
including post-harvest facilities to extend<br />
storage and shelf-life and preservation of fresh<br />
produce quality during transportation. These<br />
activities will be conducted in compliance to<br />
relevant international standards such as Good<br />
Agricultural Practices (GAP), Hazard Analysis<br />
and Critical Control Point (HACCP) and Good<br />
Manufacturing Practices (GMP). A farmers’<br />
cooperative focusing on production will be<br />
established to eventually take over the role of<br />
the anchor company. The overall objective is<br />
to enable farmers to earn a monthly income of<br />
RM4,500 per hectare. With increased production<br />
and expanded market access, the fruit and<br />
vegetable sub-sector is expected to generate a<br />
contribution of RM1.6 billion to GNI and 9,100<br />
job opportunities by 2020.<br />
• Integrated Food Parks will be established<br />
to strengthen the export capability of the<br />
processed food industry. The target is to<br />
establish four integrated food parks operated<br />
by anchor companies who will be responsible<br />
for obtaining product certification, packaging,<br />
branding, marketing and managing suppliers<br />
of raw materials. Through the Promotion of<br />
Investment Act, foreign partners will be invited<br />
to strengthen market access through contract<br />
manufacturing arrangements, equity sharing<br />
and licensing of propriety products and brands.<br />
This would also encourage the growth of SMEs<br />
in the food processing industry. Investment<br />
in the processed food industry is expected to<br />
generate a contribution of RM884 million to GNI<br />
and create 4,900 jobs by 2020.<br />
116 <strong>Productivity</strong> Report 2010/2011
Chapter 5<br />
• To further tap the premium market, a new<br />
fragrant rice variety (MRQ76) developed<br />
by the Malaysian Agriculture Research and<br />
Development Institute (MARDI) will be<br />
cultivated in rain-fed areas. Dedicated millers<br />
will be appointed to prevent contamination and<br />
preservation of quality and brand identity. This<br />
premium identity will enable farmers to fetch a<br />
high price thus increasing their income for their<br />
unmilled rice.<br />
Ensuring Food Security Objectives<br />
• The Agriculture NKEA targets to increase<br />
domestic production to cater for 85% selfsufficiency<br />
in rice, 40% self-sufficiency in<br />
beef and 5% self-sufficiency in milk by 2020.<br />
To accomplish this, productivity of paddy<br />
farming in The Muda Agriculture Development<br />
Authority (MADA) area will be up-scaled and<br />
further strengthened. The ultimate objective<br />
is to promote commercial-scale farming with<br />
improved irrigation density and accelerate the<br />
use of new technologies to increase the average<br />
yield to 8 tonnes per hectare by 2020. Adoption<br />
of technologies will be intensified in the field<br />
of seed R&D, soil fertility enhancement, large<br />
scale mechanisation, milling and paddy straw<br />
collection. MADA will establish a unit to provide<br />
standardised land management contracts and<br />
monetary incentives to encourage landowners<br />
to outsource management of their land. Tertiary<br />
canals will be further extended to improve<br />
irrigation intensity to 30 meters per hectare.<br />
MADA will establish a subsidiary that will be<br />
involved in the entire rice value chain from seed<br />
supply to rice processing and wholesaling. The<br />
subsidiary, co-owned by farmers and private<br />
sector stakeholders will enable farmers to<br />
share the value in the downstream segment. In<br />
addition, productivity of paddy farming in other<br />
irrigated areas would be further enhanced.<br />
The MADA model will be replicated in Kemubu<br />
Agriculture Development Authority (KADA)<br />
granary, Batang Lupar in Sarawak and Kota<br />
Belud in Sabah. With the commercialisation<br />
of rice farming, farmers’ income is expected to<br />
improve by 30%. The expected contribution of<br />
the rice industry to GNI by 2020 is estimated to<br />
RM1 billion.<br />
• To achieve a self-sufficiency of 40% in beef, the<br />
capacity of cattle feedlots will be expanded<br />
by 240,000 heads through an increase in the<br />
number of small-scale feedlotters. An anchor<br />
company will be developed to strengthen<br />
the linkage between farm and consumer. A<br />
partnership with a large foreign dairy company<br />
will also be established to develop dairy<br />
clusters with 27,000 heads of dairy cattle and<br />
downstream processing facilities to increase<br />
milk sufficiency from 2% to 5% by 2020. The<br />
beef and dairy industry is expected to generate<br />
a contribution of RM469 million to GNI by 2020.<br />
A total of 2,800 jobs will be created through this<br />
industry.<br />
Expanding Participation in the Regional<br />
Agriculture Value Chain<br />
• Leveraging on propriety systems and<br />
intellectual property that had been developed<br />
and exclusively licensed, Malaysia aims to<br />
become a regional service provider in higher<br />
value-added areas in agriculture. In establishing<br />
Malaysia’s leading position in regional breeding<br />
services, a regional centre will be established for<br />
the breeding and production of crop planting<br />
materials and seeds as well as livestock with<br />
disease resistant and high productivity traits.<br />
This would position Malaysia as the major<br />
supplier of these materials and thus to capitalise<br />
on the expected growth of the agriculture sector<br />
in Indonesia, Thailand and Vietnam. This would<br />
<strong>Productivity</strong> Report 2010/2011<br />
117
involve collaboration with a leading Canadian<br />
research centre in the setting up of a Center<br />
for Marker Discovery and Validation (CMDV) to<br />
lead seed and brood-stock research, initially in<br />
Malaysia and subsequently in the region. Efforts<br />
will also be directed to attract potential investors<br />
in agricultural biotechnology in crop nutrition<br />
and bio-yield enhancers, bio-pesticides and<br />
flavours and fragrances. Four overseas cattle<br />
operations will be acquired to ensure a steady<br />
supply of breeder cattle, dairy animals, and<br />
cattle for local feedlots.<br />
Enablers to Support Development of the<br />
Agriculture Sector<br />
• To support the development and creation<br />
of business opportunities in the agriculture<br />
sector, the following key enablers are required<br />
to provide the impetus for the transformation<br />
of the agriculture sector as a market-driven,<br />
industrial scale and integrated agriculturerelated<br />
businesses.<br />
• Provide Incentives for Anchor Companies<br />
in the form of RM50 per RM1,000 of value<br />
purchased from contract farmers;<br />
• Strengthen adoption of Good Agricultural<br />
Practices and Good Manufacturing Practices<br />
by imposing adherence to food safety<br />
standards as a mandatory requirement;<br />
• Change regulations and policies to enhance<br />
the credibility of Malaysian agriculture<br />
industry in terms of traceability and food<br />
safety;<br />
• Strengthen logistics infrastructure through<br />
expansion of cold chain facilities. The cool<br />
chain logistics and perishable centres will be<br />
equipped with Sanitary and Phytosanitary<br />
(SPS) facilities; and<br />
• Ensure sufficient pipeline of human<br />
capital comprising business managers<br />
and entrepreneurs and various agriculture<br />
experts including among others,<br />
agronomists, entomologists, aquaculturists,<br />
animal nutritionists, soil scientists and<br />
veterinarians.<br />
Conclusion<br />
• The strategies outlined in the Agriculture NKEA<br />
have provided a framework for the structured<br />
development of the agriculture sector in<br />
the coming decade. The implementation of<br />
the various initiatives will further uplift the<br />
social and economic position of the rural<br />
farming population. The proactive initiatives<br />
undertaken by the Government through the<br />
Agriculture NKEA will serve as a catalyst in<br />
transforming the traditional agriculture sector<br />
into a highly commercialised, market-driven<br />
agribusiness sector. Malaysia’s capabilities<br />
across the agriculture value chain are expected<br />
to further strengthen in both the upstream and<br />
downstream processing activities with active<br />
participation from the private sector. With the<br />
concerted focus on agriculture as an engine of<br />
growth, there is an optimistic outlook for the<br />
agriculture sector in the near future.<br />
118 <strong>Productivity</strong> Report 2010/2011
Box 5.1 : Integrating Innovation to Enhance<br />
Agricultural <strong>Productivity</strong> and Food Security<br />
Global food crisis has become a serious concern since 2006. The price upsurge in 2008 saw<br />
an unprecedented price increase in the food sector. Over the next few decades, the global<br />
food system will come under renewed pressure from the combined effects of fundamental<br />
and systematic factors. Added to these effects, new dimensions in the price equation are the<br />
environmental impacts of modern agriculture and the role of crude oil. These effects will create<br />
further constraints on food supply and if action is not taken, there is a real potential for demand<br />
growth to outstrip increases in global food production.<br />
Some of the effects are already being felt in third world countries. Global food prices are subjected<br />
to increasing volatility and are provoking defensive trade and political responses that disrupt<br />
normal market behaviour. World trade structures could come under increased pressure as<br />
continued access to scarce resources becomes a strategic concern for many countries. Malaysia<br />
is not immune to such activities, being dependent on a small number of critical sources and<br />
inputs from the world market.<br />
To address the challenge, innovation must play an important role in fostering agricultural<br />
productivity. Investment in agricultural R&D, technology diffusion and uptake as well as extension<br />
services are essential to foster and realise the benefits from innovation. On the other hand, low<br />
level of R&D investment in agriculture is a major stumbling block to achieving productivity<br />
growth. Thus investment requirements must be considered urgently and broadly, not only<br />
to encompass scientific advances but also to address the need for appropriate infrastructure,<br />
human resources and capacity building.<br />
There are a number of innovation opportunities in agriculture such as environmental protection,<br />
precision farming, biological control of plant pests and diseases, bio-fertilisers, new crop<br />
varieties derived through conventional hybrid as well as biotech breeding techniques including<br />
but not limited to biotechnology and further down the road, nanotechnology that needs to<br />
be given the most attention. The innovation however must be sustainable which is to increase<br />
productivity of crops, livestock and fishery while simultaneously, decreasing its impact on the<br />
environment. The priority initiatives must include plant breeding, protection, and nutrition<br />
management, sustainable livestock and fishery production, waste reduction management and<br />
greenhouse reduction.<br />
The commitment to long term investment in agricultural R&D which is the prequisite for<br />
innovation, remained low in most developing countries despite the 2008 crisis. Investment<br />
in R&D ranked highest in terms of poverty reduction and gives higher returns to productivity<br />
improvement. Hence, to improve agricultural productivity, the country needs to bring the<br />
agriculture sector back to the country’s agenda through bigger investment, support and<br />
incentives. A second generation of Green Revolution needs to be institutionalised as the<br />
production matrix in the 21st century has totally changed compared to what it was in the<br />
<strong>Productivity</strong> Report 2010/2011<br />
119
1960s when the first Green Revolution was introduced. The changes and challenges include<br />
climate change, resource depletion, increase in input costs and energy prices and competition<br />
for agricultural resources for biofuel purposes besides food. Under such situation, a truly Green<br />
Revolution II is deemed necessary. Unlike in the 1960s, the new revolution should go not only<br />
beyond productivity but also adaptation and mitigation initiatives to address climate change<br />
and sustainable management of water resources and land use.<br />
Innovation, which is the ability to create economic value by introducing new products to the<br />
market, redesigning production processes, or reconfiguring organisational practices failed<br />
to induce an optimal level of innovative activity. This is because innovation produces social<br />
benefits that innovators cannot fully appreciate and production costs are often well below the<br />
up-front costs of research and development.<br />
Compared to other sectors of the economy, agriculture presents greater challenges for inventors<br />
