Overview - MPC
Overview - MPC
Overview - MPC
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MALAYSIA
MALAYSIA
17ᵗʰ 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,<br />
mechanical, photocopying, recording or otherwise, without the prior<br />
permission of the Malaysia Productivity Corporation.<br />
May 2010<br />
For further information, please refer to the:<br />
Director General<br />
MALAYSIA PRODUCTIVITY CORPORATION<br />
P.O. Box 64, Jalan Sultan<br />
46904 Petaling Jaya, Selangor, Malaysia<br />
Tel: 03-79557266, 79578068<br />
Fax: 03-79540795<br />
http://www.mpc.gov.my
Statutory Requirements<br />
In accordance with Section 7 of the Malaysia Productivity Council (Incorporation)<br />
(Amendment) Act 1991, Malaysia Productivity Corporation hereby publishes and<br />
submits to the Minister of International Trade and Industry the status of productivity<br />
in Malaysia.
MESSAGE FROM THE MINISTER OF<br />
INTERNATIONAL TRADE AND INDUSTRY<br />
MALAYSIA<br />
The government is committed to elevate the economy from high middle income to that of<br />
high income economy. Towards this endeavour, the government has introduced the new<br />
economic model that is based on innovation, creativity and high-value added activities to<br />
increase productivity level of the country and hasten the transformation of the economy.<br />
Against the backdrop of a challenging external sector, Malaysia’s economy recovered<br />
strongly in the fourth quarter 2009 with a productivity growth of 2.3% and thus supporting<br />
the GDP growth of 4.5%. The expansion of productivity in the quarter was driven by<br />
strong growth of productivity in the manufacturing and services sectors which expanded<br />
by 4.6% and 3.1% respectively. This development had made it possible for the economy<br />
to register smaller declines in productivity and GDP at 1.8% and 1.7% respectively in<br />
2009. Among our neighbouring economies, Singapore’s productivity declined by 4.1%,<br />
Thailand 3.7% and Taiwan 2.0%. However, China, India and Indonesia recorded strong<br />
expansion at 8.4%, 4.8% and 2.5% respectively. Among the developed economies, the<br />
USA and Korea recorded productivity growth at 1.1% and 0.6%, while Japan, Germany<br />
and the United Kingdom productivity declined by 3.6%, 4.8% and 2.7% respectively.<br />
Enhancing efficiency of all factors of production is pertinent in propelling the economy<br />
into a new growth trajectory. The government places great emphasis on enhancing the<br />
contribution of Total Factor Productivity (TFP) to economic growth. During the period<br />
2000-2009, the economy posted a TFP growth of 1.5%, supporting the GDP growth of<br />
4.7%. The growth in TFP was augmented by intensification of demand, investment of<br />
human capital, capital restructuring and improvement in technical progress.
I am particularly happy to note that there exists a strategic partnership between the public<br />
and private sectors which had enabled Malaysia to be positioned in a higher level of<br />
competitiveness. I would like to encourage policy makers from all sectors, academicians<br />
and business community at large to use this report as reference to benchmark and<br />
improve performance in their quest to increase productivity and competitiveness.<br />
DATO’ SRI MUSTAPA MOHAMED<br />
Minister of International Trade and Industry<br />
Malaysia
STATEMENT BY THE CHAIRMAN<br />
<strong>MPC</strong> publishes the Productivity Report on an annual basis in accordance with the<br />
requirements of the <strong>MPC</strong> (Incorporation) (Amendment) Act 1991. The Productivity Report<br />
2009 is the 17 th edition in the series. The Report provides comprehensive analysis of<br />
productivity development in the country and strategies to enhance productivity at national,<br />
international, economic sectors and industry levels.<br />
The Report also provides comprehensive analysis of Malaysia’s Total Factor Productivity,<br />
evaluates the performance of the manufacturing, services and agriculture sectors,<br />
examines the productivity performance of the small and medium industries and the<br />
performance of the public sector. The Report also recommends strategies to strengthen<br />
domestic capabilities through productivity, innovation and quality enhancement. In<br />
addition, it examines current productivity and quality related issues such as innovation,<br />
innovative and creative circle, business excellence, benchmarking, productivity linkedwage<br />
system and competitive capabilities of the services sector.<br />
In 2009, Malaysia’s Gross Domestic Product (GDP) contracted by 1.7% attributed to<br />
unfavourable external factors. The contraction was attributed to the decline in productivity<br />
growth of the manufacturing and the mining sectors by 8.6% and 3.2% respectively.<br />
However, impressive performance was recorded by the services sector with a 1.7%<br />
productivity growth. Among the services sector, excellent performance were recorded by<br />
the finance, other services and transport sub-sectors which posted productivity growth of<br />
3.2%, 2.4% and 1.3% respectively.
<strong>MPC</strong> enjoys close cooperation with the private and public sectors. It reflects the dedication<br />
and commitment of Board members, Members of the <strong>MPC</strong> Consultative Panels and<br />
Taskforces, Members of Community of Practices as well as the management team and<br />
staff of <strong>MPC</strong>. The various government ministries and agencies, particularly the Ministry<br />
of International Trade and Industry, have contributed by providing continuous support,<br />
guidance and assistance.<br />
Tan Sri Azman Hashim<br />
Chairman<br />
Malaysia Productivity Corporation
Malaysia Productivity Corporation<br />
The Malaysia Productivity Corporation (<strong>MPC</strong>) was established to assume an<br />
important role in the enhancement of productivity and quality of the country towards<br />
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 for global<br />
competitiveness and innovation.<br />
MISSION<br />
To deliver high impact services towards achieving performance excellence through<br />
innovation for the betterment of life.<br />
OBJECTIVES<br />
Our corporate objectives are:<br />
Providing value-added information on productivity, quality, competitiveness and best<br />
practices through research activities and databases;<br />
Developing human capital and organisational excellence for building a knowledgebased<br />
society through training, systems development and best practices;<br />
Nurturing innovative and creative culture through P&Q promotion and<br />
partnership programmes.
CONTENTS<br />
MESSAGE FROM THE MINISTER<br />
STATEMENT BY THE CHAIRMAN<br />
MALAYSIA PRODUCTIVITY CORPORATION<br />
Vision, Mission and Objectives<br />
i<br />
REPORT HIGHLIGHTS<br />
PART 1: ECONOMIC AND PRODUCTIVITY DEVELOPMENT<br />
Chapter 1: Productivity Performance of Malaysia<br />
<strong>Overview</strong><br />
Economic Performance<br />
Overall Productivity Performance<br />
Sectoral Productivity Performance<br />
Services Sector<br />
Construction Sector<br />
Agriculture Sector<br />
Manufacturing Sector<br />
Mining Sector<br />
Box 1.1: Change and Innovation<br />
International Productivity Comparison<br />
Way Forward<br />
Outlook for 2010<br />
Box 1.2: A Path to Innovation<br />
Chapter 2: Total Factor Productivity<br />
<strong>Overview</strong><br />
Overall TFP Performance<br />
Box 2.1: Total Factor Productivity for High Income Economy<br />
Sources of Total Factor Productivity Growth<br />
TFP of Selected Economic Sectors<br />
Improving TFP Growth towards Achieving the National Mission<br />
Developing Human Capital<br />
Intensifying Demand<br />
Efficient Allocation of Resources among Sectors<br />
Strengthening Technological Capabilities<br />
Increasing the Technical Progress<br />
Box 2.2: Enhancing Organisational Capability through ICC<br />
Impact of ICC<br />
4<br />
4<br />
6<br />
6<br />
6<br />
8<br />
8<br />
9<br />
10<br />
11<br />
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15<br />
15<br />
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22<br />
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30<br />
31<br />
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CONTENTS<br />
PART 2: STRENGTHENING THE ECONOMIC SECTORS<br />
Chapter 3: Productivity Performance of the Services Sector<br />
<strong>Overview</strong><br />
Productivity Performance<br />
International Productivity Comparison of Selected Services Sub-sectors<br />
Total Factor Productivity<br />
Transport Industry<br />
Distributive Trade Industry<br />
Productivity of Distributive Trade Industry<br />
Labour Cost Competitiveness<br />
Hotel Industry<br />
Productivity of Hotel Industry<br />
Labour Cost Competitiveness<br />
Information and Communications Technology (ICT) Industry<br />
Productivity Performance of the ICT Industry<br />
Labour Cost Competitiveness<br />
Box 3.1: Measuring Performance of Power Producers<br />
Box 3.2: Positioning SMEs Up the Value Chain through<br />
e-Commerce Adoption<br />
Box 3.3: A Study on Productivity of the Accounting Firms<br />
Outlook for 2010<br />
Chapter 4: Productivity Performance of the Manufacturing Sector<br />
<strong>Overview</strong><br />
Productivity Performance of the Manufacturing Sector, 2009<br />
International Comparison<br />
Total Factor Productivity (TFP) of Selected Manufacturing<br />
Industries, 2005-2009<br />
Outlook for 2010<br />
Box 4.1: Productivity Improvement through Work Study:<br />
The Simplified Method Time Measurement (MTM)<br />
Box 4.2: Fundamental Waste in Toyota Production System<br />
Box 4.3: On-the-Job Training (OJT)<br />
38<br />
39<br />
40<br />
40<br />
42<br />
42<br />
43<br />
43<br />
43<br />
44<br />
44<br />
44<br />
45<br />
45<br />
46<br />
47<br />
49<br />
51<br />
54<br />
55<br />
57<br />
58<br />
59<br />
60<br />
63<br />
65
CONTENTS<br />
Chapter 5: Productivity Performance of the Agriculture Sector<br />
<strong>Overview</strong><br />
Box 5.1: Innovation in Food Product Development<br />
Productivity Performance<br />
Land Productivity<br />
Labour Productivity<br />
Capital Productivity<br />
International Agricultural Productivity Comparison<br />
Box 5.2: Good Agronomic Practices in Paddy Cultivation Activities<br />
Productivity Initiatives in the Agriculture Sector<br />
Outlook for 2010<br />
Box 5.3: Agricultural Transformation towards Value Creation<br />
Chapter 6: Productivity Performance of the Construction Sector<br />
<strong>Overview</strong><br />
Productivity of the Construction Sub-sectors<br />
Residential Sub-sector<br />
Non-Residential Sub-sector<br />
Civil Engineering Sub-sector<br />
Productivity Initiatives in the Construction Sector<br />
Box 6.1: The Green Building Index Way to a More Sustainable<br />
Construction Industry<br />
Box 6.2: The Different Components of Industrialised<br />
Building System (IBS)<br />
Measure to Mitigate the Impact of the Global Crisis<br />
Outlook for 2010<br />
Chapter 7: Productivity Performance of the Public Sector<br />
Public Sector Productivity<br />
Public Sector Revenue and Expenditure<br />
Productivity Performance of the Public Service Sub-sectors<br />
Economic Services Sub-sector<br />