trying to reap the benefits of their efforts. For crops that are self-pollinating, farmers can re-use<br />
seeds from year to year, making it difficult for inventors to enforce patents and recoup their costs.<br />
A common solution to these market failures is to grant patents or other forms of intellectual<br />
property rights for their efforts. There are other potential market failures that undermine the<br />
effectiveness of the intellectual property rights in some situations. For example, where R&D<br />
costs are high but market demand for new technologies is uncertain, patents may not be<br />
sufficient to attract private investment. This is the reason where agricultural R&D by the private<br />
sector is negligible in most developing countries.<br />
The question is how to best organise resources to create, diffuse and sustain innovation and how<br />
to leverage investment made in science and technology, research and development and related<br />
capabilities. The objective is to increase sustainable agriculture production while ensuring food<br />
security, wealth creation and improving standard of living. At the moment, the intellectual<br />
property rights are not sufficient to allow innovators to capture the reward of their investment.<br />
The Government is responsible to fund R&D in the development of technologies that have high<br />
social returns. While this traditional approach is and will remain an important part of the R&D<br />
landscape, promoting high quality intellectual property rights in creating economic incentives<br />
and fostering innovation should be encouraged.<br />
A pull mechanism where Government funding stimulates demand for new technologies is a<br />
useful complement to traditional push mechanisms which provide funding to increase the<br />
supply of R&D. With a pull mechanism, the Government releases funding only when specified<br />
outcomes are delivered that will solve the information asymmetries between both research<br />
funding and researchers. Engaging the private sector and linking research funding to adoption<br />
will also encourage innovators to pay close attention to what farmers need and want and<br />
subsequently, enhancing the agricultural productivity and food security of the country.<br />
Contributed by : Prof Dr Mad Nasir Shamsudin,<br />
Dean, Faculty of Agriculture, Universiti Putra Malaysia<br />
120 <strong>Productivity</strong> Report 2010/2011
<strong>Productivity</strong> Report 2010/2011<br />
121
122 <strong>Productivity</strong> Report 2010/2011
CHAPTER 6<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
of the Construction Sector<br />
<strong>Productivity</strong> Report 2010/2011<br />
123
PRODUCTIVITY PERFORMANCE OF THE CONSTRUCTION SECTOR<br />
Overview<br />
• The construction sector is one of the key<br />
economic sectors contributing to the country’s<br />
development agenda. Construction is the driver<br />
of all economic development as any economic<br />
activities must start with construction of basic<br />
infrastructure. The construction sector consists<br />
of three sub-sectors namely, residential, nonresidential<br />
and civil engineering. Within the<br />
construction sector, non-residential sub-sector<br />
accounted for most of the growth during the<br />
period 2007-2010 (Figures 6.1 & 6.2). The other<br />
two sub-sectors namely, residential and civil<br />
engineering were experiencing nominal growth<br />
as a result of the spill over effect of the financial<br />
crisis experienced in 2008. Besides catering for<br />
the domestic market, many of the key players<br />
are shifting their operations overseas especially<br />
to the Middle East countries and India to take<br />
advantage of the huge market potential as<br />
these countries are in the midst of developing<br />
their infrastructure. This is because Malaysian<br />
construction expertise is well recognised and<br />
accepted in these countries.<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
• The construction sector recorded a productivity<br />
growth of 4.6% amounting to RM23,898 in<br />
2010 (Figure 6.3). Much of the productivity<br />
growth was attributed to the implementation<br />
of the Government policy which required<br />
Industrialised Building System (IBS) score of 70<br />
or more for all Government projects. However,<br />
this has not abated the general decline in the<br />
productivity growth. With a declining GDP<br />
growth rate and declining value of contracts<br />
awarded over the past three years from 2007 to<br />
2009, many of the contractors were reluctant<br />
to invest in new technology and to re-train<br />
their workforce. However, the execution of the<br />
RM billion<br />
RM billion<br />
Figure 6.1: Construction GDP and Growth, 2007-2010<br />
10.0<br />
9.0<br />
8.0<br />
7.0<br />
6.0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
30.0<br />
25.0<br />
20.0<br />
15.0<br />
10.0<br />
5.0<br />
0<br />
Figure 6.2: Output of the Construction<br />
Sub-sectors 2007-2010 at 2000 Constant Price<br />
24.5<br />
24.0<br />
23.5<br />
23.0<br />
22.5<br />
22.0<br />
21.5<br />
21.0<br />
20.5<br />
20.0<br />
19.5<br />
19.0<br />
7.30<br />
4.20<br />
5.84<br />
2007 2008 2009 2010<br />
5.19<br />
2007 2008 2009 2010<br />
Computed from: - Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
Computed from: - Construction Industry Development Board, Malaysia<br />
RM Thousand<br />
3.10<br />
8.06<br />
4.55<br />
Figure 6.3: <strong>Productivity</strong> Level & Growth<br />
of the Construction Sector, 2007-2010<br />
7.00<br />
3.23<br />
8.40<br />
4.74<br />
4.20<br />
3.28<br />
8.89<br />
5.15<br />
5.68<br />
5.45<br />
7.62<br />
5.15<br />
4.64<br />
2007 2008 2009 2010<br />
Computed from: - Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
8<br />
7<br />
6<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
Residential<br />
Non-<br />
Residential<br />
Civil<br />
Engineering<br />
8<br />
7<br />
6<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
Percent<br />
Percent<br />
124 <strong>Productivity</strong> Report 2010/2011
Chapter 6<br />
Economic Transformation Programme (ETP)<br />
in 2010 will provide a boost of 30% to 50% to<br />
volume of works over the next decade for the<br />
construction sector. Nine Entry Point Projects<br />
(EPP) and 18 Economic Clusters are expected<br />
to add RM200 billion in construction contracts<br />
over the next 10 years.<br />
• With this substantial increase in the volume of<br />
high quality construction works, it provides<br />
an opportunity for the construction sector to<br />
adopt new technologies and new methods<br />
of construction that will see a quantum leap<br />
in productivity through efficient utilisation<br />
of technologies, manpower and resources.<br />
Conventional building methods will soon be<br />
replaced by wider adoption of IBS with more<br />
innovative and profitable companies expected<br />
to evolve over this decade of opportunity.<br />
International Comparisons of<br />
Construction <strong>Productivity</strong><br />
• Labour productivity as measured in terms<br />
Purchasing Power Parity (PPP) shows that<br />
each Malaysian construction workers was able<br />
to generate an output value of USD26,000<br />
in 2009 (Figure 6.4). This shows that the<br />
Malaysian construction productivity was one<br />
of the best among selected Asian and ASEAN<br />
countries. However productivity of the Korean<br />
construction workers was the highest among<br />
nine selected countries including Malaysia at<br />
USD78,785. The Korean construction sector<br />
was able to achieve higher productivity due to<br />
higher adoption of IBS, having a highly trained<br />
work force who takes pride in their work, wider<br />
adoption of Information and Communication<br />
Technology (ICT) throughout the delivery chain<br />
and the use of advanced materials.<br />
Figure 6.4: International <strong>Productivity</strong> Comparison for Selected Countries, 2009<br />
Construction<br />
<strong>Productivity</strong><br />
USD’000 / Worker<br />
(Purchasing<br />
Power Parity)<br />
90.0<br />
80.0<br />
70.0<br />
60.0<br />
50.0<br />
40.0<br />
30.0<br />
20.0<br />
10.0<br />
0<br />
79<br />
67<br />
62<br />
26 25 22 21<br />
11 10<br />
Korea United States Australia Malaysia Indonesia Thailand Bangladesh Pakistan Philippines<br />
Source : Chia & Others “ International comparison of Malaysian construction labour productivity. CIDB 2010”<br />
<strong>Productivity</strong> Report 2010/2011<br />
125
• Similar studies in the USA have shown that<br />
construction productivity improvements<br />
were the result of mechanisation, automation,<br />
pre-fabrication, less costly and easier to use<br />
materials. The USA construction industry has<br />
transferred tasks from the construction site to<br />
the factory, automated many of the tasks in the<br />
construction site, benefited from lower cost<br />
materials and taking advantage of labour saving<br />
materials.<br />
Best Practices<br />
• When conventional methods of construction<br />
are used, the five key factors contributing to<br />
construction productivity are:<br />
• Timely delivery of materials to project site;<br />
• Project cash flow management to allow<br />
timely payment to suppliers and subcontractors;<br />
• Advanced notifications of change order by<br />
consultants;<br />
• Timely issuance of construction drawing by<br />
consultants; and<br />
• Capability of contractors’ site management<br />
to organise site activities.<br />
• On the other hand, it has been found that the<br />
five most common factors that bring down<br />
construction productivity in the Malaysian<br />
construction sector are:<br />
• Material shortage at project site;<br />
• Non-payment to suppliers causing the<br />
stoppage of material delivery to site;<br />
• Late issuance of progress payment by the<br />
client to main contractor;<br />
• Lack of workers in the market; and<br />
• Coordination problem between the main<br />
contractor and sub-contractors.<br />
• Industry studies have indicated that the lack of<br />
construction management skills is still prevalent<br />
in the construction sector. The following<br />
key areas of improvement will have to be<br />
implemented:<br />
• More construction professionals and<br />
managers to be trained from universities<br />
and technical colleges;<br />
• Wider adoption of Good Construction<br />
Management Practices - ISO 9001;<br />
• More retraining and adult education courses<br />
in technical colleges and polytechnics; and<br />
• Restarting the skilled tradesman courses in<br />
polytechnic and technical schools.<br />
• Studies of best practices have also pointed<br />
to higher productivity from higher IBS<br />
adoption. Higher productivity had also been<br />
derived from projects that leverage ICT for<br />
greater consolidation and integration of the<br />
construction value chain by wider adoption of<br />
Building Information Modelling (BIM) over the<br />
whole value chain.<br />
• Other studies of IBS systems have also concluded<br />
that one of the approaches that is capable of<br />
increasing productivity drastically within the<br />
construction industry is the implementation<br />
of the IBS. For IBS construction, the following<br />
are the most important factors for productivity<br />
improvement. (Table 6.1)<br />
Strategies and Outlook<br />
• With rapid expansion of demand on the<br />
construction sector over the next decade,<br />
the question arises whether the construction<br />
industry can cope with the expected growth<br />
or are we heading for another labour crunch<br />
faced by the industry in 2004?. The EPP and<br />
18 Economic Cluster Projects are all projected<br />
to commence in 2011 and peak around 2015<br />
126 <strong>Productivity</strong> Report 2010/2011
Chapter 6<br />
Table 6.1 : Benefits of Industrialised Building Systems (IBS)<br />
1 Accuracy of Work Planning<br />
and Scheduling<br />
2 Availability of Machinery at<br />
Construction Site<br />
3 Availability of Prefabricated<br />
Components at<br />
Construction Site<br />
4 Professionalism of Design<br />
Team Members<br />
5 Competency of Site<br />
Supervisors<br />
6 Labour Skillfullness<br />
7 Availability of Precise Tools<br />
at the Work Sites<br />
8 Availability of Specific<br />
Workforce at the Work Sites<br />
Unlike conventional construction, IBS requires good preconstruction<br />
planning and management to ensure components<br />
are manufactured and delivered on time.<br />
IBS components installation works are complicated, use<br />
machinery and the sizes of the components are relatively large.<br />
Timely delivery of the IBS components is key to productivity<br />
improvements. Any idle state while waiting for the prefabricated<br />
components to be delivered will result in lower productivity.<br />
The role of the project team in issuing all relevant information<br />
about the work implementation in a timely manner is vital for<br />
projects to be completed on time.<br />
Site supervisors who have adequate knowledge and experience<br />
critical to resolve any problems that arise from the on-site<br />
installation works.<br />
IBS component installation depends much on a highly skilled<br />
workforce.<br />
The availability of precise tools is a very important factor because<br />
any shortcomings in the provision of these tools will hinder the<br />
efforts of the workers to place and secure the prefabricated<br />
components at the correct locations as required by the works.<br />
Prefabricated components installation works require a higher<br />
level of skill. The workers need to equip themselves with specific<br />
knowledge and experience in making sure these installation<br />
works are carried out efficiently.<br />
Source : - Mohd Hanizun Hanafi, Abd. Ghani Khalid, Arman Abdul Razak, Shardy Abdullah (2010),<br />
“Main Factors Influencing Labour <strong>Productivity</strong> of the Installation of On-site Prefabricated Components”<br />
before tapering off in 2020. This is a golden<br />
opportunity for the construction industry to<br />
change for the better. The industry cannot adopt<br />
the old approach of importing more foreign<br />
labour and using old methods of construction<br />
and expect the Government to support it. It<br />
must take this opportunity to upgrade itself to<br />
both improve its productivity and image which<br />
in turn will improve its profitability. Parallel to<br />
this, its workforce must improve its skill level in<br />
order to grow with the rest of the economy.<br />
<strong>Productivity</strong> Report 2010/2011<br />
127
• Most important, the construction industry<br />
must adopt new methods of management<br />
and new construction technology. This is a 10<br />
year window of opportunity for both growth<br />
and productivity improvements. The industry<br />
needs to improve its competitiveness that can<br />
be achieved by using good practices, advanced<br />
construction techniques and optimise resources<br />
utilisation.<br />
• Enhancing productivity is the greatest<br />
untapped area for improvement in the<br />
construction industry. Companies that embrace<br />
new technologies, innovative processes,<br />
collaborative partnering, improved safety and<br />
reduction in litigation costs through contract<br />
arrangements will have a significant advantage<br />
over those that continue with past practices.<br />
It is only through enhanced capabilities and<br />
capacity can the industry face the challenges of<br />
this new decade of opportunity.<br />
• According to the seven strategic thrusts outlined<br />
in the Construction Industry Master Plan (CIMP)<br />
2006-2015, the construction industry will have<br />
to boost its capabilities in the following key<br />
strategic areas (Table 6.2).<br />
Table 6.2: Seven Strategic Thrusts of the Construction Industry Master Plan (CIMP) 2006-2015<br />
STRATEGIC THRUST<br />
1 Integration of the<br />
Construction Industry<br />
Value Chain<br />
2 Higher Professionalism in<br />
the Construction Industry<br />
3 Highest Standard of<br />
Quality, Occupational<br />
Safety & Health and<br />
Environmental Practices<br />
KEY AREAS<br />
1.1 Consolidation of industry practices with greater cooperation<br />
along the value chain.<br />
1.2 Greater standardisation of practices, components and<br />
methods.<br />
1.3 Implementation of Construction Industry Payment and<br />
Adjudication Act (CIPAA) for faster dispute resolution.<br />
2.1 More construction professionals and managers from<br />
universities and technical colleges.<br />
2.2 Wider adoption of Good Construction Management<br />
Practices - ISO 9001, etc.<br />
2.3 Enhanced Business to Business (B2B) strategies.<br />
3.1 Wider adoption of Malaysian Standard (MS) and related<br />
standards in manufacture and installation of building<br />
components.<br />
3.2 Minimum Construction Industry Standard 7 (CIS7) standards<br />
for all projects to get it right the first time - reduce wastage<br />
from repeat works.<br />
3.3 Occupational Safety and Health Act (OSHA) standards for all<br />
projects to reduce injury related man-days.<br />
3.4 All projects to at least meet minimum Green Building Index<br />
(GBI) certified.<br />
128 <strong>Productivity</strong> Report 2010/2011
Chapter 6<br />
STRATEGIC THRUST<br />
4 Human Resource Capability<br />
and Capacity for the<br />
Construction Industry.<br />
5 Innovation, R&D and New<br />
Construction Methods<br />
6 Leverage ICT in the<br />
Construction Industry<br />
7 Globalisation through<br />
Export of Construction<br />
Products and Services<br />
KEY AREAS<br />
4.1 More project management, engineering and related courses<br />
in universities and technical colleges.<br />
4.2 More retraining and adult education courses in technical<br />
colleges and polytechnics.<br />
4.3 Restarting the skilled tradesman courses in polytechnic and<br />
technical schools.<br />
5.1 All projects to have higher IBS adoption.<br />
5.2 IBS components manufactures to be given economic<br />
incentives to boost the industry.<br />
5.3 Construction Industry Development Board (CIDB) to<br />
coordinate Research and Development (R&D) demand by<br />
industry with research facilities.<br />
6.1 Greater adoption of object based Computer Aided Design<br />
(CAD) instead of electronic drawing boards for design<br />
through management and construction process.<br />
6.2 Leverage ICT for greater consolidation and integration of<br />
the construction value chain by wider adoption of BIM over<br />
the whole value chain.<br />
7.1 Learn from the many successful projects implemented by<br />
Malaysian construction firms overseas.<br />
7.2 Expand markets regionally for construction products and<br />
services to get a larger market volume.<br />
Source :<br />
Construction Industry Development Board, Malaysia<br />
• Project Management Skills - In order to adopt<br />
and use new technology such as IBS, many of<br />
the professionals will have to be retrained on<br />
new management methods. IBS projects have<br />
very high front end planning requirements and<br />
with the accelerated completion times, are less<br />
tolerant of mistakes and changes. Construction<br />
professionals will have to upgrade their skills to<br />
match. Similarly mid-level technical personnel<br />
will have to be trained and upgraded to handle<br />
these new technologies.<br />
• Industrialised Building Systems - IBS adoption<br />
is the key to improving the productivity of the<br />
Malaysian Construction Industry (MCI). Studies<br />
carried out in Singapore had shown a close<br />
correlation between productivity improvement<br />
and the buildability score - the equivalent of<br />
CIDB Malaysia’s IBS score (Figure 6.5). IBS score<br />
of up to 50 can bring about a 40 % improvement<br />
in productivity while IBS score above 70 will<br />
correspondently lead to 70% productivity<br />
improvement. Hence, the MCI must work<br />
towards more IBS adoption in their projects.<br />
<strong>Productivity</strong> Report 2010/2011<br />
129
Figure 6.5: <strong>Productivity</strong> versus IBS score<br />
<strong>Productivity</strong> (Sqm/man-day)<br />
All Categories Grouped<br />
1.1<br />
1.0<br />
0.9<br />
0.8<br />
0.7<br />
0.6<br />
0.5<br />
0.4<br />
0.3<br />
0.2<br />
0.1<br />
0<br />
40 45 50 55 60 65 70 75 80 85 90<br />
Buildability Score<br />
Source : Patrick Lim & others.<br />
• Building Information Modelling (BIM) - Wide<br />
adoption of ICT throughout the construction<br />
supply chain will also greatly improve<br />
productivity. Studies in several advanced<br />
countries showed that adoption of BIM will<br />
reduce design and documentation errors and<br />
improved productivity from less rework and<br />
mistakes. There will have to be wider adoption<br />
of BIM over the entire supply chain from design<br />
and documentation to manufacturing and<br />
installation and finally, in building management<br />
using the same BIM information set.<br />
• The ETP was launched in the fourth quarter<br />
of 2010. With its launching, the construction<br />
volume is projected to grow by approximately<br />
30% in 2011. The MCI should initiate<br />
programmes to improve the capability and<br />
capacity of its workforce, both management<br />
and skilled workers in anticipation for further<br />
increases in the volume of construction activities.<br />
The MCI should further adopt new technologies<br />
and methods of construction to improve its<br />
productivity and ultimately, its profitability. The<br />
key areas which will enhance productivity are as<br />
follows:<br />
• Project management and implementation<br />
capabilities, ncrease in workforce skill and<br />
capacity;<br />
• Wider adoption of IBS and new methods of<br />
construction. Currently, the IBS adoption in<br />
Malaysia is only 15%. If only the industry can<br />
increase their IBS adoption by another 15%,<br />
this can bring about additional 10% boost in<br />
productivity for the construction sector;<br />
• Adoption of ICT and integration into the<br />
overall construction process to use BIM<br />
systems;<br />
130 <strong>Productivity</strong> Report 2010/2011
Chapter 6<br />
• Currently, universities and polytechnics<br />
are not training enough professionals and<br />
technicians in the discipline of architecture,<br />
engineering, quantity surveying and project<br />
management to meet the increasing demand<br />
for these construction professionals. Hence<br />
there is a need to increase the intake of<br />
undergraduates in these fields of studies.<br />
There should be greater collaboration<br />
between the institutions of higher learning<br />
and professional associations or industries<br />
to jointly develop the relevant curriculum to<br />
meet the industry demand;<br />
• R&D to develop lower cost, higher quality,<br />
substitute and easier to use materials such<br />
as pre-stressed and prefabricated floor slabs;<br />
and<br />
• The concern for environmentally friendly<br />
construction has compelled the construction<br />
sector to look for greener ways of<br />
construction and this calls for the adoption<br />
of GBI. GBI adoption results in lower energy<br />
consumption, better environmental quality,<br />
less wastage of materials and water savings<br />
(use of rain water for landscape, water<br />
efficient fittings, recycling of test water).<br />
Conclusion<br />
• Construction GDP and productivity growth has<br />
been generally on the decline since the world<br />
economic crisis of 2008. The growth rate of the<br />
two largest sub-sectors namely, non-residential<br />
and civil engineering had stabilised over the<br />
past three years resulting in a lower productivity<br />
growth. In 2010, there was an uptrend in the<br />
demand for residential properties boosted by an<br />
increasing demand from the housing industry.<br />
• With the launch of the ETP and the GTP in<br />
2010, the roadmap for the construction sector<br />
for the next decade is now made even clearer<br />
with many opportunities for growth. The<br />
construction sector is projected to be given<br />
a 30% to 50% boost in volume of works over<br />
the next decade. Nine EPPs and 18 Economic<br />
Clusters are projected to inject another RM200<br />
billion worth of construction contracts over the<br />
next 10 years. With this substantial increase in<br />
the volume of high quality construction works, it<br />
is a great opportunity for the construction sector<br />
to adopt new technologies and new methods of<br />
construction that will see it achieving a quantum<br />
leap in productivity. This will be supported with<br />
larger volume of works of a higher quality and<br />
using much less manpower and resources.<br />
• The MCI must take this opportunity to upgrade<br />
itself to both improve its productivity and image<br />
which in turn, will improve its profitability.<br />
The workforce must work in tandem with the<br />
management to develop the right skills level so<br />
that the construction sector can grow parallel<br />
with the rest of the economy. This is a 10 year<br />
window of opportunity for both growth and<br />
productivity improvements. The industry needs<br />
to improve its competitiveness that can be<br />
achieved by adopting best industry practices,<br />
advanced construction techniques and optimise<br />
resources utilisation.<br />
<strong>Productivity</strong> Report 2010/2011<br />
131
Box 6.1 : Economic Tranformation Programme<br />
2011-2020: Boost For Construction Sector<br />
The four strategic thrusts set out by the Government to transform Malaysia into Vision 2020 are<br />
set out below.<br />
1Malaysia<br />
(People First, <strong>Performance</strong> Now)<br />
Government<br />
Transformation<br />
Programme<br />
4<br />
Strategic<br />
Thrusts<br />
Economic<br />
Transformation<br />
Programme<br />
10 th & 11 th Malaysia Plan<br />
Source : Economic Transformation Programme<br />
With the launch of the Tenth Malaysia Plan, the Economic Transformation Programme (ETP) and<br />
the Government Transformation Programme (GTP) in 2010, the roadmap for the construction<br />
sector for the next decade is made even clearer with many opportunities for growth.<br />
The ETP recognises that compact urban growth is one of the key areas for the country to<br />