Social Services Sub-sector<br />
Health Services<br />
Poverty<br />
Education Services<br />
Security Services Sub-sector<br />
Public Safety<br />
Infrastructure Facilities<br />
68<br />
70<br />
72<br />
72<br />
72<br />
72<br />
73<br />
74<br />
76<br />
77<br />
78<br />
82<br />
83<br />
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86<br />
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90<br />
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97<br />
98<br />
98<br />
99<br />
99<br />
100
CONTENTS<br />
General Public Administration Sub-sector<br />
International Comparison on Public Sector Performance<br />
International Best Practices on Public Administration Efficiency<br />
Enhancing Public Service Delivery<br />
Box 7.1: Efficiency Enhancement for Public Sector - IMPaCT<br />
Box 7.2: Government Transformation Programme<br />
Chapter 8: Productivity Performance of the Small and Medium Industries<br />
<strong>Overview</strong><br />
Performance of the SMIs in the Manufacturing Sector<br />
Box 8.1: SMIs towards Green Productivity<br />
Productivity Performance<br />
Added Value per Employee<br />
Capital Intensity<br />
Capital Productivity<br />
Labour Cost Competitiveness<br />
Box 8.2: Enhancing Productivity through Quality Environment Activities<br />
Outlook for 2010<br />
Box 8.3: Importance of Product Development for SMIs<br />
100<br />
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103<br />
104<br />
105<br />
108<br />
109<br />
110<br />
111<br />
111<br />
112<br />
112<br />
113<br />
114<br />
114<br />
115<br />
PART 3: STRENGTHENING DOMESTIC CAPABILITIES<br />
Chapter 9: Towards Global Competitiveness<br />
Malaysia’s Competitiveness Performance<br />
A. World Competitiveness Yearbook by the Institute for<br />
Management Development (IMD)<br />
B. Global Competitiveness Report by World Economic Forum (WEF)<br />
Box 9.1: Characteristics of the Top 3 Most Competitive Economies<br />
C. Doing Business by World Bank<br />
Box 9.2: Malaysia’s Competitiveness Strengths and Opportunities<br />
for Improvement<br />
Challenges in Sustaining Malaysia’s Competitiveness<br />
<strong>MPC</strong>’s Initiatives in Enhancing Competitiveness<br />
Transformation, Innovation & Productivity through Partnership<br />
Box 9.3: Business Excellence Framework- Key to Organisational<br />
Transformation<br />
Box 9.4: Benchmarking for Enhancing Competitiveness<br />
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123<br />
126<br />
127<br />
129<br />
130<br />
130<br />
131<br />
133<br />
136
CONTENTS<br />
APPENDIX<br />
Appendix A: Terminology and Definitions<br />
Appendix B: Deriving the Sources of Long-Term Economic<br />
and Productivity Growth<br />
Appendix C: The Contribution by Sub-sectors, 2009<br />
Appendix D: Productivity Indicators - Manufacturing Sector, 2009<br />
<strong>MPC</strong> BOARD OF DIRECTORS<br />
<strong>MPC</strong> CONSULTATIVE PANELS<br />
<strong>MPC</strong> MANAGEMENT TEAM<br />
<strong>MPC</strong> OFFICES<br />
INDEX<br />
141<br />
147<br />
151<br />
153<br />
165<br />
166<br />
172<br />
173<br />
175
REPORT HIGHLIGHTS<br />
PRODUCTIVITY PERFORMANCE OF MALAYSIA<br />
Malaysia’s Productivity Performance<br />
In fourth quarter 2009, the economy recovered strongly with a GDP growth of 4.5%. This<br />
was a commendable achievement after the economy experienced negative growth for<br />
the last three quarters. In 2009, GDP contracted by 1.7%, a smaller contraction than the<br />
earlier forecast driven by improvement in domestic demand, stronger consumption and<br />
higher public sector spending. The economy is expected to continue its growth momentum<br />
in 2010 with GDP growing by more than 5.0%.<br />
In fourth quarter 2009, productivity grew by 2.3% driven by robust productivity growth of<br />
the manufacturing and services sectors that expanded by 4.6% and 3.1% respectively.<br />
However, the mining and agriculture sector’s productivity contracted by 9.3% and 2.4%<br />
respectively. In 2009, productivity of the economy contracted by 1.8% to RM48,614<br />
lowering the capacity utilisation from 88% in 2008 to 69%. Among the economic sectors,<br />
productivity expansion was recorded in the construction and services that grew by 5.0%<br />
and 1.7% respectively. However, productivity of the manufacturing and mining sectors<br />
contracted by 8.6% and 3.2% respectively.<br />
Productivity of the services sector expanded by 1.7% with finance and other services<br />
sub-sectors performed well, growing by 3.2% and 2.4% while transport and trade subsectors<br />
grew by 1.3% and 0.8% respectively. The sector benefited from the liberalisation<br />
of services sub-sectors which created conducive business environment.<br />
International Productivity Comparison<br />
Among Asian countries, China posted highest productivity growth of 8.4% followed by<br />
India (4.8%) and Indonesia (2.6%). However, negative productivity growth were registered<br />
by other Asian countries namely the Philippines (-2.0%), Taiwan (-2.0%), Hong Kong<br />
(-2.9%), Thailand (-3.7%) and Singapore (-4.1%).<br />
PRODUCTIVITY REPORT 2009<br />
i
2009<br />
REPORT<br />
HIGHLIGHTS<br />
Malaysia’s productivity growth was better than some of the Organisation for Economic<br />
Cooperation Development (OECD) economies among which Sweden (-2.5%), United<br />
Kingdom (-2.7%), Japan (-3.6%), Italy (-3.9%), Finland (-4.0%) and Germany (-4.8%).<br />
However, the USA, Ireland and Korea registered positive growth at 1.1%, 0.8% and 0.6%<br />
respectively.<br />
Within Asian countries, Malaysia’s productivity level (USD12,793) was higher than<br />
Thailand (USD4,596), China (USD3,734), the Philippines (USD3,192), Indonesia<br />
(USD2,471) and India (USD2,051).<br />
Total Factor Productivity<br />
The economy registered a TFP growth of 1.5% supporting a GDP growth of 4.7%<br />
for the period 2000-2009. In the same period, capital and labour grew by 1.8% and<br />
1.5% respectively. In terms of contribution, TFP contributed 31.4% to GDP growth as<br />
compared with 37.4% and 31.2% contribution from capital and labour. The TFP growth<br />
during the period was supported by the contribution from human capital (35.9%), capital<br />
structure (23.7%), demand intensity (16.2%), technical progress (14.1%) and economic<br />
restructuring (10.1%).<br />
The manufacturing sector recorded a marginal TFP growth of 0.6% for the period 2000-<br />
2009. The sector was severely impacted by global economic slowdown which saw<br />
contraction in the exports of manufactured products. Among services sector, trade subsector<br />
registered a TFP growth of 3.1%, finance (3.1%), transport (2.1%), utilities (0.7%)<br />
and other services (0.2%).<br />
For the same period, the agriculture sector recorded a TFP growth of 1.6% supporting<br />
an output growth of 3.2%. Initiatives undertaken by the government in encouraging<br />
commercial farming, application of modern technology and production of high quality<br />
products had positively impacted TFP of the sector.<br />
ii<br />
PRODUCTIVITY REPORT 2009
2009<br />
Productivity of the Small and Medium Industries<br />
In 2009, Small and Medium Industries (SMIs) contributed 31.6% to total manufacturing<br />
output and 26.7% of total manufacturing added value. The sector contributed 31.9% of<br />
total manufacturing employment. Productivity of the sector stood at RM48,428 recording<br />
a decline of 0.6%. The sub-sectors that registered productivity growth were food products<br />
and beverages, textiles, rubber and plastic products, wearing apparels and wood and<br />
wood products. SMIs recorded a slight growth in capital intensity by 0.7% while capital<br />
productivity declined by 1.1%. Labour cost competitiveness of the sector was sustained<br />
as indicated by a marginal decline of 0.2% in unit labour cost. Labour cost per employee<br />
grew by 0.5% while productivity contracted by 0.6%.<br />
REPORT<br />
HIGHLIGHTS<br />
Outlook for 2010<br />
The economy is poised to continue its growth momentum in 2010 with greater involvement<br />
from the private sector. The economy is expected to achieve a productivity growth of more<br />
than 3.0%. The manufacturing sector’s productivity is expected to improve by more than<br />
2.3% supported by higher domestic consumption as well as the recovery of the exports<br />
market.<br />
The services sector is expected to continue its productivity growth momentum of more<br />
than 4.1% benefiting from liberalisation, National Broadband Initiative and High Speed<br />
Broadband Services. Trade, transport and finance sub-sectors are to lead the growth with<br />
more than 4.5% expansion.<br />
The agriculture sector is expected to post a productivity growth of more than 2.5%. The<br />
sector is to leverage on large scale commercial farming, application of modern technology,<br />
production of high quality and value added products, biotechnology and increase in the<br />
use of ICT.<br />
The construction sector is targeted to register a productivity growth of more than 1.8%.<br />
The growth will be propelled by continued implementation of projects under the second<br />
stimulus packages and the Ninth Malaysia Plan.<br />
PRODUCTIVITY REPORT 2009<br />
iii
PART 1<br />
Economic and Productivity<br />
Development
CHAPTER 1<br />
Productivity Performance of<br />
Malaysia
PRODUCTIVITY PERFORMANCE OF MALAYSIA<br />
<strong>Overview</strong><br />
Economic Performance<br />
• The economy recovered strongly in the<br />
fourth quarter 2009 with a GDP growth<br />
of 4.5%. This was a commendable<br />
achievement as the economy<br />
experienced negative growth for the<br />
last three quarters. The growth pattern<br />
is expected to continue in 2010 with a<br />
GDP growth of more than 5.0%.<br />
• Being an open economy, Malaysia<br />
is not totally insulated from global<br />
economic slowdown. In 2009, GDP<br />
contracted by 1.7%, a smaller<br />
contraction than the earlier forecast<br />
(Figure 1.1). The economy benefited<br />
from the improvement in domestic<br />
demand, stronger domestic consumption<br />
and higher public sector spending.<br />
Government expenditure expanded by<br />
3.7% while private expenditure grew by<br />
0.8% (Figure 1.2).<br />
• On the supply side, the construction<br />
and aggregated services sector's<br />
output registered 5.7% and 2.5%<br />
growth respectively. The manufacturing<br />
sector’s output declined by 9.3% while<br />
mining sector’s output contracted by<br />
3.8% (Table 1.1).<br />
• The expansion in the construction sector<br />
was attributed mainly to the continued<br />
progress in the implementation projects<br />
under the stimulus packages. Under<br />
the economic stimulus packages,<br />
most of the spending are for projects<br />
with high multiplier effect especially in<br />
infrastructure.<br />
Figure 1.1: Gross Domestic Product (GDP) Growth,<br />
2005-2009<br />
Sources:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Department of Statistics, Malaysia<br />
Figure 1.2: Expenditure on GDP<br />
(at constant 2000 prices)<br />
Source: Department of Statistics, Malaysia<br />
Table 1.1: GDP Growth by Economy Activities<br />
(at 2000 constant prices)<br />
*Except Government services<br />
Sources:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Department of Statistics, Malaysia<br />