progress economically. High density urban clusters contributed the highest GDP to the country.<br />
The Greater Kuala Lumpur/Klang Valley is one of the NKEAs for the ETP. The ETP has set a very<br />
high target for the Greater KL/KV area by achieving 20-20 by 2020, that is being the top 20 cities<br />
in the world in terms of economic growth while at the same time, achieving top 20 cities status<br />
in terms of liveability. Traditionally, rapid urban growth has been accompanied by pollution,<br />
slums, congestion and declining liveability.<br />
With this projected urban growth of the Greater KL/KV by more than 50% increase in population<br />
over the next decade, there will be many opportunities for the construction sector in terms of<br />
public, commercial and residential building construction. Infrastructure construction will follow<br />
parallel with this and the construction sector is expected to grow by 30% to 50% over the next<br />
decade.<br />
Contributed by : Ar. Chan Seong Aun<br />
132 <strong>Productivity</strong> Report 2010/2011
<strong>Productivity</strong> Report 2010/2011<br />
133
PART 3<br />
Strengthening<br />
Public-Private<br />
Partnership<br />
134 <strong>Productivity</strong> Report 2010/2011
CHAPTER 7<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
of the Public Sector<br />
<strong>Productivity</strong> Report 2010/2011<br />
135
PRODUCTIVITY PERFORMANCE OF THE PUBLIC SECTOR<br />
Overview<br />
• In its quest to achieve Vision 2020 through<br />
the 1Malaysia philosophy of “People First,<br />
<strong>Performance</strong> Now” the Government launched<br />
the Government Transformation Programme<br />
(GTP) in 2010. Six National Key Results Areas<br />
(NKRAs) were identified under the GTP namely,<br />
reducing crime, fighting corruption, improving<br />
student outcome, raising living standards of<br />
low-income households, improving rural basic<br />
infrastructure and improving urban public<br />
transport.<br />
RM Thousand<br />
Figure 7.1: Public Sector <strong>Productivity</strong>, 2006-2010<br />
34,000<br />
33,000<br />
5.22<br />
32,000<br />
3.70<br />
31,000<br />
32,248 3.23<br />
30,000<br />
29,000<br />
30,826 31,967<br />
1.60<br />
33,289<br />
0.88<br />
28,000 29,296<br />
27,000<br />
2006 2007 2008 2009 2010<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
6.0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
Growth (%)<br />
• In its attempts to serve the people better<br />
through greater transparency, the Government<br />
held open days in Petaling Jaya, Kuching and<br />
Kota Kinabalu for people to study and offer<br />
their views on over 2,000 projects and 100<br />
programmes.<br />
<strong>Productivity</strong> <strong>Performance</strong><br />
• The productivity of the public sector grew by<br />
3.2% to RM33,289 in 2010 from RM32,248 in<br />
2009 (Figure 7.1).<br />
• The Government has stepped up initiatives to<br />
raise productivity and efficiency of the public<br />
sector to move the country from an upper middle<br />
income to a high income economy by 2020. To<br />
achieve this, the Government has made peopledriven<br />
innovation and productivity as the route<br />
to achieve efficiency and competitiveness.<br />
• Significant improvement was achieved in the<br />
provision of public services under the initiatives<br />
of <strong>Performance</strong> Management and Delivery Unit<br />
(PEMANDU) and Special Taskforce to Facilitate<br />
Business (PEMUDAH) such as renewal of passport<br />
to be completed within a day as compared to<br />
three days before such initiatives were being<br />
Figure 7.2: Government Revenue per Employee, 2006-2010<br />
RM Thousand<br />
RM Million<br />
160,000<br />
140,000<br />
120,000<br />
100,000<br />
80,000<br />
6,000<br />
4,000<br />
2,000<br />
0<br />
2006 2007 2008 2009 2010<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
0<br />
-5,000<br />
-10,000<br />
-15,000<br />
-20,000<br />
-25,000<br />
-30,000<br />
-35,000<br />
-40,000<br />
-45,000<br />
-50,000<br />
12.78<br />
107,198<br />
4.86<br />
112,412<br />
13.45<br />
127,532 126,988<br />
0.43<br />
7.3: Government Deficit in GDP, 2006-2010<br />
2006 2007 2008 2009 2010<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
8.44<br />
137,711<br />
-19,109 -20,658 -35,594 -47,424 -43,338<br />
-3.3<br />
-3.2<br />
-4.8<br />
-7.0<br />
-5.6<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
-2<br />
Growth (%)<br />
0<br />
-1<br />
-2<br />
-3<br />
-4<br />
-5<br />
-6<br />
-7<br />
-8<br />
Growth (%)<br />
136 <strong>Productivity</strong> Report 2010/2011
Chapter 7<br />
pursued. The Government has also introduced<br />
the Malaysia Corporate Identity Number System<br />
(MyCoID) to fast track business registration to<br />
three days.<br />
Revenue and Expenditure<br />
• The fiscal stimulus package provided by the<br />
Government and steady recovery of the external<br />
sector had increased Government revenue by<br />
2.2% to RM162,131 million in 2010. This was<br />
reflected by an increase in Government revenue<br />
per employee by 8.8% to RM137,711 in 2010<br />
(Figure 7.2).<br />
• The increase in revenue helped to lower<br />
Government deficit in GDP from -7.0% in 2009<br />
to -5.6% in 2010 (Figure 7.3). With initiatives to<br />
make the Government lean and efficient, the<br />
public sector’s share in GDP fell from 25.6% in<br />
2009 to 24.8% in 2010.<br />
• Government expenditure fell by 0.2% as various<br />
cost cutting measures took effect. Operating<br />
expenditure fell by 3.1% to RM152,158 million<br />
in 2010 (Figure 7.4) while development<br />
expenditure grew by 9.1% to RM54,042 million<br />
in 2010.<br />
<strong>Performance</strong> of the Public Service<br />
Sub-sectors<br />
• The Government’s efforts to cushion the<br />
negative effects of the global financial crisis had<br />
been successful as public sector productivity<br />
rose significantly in 2010. Public service subsector<br />
productivity is analysed from the<br />
following perspectives.<br />
Table 7.1: Public Service Sub-sectors <strong>Productivity</strong>, 2006-2010<br />
General public<br />
administration (RM)<br />
Growth (%)<br />
Security Services (RM)<br />
Growth (%)<br />
Economic Services (RM)<br />
Growth (%)<br />
Social Services (RM)<br />
Growth (%)<br />
2006 2007 2008 2009 2010<br />
60,499 61,976 64,129 64,876 67,155<br />
6.65 2.44 3.47 1.16 3.51<br />
22,872 24,616 26,924 27,292 28,355<br />
1.86 7.63 9.38 1.37 3.89<br />
28,798 28,200 30,249 30,266 31,908<br />
0.43 -2.08 7.27 0.06 5.43<br />
29,006 30,842 31,181 31,376 32,223<br />
1.52 6.33 1.10 0.63 2.70<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
Figure 7.4: Government Expenditure (RM Million), 2006-2010<br />
250,000<br />
RM Million<br />
200,000<br />
150,000<br />
100,000<br />
50,000<br />
107,694<br />
35,807<br />
143,501<br />
123,084<br />
40,564<br />
163,648<br />
153,499<br />
42,847<br />
196,346<br />
157,067<br />
49,515<br />
206,582<br />
152,158<br />
54,042<br />
206,200<br />
Operating<br />
Development<br />
Total<br />
0<br />
2006 2007 2008 2009 2010<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
<strong>Productivity</strong> Report 2010/2011<br />
137
General Public Administration<br />
• The productivity of general public<br />
administration improved by 3.5% to RM67,155<br />
in 2010. The improvement in the productivity<br />
of general public administration in 2010 was<br />
mainly due to efforts taken by the Government<br />
to ensure more efficient services.<br />
• Government expenditure on general<br />
administration rose from RM1.7 billion in<br />
2009 to RM1.8 billion in 2010. Government<br />
had also setup the PEMUDAH taskforce to<br />
modernise Government delivery systems such<br />
as improving the transaction payment systems<br />
which had enabled the public to perform<br />
transactions online to over 88 Government<br />
agencies including the essential services of<br />
renewal of driving licences, road tax renewals<br />
and settlement of summons.<br />
Security<br />
• Security services enjoyed a productivity growth<br />
of 3.9% to RM28,355 in 2010. Mindful of its<br />
importance, the Government had maintained<br />
expenditure on security although it fell from<br />
RM4 billion in 2009 to RM3.9 billion in 2010.<br />
The largest proportion of security expenditure<br />
in 2010 was for defence (RM2.7 billion) and<br />
internal security (RM1.2 billion).<br />
• Under the GTP, convicted public officers will<br />
face harsher penalties. The impact of the<br />
Government’s NKRA activities saw crime rates<br />
involving murder, rape, robbery, aggravated<br />
assault and property crimes fell by 14.2% during<br />
the first half of 2010 from 103,419 cases in 2009.<br />
The improved performance of the police force<br />
was reflected in street crimes falling by 14,634<br />
cases in June 2010.<br />
Economic Services<br />
• Economic services productivity recorded the<br />
highest growth of 5.4% amounting to RM 31,908.<br />
Both import and export as a share of GDP rose<br />
from 106% and 83% in 2009 to 116% and 90% in<br />
2010 respectively thereby pushing trade in GDP<br />
from 190% in 2009 to 206% in 2010 (Figure 7.5).<br />
The unemployment rate fell from 3.7% in 2009<br />
to 3.6% in 2010 (Figure 7.6). Poverty incidence<br />
remained at 3.8% in 2007 and 2009, hardcore<br />
poverty incidence fell from 0.8% in 2007 to 0.7%<br />
in 2009 (Figure 7.7).<br />
• The Government has earmarked the private<br />
sector as the engine of growth in the NEM, and<br />
hence through the Economic Transformation<br />
Programme (ETP), it will provide the<br />
infrastructure to stimulate GDP growth over the<br />
next 10 years.<br />
• To ensure easier access to financing, the Central<br />
Bank has specifically targeted the poor to obtain<br />
entrepreneurial development finance through<br />
the following schemes:<br />
• Microfinance schemes such as Micro<br />
Enterprise Fund (MEF) by BNM, AgroBank<br />
(Pinjaman Mikro ESP-i) and Tabung Ekonomi.<br />
• Kumpulan Usaha Niaga (TEKUN) and<br />
Amanah Ikhtiar Malaysia (AIM).<br />
• Soft Loans for SMEs by the Ministry of<br />
International Trade and Industry (MITI)<br />
through SME Corp. Malaysia.<br />
• SMEs Scheme and Prosper Scheme by<br />
Perbadanan Usahawan Nasional Berhad<br />
(PUNB).<br />
138 <strong>Productivity</strong> Report 2010/2011
Chapter 7<br />
Figure 7.5: Trade in GDP, 2006-2010<br />
250<br />
Percent<br />
200<br />
150<br />
100<br />
50<br />
124<br />
101<br />
224<br />
119<br />
99<br />
218<br />
125<br />
98<br />
223<br />
106<br />
83<br />
190<br />
116<br />
90<br />
206<br />
Export<br />
Import<br />
Trade<br />
0<br />
2006 2007 2008 2009 2010<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
Percent<br />
Percent<br />
3.8<br />
3.7<br />
3.6<br />
3.5<br />
3.4<br />
3.3<br />
3.2<br />
3.1<br />
3.0<br />
2.9<br />
Figure 7.6: Unemployment Rate, 2005-2009<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
4.0<br />
3.5<br />
3.0<br />
2.5<br />
2.0<br />
1.5<br />
1.0<br />
0.5<br />
0<br />
3.3<br />
2006 2007 2008 2009 2010<br />
Figure 7.7: Poverty Incidence, 2007-2009<br />
3.8<br />
0.8<br />
3.2<br />
3.8<br />
3.3<br />
2007 2009<br />
0.7<br />
3.7<br />
3.6<br />
Poverty<br />
Incidence<br />
Hardcore<br />
Poverty<br />
Incidence<br />
Social Services<br />
• <strong>Productivity</strong> growth of social services grew by<br />
2.7% to RM32,223 in 2010. The Government<br />
targeted part of the fiscal stimulus available<br />
in 2010 for social services to assist the poor by<br />
ensuring that social provisions are delivered to<br />
the needy group. Hence, despite the negative<br />
GDP growth rate achieved in 2009 following the<br />
global financial crisis, both health and education<br />
continued to enjoy tangible improvements.<br />
• The Government’s National Service Programme<br />
and the Biro Tatanegara Programmes benefited<br />
195,000 youths and 1,016,749 participants<br />
respectively in 2010. The Government had also<br />
trained 2,000 new women entrepreneurs in<br />
2010.<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
<strong>Productivity</strong> Report 2010/2011<br />
139
Health Services<br />
• Malaysia enjoyed its highest life expectancy at<br />
birth of 72 years for males and 76.8 years for<br />
females in 2009 (Figure 7.8).<br />
• The number of beds in hospitals and special<br />
medical institutions increased by 0.8% to 41,580<br />
beds in 2009, the number of persons per doctor<br />
improved significantly from 1,105 in 2008 to<br />
927 in 2009 (Figure 7.9).<br />
Education<br />
• Malaysia enjoyed its highest literacy rate of<br />
92.7% in 2009 (Figure 7.10). Malaysia’s primary<br />
and secondary enrolment remained high at<br />
94.3% and 82.8% respectively in 2009. The<br />
teacher-pupil ratio improved to 13.3:1 and<br />
13.7:1 respectively for primary and secondary<br />
schools in 2009 (Figure 7.11). Improvement<br />
in human capital was also observed in the<br />
enrolment of students in public universities<br />
which rose by 4.3% to 437,420 in 2009 (Figure<br />
7.12).<br />
• Pre-school enrolment in 2010 reached 72.4%,<br />
which exceeded the Government’s target of<br />
Age<br />
Number of Beds<br />
78.0<br />
77.0<br />
76.0<br />
75.0<br />
74.0<br />
73.0<br />
72.0<br />
71.0<br />
70.0<br />
69.0<br />
Figure 7.8: Life Expectancy at Birth, 2005-2009<br />
Male (Yr)<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
42,000<br />
41,000<br />
40,000<br />
39,000<br />
38,000<br />
37,000<br />
36,000<br />
35,000<br />
76.2<br />
76.5<br />
76.4<br />
71.4 71.5 71.5 71.6<br />
Figure 7.9: Doctors and Beds, 2005-2009<br />
1,400<br />
1,200<br />
100<br />
800<br />
600<br />
400<br />
200<br />
0<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
76.4<br />
Female (Yr)<br />
72.0<br />
2005 2006 2007 2008 2009<br />
1,300<br />
1,214<br />
1,145 1,105<br />
927<br />
37,677 38,625 40,057 41,249 41,580<br />
2005 2006 2007 2008 2009<br />
Population per Doctor<br />
76.8<br />
Beds in<br />
Government<br />
and Special<br />
Medical<br />
Institutions<br />
Population<br />
per Doctor<br />
Figure 7.10: Educational Enrolment and Literacy, 2005-2009<br />
100<br />
Percent<br />
95<br />
90<br />
85<br />
94.3<br />
91.6<br />
94.4<br />
92.5<br />
94.2<br />
92.3<br />
94<br />
92.1<br />
94.3<br />
92.7<br />
Primary<br />
Secondary<br />
80<br />
82<br />
81.9<br />
81.5<br />
82.9<br />
82.8<br />
Literacy Rate<br />
75<br />
2005 2006 2007 2008 2009<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
140 <strong>Productivity</strong> Report 2010/2011
Chapter 7<br />
72.0%. In 2010, 315 pre-schools were started with<br />
a planned addition of another 2,765 pre-schools<br />
in 2011. Under the NKRAs, the Government<br />
plans to establish High <strong>Performance</strong> Schools<br />
besides the pre-schools.<br />
Infrastructure<br />
• The Government’s provision of infrastructure<br />
is ongoing to accelerate economic growth.<br />
The mileage of roads increased by 10.2% to<br />
136,861km in 2009 (Figure 7.13).<br />
Number of Teachers<br />
18<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
Figure 7.11: Enrolment per Teacher, 2005-2009<br />
16.5 16.2 16.1 16.1 15.7 15.5 15<br />
14.5<br />
13.3 13.7<br />
2005 2006 2007 2008 2009<br />
Primary<br />
Secondary<br />
• The number of 3G subscribers and hotspot<br />
locations increased by 68.3% and 45.7%<br />
respectively to 7,347 and 2,846 in 2009.<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
Figure 7.12: Public University Enrolment, 2006-2009<br />
• There has been an increase in Light Rail Transit<br />
(LRT) capacity with an addition of 22 four-coach<br />
trains on the Kelana Jaya LRT line by December<br />
2010. Around 2.21 million commuters had taken<br />
the LRT in the first 11 months of 2010.<br />
• Journey time has been reduced to around 30<br />
minutes along the four Bus Expressway Transit<br />
(BET) routes in the Klang Valley with increased<br />
ridership in all routes.<br />
Number in Thousand<br />
500<br />
450<br />
400<br />
350<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
7.78<br />
15.70<br />
9.49<br />
331,025 382,997 419,334<br />
437,420<br />
4.31<br />
2006 2007 2008 2009<br />
18.0<br />
16.0<br />
14.0<br />
12.0<br />
10.0<br />
8.0<br />
6.0<br />
4.0<br />
2.0<br />
0<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
Enrolment<br />
Growth<br />
Figure 7.13: Infrastructure, Malaysia, 2006-2009<br />
Number/km (Thousand)<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
427<br />
136,861<br />
122,150 124,212<br />
101,003<br />
1,358 1,555 1,485 4,366 1983 7,347, 2846<br />
2006 2007 2008 2009<br />
3G Subscribers<br />
Hotspot location<br />
(number)<br />
Road mileage (km)<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
<strong>Productivity</strong> Report 2010/2011<br />
141
• Integrated Transport Terminal (ITT) in Bandar<br />
Tasik Selatan has been completed at the end of<br />
2010 and will divert approximately 500 – 600<br />
express buses from the city centre. The ITT will<br />
also serve as a key transportation hub (bus, LRT,<br />
Keretapi Tanah Melayu (KTM), Express Rail Link<br />
(ERL), taxis).<br />
• The percentage of rural households having<br />
electricity had increased from 91.7% in 2008 to<br />
92.2% in 2009 (Figure 7.14). The commensurate<br />
figure for water accessibility rose from 90.9% in<br />
2008 to 91.6% in 2009.<br />
Corruption<br />
• The Government began implementing more<br />
serious measures in 2010 to eradicate corruption<br />
and unfair business practices in the country<br />
following the enactment of the Whistleblower<br />
Act 2010 and the Competition Act 2010.<br />
• In the transparency global corruption<br />
barometer survey on Government actions to<br />
fight corruption, the percentage of respondents<br />
who rated positively increased from the original<br />
target of 37% to 48% in 2010.<br />
• Revenue collection had also improved through<br />
taxes charged against under-declared goods<br />
which rose from RM9 million in 2009 to RM21<br />
million in 2010.<br />
International Comparison<br />
• Significant improvements in Malaysia’s position<br />
on Government efficiency were recorded over<br />
the period of 2009-2010 which demonstrated<br />
the effectiveness of the GTP. Except for debt<br />
related issues in which Government’s efforts<br />
to insulate the national economy from the<br />
Percent<br />
Figure 7.14: Coverage of Utilities, Malaysia, 2006-2009<br />
94.0<br />
93.5<br />
93.0<br />
92.5<br />
92.0<br />
91.5<br />
91.0<br />
90.5<br />
90.0<br />
89.5<br />
89.0<br />
93.3<br />
90.9<br />
Source: Economic Report, Ministry of Finance, 2010 - 2011<br />
global financial crisis saw some aggravation in<br />
public finance indicators, the data used in this<br />
section from the “The World Competitiveness<br />
Yearbook 2010” showed marked improvement<br />
in Malaysia’s international performance (Tables<br />
7.2 to 7.9).<br />
Public Finance<br />
• Malaysia’s ranking on public finance had<br />
improved internationally (Table 7.2). The overall<br />
public finance ranking of Malaysia rose from<br />
24 th in 2009 to 15 th in 2010.<br />
• The biggest jump in position was achieved in<br />
tax evasion where Malaysia’s rank rose from 18th<br />
to 2 nd .<br />
• Malaysia also enjoyed improvement in ranking<br />
in Government budget surplus/deficit and both<br />
its local and foreign share of GDP as well as<br />
the management of public finance especially<br />
managing future pension funding.<br />
Fiscal Policy<br />
93.5<br />
90.5<br />
2006 2007 2008 2009<br />
• Malaysia’s fiscal policy improved from 10th<br />
in 2009 to 8 th in 2010 (Table 7.3). The biggest<br />
91.7<br />
90.9<br />
92.2<br />
91.6<br />
Rural<br />
Electricity<br />
coverage (%<br />
of houses)<br />
Water<br />
coverage<br />
(% of<br />
population)<br />
142 <strong>Productivity</strong> Report 2010/2011
Chapter 7<br />
Table 7.2: Public Finance, Malaysia, 2009-2010<br />
Indicators<br />
Change<br />
Value<br />
2010 2009<br />
Rank<br />
Value<br />
Rank<br />
PUBLIC FINANCE 9 15 24<br />
1 Government Budget Surplus/Deficit (US$ billions)* 7 -13.47 36 -10.67 43<br />
2 Government Budget Surplus/Deficit (% of GDP) 5 -7.03 45 -4.81 50<br />
3 Total General Government Debt (US$ billions)* -4 102.95 27 91.86 23<br />
4 Total General Government Debt (% of GDP) -1 53.73 35 41.37 34<br />
5 Total General Government Debt - Real Growth (% change,<br />
based on national currency in constant price) -1 17.52 43 8.96 42<br />
6 Central Government Domestic Debt (% of GDP)* -4 51.69 45 38.63 41<br />
7 Central Government Foreign Debt (% of GDP)* 3 2.04 17 2.74 20<br />
8 Interest Payment (% of current revenue) -1 8.97 42 8.01 41<br />
9 Management of Public Finances over the next<br />
two years is likely to improve 3 7.15 4 5.76 7<br />
10 Tax evasion does not damage public finances 16 5.80 2 5.03 18<br />
11 Pension funding is adequately addressed for the future 3 6.61 3 5.1 6<br />
12 General Government Expenditure (% of GDP) -1 30.63 18 26.51 17<br />
Source :<br />
World Competitiveness Yearbook, 2010, Institute Management Development, Switzerland<br />
Table 7.3: Fiscal Policy, Malaysia, 2009-2010<br />
Indicators<br />
Change<br />
Value<br />
2010 2009<br />
Rank<br />
Value<br />
Rank<br />
FISCAL POLICY 2 8 10<br />
1 Collected Total Tax Revenues (% of GDP) -2 15.28 9 14.83 7<br />
2 Collected Personal Income Tax (On profits, income<br />
and capital gains, as a % of GDP)* -1 2.03 9 1.82 8<br />
3 Collected Corporate Taxes (On profits, income<br />
and capital gains, as a % of GDP)* -7 5.11 49 5.01 42<br />
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143
Indicators<br />
Change<br />
Value<br />
2010 2009<br />
4 Collected Indirect Tax Revenues<br />
(Taxes on goods and services as at % of GDP) -1 4.16 5 4.02 4<br />
5 Collected Capital and Property taxes (% of GDP) 2 0.01 1 0.04 3<br />
6 Collected Social Security Contribution (Compulsory<br />
contribution of employees and employers as a % of GDP) 1 4.82 20 4.51 21<br />
7 Effective Personal Income Tax Rate<br />
(% of an income equal to GDP per capita) 4 10.91 14 11.5 18<br />
8 Corporate Tax Rate on Profit (Maximum tax rate,<br />
calculated on profit before tax) -4 25 23 25 19<br />
9 Consumption tax rate (Standard rate of VAT/GST) - - - - -<br />
10 Employee’s Social Security Contribution Rate (Compulsory<br />
contribution as a % of an income equal to GDP per capita) 6 8 28 11 34<br />
11 Employer’s Social Security Contribution Rate (Compulsory<br />
contribution as a % of an income equal to GDP per capita) -3 12 24 12.01 21<br />
12 Real Personal Taxes do not discourage people from<br />
working or seeking advancement 4 6.67 6 5.85 10<br />
13 Real Corporate Taxes do not<br />
discourage entrepreneurial activity 6 6.44 8 5.73 14<br />
Rank<br />
Value<br />
Rank<br />
Source :<br />
World Competitiveness Yearbook, 2010, Institute Management Development, Switzerland<br />
improvement recorded was reducing the<br />
negative impact of corporate tax, employees<br />
social security contribution rate and personal<br />
income tax rate. Malaysia recorded a drop in<br />
ranking in the collection of corporate tax which<br />
fell from 42 nd position in 2009 to 49 th position<br />
in 2010.<br />
• Malaysia improved in the collection of social<br />
security contributions from 3 rd position in 2009<br />
to 1 st position in 2010.<br />
Institutional Framework<br />
• Apart from the volatility of short-term interest<br />
and exchange rates, and foreign currency<br />
reserves arising from the global financial<br />
crisis, Malaysia’s position on macroeconomic<br />
conditions recorded mixed results. Central<br />
Bank policy improved by 9 th position in 2010<br />
over 2009 to place Malaysia in 3 rd position<br />
internationally. Malaysia ranked 2 nd on capital<br />
costs in 2010. The Government will strive to<br />
stabilise short-term interest and exchange rates<br />
following Malaysia’s fall by 21 and 30 positions<br />
respectively during the period 2009-2010 (Table<br />
7.4).<br />
• Malaysia improved in all aspects of state<br />
efficiency. The biggest improvement in state<br />
efficiency was a jump in 21, 14, 12, 8 and<br />
7 positions respectively for government<br />
transparency, effective implementation of<br />
144 <strong>Productivity</strong> Report 2010/2011
Chapter 7<br />
Table 7.4 : Central Bank, 2009-2010<br />
Indicators<br />
Change<br />
Value<br />
2010 2009<br />
Rank<br />
Value<br />
Rank<br />
1 Real Short- Term Interest Rate (real discount/ bank rate) -21 1.40 36 -1.88 15<br />
2 Cost of Capital encourages business development 2 7.05 2 5.88 4<br />
3 Interest Rate Spread (lending rate minus deposit rate) 1 3 24 2.95 25<br />
4 Country Credit Rating (rating on a scale of 0-100<br />
assessed by the institutional investor magazine ranking) 0 70.1 34 72.5 34<br />
5 Central Bank Policy has a positive impact on<br />
economic development 9 7.88 3 7.04 12<br />
6 Foreign Currency Reserves (US$ billions) -2 96.68 17 91.54 15<br />
7 Exchange Rate Stability (parity change from national<br />
currency to SDR, 2009/2007) -30 0.027 32 0 2<br />
Source :<br />
World Competitiveness Yearbook, 2010, Institute Management Development, Switzerland<br />
government policy, bureaucratic efficiency,<br />
Government adaptability to changes in<br />
economy and legal and regulatory framework<br />
supporting competitiveness. Indeed, Malaysia<br />
ranked second and third respectively in<br />
adaptability of Government to changes in<br />
the economy and the legal and regulatory<br />
framework supporting competitiveness in 2010<br />
(Table 7.5).<br />
Table 7.5: State Efficiency, Malaysia, 2009-2010<br />
Indicators<br />
Change<br />
Value<br />
2010 2009<br />
Rank<br />
Value<br />
Rank<br />
STATE EFFICIENCY<br />
1 Legal and Regulatory Framework encourages the<br />
competitiveness of enterprises 7 6.93 3 5.82 10<br />
2 Adaptability of Government Policy to changes<br />
in the economy is high 8 7.22 2 5.34 10<br />
3 Government Decisions are effectively implemented 14 6.20 4 4.48 18<br />
4 Tranparency of government policy is satisfactory 21 5.98 10 3.94 31<br />
5 Bureaucracy does not hinder business activity 12 5.22 4 3.37 16<br />
6 Bribing and Corruption do not exist 5 4.73 26 3 31<br />
Source :<br />
World Competitiveness Yearbook, 2010, Institute Management Development, Switzerland<br />