4<br />
PRODUCTIVITY REPORT 2009
2009<br />
• The decline in the manufacturing<br />
sector's output was attributed to 10.9%<br />
contraction in the export-oriented<br />
industries and domestic-oriented<br />
industries. Among export-oriented<br />
industries, electrical and electronic<br />
products contracted by 18.5% and<br />
24.6% respectively (Figure 1.3 and<br />
Table 1.2).<br />
which fabricated metal products and<br />
transport equipment contracted by 0.9%<br />
and 12.4% respectively. Positive growth<br />
was recorded in food and beverages<br />
products at 1.5%.<br />
Figure 1.3: Performance of the Manufacturing Sector<br />
CHAPTER 1<br />
• In the primary-related industry cluster,<br />
rubber products and chemicals &<br />
chemical products contracted by 3.2%<br />
and 1.7% respectively. However,<br />
petroleum products output expanded<br />
by 0.1%.<br />
• The output of the domestic-oriented<br />
industries declined by 5.7% among<br />
Source: Department of Statistics, Malaysia<br />
Table 1.2: Performance of the Manufacturing Sector<br />
Value Added (at constant 2000 prices)<br />
Overall Production¹<br />
Export-oriented industries<br />
Electronics and electrical<br />
Products cluster<br />
Of which:<br />
Electronics<br />
Electrical products<br />
Primary-related industry cluster<br />
Of which:<br />
Chemicals and chemical products<br />
Petroleum products<br />
Rubber products<br />
Off-estate processing<br />
2008 2009<br />
4Q Year 3Q 4Q<br />
-8.8<br />
-11.1<br />
-13.4<br />
-22.5<br />
-27.8<br />
-8.2<br />
-6.8<br />
-15.0<br />
2.0<br />
2.1<br />
-0.2<br />
1.3<br />
0.6<br />
-1.2<br />
-3.6<br />
-5.4<br />
0.9<br />
0.4<br />
-3.5<br />
5.9<br />
4.7<br />
9.4<br />
Percent (%)<br />
-8.6<br />
-9.1<br />
-10.0<br />
-22.6<br />
-22.9<br />
-22.1<br />
-1.2<br />
-1.8<br />
6.5<br />
2.4<br />
-5.1<br />
5.3<br />
5.1<br />
5.0<br />
2.0<br />
0.6<br />
5.0<br />
6.7<br />
19.6<br />
-3.4<br />
15.6<br />
8.5<br />
Year<br />
-9.3<br />
-9.8<br />
-10.9<br />
-22.8<br />
-24.6<br />
-18.5<br />
-3.2<br />
-1.7<br />
0.1<br />
-3.2<br />
-2.1<br />
Domestic-oriented industries<br />
Construction-related cluster<br />
Of which:<br />
Construction-related materials<br />
Fabricated metal products<br />
Consumer-related cluster<br />
Of which:<br />
Transport equipment<br />
Food, beverage & tobacco products<br />
-2.0<br />
-8.3<br />
-10.7<br />
-4.4<br />
3.1<br />
18.4<br />
-2.3<br />
8.0<br />
4.3<br />
3.2<br />
6.1<br />
11.0<br />
23.4<br />
7.4<br />
-5.7<br />
-8.6<br />
-15.2<br />
1.0<br />
-3.4<br />
-16.2<br />
-0.1<br />
5.5<br />
2.6<br />
-2.9<br />
11.1<br />
7.7<br />
-8.6<br />
12.1<br />
-5.7<br />
-11.4<br />
-18.2<br />
-0.9<br />
-1.3<br />
-12.4<br />
1.5<br />
¹Industrial Production Index (2005=100)<br />
Source: Department of Statistics, Malaysia<br />
PRODUCTIVITY REPORT 2009 5
2009<br />
CHAPTER 1<br />
Overall Productivity Performance<br />
• In the fourth quarter 2009, productivity<br />
expanded by 2.3% driven by robust<br />
productivity growth of the manufacturing<br />
and services sectors that grew by<br />
4.6% and 3.1% respectively. However,<br />
the mining and agriculture sector’s<br />
productivity contracted by 9.3% and<br />
2.4% respectively.<br />
Table 1.3: Quarterly Productivity Growth by<br />
Economic Sectors (at 2000 constant prices)*<br />
Economic Sectors<br />
• In 2009, productivity of the economy<br />
contracted by 1.8% to RM48,614<br />
lowering the capacity utilisation from<br />
88% in 2008 to 69%. The growth was<br />
supported by commendable expansion<br />
of the construction and services<br />
sectors that grew by 5.0% and 1.7%<br />
respectively, offsetting the contraction<br />
in the manufacturing (-8.6%) and mining<br />
(-3.2%) sectors (Figure 1.4).<br />
*Percentage change from preceding quarter<br />
** Except Government Services<br />
Computed from: National Accounts and Labour Force Survey,<br />
Department of Statistics, Malaysia<br />
Figure 1.4: Productivity Growth of the<br />
Economic Sectors, 2009<br />
Sectoral Productivity Performance<br />
Services sector<br />
• In 2009, the Government liberalised<br />
services sub-sectors to create a more<br />
conducive business environment to<br />
attract investment, technology and<br />
to create higher value employment<br />
opportunities.<br />
• The productivity of the sector expanded<br />
by 1.7% with finance and other services<br />
sub-sectors performed well; growing by<br />
3.2% and 2.4%, while transport and<br />
trade sub-sectors grew by 1.3% and<br />
0.8% respectively (Figure1.5).<br />
Computed from: Department of Statistics, Malaysia<br />
Figure 1.5: Productivity Growth of the<br />
Services Sectors, 2005-2009<br />
2005 2006 2007 2008 2009<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
6<br />
PRODUCTIVITY REPORT 2009
2009<br />
• The finance 1 sub-sector productivity<br />
improved by 3.2% to RM128,281.<br />
The growth was driven by measures<br />
introduced by the Government such<br />
as credit enhancement scheme and<br />
corporate debt restructuring. These<br />
measures make it easier for companies<br />
to borrow and strengthen their financial<br />
position (Figure 1.6).<br />
Figure 1.6: Productivity Level & Growth of the<br />
Finance Sector, 2005-2009<br />
CHAPTER 1<br />
• The trade 2 sub-sector productivity<br />
grew by a marginal 0.8% to RM40,359<br />
(Figure 1.7). It was driven by higher<br />
disposable income and better labour<br />
market plus increasing numbers of<br />
tourist arrival. According to the Travel<br />
and Tourism Competitiveness Index<br />
2009, Malaysia was ranked at 32 nd<br />
among 132 countries. Tourists from<br />
ASEAN countries represent about three<br />
quarters of tourists arrival.<br />
• The transport 3 sub-sector productivity<br />
grew by 1.3% to RM71,513 supported<br />
by an increase in air transport as well<br />
as higher broadband users. This was<br />
further boosted by an increase in the<br />
passenger segment especially budgettravel<br />
and short-haul travellers. The<br />
National Broadband Initiative to be<br />
implemented in 2010 will augur well for<br />
the development of the sector (Figure<br />
1.8).<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
Figure 1.7: Productivity Level & Growth of the<br />
Trade Sector, 2005-2009<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
Figure 1.8: Productivity Level & Growth of the<br />
Transport Sector, 2005-2009<br />
Note:<br />
1<br />
Includes insurance, real estate and business<br />
services.<br />
2<br />
Includes wholesale, retail trade, accommodation<br />
and restaurant.<br />
3<br />
Includes storage and communication.<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
PRODUCTIVITY REPORT 2009 7
2009<br />
CHAPTER 1<br />
• The utilities sub-sector recorded a<br />
marginal growth of 0.6% to RM163,547.<br />
Though there is a slower demand<br />
especially from the manufacturing<br />
sector, household demand remained<br />
unabated (Figure 1.9).<br />
Figure 1.9: Productivity Level & Growth of the<br />
Utilities Sector, 2005-2009<br />
Construction sector<br />
• The productivity of the construction<br />
sector improved further in 2009,<br />
growing by 5.0% compared with 1.5%<br />
growth registered in previous year<br />
(Figure 1.10).<br />
• The productivity of the sector was<br />
supported by intensified utilisation of<br />
Integrated Building System (IBS). The<br />
productivity of the sector was further<br />
enhanced by the implementation of<br />
projects under the stimulus packages<br />
and Ninth Malaysia Plan.<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
Figure 1.10: Productivity Level & Growth of the<br />
Construction Sector, 2005-2009<br />
Agriculture sector<br />
• The agriculture 4 sector recorded a<br />
marginal productivity growth of 0.4%<br />
to RM26,466 (Figure 1.11). The sector<br />
benefited from wider application of<br />
modern technology, production of<br />
high quality and value added products<br />
and increased use in Information and<br />
Communication Technology (ICT).<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
Figure 1.11: Productivity Level & Growth of the<br />
Agriculture Sector, 2005-2009<br />
Note:<br />
4<br />
Includes livestock and horticulture.<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
8<br />
PRODUCTIVITY REPORT 2009
2009<br />
Manufacturing sector<br />
• Productivity of the sector dived by a<br />
massive 8.6%, the highest slide since<br />
1997. It was impacted by deterioration<br />
in the export of electrical and electronic<br />
(E&E) products cluster which contracted<br />
by 22.8%. This sub-sector represented<br />
about 41.2% of the manufactured<br />
exports.<br />
Figure 1.12: Manufacturing’s Output and<br />
Productivity Growth, 2005-2009<br />
CHAPTER 1<br />
• The contraction in productivity was<br />
more prevalent in the resource based<br />
industries such as chemicals and<br />
chemical products (-20.2%) food<br />
and beverages (-5.5%) and rubber<br />
products (-3.9%). However, the fall<br />
in the productivity was cushioned<br />
by improvement in the productivity<br />
of industries namely wood & wood<br />
products which grew by 2.9% (Figure<br />
1.13).<br />
• Non-resource based industries such as<br />
medical devices and textiles registered<br />
a productivity growth of 12.4% and<br />
2.6% respectively. However, contraction<br />
in productivity was experienced in<br />
transport equipments, metal, machinery<br />
& equipment and E&E at 9.3%, 8.0%,<br />
5.7% and 3.1% respectively (Figure<br />
1.14).<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
Figure 1.13: Productivity of the Resource<br />
Based, 2009<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
Figure 1.14: Productivity of the Non-Resource<br />
Based, 2009<br />
• Nevertheless, productivity of the sector<br />
improved by 4.6% in the fourth quarter<br />
2009 in tandem with the recovery of the<br />
external demand.<br />
E&E<br />
Machinery &<br />
equipment<br />
Metal<br />
Transport<br />
equipment<br />
Medical<br />
devices<br />
Textile &<br />
apparel<br />
Manufacturing<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
PRODUCTIVITY REPORT 2009 9
2009<br />
CHAPTER 1<br />
Mining sector<br />
• The productivity of the mining sector<br />
declined by 3.2% to RM943,344. The<br />
sector was impacted by unfavourable<br />
external market resulting in a decline of<br />
the production of crude oil and natural<br />
gas (Figure 1.15).<br />
Figure 1.15: Productivity Level & Growth of the<br />
Mining Sector, 2005-2009<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
Table 1.4: Productivity Level and Growth of Economic Sectors<br />
National/Economic Sectors<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
10<br />
PRODUCTIVITY REPORT 2009
2009<br />
Box 1.1: Change and Innovation<br />
Staying competitive is more challenging than before, as the competitive advantages<br />
change at an unparallel speed. The best practices of today will not ensure tomorrow's<br />
success. Hence, the pervasive significance of innovation is for organisations to achieve<br />
world class excellence.<br />
CHAPTER 1<br />
Innovation is a wide concept and can be interpreted in many ways. Innovation adds<br />
values to products and services, stimulating sales growth, exploiting new markets and<br />
formulating new organisational method. Thus, the focus of innovations are:<br />
• Product Innovation involves new products and new characteristics of old product;<br />
process may be the same but the product has completely changed.<br />
• Process Innovation involves a new or significantly improved production or delivery<br />
method.<br />
• Marketing Innovation involves a new marketing method involving significant changes<br />
in product design or packaging, product placement, product promotion or pricing.<br />
• Organisational Innovation involves introducing a new organisational method in the<br />
firm’s business practices, workplace organisations or external relations.<br />
The input of any innovation lies in ideas, and the ability to introduce new products,<br />
services and processes depends on the pool of ideas available and the ability to<br />
generate new ideas. Ideas and innovations within the organisation context are<br />
contributions made with the objective of improving the operation of the organisation.<br />
Creativity is the process of developing new or interesting ideas, while innovation is the<br />
implementation and transformation of those ideas into valuable or profitable solutions.<br />
Innovation finds the value in creativity, so innovation is really about how organisations<br />
can profit from their ideas.<br />
The principle for designing innovation is to assure that the four essential elements of<br />
the firm are aligned with its competitive strategy. Alignment means that each element<br />
consistently support the competitive strategy and mutually reinforce other elements.<br />
PRODUCTIVITY REPORT 2009 11
2009<br />
The four elements are shown below:<br />
CHAPTER 1<br />
Work<br />
- Nature of job<br />
- Teams<br />
- Rewards<br />
Formal Organisation<br />
- Structure<br />
- Processes<br />
- Systems<br />
Competitive<br />
Strategy<br />
People<br />
- Education<br />
- Training<br />
Informal Organisation<br />
- Culture<br />
- Value<br />
- Norms<br />
- Beliefs<br />
Work refers to activities that add value to a company’s products and services. Work<br />
should be designed so that employees both grow in their job and at the same time<br />
help the company to reach its goal. Exposing employee to a broad variety of duties<br />
and jobs gives them the opportunity to learn from one another and be creative, coming<br />
up with totally new ideas and better way of doing the same job.<br />
People often get channeled by their own specialties and have a myopic vision of<br />
work done by others. It is important that the employees see the important and the<br />
interrelatedness of their tasks compared with the tasks of others. As employees differ<br />
in their skill and experience, they will have different capacities to contribute to the firm’s<br />
innovation and growth. Human capital can be enhanced by education and training<br />
programmes that focus on developing growth path of employee.<br />
Informal Organisation relates to organisational culture. Research shows that a strong<br />
corporate culture can give a company a powerful advantage over its competitors. In<br />
order for innovative effort to succeed, the culture should be supportive of innovation.<br />
An innovation-supportive culture is one that value creativity and cooperation. This type<br />
of culture also tolerates errors and even celebrates failures as long as lesson learned.<br />
Formal Organisation that encourages the maximum generation of ideas from all<br />
employees should have :<br />
• Flat structure to broaden the responsibility of employees at each level, enable<br />
employee to see the big picture and encourage open door policy;<br />
• Information shared with all employees at all level;<br />
• Created ad hoc collateral structure for brainstorming and problem solving. The<br />
more diverse the membership, the greater the chance for creative idea generation;<br />
• Captured learning generated from ad hoc collateral structure; and<br />
• Developed a measurement system that track critical project activities and valued<br />
outcome.<br />
12<br />
PRODUCTIVITY REPORT 2009
2009<br />
International Productivity<br />
Comparison<br />
• Malaysia began to feel the impact of<br />
the global economic crisis in the last<br />
quarter of 2008. Some of the effects<br />
of the crisis on the country were lower<br />
exports, which caused a decline in<br />
industrial production, lower commodity<br />
prices and weaker business sentiment.<br />
The crisis remained a manufacturingfor-exports<br />
crisis and did not significantly<br />
spill over to the rest of the economy.<br />
The Malaysian economy remained<br />
fundamentally resilient with relatively<br />
stable inflation rate and high savings.<br />
• To achieve higher productivity level,<br />
Malaysia needs to aspire towards<br />
becoming an innovation-driven<br />
economy which is characterised by the<br />
ability to produce innovative products<br />
and services at the global technology<br />
frontier using the most sophisticated<br />
production processes.<br />
Figure 1.16: Productivity Growth of Malaysia and<br />
Selected OECD Countries, 2009<br />
CHAPTER 1<br />
• Among Organisation for Economic<br />
Cooperation Development (OECD)<br />
countries, Malaysia's productivity which<br />
contracted by 1.8% was better than<br />
Sweden (-2.5%), the United Kingdom<br />
(-2.7%), Japan (-3.6%), Italy (-3.9%),<br />
Finland (-4.0%) and Germany (-4.8%).<br />
However, the USA, Ireland and Republic<br />
of Korea registered positive growth at<br />
1.1%, 0.8% and 0.6% respectively.<br />
• Among Asian countries, China posted<br />
the highest productivity growth of<br />
8.4% followed by India (4.8%) and<br />
Indonesia (2.6%). However, negative<br />
productivity growth was registered by<br />
other Asian countries such as the<br />
Philippines (-2.0%), Taiwan (-2.0%),<br />
Hong Kong (-2.9%), Thailand (-3.7%)<br />
and Singapore (-4.1%) (Figure 1.17).<br />
• Malaysia’s productivity level (USD<br />
12,793) was higher than Thailand<br />
(USD4,596), China (USD3,734), the<br />
Philippines (USD3,192), Indonesia<br />
(USD2,471) and India (USD2,051)<br />
(Table 1.5).<br />
Computed from:<br />
i. Economic Report, Ministry of Finance, Malaysia, various issues<br />
ii. OECD Economic Outlook, Vol. 86 Database<br />
iii. National Accounts of OCED Countries: Detailed Tables, Vol. ii 2009<br />
Figure 1.17: Productivity Growth of Malaysia and<br />
Selected Asian Countries, 2009<br />
Computed from:<br />
i. Economic Report, Ministry of Finance, Malaysia, various issues<br />
ii. Country Data, The Economist Intelligence Unit<br />
iii. Market Indicator and Forecast, The Economist Intelligence Unit<br />
Malaysia<br />
Malaysia<br />
PRODUCTIVITY REPORT 2009 13
2009<br />
Table 1.5: Productivity Level and Growth for Selected Countries, 2009<br />
CHAPTER 1<br />
Country<br />
Productivity Level<br />
(at 2000 constant prices<br />
in USD)<br />
Productivity Growth<br />
USA 77,828 1.1<br />
Japan 77,640 -3.6<br />
Norway 76,656 -0.8<br />
Ireland 65,767 0.8<br />
Sweden 63,582 -2.5<br />
Denmark 59,777 -1.6<br />
United Kingdom 58,733 -2.7<br />
Finland 57,682 -4.0<br />
France 57,567 -1.8<br />
Hong Kong 50,174 -2.9<br />
Germany 49,517 -4.8<br />
Canada 49,438 -1.1<br />
Australia 48,357 0.6<br />
Singapore 45,275 -4.1<br />
Italy 44,724 -3.9<br />
Taiwan 39,218 -2.0<br />
Republic of Korea 32,059 0.6<br />
New Zealand 30,739 0.4<br />
Malaysia 12,793 -1.8<br />
Thailand 4,596 -3.7<br />
China 3,734 8.4<br />
Philippines 3,192 -2.0<br />
Indonesia 2,471 2.5<br />
India 2,051 4.8<br />
(%)<br />
Computed from:<br />
i. Economic Report, Ministry of Finance, Malaysia, various issues<br />
ii. OECD Economic Outlook, Vol. 86 Database<br />
iii. National Accounts of OCED Countries: Detailed Tables, Vol. ii 2009<br />
iv. Country Data, The Economist Intelligence Unit<br />
v. Market Indicator and Forecast, The Economist Intelligence Unit<br />
14<br />
PRODUCTIVITY REPORT 2009
2009<br />
Way Forward<br />
• Enhancing productivity and<br />
competitiveness of the country<br />
requires involvement of all spectrum<br />
of the society. It starts in changing the<br />
mindset of each individual towards<br />
productivity and quality culture in daily<br />
life by performing daily routine in a more<br />
productive way. At a firm and industry<br />
level, both employees and employers<br />
must work in harmony by doing things<br />
in an innovative system while working in<br />
an environment that promotes creativity<br />
and innovativeness. The Government<br />
is providing conducive environment to<br />
promote the innovative culture.<br />
• In an effort to increase productivity and<br />
competitiveness of the nation, <strong>MPC</strong> has<br />
undertaken the following measures;<br />
◦◦<br />
Research – provides reliable,<br />
comprehensive and informative data<br />
on productivity, quality, innovation<br />
and competitiveness for strategy<br />
planning and decision making. This<br />
involves continuous updating of<br />
existing databases at the sectoral,<br />
national and international levels.<br />
◦◦<br />
Training and system development –<br />
training and systems development<br />
programmes are conducted for<br />
human capital development and<br />
organisational excellence.<br />
◦◦<br />
Promotion – the continuous<br />
promotion of productivity and<br />
quality to ensure the development<br />
of innovative culture for<br />
organisational excellence. Among<br />
the programmes introduced to<br />
internalise innovative culture are<br />
Innovative and Creative Circle (ICC)<br />
Convention, Quality Environment<br />
Convention, Inno Race, Productivity<br />
Performance Award and National<br />
Competitiveness Conference.<br />
◦◦<br />
Benchmarking and best practices –<br />
Benchmarking is a self-assessment<br />
management tool for organisations<br />
to compare performance and adapt<br />
best practices towards achieving<br />
best-in-class performance.<br />
Outlook for 2010<br />
• The economy is poised to continue its<br />
growth momentum in 2010. The private<br />
sector will assume pivotal role in driving<br />
the country's economic expansion<br />
while the public sector will intensify<br />
its facilitating and supportive role in<br />
improving productivity. At the industry<br />
level, productivity initiatives such as<br />
integrated work process, utilisation<br />
of higher technology, improvement in<br />
management systems, strengthening<br />
human resource capabilities and<br />
nurturing creativity and innovation at<br />
all spectrum of the population need to<br />
be intensified. The initiatives will propel<br />
the economy to achieve a productivity<br />
growth of more than 3.0% in 2010.<br />
• The manufacturing sector's productivity<br />
is expected to improve by more than<br />
2.3%. It will be supported by higher<br />
domestic consumption as well as the<br />
recovery of the exports market. The year<br />
will witness better performance of the<br />
domestic-oriented industries benefiting<br />
from higher demand of construction<br />
sector.<br />
CHAPTER 1<br />
PRODUCTIVITY REPORT 2009 15
2009<br />
CHAPTER 1<br />
• The services sector is expected<br />