<strong>Productivity</strong> Report 2010/2011<br />
145
Business Legislation<br />
• Apart from tariff barriers, Malaysia recorded<br />
improvement in the remaining indicators of<br />
openness in 2010. The highest jump in ranking<br />
was recorded in incentives for foreign investors<br />
(35)(2009:53), reduction in protection (20)<br />
(2009:44), sufficient openness to foreigners in<br />
the allocation of public contracts (28)(2009:49)<br />
(Table 7.6).<br />
• Except for the provision of Government<br />
subsidies (53)(2009:41), start up procedures<br />
and periods (21)(2009:19), Malaysia enjoyed<br />
improvement in ranking in the remaining<br />
indicators of competition and regulation<br />
in 2010 with threats to state ownership (4)<br />
(2009:35), legislative support for starting firms<br />
(13)(2009:28), competition and the avoidance<br />
of subsidies in support of fair competition and<br />
economic development (17)(2009:32) enjoying<br />
the highest jump in ranking (Table 7.7).<br />
• Apart from labour market flexibility (9)(2009:7),<br />
Malaysia’s rank in the remaining labour<br />
regulation (5)(2009:6) indicators improved<br />
with the highest rise in ranking enjoyed in<br />
immigration laws on the hiring of foreign<br />
workers (7)(2009:36) in 2010 (Table 7.8).<br />
Table 7.6: Openness, Malaysia, 2009-2010<br />
Indicators<br />
Change<br />
Value<br />
2010 2009<br />
Rank<br />
Value<br />
Rank<br />
1 Tariff barriers (tariffs on imports: Most favored<br />
nation simple average rate) -4 8.8 46 8.4 42<br />
2 Customs’ Authorities do facilitate the<br />
efficient transit of goods 11 6.32 22 5.43 33<br />
3 Protectionism does not impair the conduct of your business 24 6.02 20 4.6 44<br />
4 Public Sector Contracts are sufficiently<br />
open to foreign bidders 21 6.05 28 4.48 49<br />
5 Foreign Investors are free to acquire control<br />
in domestic companies 18 6.54 35 4.6 53<br />
6 Capital Markets (foreign and domestic) are easily accessible 16 7.01 25 5.37 41<br />
7 Investment Incentives are attractive to foreign investors 24 7.46 3 5.91 27<br />
Source : World Competitiveness Yearbook, 2010, Institute Management Development, Switzerland<br />
146 <strong>Productivity</strong> Report 2010/2011
Chapter 7<br />
Table 7.7: Competition and Regulation, Malaysia, 2009-2010<br />
Indicators<br />
Charge<br />
Value<br />
2010 2009<br />
Rank<br />
Value<br />
Rank<br />
1 Government Subsidies (to private and public<br />
companies as a % of GDP) -12 4.76 53 1.63 41<br />
2 Subsidies do not distort fair competition and<br />
economic development 15 5.76 17 4.88 32<br />
3 State Ownership of Enterprises is not a threat<br />
to business activities 31 7.01 4 5.07 35<br />
4 Competition Legislation is efficient in preventing<br />
unfair competition 15 6.46 13 5.34 28<br />
5 Parallel Economy (black-market,unrecorded) does not<br />
impair economic development 7 5.44 20 4.57 27<br />
6 Ease of Doing Business is supported by regulations 8 7.17 2 5.88 10<br />
7 Creation of Firms is supported by legislation 16 7.63 4 6.61 20<br />
8 Start - Up Days (number of days to start a business) -2 11 21 13 19<br />
9 Start-Up Procedures (number of procedures<br />
to start a business) -4 9 43 9 39<br />
Source :<br />
World Competitiveness Yearbook, 2010, Institute Management Development, Switzerland<br />
Table 7.8: Labour Regulation, Malaysia, 2009-2010<br />
Indicators<br />
Change<br />
Value<br />
2010 2009<br />
Rank<br />
Value<br />
Rank<br />
1 Labour Regulations (hiring/firing practices, minimum<br />
wages, etc) do not hinder business activities 1 7.10 5 6.18 6<br />
2 Unemployment Legislation provides an<br />
incentives to look for work 2 7.02 2 6.39 4<br />
3 Immigration Laws do not prevent your company<br />
from employing foreign labor 29 7.15 7 5.58 36<br />
4 Redundancy Costs (Number of week s of salary) New 75 48<br />
5 Labour Market Flexibility (index on rigidity of<br />
employment) (index 0-100) -2 10 9 10 7<br />
Source :<br />
World Competitiveness Yearbook, 2010, Institute Management Development, Switzerland<br />
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147
Societal Framework<br />
• Improvement in the ranking of Malaysia on societal indicators was justified as the dissemination of<br />
1Malaysia philosophy to society is positively accepted. Overall, Malaysia’s ranking on societal framework<br />
rose sharply from 40 th position in 2009 to 27 th in 2010.The strongest improvement was recorded in risk of<br />
political instability (26)(2009:44) and Government priority on social cohesion (6)(2009:22). Malaysia also<br />
ranked at 12 th position on the new indicator of equal opportunity legislation in 2010. (Table 7.9).<br />
Table 7.9: Societal Framework, Malaysia, 2009-2010<br />
Indicators<br />
Change<br />
Value<br />
2010 2009<br />
Rank<br />
Value<br />
Rank<br />
SOCIETAL FRAMEWORK 13 27 40<br />
1 Justice is fairly administered 5 6.56 23 5.37 28<br />
2 Personal Security and Private Property<br />
are adequately protected 5 6.80 28 6.06 33<br />
3 Ageing of Society is not a burden for economic development 5 7.43 2 6.54 7<br />
4 Risk of Political Instability is very low 18 6.90 26 4.78 44<br />
5 Social Cohesion is a priority for the government 16 7.76 6 6.39 22<br />
6 Gini Index (Equal distribution of income scale :<br />
0 (absolute equality) 100 (absolute inequality)* New 38 37 - -<br />
7 Income Distribution - Lowest 10% (% of household<br />
incomes going to lowest 10% households)* New 2.60 - - -<br />
8 Equal Opportunity Legislation in your country<br />
encourages economic development New 6.90 12 - -<br />
9 Females in Parliament (% of total seats in Parliament) 0 15 39 14.6 39<br />
10 Female Positions (% of total legislators, senior officials<br />
and managers) 0 23 45 23 45<br />
11 Gender Income Ratio (ratio of estimated female to male<br />
earned income globally) -1 0.42 51 0.44 50<br />
12 Justice is fairly administered 5 6.56 23 5.37 28<br />
Source :<br />
World Competitiveness Yearbook, 2010, Institute Management Development, Switzerland<br />
148 <strong>Productivity</strong> Report 2010/2011
Chapter 7<br />
Strategies and Outlook<br />
• The GTP aims to improve better public services<br />
to the nation by focusing on six core NKRAs<br />
namely,<br />
Reducing Crime<br />
• Efforts are being taken to reduce the crime<br />
index by 5% over the next three years with<br />
special focus on street crimes. Public perception<br />
of safety especially through public participation<br />
and volunteerism will be intensified by<br />
organizing more dialogue sessions between<br />
the public and the police in all housing estates.<br />
More mobile police beat bases will be set<br />
up in high population density areas in order<br />
to maintain closer rapport with the public.<br />
Greater transparency will be incorporated<br />
into the criminal justice system to build public<br />
confidence and strengthen professional pride<br />
across the system.<br />
Fight Corruption<br />
• The Malaysia Anti Corruption Commission<br />
(MACC) will be given wider jurisdiction to<br />
prosecute offenders and to confiscate their<br />
assets in their quest to achieve zero corruption<br />
in the civil service. More effective compliance<br />
units will be established at some of the key<br />
enforcement agencies such as Royal Malaysian<br />
Police, Royal Malaysian Customs Department,<br />
Immigration Department of Malaysia and the<br />
Road Transport Department. Circulars have been<br />
issued to all civil service employees containing<br />
guidelines on how to handle ‘support letters’<br />
from persons of influence to minimise graft.<br />
• A one-stop information centre for Government<br />
procurement that discloses details of advertised<br />
and awarded contracts in a move toward greater<br />
transparency in Government procurement has<br />
been established. A directive has been issued<br />
which requires all Government agencies to<br />
implement the Integrity Pact in their contracts.<br />
• A public ‘name and shame’ database of persons<br />
convicted for corruption offences has been<br />
established by MACC to which the public<br />
can refer, which serves not only as a valuable<br />
reference source but also as a deterrent to other<br />
potential offenders.<br />
• The Whistleblower Protection Act 2010 and the<br />
creation of a framework to receive complaints<br />
from whistleblowers and confer them with<br />
protection such as confidentiality of their<br />
information has been enacted.<br />
• Establishment of 14 new special corruption<br />
sessions courts and four special corruption high<br />
courts to increase capacity to handle trials.<br />
• Amendments to the Criminal Procedure Code<br />
to expedite cases going to trial.<br />
Improve Student <strong>Performance</strong><br />
• Revising the pre-school enrolment rate to<br />
both 4+ and 5+ year olds children from the<br />
present 6+ year old in order to have an earlier<br />
start to education for the new generation. The<br />
education syllabus will be structured to ensure<br />
that all children will have basic literacy and<br />
numeracy skills after three years of primary<br />
school education by 2012. To nurture talent,<br />
100 High Performing Schools (HPS) will be<br />
established by 2012.<br />
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149
Raise Living Standards<br />
of Low Income Households<br />
• The Poverty Line Income (PLI) is based on what<br />
is considered to be minimum consumption<br />
requirements of a household for food<br />
(constituting the Food PLI) and non-food items<br />
such as clothing, rent, fuel and power (making<br />
up the Non-food PLI).<br />
• Extreme Poor describes households that have<br />
a total income less than or equal to RM440 per<br />
month. This is based on the Food PLI and is a<br />
uniform national number. To-date, less than 4%<br />
of Malaysians live in poverty. Currently, there is<br />
no extreme household poverty in the country.<br />
The Government had launched the Gerakan 1<br />
Azam which is a comprehensive programme<br />
based upon the concept of driving productivity<br />
and managing aid to lift the living standards of<br />
the poor and extreme poor.<br />
Improve Rural Basic Infrastructure<br />
• The Government aspires to build more than<br />
7,000km of new and upgraded roads by 2012<br />
where 1,900km of these will be in Sabah and<br />
Sarawak. With this, it means that 91.4% of the<br />
population will be living within a five kilometer<br />
radius to a paved road in 2010 in Peninsular<br />
Malaysia. The number is expected to rise close<br />
to 100% by 2012.<br />
• The Government aims to provide 50,000 new<br />
and restored houses to the rural and hardcore<br />
poor by 2012 where two-thirds of these houses<br />
will be in Sabah and Sarawak.<br />
• Clean or treated water to over 360,000<br />
additional households will be completed by<br />
2012. This means that in Sabah and Sarawak,<br />
the percentage of rural houses with access to<br />
clean or treated water will increase from 60% in<br />
2010 to 90% in 2012.<br />
• A 24-hour electricity supply to over 140,000<br />
additional households will be completed by<br />
2012. By the end of 2010, 81% of households in<br />
Sabah and 73% of households in Sarawak had<br />
access to electricity. This was an improvement<br />
from 77% and 67% respectively.<br />
• To meet the above-mentioned targets, the rate<br />
of deployment must be accelerated. What we<br />
need to achieve over the next three years will be<br />
to build 11 times as many kilometers of roads,<br />
2.5 times as many houses, connect 7 times as<br />
many houses to clean water and 5 times for<br />
electricity as compared to 2006-2008 period.<br />
• The above targets can be achieved by using<br />
innovative, quick and cost-effective ways of<br />
delivery. For example:<br />
• building standard-design houses and using<br />
power generation technologies like solar<br />
hybrid generation.<br />
• Revamping existing administrative<br />
processes to reduce time required such<br />
as fine-tuning the open tender process by<br />
using standard templates and accelerating<br />
communications.<br />
• Facilitate and work closely with suppliers<br />
to ensure that the supply and availability of<br />
machineries, materials and manpower are<br />
available when required.<br />
150 <strong>Productivity</strong> Report 2010/2011
Chapter 7<br />
• Ensure effective programme management<br />
by closely monitoring projects. Project<br />
Monitoring System II (PMS II), a project<br />
monitoring system managed by the<br />
Implementation Coordination Unit (ICU)<br />
of the Prime Minister’s Department will be<br />
used for recording and tracking Rural Basic<br />
Infrastructure (RBI) initiatives to ensure they<br />
are delivered on time and within budget.<br />
Improving Urban Public Transportation<br />
• More Integrated Transport Terminals should be<br />
established nationwide because they provide<br />
a one-stop centre for the convenience of the<br />
commuters and encourage wider usage of<br />
public transport.<br />
Conclusion<br />
• The Government’s efforts to involve the people<br />