to continue its growth momentum<br />
benefiting from National Broadband<br />
Initiative and High Speed Broadband<br />
Services that will improve speed and<br />
efficiency of doing business. The sector<br />
is expected to grow by more than for<br />
4.1%.Trade, transport and finance subsectors<br />
are to lead the growth with more<br />
than 4.5% expansion.<br />
• The agriculture sector is expected to<br />
post a productivity growth of more than<br />
2.5%. The sector is to leverage on large<br />
scale commercial farming, application<br />
of modern technology, production of<br />
high quality and value added products,<br />
biotechnology and increase in the use<br />
of ICT.<br />
• The construction sector is targeted to<br />
register a productivity growth of more<br />
than 1.8%. The growth will be propelled<br />
by continued implementation of projects<br />
under the second stimulus packages<br />
and the Ninth Malaysia Plan. Green<br />
Building Index (GBI) introduced to create<br />
awareness, enforce the requirements<br />
for more sustainable energy and<br />
intensifying the use of Industrial Building<br />
System (IBS) methods in construction<br />
activities will enhance productivity and<br />
competitiveness of the sector.<br />
Figure 1.18: GDP and Productivity Growth, 2010<br />
16<br />
PRODUCTIVITY REPORT 2009
2009<br />
Box 1.2: A Path to Innovation<br />
Smart innovation needs innovation strategies, innovative organisation, innovative<br />
processes and innovative people. Strategy innovation involves programmes linked to<br />
organisational goals and objectives, to the business plan, and the market competitive<br />
positioning. The overall aim of an innovation strategy is to harness new knowledge<br />
and ideas in order to deliver new value to customers. A key objective of innovation<br />
is to create results that have a positive impact on the business. It is important<br />
that organisations proactively seek feedback and suggestions in order to improve<br />
performance, and there should be mechanisms established that encourage and<br />
facilitate the provision of ideas and feedback from all possible sources.<br />
CHAPTER 1<br />
There are seven steps which recommend as extremely versatile and applicable in a<br />
multiple situations – be it identifying high-potential innovation leaders, or launching a<br />
winning project, or integrating best practices for innovation into existing organisational<br />
processes, and changing organisational culture and competency. The seven steps are<br />
modular, so one can pick and choose the steps that are right for their own situation.<br />
The Seven Steps<br />
Step<br />
Objective<br />
Participant<br />
Action<br />
One: Synthesise<br />
Assess and<br />
diagnose<br />
Entire organisation or<br />
individual units<br />
• Interview key leaders and<br />
stakeholders.<br />
• Administer, collect and<br />
analyse data.<br />
• Interpret the assessment.<br />
PRODUCTIVITY REPORT 2009 17
2009<br />
CHAPTER 1<br />
Two: Strategise<br />
Create a vision of<br />
the future and a<br />
road map that leads<br />
to it<br />
Team and other<br />
appropriate leaders and<br />
experts from within and<br />
outside the organisation<br />
• Identify the current<br />
strategic landscape<br />
competencies,<br />
opportunities and<br />
threats to the<br />
organisation.<br />
• Identify the forces<br />
driving the future of the<br />
organisation, their impact<br />
and probability and the<br />
competencies required to<br />
meet these future needs.<br />
• Integrate the road map<br />
to the future with current<br />
strategic and operating<br />
plans.<br />
Three: Socialise<br />
Establish a shared<br />
vision and shared<br />
values in the<br />
Leadership Team<br />
Leadership Team<br />
• Create a shared vision of<br />
the desired organisation<br />
and establish the shared<br />
values required to achieve<br />
it.<br />
• Leaders commit to<br />
changes in behaviour<br />
required to achieve the<br />
shared vision and values.<br />
• Identify facilitators and<br />
a few strategic targets that<br />
will lead the organisation<br />
to the shared vision and<br />
values.<br />
Four: Supervise<br />
Develop Facilitators<br />
to lead and sustain<br />
change and<br />
innovation<br />
Facilitators<br />
• Train Facilitators in<br />
change and innovation<br />
methods and in facilitation<br />
tools and techniques.<br />
• Provide opportunities for<br />
facilitators to facilitate<br />
action teams.<br />
• Identify the development<br />
needs of facilitators, coach<br />
them in improving their<br />
effectiveness and<br />
review their progress.<br />
18<br />
PRODUCTIVITY REPORT 2009
2009<br />
Five:<br />
Synchronise<br />
Engage leader<br />
throughout the<br />
organisation to<br />
put the vision into<br />
operation<br />
Leadership Team,<br />
Action Team and other<br />
appropriate leaders and<br />
experts from throughout<br />
the organisation (This<br />
step requires the<br />
involvement of a large<br />
number of participants<br />
and needs to be held in a<br />
setting of significant size)<br />
• Convene a summit of the<br />
organisation’s leaders and<br />
break them into groups to<br />
execute a few strategic<br />
targets.<br />
• Determine what<br />
management practices<br />
need to be changed and<br />
how to change them;<br />
develop action plans.<br />
CHAPTER 1<br />
• Develop quick wins<br />
and integrate them into<br />
operating plans; get<br />
authorisation to implement<br />
them immediately.<br />
Six: Specialise<br />
Jump-start change<br />
and innovation<br />
Action Teams<br />
Action Teams and other<br />
appropriate leaders and<br />
experts from throughout<br />
the organisation and<br />
other appropriate<br />
leaders and experts from<br />
within and outside the<br />
organisation<br />
• Launch a wide array<br />
of action teams to<br />
work on quick-win<br />
projects and organisational<br />
practices.<br />
• Create ways to develop<br />
new competencies<br />
and expand market<br />
opportunities.<br />
• Learn what works and<br />
what does not and<br />
make revisions.<br />
Seven:<br />
Systemise<br />
Review and revise<br />
projects, adjust<br />
organisational<br />
practices and learn<br />
Leadership Team,<br />
Action Team and other<br />
appropriate leaders and<br />
experts from throughout<br />
the organisation<br />
• Create processes for<br />
managing multiple projects:<br />
key measures,<br />
development process,<br />
resource allocation and<br />
portfolio management.<br />
• Advance projects that<br />
demonstrate the ability to<br />
produce superior results,<br />
modify those with high<br />
potential and stop all<br />
others.<br />
• Integrate the best practices<br />
of the action teams into the<br />
organisation’s practices.<br />
PRODUCTIVITY REPORT 2009 19
CHAPTER 2<br />
Total Factor Productivity
TOTAL FACTOR PRODUCTIVITY<br />
<strong>Overview</strong><br />
• Total Factor Productivity (TFP) plays<br />
an important role in the country’s<br />
economic development. TFP is a<br />
measure of efficiency in the utilisation<br />
of both capital and labour. Better quality<br />
inputs generate more output when<br />
these inputs are utilised effectively<br />
and efficiently. Some of the initiatives<br />
to enhance TFP are business process<br />
innovations such as supply-change<br />
management techniques, effective<br />
retail store layout or advancement in<br />
technology to improve the efficiency<br />
of firm’s operations. High contribution<br />
of TFP to economic growth is a<br />
prerequisite for improving the standard<br />
of living of a country (Figure 2.1).<br />
Figure 2.1: Productivity Framework<br />
Overall TFP Performance<br />
• The standard of living enjoyed by<br />
the Malaysian is the result of higher<br />
productivity growth, which enable the<br />
economy to sustain growth momentum.<br />
The growth in productivity is derived<br />
fron capital intensity and TFP.<br />
Figure 2.2: TFP Contribution to<br />
Productivity Growth, 2000-2009<br />
• During the period 2000-2009,<br />
productivity grew by 1.6% which was<br />
supported by TFP growth that grew by<br />
1.5% and capital intensity growth of<br />
0.1% (Figure 2.2).<br />
TFP<br />
1.48%<br />
Capital<br />
Intensity<br />
0.13%<br />
• For the period 2000-2009, the economy<br />
registered a TFP growth of 1.5% and<br />
GDP growth of 4.7%, while capital and<br />
labour registered a growth of 1.8% and<br />
1.5% respectively (Figure 2.3).<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
22<br />
PRODUCTIVITY REPORT 2009
2009<br />
• For the sub-period 2005-2009, TFP<br />
grew by 1.4% which was slightly lower<br />
as compared with the sub-period 2000-<br />
2004 that grew by 1.6%. It is evident<br />
that the lower contribution of capital<br />
intensity and demand intensity in the<br />
latter period had lowered the TFP<br />
growth (Figure 2.3).<br />
Figure 2.3: The Growth of GDP, TFP,<br />
Capital and Labour<br />
CHAPTER 1 2<br />
• In terms of contribution, TFP contributed<br />
31.4% to GDP growth as compared<br />
with 37.4% and 31.2% contribution<br />
from capital and labour respectively<br />
(Figure 2.4).<br />
• The growth and contribution of TFP<br />
could have been higher if not for global<br />
economic slowdown in 2009 that<br />
impacted negatively on the domestic<br />
economy. Exports of both manufactured<br />
products and services declined by<br />
16.6% in 2009; reducing capacity<br />
utilisation of the economy to 69% as<br />
compared with 88% in 2008.<br />
• In enhancing the contribution of TFP<br />
to economic growth, both public and<br />
private sector need to invest in human<br />
capital development to nature creativity,<br />
design and innovative capabilities.<br />
Investments in appropriate and more<br />
advanced machinery and equipment<br />
lead to quality output, thus reducing<br />
cost of doing business. Implementation<br />
of productivity and quality system,<br />
developing a culture of excellance,<br />
efficient management practices as well<br />
as adopting best practices will improve<br />
technical progess.<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
Figure 2.4: Contribution of TFP, Capital and<br />
Labour to GDP Growth, 2000-2009<br />
TFP<br />
31.42%<br />
Capital<br />
37.37%<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
PRODUCTIVITY REPORT 2009 23
2009<br />
CHAPTER 1 2<br />
Box 2.1: Total Factor Productivity for High Income Economy<br />
Malaysia had been very successful in the past in transforming the economy from<br />
agriculture to industrial-based. The growth strategy then, was largely input-driven<br />
especially in the accumulation of foreign direct investment. The input-driven growth<br />
strategy was particularly appropriate in the early stages of economic development,<br />
where there were abundance and relatively cheaper supply of input factors. However,<br />
the strategy faced many challenges and a new growth strategy must be formulated to<br />
sustain further growth and move the country from high-middle income to high income<br />
economy by 2020. The new growth strategy must be based on innovation, creativity<br />
and high value added activities. The strategy must leverage on productivity-driven<br />
in particular Total Factor Productivity (TFP) as a driver for a sustainable economic<br />
growth.<br />
Total Factor Productivity is a measure of efficiency in the utilisation of both capital<br />
and labour. Better quality inputs generate more outputs when these inputs are utilised<br />
effectively and efficiently. Some of the initiatives to enhance TFP are business process<br />
innovations such as supply-chain management techniques, effective retail store layouts<br />
or advancements in technology to improve the efficiency of a firm’s operations. High<br />
contribution of TFP to economic growth is a prerequisite for improving the standard of<br />
living of a country.<br />
Human Capital<br />
*Skill, expertise &<br />
innovating<br />
*Continuous training<br />
*Quality of training<br />
*On the job training<br />
Demand Intensity<br />
*Branding<br />
*High value added<br />
products and services<br />
*Marketing strategies<br />
Capital Structure<br />
*ICT<br />
*Advanced technology<br />
*Automation<br />
INPUTS<br />
Capital and<br />
Labour<br />
Transformation<br />
INPUTS<br />
Higher quality<br />
Labour<br />
and<br />
Capital<br />
HIGHER TFP<br />
*Quality products<br />
*Excellent services<br />
*Lower cost<br />
*Customer satisfaction<br />
*Sustainable economic<br />
growth<br />
HIGHER GDP<br />
*Great wealth<br />
*Higher standard<br />
of living<br />
Input-<br />
Driven<br />
Growth<br />
Productivity<br />
and<br />
Innovation-<br />
Driven Growth<br />
Technical Progress<br />
*Productivity management<br />
*Leadership<br />
*Creativity<br />
*Best practices<br />
*Innovation<br />
Economic Restructuring<br />
*Labour mobility<br />
*Reallocation of resources<br />
*Skill level<br />
24<br />
PRODUCTIVITY REPORT 2009
2009<br />
Sources of Total Factor Productivity Growth<br />
The growth in TFP is derived mainly from human capital development, capital structure,<br />
demand intensity, economic restructuring and technical progress. Investment in human<br />
capital increases the capacity and the capabilities of the workforce in producing more<br />
quality products and services that are important in enhancing TFP growth. Capital<br />
structure represents the productive capital investments in the economy, which will<br />
further improve the economic efficiency. Demand intensity is improved through an<br />
increase in internal and external demand for products and services which lead to<br />
higher capacity utilisation.<br />
CHAPTER 1 2<br />
Economic restructuring involves the allocation of resources among economic sectors<br />
and industries. More resources will be allocated to productive industries or sectors that<br />
ultimately contribute to higher TFP growth. Technical progress involves activities such<br />
as innovation, R&D, positive work attitudes, good management and organisational<br />
system, supply chain management and best practices.<br />
Sources of Total Factor Productivity<br />
Growth<br />
• The growth in TFP is driven by human<br />
capital, demand intensity, technical<br />
progress, economic restructuring and<br />
capital structure.<br />
• Human capital is the key thrust to ensure<br />
the country sustains its competitive edge<br />
to face the challenges of globalised<br />
economy. Investment in human capital<br />
produces skilled workers that are<br />
capable in producing better quality<br />
products and services. Investment in<br />
skills enhancement, creativity, design<br />
and innovation will improve TFP growth.<br />
Figure 2.5: Sources of TFP Growth,<br />
2000-2009<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
PRODUCTIVITY REPORT 2009 25
2009<br />
CHAPTER 1 2<br />
• For the period 2000-2009, human capital<br />
contributed 35.9% to TFP growth. The<br />
contribution of human capital to TFP<br />
growth was more prevalent in later<br />
years. For the period 2005-2009, human<br />
capital contributed 40.4% as compared<br />
with 31.4% during the period 2000-<br />
2004. The high contribution in latter<br />
period showed continuous investment<br />
in human capital that resulted in more<br />
productive and competitive workforce.<br />
Figure 2.6: Sources of TFP Growth,<br />
2000-2004<br />
• For the period 2000-2009, demand<br />
intensity grew by 0.2% and contributed<br />
16.2% to TFP growth of 1.5% (Figure<br />
2.5). The contribution of demand<br />
intensity in the period 2005-2009 was<br />
at 14.9% as compared with 17.6%<br />
contribution in the period 2000-2004<br />
(Figure 2.6 and Figure 2.7). The smaller<br />
contribution in the latter period was<br />
attributed to significant contraction in<br />
exports of manufactured goods.<br />
• Demand intensity affects the productive<br />
capacity of the economy. A slowdown<br />
in demand will result in lower capacity<br />
utilisation of existing productive<br />
capacity.<br />
• Capital structure refers to proportion<br />
of investment in productive capital. It<br />
yields immediate output as compared<br />
with investment on infrastructure, land<br />
and buildings.<br />
• For the period 2000-2009, capital<br />
structure contributed 23.7% to TFP<br />
growth. The contribution fell to 22.7% in<br />
the period 2005-2009 as compared with<br />
24.4% contribution for the period 2000-<br />
2004.<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
Figure 2.7: Sources of TFP Growth,<br />
2005-2009<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
• Low contribution was attributed to<br />
the decline in the inflow of FDI which<br />
from RM46.1 billion in 2008 to RM22.1<br />
billion in 2009 affecting profitability<br />
and diminishing market opportunities<br />
(Figure 2.8). This has resulted in capital<br />
structure contribution to diminish.<br />
26<br />
PRODUCTIVITY REPORT 2009
2009<br />
• Economic restructuring refers to the<br />
movement of resources from less<br />
productive to more productive sectors of<br />
the economy. Experiences of developed<br />
countries indicate that resources in<br />
productive sectors were utilised more<br />
efficiently.<br />
Figure 2.8: Total Investment for Approved<br />
Projects, 2005-2009<br />
CHAPTER 1 2<br />
• For the period 2000-2009, the<br />
contribution of economic restructuring<br />
to TFP growth was 10.1% and 7.8% for<br />
the period of 2005-2009. This shows<br />
that the economy has been successful<br />
in mobilising the workforce from low<br />
value-added activities to higher valueadded<br />
activities in the various economic<br />
sectors.<br />
• The expansion in the services sectors<br />
resulted in significant job creation<br />
during the period 2000-2009. This<br />
sector provided the largest source of<br />
employment and its share to the total<br />
employment increased from 38.1% in<br />
2000 to 41.6% in 2009 (Figure 2.9).<br />
• Technical progress indicates efficient<br />
and effective utilisation of technology,<br />
innovative capabilities, management<br />
and organisational effectiveness.<br />
• During the period 2000-2009, technical<br />
progress contributed 14.0% to TFP<br />
growth. Creativity, innovation and<br />
positive mindset that are oriented<br />
towards accumulation, dissemination<br />
and utilisation of knowledge had<br />
enhanced TFP growth.<br />
Source: Malaysian Industrial Development Authority<br />
Figure 2.9: Employment Share of Economic<br />
Sectors<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
PRODUCTIVITY REPORT 2009 27
2009<br />
CHAPTER 1 2<br />
TFP of Selected Economic Sector<br />
• The development of competitive and<br />
resilient enterprises is a key component<br />
for TFP growth. Enterprises in the sector<br />
need to fortify strategic partnerships<br />
and skill linkages by promoting local<br />
sourcing, sub-contracting, innovative<br />
marketing strategy, upgrading of<br />
business transaction and advance<br />
technological and R&D spillovers and<br />
capabilities.<br />
• The TFP of the manufacturing sectors<br />
improved by a marginal 0.6% during the<br />
period 2000-2009 (Figure 2.10). This<br />
indicates that the sector was severely<br />
impacted by global economic slowdown<br />
through contraction in exports of<br />
manufactured products.<br />
Figure 2.10: TFP of the Economic Sectors,<br />
2000-2009<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
Figure 2.11: TFP of the Economic Sectors,<br />
2000-2004<br />
• High exposure of the sectors to global<br />
economic environment was evident as<br />
shown by marginal TFP growth of 0.1%<br />
during the period 2005-2009. For the<br />
period 2000-2004, TFP grew by 2.7%<br />
and contributing 40.1% to the output<br />
growth.<br />
• For the period 2000-2009, TFP of<br />
the trade sector improved by 3.1%,<br />
contributing 51.5% to output growth<br />
while labour and capital contributed<br />
33.9% and 14.7% respectively (Figure<br />
2.13). Improvement in TFP was driven<br />
mainly by innovative marketing strategy<br />
and upgrading business operation<br />
and transaction based on real-time<br />
information.<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
Figure 2.12: TFP of the Economic Sectors,<br />
2005-2009<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
28<br />
PRODUCTIVITY REPORT 2009
2009<br />
• The transport sector recorded a TFP<br />
growth of 2.1% for the period 2000-<br />
2009 and contributed 34.1% to output<br />
growth. Labour and capital contributed<br />
34.3% and 31.6% respectively. It was<br />
supported by new competitive and value<br />
added services, innovative operation<br />
systems, modernisation of transport<br />
equipments and facilities.<br />
Figure 2.13: Contribution of TFP, Capital and<br />
Labour to Output Growth, 2000-2009<br />
CHAPTER 1 2<br />
• For the period 2000-2009, the utilities<br />
sector registered a TFP growth of 0.7%<br />
and contributed 16.5% to output growth<br />
with labour and capital contributed<br />
43.2% and 40.3% respectively.<br />
Effective strategic planning and efficient<br />
management of energy resources have<br />
contributed to TFP growth.<br />
• For the period 2000-2009, the finance<br />
sector registered a TFP growth of 3.1%<br />
and contributed 40.4% to output growth.<br />
While capital and labour contributed<br />
29.9% and 29.7% respectively.<br />
• It was attributed to initiatives undertaken<br />
within the sector such as human capital<br />
development, professional, technical<br />
and leadership skill provided by the<br />
financial institutions. The growth was<br />
also supported by higher insurance<br />
activities such as medical and health<br />
insurance and innovation in investmentlinked<br />
products from the life insurance<br />
segment.<br />
• For the period 2000-2009, the<br />
agriculture sector recorded a TFP<br />
growth of 1.6%. Initiatives undertaken<br />
by the Government in encouraging<br />
commercial farming, application of<br />
modern technology and production of<br />
high quality products had contributed to<br />
TFP growth.<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
Improving TFP Growth Towards<br />
Achieving the National Mission<br />
• Malaysia is to become a high income<br />
economy by 2020, where the per capita<br />
income improved from current level of<br />
USD7,000 to USD15,000. To ensure the<br />
realisations of achieving high income<br />