through its 1Malaysia philosophy have indeed<br />
borne fruits as reflected in the improvement of<br />
delivery of public services. As a result, Malaysia’s<br />
ranking internationally on most indicators<br />
improved significantly in 2010.<br />
• The success achieved from the People First,<br />
<strong>Performance</strong> Now approach has further<br />
strengthened the Government’s effort to<br />
improve the efficiency and effectiveness of<br />
public services to the people.<br />
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Box 7.1 : Talent Management Practices In<br />
Government-Linked Companies<br />
Talent management is about the process of developing and integrating new workers, developing<br />
and retaining current workers and attracting skilled workers to work for your company. As more<br />
companies came to realise that their employees’ talents and skills drive their business success,<br />
they put tremendous effort to attract employees to their company as well as retaining and<br />
developing talent. The shift in the changing requirements of the global workforce had influenced<br />
the way organisations recruit, develop and retain key talent. As such, talent management system<br />
must be integrated into the business strategy and implemented in daily processes throughout<br />
a company. A research was carried out by <strong>MPC</strong> on two GLCs namely, Pharmaniaga Berhad and<br />
Proton Berhad to find out how they nurture, attract and retain top talent.<br />
Pharmaniaga Berhad is the largest integrated local healthcare company in Malaysia. Its core<br />
business is generic pharmaceutical products while its principal activities are the manufacturing<br />
of generic pharmaceuticals, logistics, distribution, sales, marketing, supply of medical<br />
products and services and hospital equipment. This company defines talent management<br />
in two perspectives. The first is on the management of individual performance with defined<br />
key indicators such as sales targets and the number of new products that can be developed<br />
and marketed within a specific time frame. The second perspective looks at the individual<br />
potential which involves gauging leadership ability, mobility to be relocated and behavourial<br />
characteristics.<br />
The emphasis on people and talent optimisation are strong at Pharmaniaga Berhad as business<br />
niche and competitiveness rely more on people than mere having processes in place. Employees<br />
are encouraged to build their multi-tasking skills, make themselves marketable both within and<br />
outside the company by branding one’s expertise as well as networking with as many people<br />
as possible. Pharmaniaga Berhad has the corporate social responsibility (CSR) aims to be an<br />
exporter of talent in general positions such as finance, human capital, marketing, sales and<br />
corporate communication in the future.<br />
PROTON or Perusahaan Otomobil Nasional is the largest manufacturer of automobiles and the<br />
only full-fledged Original Equipment Manufacturer (OEM) car manufacturer in South-East Asia.<br />
PROTON produces cars to suit a range of consumer demands and preferences. With this business<br />
view, PROTON looks at talent management together with succession planning to maintain<br />
leadership continuity by identifying critical positions in the company and their potential<br />
successors through concerted development efforts. The company has an assessment centre to<br />
assess and choose the right candidates for its leadership talent pool. This initiative enables the<br />
company to have a ready supply of talent with the right leadership skills. The identified talent<br />
is periodically assessed to avoid experiencing any succession planning gap when there is the<br />
needs to fill critical positions with the required talent.<br />
152 <strong>Productivity</strong> Report 2010/2011
PROTON implements talent management in two prongs: one group manages the business –<br />
strategic drivers and they are skilled in balancing the external and internal environment of the<br />
business arena. The other group is the discipline experts who focus on human capital aspects.<br />
PROTON also practices strategic hiring to ensure employee engagement in the company<br />
especially among the senior management. Employees who are deemed high potentials are<br />
fast-tracked on development planning and ear-marked for critical position. The main aim is to<br />
build directors as well as division head for Level 5 competency. PROTON recognises the fact that<br />
everyone has talent and as such, must be measured at individual level. PROTON continuously<br />
assesses talent needs and implement development plan.<br />
In essence, the leadership of any company must clearly define what talent is and in what aspect,<br />
people are considered as talent and how they are assessed with clearly communicated talent<br />
scorecard. Cognisance should be taken to address the challenge in balancing expectations<br />
from the employees and the company. Talent potentials should be continuously identified and<br />
liberated through behavioural interview, role play, individual timed exercises and third party<br />
assessment. Like PROTON, companies should undertake proactive planning to initiate a broad<br />
“catchment area” to ensure the respective company has a continuous supply of talent to meet<br />
its wide business scope.<br />
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154 <strong>Productivity</strong> Report 2010/2011
CHAPTER 8<br />
New Sources of Growth Based on 12<br />
National Key Economic Areas (NKEAs)<br />
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155
NEW SOURCES OF GROWTH BASED ON 12<br />
NATIONAL KEY ECONOMIC AREAS (NKEAs)<br />
Overview<br />
• Pursuant to continuous enhancement in<br />
productivity and efficiency, the Government had<br />
launched the New Economic Model (NEM) which<br />
will provide the impetus in transforming the<br />
nation into a developed country incorporating<br />
high income, inclusiveness and sustainable<br />
economy.<br />
• The initiatives under NEM were executed in<br />
tandem with the 12 National Key Economic Areas<br />
(NKEAs) as one of the approaches in enhancing<br />
the economy. The 12 NKEAs are the foundation<br />
towards the Economic Transformation<br />
Programme (ETP). An NKEA is defined as “a driver<br />
of economic activity that has the potential to<br />
directly and materially contribute a quantifiable<br />
amount of economic growth to the economy”.<br />
The 12 NKEAs selected are oil, gas and energy,<br />
palm oil, financial services, wholesale and retail,<br />
education, healthcare, tourisms, electronics and<br />
electrical, business services, communications<br />
content and infrastructure, agriculture and<br />
greater Kuala Lumpur/Klang Valley. The<br />
NKEAs were selected due to their significant<br />
contributions towards future economic growth.<br />
The Impact of Forward and<br />
Backward Linkages of the<br />
12 NKEAs<br />
• Both multiplier and linkages show magnitude<br />
of inter-industry. Linkages measure<br />
interconnectedness of sectoral link while<br />
multiplier measures the effect when a unit of<br />
increment of “autonomous” investment causes<br />
an initial increase in income which generates<br />
successive rounds of consumer spending and<br />
incomes, each round producing numerically<br />
smaller increments until the process worked<br />
itself out, i.e. has reached its equilibrium.<br />
• Using the measure of linkages and multipliers,<br />
the 12 NKEAs interact with each other and<br />
performance can be easily identified. In<br />
developed countries, services industries play<br />
utmost importance in the structure of interindustry<br />
linkages. This trend has also emerged<br />
in the country’s services industries that is<br />
becoming an important player in the economy.<br />
• Along the chains of backward linkages, industries<br />
are interconnected and linked towards channels<br />
of upstream inputs unlimited by not only raw<br />
materials, pipelines, transports, etc., but also<br />
lingers along conduits of other input channels.<br />
The higher the index, the more critical an area or<br />
sector. NKEAs, particularly those in the services<br />
sector dominated the linkages followed by the<br />
non-service sector. (Figure 8.1).<br />
• On the contrary, amongst forward linkages, the<br />
downstream chains are dominated by NKEAs<br />
types of industry that shows the highest index.<br />
This means that the economy had developed<br />
areas or sectors with the highest index that<br />
contributed interlinkages throughout output<br />
channels and productivity (Figure 8.2).<br />
• Palm oil formed the main backward linkage<br />
amongst the 12 NKEAs. This was followed by<br />
tourism, financial services, healthcare and<br />
others. Moderate linkages were found for<br />
communication content and infrastructure,<br />
oil, gas & energy, wholesale and retail and<br />
electronics and electrical. The lowest linkages<br />
were found in areas such as agriculture, business<br />
services as well as education.<br />
• Forward linkages estimate a sector by one unit<br />
increase in final demand. A key sector will have<br />
a high forward linkages index that depicted<br />
increases of a sector’s output more when<br />
compared to other sectors if all the systems<br />
increase one unit of their final demand. Thus,<br />
156 <strong>Productivity</strong> Report 2010/2011
Chapter 8<br />
Figure 8.1: Backward linkages of the 12 NKEAs<br />
Education<br />
Business Services<br />
Agriculture<br />
Electronics and Electrical<br />
Wholesale and Retail<br />
Oil, Gas and Energy<br />
Communication Content and Infrastructure<br />
Others<br />
Healthcare<br />
Financial Services<br />
Tourism<br />
Palm Oil<br />
0.81<br />
0.86<br />
0.87<br />
0.90<br />
0.92<br />
0.95<br />
0.99<br />
1.00<br />
1.04<br />
1.08<br />
1.20<br />
1.37<br />
0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6<br />
Index<br />
Source: Calculated from Malaysia Input-Output Table 2005, Department of Statistics, Malaysia<br />
Education<br />
Business Services<br />
Agriculture<br />
Healthcare<br />
Communication Content and Infrastructure<br />
Electronics and Electrical<br />
Tourism<br />
Palm Oil<br />
Oil, Gas and Energy<br />
Financial Services<br />
Wholesale and Retail<br />
Others<br />
Figure 8.2: Forward linkages of the 12 NKEAs<br />
0.54<br />
0.61<br />
0.68<br />
0.69<br />
0.70<br />
0.73<br />
Source: Calculated from Malaysia Input-Output Table 2005, Department of Statistics, Malaysia<br />
0.98<br />
1.21<br />
1.25<br />
1.30<br />
1.36<br />
0 0.5 1 1.5 2<br />
Index<br />
1.95<br />
a key sector has a higher average input and<br />
output produced if it is used extensively by other<br />
sectors. Figure 8.2 shows that “other” industry<br />
has a wider linkage than any other single NKEA<br />
and has great potential in generating economic<br />
output.<br />
• Forward linkages analysis ranks others as<br />
the highest followed by wholesale and retail,<br />
financial services, oil, gas & energy and palm oil.<br />
In addition, moderate sectors include tourism,<br />
electronics and electrical, communication<br />
content and infrastructure, healthcare and<br />
agriculture. Amongst the 12 NKEAs, business<br />
services and education had the lowest forward<br />
linkages (Figure 8.2).<br />
• In addition, the strength of the economy can<br />
be gauged by multiplier approaches that<br />
measure the effect when a unit of increment<br />
of “autonomous” investment causes an initial<br />
increase in income. This generates successive<br />
rounds of consumer spending and incomes<br />
with each round producing numerically<br />
smaller increment until the process reached<br />
its equilibrium. It summarises the total impact<br />
that can be expected from changes in a given<br />
economic activity.<br />
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• Any NKEA with output multiplier more than one<br />
connotes significant potential in generating<br />
goods and services in the economy. The<br />
palm oil industry (3.11) ranked the highest<br />
followed by tourism (2.93), financial services<br />
(2.69), healthcare (2.41), education (2.39),<br />
communication content and infrastructure<br />
(2.19), others (2.19) and agriculture (2.06).<br />
Sectors that have moderate multipliers were<br />
oil, gas & energy (1.91), business services (1.91),<br />
wholesale and retail (1.89) and electronics and<br />
electrical (1.87) as shown in Table 8.1.<br />
• Table 8.1 also shows results from the income<br />
multiplier analysis with education (0.58) leading<br />
with the highest multiplier followed by tourism<br />
(0.45), financial services (0.44), palm oil (0.35) and<br />
healthcare (0.30). A moderate-income multiplier<br />
was found in sectors such as agriculture (0.29),<br />
communication content and infrastructure<br />
(0.22), others (0.21) and business services<br />
(0.20). The lowest ranking were electronics and<br />
electrical (0.11), wholesale and retail (0.10), and<br />
oil, gas & energy (0.09).<br />
• Agriculture (0.048) was a leading employment<br />