nation, it is pertinent to improve the<br />
efficiency of the economic through the<br />
TFP enhancement.<br />
Developing human capital<br />
◦◦<br />
Human capital assumes pivotal<br />
role in improving TFP growth.<br />
Investment in human capital raises<br />
the skills, knowledge, adaptability<br />
and abilities of the workforce which<br />
ultimately raise productivity and<br />
capacity for innovation. Investment<br />
in human capital is necessary to<br />
ensure adequate supply of skilled<br />
workforce in the markets.<br />
PRODUCTIVITY REPORT 2009 29
2009<br />
CHAPTER 1 2<br />
Intensifying demand<br />
◦◦<br />
There is a need to constantly improve<br />
the quality of products, adopting<br />
effective marketing strategies, new<br />
product development and branding<br />
to strengthen competitiveness<br />
to sustain demand for Malaysia<br />
products and services.<br />
◦◦<br />
It requires concerted effort by<br />
both public and private sectors to<br />
widen export base and diversified<br />
export markets. Some initiatives<br />
to be adopted include improving<br />
the quality and modes of providing<br />
information, using innovative<br />
export promotion tools as well as<br />
promoting the use of export quality<br />
inspection system and certification<br />
services.<br />
Efficient allocation of resources<br />
among sectors<br />
◦◦<br />
The Government is currently<br />
promoting the development of new<br />
sources of growth in the agriculture<br />
sector, manufacturing and services<br />
sectors as well as broadening the<br />
knowledge-based economy. This is<br />
vital since different sectors of the<br />
economy are operating at different<br />
levels of efficiency.<br />
◦◦<br />
More efforts need to be undertaken<br />
to mobilise and allocate resources<br />
more effectively and efficiently<br />
to attain a higher growth through<br />
productivity driven investments<br />
and greater application of ICT in all<br />
sectors of the economy.<br />
Strengthening technological<br />
capabilities<br />
◦◦<br />
The efficient application of more<br />
fixed capital per person employed<br />
will tend to be TFP enhancing.<br />
Moreover, accelerating the pace of<br />
capital investment would allow the<br />
substitution of capital for labour,<br />
a useful outcome in an economy<br />
facing shortages of workforce.<br />
Capital deepening involved more<br />
resources being invested in<br />
physical assets such as advanced<br />
technology, plant and machinery<br />
that are available for workers to<br />
work with.<br />
◦◦<br />
Investment in modern machinery<br />
and equipment will increase<br />
the technological capabilities<br />
and productive capacity of the<br />
economy. Greater efforts need<br />
to be undertaken to develop<br />
technological capabilities to<br />
take advantage of new trends in<br />
technology, and application of ICT<br />
and capital-intensive processes<br />
to produce higher value added<br />
products.<br />
Increasing the technical progress<br />
◦ ◦ Technical progress will enable the<br />
economy to shift to a higher value<br />
chain. This can come about through<br />
continuous R&D and innovation<br />
activities, increase utilisation of<br />
technology and ICT, and upgrade<br />
skilled and management capabilities<br />
in all sectors of the economy. Thus,<br />
greater efforts need to be channelled<br />
towards R&D activities, specifically<br />
among local companies. Innovative<br />
capabilities drive productivity to<br />
grow between 1%-2% higher than<br />
that experienced by economies that<br />
are significantly less innovative.<br />
30<br />
PRODUCTIVITY REPORT 2009
2009<br />
Box 2.2: Enhancing Organisational Capability through ICC<br />
<strong>MPC</strong> conducted ICC Convention in three phases namely, Mini Convention, Regional<br />
Convention and National Convention.<br />
Mini ICC Convention<br />
CHAPTER 1 2<br />
Mini ICC Convention are introduced to encourage the establishment of new circles<br />
and organised at three regions namely, Central, Southern and Northern.<br />
Central<br />
Mini ICC<br />
Convention<br />
Northern<br />
Southern<br />
For the period of 2005 to 2009, 1,698 participants have registered in mini ICC and 275<br />
circles were established from 217 participating organisations. The projects carried out<br />
by the circles had generated RM50.45 million in cost savings.<br />
2005 – 2009<br />
Participants 1698<br />
Circles 275<br />
Organisations 217<br />
Savings<br />
RM50.45 million<br />
Regional ICC Convention<br />
Regional ICC Convention is conducted yearly to promote the innovative and creativity<br />
culture among participating companies in five main selected regions namely Central,<br />
Southern, Northern, East Coast and Sabah/Sarawak. Qualified circles from each<br />
region will be selected to participate and present their innovative and creative projects<br />
in the National ICC Convention.<br />
PRODUCTIVITY REPORT 2009 31
2009<br />
CHAPTER 1 2<br />
Southern<br />
Central<br />
NATIONAL<br />
ICC CONVENTION<br />
Northern<br />
Sabah/Sarawak<br />
East Coast<br />
A total of RM471.75 million in cost savings was recorded with the participation of<br />
8,166 participants from 1,164 circles in 679 organisations during the Regional ICC<br />
Convention from 2005 to 2009. The winning circles from the respective regional<br />
conventions were invited to participate in the National ICC Convention.<br />
2005 – 2009<br />
Participants 8,166<br />
Circles 1,164<br />
Organisations 679<br />
Savings<br />
RM471.75 million<br />
National ICC Convention<br />
National ICC Convention provides a platform for qualified circles to share excellent<br />
practices in solving problems and carrying out improvement activities at their respective<br />
workplace. From 2005 to 2009, a total of RM367.51 million in savings was recorded<br />
from the National ICC Convention.<br />
2005 – 2009<br />
Participants 5,273<br />
Circles 709<br />
Organisations 398<br />
Savings<br />
RM367.51 million<br />
32<br />
PRODUCTIVITY REPORT 2009
2009<br />
Impact of ICC<br />
Overall<br />
• Enhance efficiency in work operations.<br />
• A way of looking at cost inherent in preventing, appraising, reducing and resolving<br />
failure.<br />
• Allow employees to become more involved by solving their own problems in an<br />
organised and systematic way.<br />
• Inculcate a creative and innovative culture among employees.<br />
CHAPTER 1 2<br />
Employees<br />
• Gain knowledge on ICC concepts and tools.<br />
• Gain technical and engineering knowledge.<br />
• Nurtured teamwork.<br />
• Participation in idea generations.<br />
• More personal commitment.<br />
• Enhance working relationship within the organisation.<br />
• Develop external networking to exchange ideas and knowledge.<br />
• Greater involvement in problem solving.<br />
• Inculcate breakthrough in product innovation.<br />
• Be more creative and innovative.<br />
• Improve employees’ motivation.<br />
• Employee gains reward and recognition from colleagues, supervisor and<br />
management.<br />
Organisations<br />
• Generate higher revenue due to product and process innovations.<br />
• Reduce operation costs due to improvement in work processes.<br />
• Promote environmental and social responsibility.<br />
• Improve organisation image.<br />
• Produce products and services that meet requirements and expectations of both<br />
internal and external customers.<br />
PRODUCTIVITY REPORT 2009 33
PART 2<br />
Strengthening the<br />
Economic Sectors
CHAPTER 3<br />
Productivity Performance of<br />
the Services Sector
PRODUCTIVITY PERFORMANCE OF THE SERVICES SECTOR<br />
<strong>Overview</strong><br />
• Services sector is the major contributor<br />
to the economy, contributing 49.7%<br />
to GDP in 2009. Among the major<br />
contributors to services sector's output<br />
are finance, trade and transport which<br />
contributed 17.0%, 15.7% and 8.0%<br />
respectively (Figure 3.1).<br />
Figure 3.1: Contribution of Services<br />
Sector to GDP<br />
• The development of services sector<br />
was supported by the liberalisation<br />
of 27 services sub-sectors. This<br />
initiative was taken to enhance service<br />
delivery, increase productivity and<br />
competitiveness of the nation.<br />
• In 2009, the services sector's output<br />
grew by 2.5% compared to a contraction<br />
of 6.7% in 2008. The growth was<br />
mainly supported by strong domestic<br />
consumption, expansion in finance and<br />
insurance sub-sectors especially in<br />
Islamic finance as well as increase in<br />
business and tourism activities. Finance<br />
sub-sector registered an output growth<br />
of 3.7%, followed by transport (1.6%)<br />
and trade (1.4%) (Figure 3.2).<br />
Computed from:<br />
- Economic Reports, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
Figure 3.2: Output Growth of Services Sector<br />
Computed from:<br />
- Economic Reports, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
38<br />
PRODUCTIVITY REPORT 2009
2009<br />
Productivity Performance<br />
• The services sector registered a<br />
productivity growth of 1.7% to RM57,090<br />
in 2009 (Figure 3.3 and Figure 3.4). The<br />
growth would be higher if not for global<br />
economic slowdown that impeded the<br />
projected productivity growth.<br />
Figure 3.3: Productivity Level<br />
CHAPTER 3<br />
• Finance sub-sector recorded a<br />
productivity growth of 3.2% to<br />
RM128,280. Expansion of consumer<br />
credit activities, efficiency measures<br />
and creative financial products had<br />
contributed to improve performance.<br />
• Trade sub-sector achieved a<br />
productivity level of RM40,360 in<br />
2009, attaining a slight growth of<br />
0.8%. The accommodation and<br />
restaurant business benefited from<br />
increased arrival of tourists. There<br />
was less contribution from the<br />
distributive trade and sale of motor<br />
vehicles.<br />
Computed from:<br />
- Economic Reports, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
Figure 3.4: Productivity Growth<br />
• Transport sub-sector recorded a<br />
productivity growth of 1.3% to<br />
RM71,510 in 2009. The sub-sector<br />
recovered in the third quarter of 2009<br />
from a slower demand of cargo activities<br />
in the previous quarters as a result<br />
of slower pace in international trade.<br />
Productivity of communication industry<br />
has shown positive performance due to<br />
better product offerings such as cellular,<br />
broadband and third generation (3G)<br />
services.<br />
Computed from:<br />
- Economic Reports, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
PRODUCTIVITY REPORT 2009 39
2009<br />
CHAPTER 3<br />
International Productivity<br />
Comparison of Selected Services<br />
Sub-sectors<br />
• In 2009, Malaysia’s services sector<br />
performed better than services sector<br />
of Singapore, Hong Kong and Republic<br />
of Korea. Malaysia’s services sector<br />
recorded 1.1% productivity growth as<br />
compared with Singapore, Hong Kong<br />
and Republic of Korea which registered<br />
contraction at 4.8%, 2.4% and 0.6%<br />
respectively.<br />
Table 3.1: Productivity Growth in the Services Sector<br />
for Selected Asian Countries, 2009<br />
Country<br />
Malaysia<br />
Singapore<br />
Hong Kong<br />