multiplier followed by education (0.038),<br />
healthcare (0.027), tourism (0.026) and palm<br />
oil (0.025). Moderate employment multipliers<br />
were wholesale and retail trade (0.015), others<br />
(0.014), business service (0.014) and financial<br />
services (0.013). Lowest multiplier indices<br />
amongst them were communication content<br />
and infrastructure (0.009), electronics and<br />
electrical (0.007) and oil, gas & energy (0.004).<br />
This renders that the agriculture sector was<br />
capable of generating higher employment<br />
than any other sector. Realising the potential of<br />
agriculture to create and expand its activities,<br />
there is a need to emphasise on deepening and<br />
increasing efficiency in this sector.<br />
• The interindustry linkages and multiplier effects<br />
when combined derived overall conclusion<br />
Table 8.1: Overall Weighted Average of Scores from Inter-industry Indices<br />
Output<br />
Income Employment Value Added Operating Surplus<br />
Average<br />
Sectors IO Code<br />
Multiplier Rank Multiplier Rank Multiplier Rank Multiplier Rank Multiplier Rank of Rank<br />
Education 2 2.39 5 0.58 1 0.038 2 1.14 1 0.53 7 3.2<br />
Tourism 3 2.93 2 0.45 2 0.026 4 0.98 3 0.66 5 3.2<br />
Financial Services 11 2.69 3 0.44 3 0.013 9 1.11 2 0.81 1 3.6<br />
Palm Oil 7 3.11 1 0.35 4 0.025 5 0.95 6 0.63 6 4.4<br />
Agriculture 9 2.06 8 0.29 6 0.048 1 0.97 4 0.69 4 4.6<br />
Healthcare 6 2.41 4 0.30 5 0.027 3 0.84 8 0.50 9 5.8<br />
Communication Content & Infrastructure 8 2.19 6 0.22 7 0.009 10 0.97 5 0.75 2 6<br />
Others 12 2.19 7 0.21 8 0.014 7 0.73 10 0.51 8 8<br />
Oil, Gas and Energy 1 1.91 9 0.09 12 0.004 12 0.77 9 0.70 3 9<br />
Business Services 10 1.91 10 0.20 9 0.014 8 0.91 7 0.48 11 9<br />
Wholesale and Retail 4 1.89 11 0.10 11 0.015 6 0.70 11 0.49 10 9.8<br />
Electronics and Electrical 5 1.87 12 0.11 10 0.007 11 0.41 12 0.30 12 11.4<br />
Source: Calculated from Malaysia Input-Output Table 2005, Department of Statistics, Malaysia<br />
158 <strong>Productivity</strong> Report 2010/2011
Chapter 8<br />
in terms of average. The result shows that<br />
both education and tourism led in almost all<br />
measurements and positions as the highest<br />
rank amongst the 12 NKEAs. This was followed<br />
by service category industry such as financial<br />
service which has proven great potential to<br />
expand along with the structure of the economy<br />
in times to come. The overall multiplier effect is<br />
depicted in Table 8.1.<br />
• Next, the rank was followed by palm oil,<br />
agriculture and other NKEAs and lastly, by the<br />
once leading manufacturing industry namely,<br />
electronics and electrical which presently is<br />
declining and taking the back seat in output<br />
as the lowest rank amongst the 12 NKEAs as<br />
compared to its previous role as the rising star<br />
of the economy.<br />
• The strength of linkages and multipliers of 12<br />
NKEAs have potential to continue leading the<br />
country in terms of economic growth.<br />
• Service sectors which potentially created more<br />
linkages and multipliers generated more output<br />
to the economy. Greater focus should be given<br />
towards education and tourism development<br />
due to their strong multiplier effects.<br />
Best Practices<br />
• Being the largest producer of palm oil, Malaysia<br />
is the country to be benchmarked in terms of<br />
R&D, business development and technology<br />
advancement.<br />
• Being strategically located, Malaysia is an ideal<br />
destination for tourism healthcare.<br />
• Being the pioneer in Islamic banking in this<br />
region, the country offers good investment<br />
opportunities for investors from the Middle East<br />
countries.<br />
Strategies and Outlook<br />
• Given the previous dynamic achievements on<br />
economic development facilitated by existing<br />
infrastructure network, the speed of progress can<br />
be further expedited with the implementation<br />
of the 12 NKEAs which provide the momentum<br />
for future growth.<br />
• In terms of our economic structure, the economic<br />
transformation has already taken place as the<br />
economy is moving from a once manufacturing<br />
emphasis to one which is services oriented.<br />
Thus, non-physical development will play a<br />
more critical role to facilitate inclusiveness and<br />
sustainability which endevours the country’s<br />
achievement towards a developed country.<br />
• The uncertainty in the global market is a<br />
challenge to Malaysia in its strives to achieve<br />
economic resilience. However, with a stable<br />
economic condition and a positive outlook,<br />
Malaysia is in a good position to continue on<br />
its journey towards achieving developed nation<br />
status. It remains to be seen if Malaysia could<br />
also benefit from new emerging countries such<br />
as India and China due to the spin-off effect<br />
from these economies.<br />
• A number of strategic reform initiatives have<br />
been proposed which focus on innovationdriven<br />
growth and more private sector<br />
involvement to spearhead economic growth.<br />
This involves rolling out Government presence<br />
in some of the NKEAs in order to promote fair<br />
competition in undertaking all commercial<br />
activities. The inflow of FDIs should be towards<br />
the production of high added value products<br />
and services for us to remain competitive.<br />
• Domestic Direct Investment (DDI) will be one of<br />
the major impetus towards economic expansion.<br />
This calls for continous upgrading of soft-skills<br />
to increase the skill levels and preparing the<br />
nation towards achieving High Development<br />
Index (HDI) .<br />
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160 <strong>Productivity</strong> Report 2010/2011
CHAPTER 9<br />
High Impact <strong>Productivity</strong> Drivers<br />
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161
HIGH IMPACT PRODUCTIVITY DRIVERS<br />
Moving up the Value Chain<br />
• Malaysia <strong>Productivity</strong> Corporation (<strong>MPC</strong>)<br />
recorded another milestone chart in 2010 as<br />
it geared itself to move in tandem with the<br />
country’s transformation journey to achieve<br />
high income nation status by 2020. To achieve<br />
this, Malaysia has to ensure that private sector<br />
investment level must grow at least 12.8% per<br />
annum with Total Factor <strong>Productivity</strong> growth of<br />
2.3% and productivity growth of 4.6% as shown<br />
in Figure 9.1.<br />
• The country also needs a Gross National Income<br />
growth per capita of 8% per annum with an<br />
annual GDP growth of 6% per annum. In line with<br />
the above aspirations, the focus is to achieve<br />
quantum leap in productivity growth and we<br />
need to put in place an enabling environment<br />
where productivity, competitiveness and<br />
innovation will be the enablers towards the<br />
creation of high value-added activities in the<br />
economy.<br />
• Economic growth is not the sole responsibility<br />
of the Government alone. The private sector<br />
must play its role and the Government’s role<br />
is to facilitate private participation in the<br />
economy. Several innovative measures have<br />
been introduced to spur private investment.<br />
These include creating a conducive business<br />
environment by moving the economy towards<br />
more market driven, implementing the second<br />
wave of privatisation of Government-Linked<br />
Companies (GLC), strengthening publicprivate<br />
partnership initiatives and accelerating<br />
Figure 9.1: National Agenda for <strong>Productivity</strong> Growth<br />
Strong private investment and productivity growth<br />
required to deliver robust annual GDP growth<br />
Enabling Malaysia to reach<br />
high-income status by 2020<br />
1.4%<br />
Labour<br />
Growth<br />
2.3%<br />
12.8% 1<br />
Capital<br />
Growth<br />
4.6%<br />
6%<br />
8%<br />
2.3%<br />
Private<br />
Investment Growth<br />
TFP<br />
Growth<br />
Annual<br />
<strong>Productivity</strong> Growth<br />
Annual Real GDP<br />
Growth<br />
Annual GNI/Capita<br />
Real GDP Growth<br />
Malaysia needs strong growth in productivity to realise vision of a high-income economy by 2020<br />
162 <strong>Productivity</strong> Report 2010/2011
Chapter 9<br />
foreign direct investment by easing rules and<br />
streamlining procedures.<br />
• A key driver of productivity and competitiveness<br />
is the nation’s capacity to foster innovation<br />
as well as to ensure greater utilisation of the<br />
state of the art technologies. The availability of<br />
such technologies will enhance collaboration<br />
and develop an excellent opportunity for<br />
learning, experimenting and innovating. It<br />
is also an enabler to improve technical skills<br />
and enhance national human competencies.<br />
Indeed, the ability to leverage on leading<br />
edge technologies will be the forefront of our<br />
innovation-led growth strategy. To move the<br />
country forward, the Government had crafted<br />
a National Agenda comprising 1Malaysia,<br />
Government Transformation Programme<br />
(GTP), New Economy Model (NEM), Economic<br />
Transformation Programme (ETP) and 10 th<br />
Malaysia Plan to spur the economy. Towards<br />
this end, <strong>MPC</strong>”s roles and functions have been<br />
revanped and realigned to the requirements of<br />
the National Agenda. The focus will be towards<br />
supporting both the business environment and<br />
business efficiency through regulatory review<br />
and enterprise innovation.<br />
• ETP’s goal is by 2015, Malaysia will be one of<br />
the top 10 nations in the world in terms of the<br />
ease of doing business. To achieve this goal, the<br />
Government has undertaken a comprehensive<br />
review of business regulations starting with<br />
regulations that will have an impact on National<br />
Key Results Areas (NKEAs). Regulations that<br />
contribute to improve national outcomes will<br />
be retained while redundant and outdated<br />
regulations will be eliminated to enhance<br />
productivity and innovation through PEMUDAH.<br />
This regulatory review will be led by <strong>MPC</strong> to<br />
enable Malaysia to propel itself into becoming a<br />
developed economy as stated in the NEM.<br />
• This message was again reinforced in the<br />
Tenth Malaysia Plan that <strong>MPC</strong> has to lead in the<br />
review of business regulations and enterprise<br />
non-technical innovations. In line with these<br />
requirements, <strong>MPC</strong> has been rebranded and<br />
restructured to ensure that it has strong<br />
capabilities and resources to review existing<br />
regulations with a view to remove unnecessary<br />
rules and compliance costs. <strong>MPC</strong> will also provide<br />
detailed productivity statistics at sectoral,<br />
national and international levels through<br />
benchmarking of best practices with other<br />
relevant countries. <strong>MPC</strong> will assist in diagnosing<br />
business innovation eco-system, nurturing<br />
enterprises and improve processes along the<br />
innovation value chain and monitor the success<br />
of the above-mentioned interventions.<br />
<strong>MPC</strong>’s Business Transformation<br />
• <strong>MPC</strong> is the prime mover of productivity,<br />
innovation and competitiveness to support the<br />
aspirations of the NEM and Tenth Malaysia Plan<br />
by nurturing a culture of innovation through<br />
knowledge repositories, knowledge mapping<br />
and content development.<br />
• Aligning with the Government initiatives to<br />
move the country forward, <strong>MPC</strong> from its earlier<br />
functions of providing management training<br />
and advisory services in the 1960s has shifted<br />
its focus into areas of competitiveness and<br />
innovation in 2010. All these transformation of<br />
<strong>MPC</strong> programmes and activities are based on<br />
the tagline of “Transformation, Innovation and<br />
Partnership”. This is to ensure that businesses<br />
are more productive through the application of<br />
productivity and innovative tools, intervention<br />
processes and systems as well as to create the<br />
outreach to the masses through partnership<br />
with both local and global partners.<br />
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163
• With the goal of building a forwardlooking,<br />
responsive and dynamic <strong>MPC</strong>, a<br />
five-departmental model that integrates<br />
innovation and productivity activities together<br />
with regulatory review collaboration was<br />
proposed. The core of this transformation is the<br />
establishment of new functions of Regulatory<br />
Review and Enterprise Innovation departments<br />
which place greater emphasis on <strong>MPC</strong>’s<br />
innovative programmes at the enterprise level<br />
and analysis of cost and benefits of selected<br />
regulations. The other three departments<br />
to strengthen <strong>MPC</strong>’s functions are Business<br />
Excellence, Global Competitiveness and<br />
Knowledge Management. The new five key<br />
functions which integrate both horizontally and<br />
vertically will help to spur <strong>MPC</s