Republic of Korea<br />
Indonesia<br />
Growth (%)<br />
1.13<br />
-4.82<br />
-2.36<br />
-0.60<br />
5.82<br />
Computed from:<br />
- Economic Reports, Ministry of Finance, Malaysia<br />
- Economic Survey of Singapore, Ministry of Manpower, Singapore<br />
- Hong Kong in Figures, 2010 Edition, Census and Statistics Department<br />
of Hong Kong.<br />
- Asian Development Bank<br />
- Statistics Department of Indonesia<br />
• The better performance of the services<br />
sector in Malaysia was contributed by<br />
effective Government policies such as<br />
introduction of stimulus packages which<br />
has resulted an increased in domestic<br />
demand.<br />
Total Factor Productivity<br />
• During the period 2000-2009, the<br />
services sector registered a TFP growth<br />
of 1.7%. The contribution of TFP growth<br />
to the services sector output was<br />
26.5% while contributions from labour<br />
and capital were 37.5% and 36.0%<br />
respectively (Table 3.2).<br />
• Within the services sector, trade subsector<br />
recorded the highest TFP<br />
growth of 3.1%, contributing 51.5%<br />
to output growth. The contributions<br />
from labour and capital were 33.9%<br />
and 14.7% respectively. The high<br />
TFP growth was attributed to factors<br />
such as innovative marketing strategy,<br />
upgrading business transaction based<br />
on real-time information and also<br />
competitive business environment from<br />
the participation of foreign investors in<br />
local trade activities (Figure 3.5).<br />
Table 3.2: TFP Growth and Contribution<br />
(2000-2009)<br />
Services Sub-<br />
Sector<br />
Services<br />
Trade<br />
Finance<br />
Transport<br />
Utilities<br />
TFP<br />
Growth<br />
(%)<br />
1.65<br />
3.14<br />
3.09<br />
2.12<br />
0.67<br />
Contribution to Output<br />
TFP<br />
(%)<br />
26.50<br />
51.47<br />
40.36<br />
34.06<br />
16.46<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
Growth<br />
Capital<br />
(%)<br />
36.04<br />
14.65<br />
29.94<br />
31.63<br />
40.32<br />
Labour<br />
(%)<br />
37.46<br />
33.88<br />
29.69<br />
34.31<br />
43.21<br />
Figure 3.5: Contribution to Output Growth for<br />
Trade Sub-Sector<br />
TFP Capital Labour<br />
33.88%<br />
14.65%<br />
51.47%<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
40<br />
PRODUCTIVITY REPORT 2009
2009<br />
• As for the finance sub-sector, TFP<br />
grew by 3.1% and contributed 40.4%<br />
to output growth. The contribution from<br />
labour and capital were 29.7% and<br />
29.9% respectively. The growth in TFP<br />
was attributed to efficient consumer<br />
credit activities, innovative new range of<br />
products and services such as Islamic<br />
financing (Figure 3.6).<br />
Figure 3.6: Contribution to Output Growth for<br />
Finance Sub-Sector<br />
TFP Capital Labour<br />
29.69%<br />
29.94%<br />
40.36%<br />
CHAPTER 3<br />
• Transport sub-sector recorded TFP<br />
growth of 2.1% and contributed<br />
34.1% to output growth. Labour and<br />
capital contributed 34.3% and 31.6%<br />
respectively. The TFP growth was due<br />
to the competitive and value added<br />
services offered, modernisation of<br />
transport equipments and facilities<br />
(Figure 3.7).<br />
• Utilities sub-sector registered a TFP<br />
growth of 0.7% and contributed 16.5%<br />
to output growth while labour and<br />
capital contributed at 43.2% and 40.3%<br />
respectively. The improvement in TFP<br />
growth was due to factors such as<br />
better strategic planning and managing<br />
of energy resources, restructuring<br />
programme for the water supply industry<br />
undertaken to ensure sustainability and<br />
efficiency of the water supply, as well as<br />
continuous investment in human capital<br />
through learning and training (Figure 3.8).<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
Figure 3.7: Contribution to Output Growth for<br />
Transport Sub-Sector<br />
TFP Capital Labour<br />
34.31%<br />
31.63%<br />
34.06%<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
Figure 3.8: Contribution to Output Growth for<br />
Utilities Sub-Sector<br />
TFP Capital Labour<br />
16.46%<br />
43.21%<br />
40.32%<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
PRODUCTIVITY REPORT 2009 41
2009<br />
CHAPTER 3<br />
Transport Industry<br />
• In 2009, productivity of the sector grew<br />
by 0.9% to RM71,266. The industry was<br />
recovering towards the third quarter of<br />
the year.<br />
Figure 3.9: Productivity Level of<br />
Transport Industry<br />
• Major ports possesed competitive<br />
advantage in price, strong logistics<br />
infrastructure and free zone land.<br />
In addition, port authorities together<br />
with industry players harnessed their<br />
resources to ensure higher productivity<br />
of terminal operation. Furthermore,<br />
efficient supporting industry such as<br />
forwarding agents, road haulage and<br />
shipping agents also contributed to the<br />
productivity of the industry.<br />
• Among the initiatives to increase<br />
the number of passenger and cargo<br />
carried, airlines offered attractive<br />
travel packages such as abolishing<br />
administration fees and fuel surcharge;<br />
discounts for group/family traveling;<br />
and terminal charges rebate for cargo<br />
transshipped. Land transport such<br />
as rail and road have upgraded their<br />
services using online system and<br />
improved operation efficiency on<br />
vehicle turnaround time.<br />
Distributive Trade Industry<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
Figure 3.10: Productivity Growth of<br />
Transport Industry<br />
4.03<br />
4.07<br />
5.66<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
4.51<br />
0.93<br />
• Distributive trade involves all related<br />
activities in the transfer of goods and<br />
services through the supply chain. It<br />
comprises wholesale, retail and motor<br />
vehicle trade. The industry assumes<br />
an important role in providing linkages<br />
for the growth of the services sector<br />
as dynamics within this industry have<br />
generated new activities and services<br />
to support supply chain activities,<br />
greater networking and outsourcing<br />
opportunities.<br />
42<br />
PRODUCTIVITY REPORT 2009
2009<br />
Productivity of Distributive Trade<br />
Industry<br />
◦◦<br />
The distributive trade industry<br />
registered contraction in productivity<br />
growth at 2.8% in 2009 to<br />
RM738,970. The productivity of<br />
distributive trade sector was<br />
impacted by low capacity utilisation<br />
due to weak economic performance,<br />
lack of major promotions as a result<br />
of sluggish world demand, slower<br />
private investment and price wars<br />
(Figure 3.11 and Figure 3.12).<br />
Figure 3.11: Productivity of Distributive<br />
Trade Industry<br />
CHAPTER 3<br />
Labour Cost Competitiveness<br />
◦◦<br />
Labour cost competitiveness of<br />
the distributive trade industry<br />
was affected by the declined in<br />
productivity growth of 2.8% which<br />
was lower than growth in the labour<br />
cost per employee that grew by<br />
3.5%; resulting in unit labour cost<br />
to grow by 0.2%. The decline of<br />
labour cost competitiveness was<br />
due to the high cost of retaining<br />
employee while the performance of<br />
the sector was affected by economic<br />
slowdown (Figure 3.12).<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
Figure 3.12: Growth of Labour Cost<br />
Competitiveness of Distributive Trade Industry<br />
Hotel Industry<br />
• Malaysia has emerged as the fourth<br />
most price competitive country in<br />
the world in the travel and tourism<br />
industry. Based on the Travel and<br />
Tourism Competitiveness Report 2009<br />
published by the World Economic<br />
Forum (WEF), Malaysia ranked 23 rd<br />
out off 133 countries. The good ranking<br />
was attributed to quality infrastructure,<br />
good market efficiency, financial<br />
market sophistications, strong business<br />
sophistications and innovative potential.<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
• The tourism industry in Malaysia,<br />
like the rest of the world has also<br />
been affected by the global economic<br />
slowdown and the outbreak of influenza<br />
A (H1N1). Despite this, Malaysia has<br />
attracted a total of 23.6 million tourists<br />
and has generated tourist receipts of<br />
RM53 billion in 2009.<br />
PRODUCTIVITY REPORT 2009 43
2009<br />
CHAPTER 3<br />
Productivity of the Hotel Industry<br />
◦◦<br />
The hotel industry registered a<br />
productivity growth of 2.5% to<br />
RM50,754 in 2009. The increase<br />
in productivity was due to attractive<br />
room rates and innovative travel<br />
packages introduced by the airlines.<br />
(Figure 3.13 and Figure 3.14).<br />
Figure 3.13: Productivity of the Hotel Industry<br />
Labour Cost Competitiveness<br />
◦◦<br />
The hotel industry continued<br />
to strengthen its labour cost<br />
competitiveness in 2009 as<br />
reflected by a decline in unit<br />
labour cost of 0.9%. Labour cost<br />
competitiveness of the hotel industry<br />
improved with higher productivity<br />
growth of 2.5% as compared with<br />
labour cost per employee that grew<br />
by 1.6%.<br />
Information and Communications<br />
Technology (ICT) Industry<br />
• ICT services industry includes the<br />
computer and telecommunications<br />
services industry. Computer and<br />
telecommunications goods and services<br />
enable information processing and<br />
electronic communications. Computer<br />
services industry includes hardware<br />
consultancy, software consultancy<br />
and supply, data processing services,<br />
database activities, maintenance and<br />
repair, and other computer related<br />
services, while telecommunications<br />
services industry covers telephone<br />
services, broadcasting, internet<br />
services and paging services.<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
Figure 3.14: Growth of Labour Cost<br />
Competitiveness of the Hotel Industry<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
44<br />
PRODUCTIVITY REPORT 2009
2009<br />
Productivity Performance of the ICT<br />
Industry<br />
◦◦<br />
The productivity of the ICT industry<br />
registered a growth of 7.2%<br />
in 2009. The telecommunications<br />
services industry recorded a higher<br />
growth of 13.1% as compared with<br />
the computer services industry that<br />
grew by 0.5% (Figure 3.15).<br />
◦◦<br />
The significant growth of<br />
telecommunications services was<br />
attributed to high efficiency in<br />
business process through investment<br />
in telecommunications facilities.<br />
Labour Cost Competitiveness<br />
◦◦<br />
Labour cost competitiveness of ICT<br />
industry improved as shown by high<br />
productivity growth of 7.2% which<br />
was higher than growth of labour<br />
cost per employee of 1.2%, resulting<br />
in unit labour cost to decline by<br />
7.2%. The ICT industry succeeded<br />
in maintaining the labour cost<br />
competitiveness through skilled<br />
workforce and intensification of<br />
technologies adoption to enhance<br />
business operation (Figure 3.16<br />
and Figure 3.17).<br />
Figure 3.15: Productivity Growth of the<br />
ICT Industry<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
Figure 3.16: Growth of Labour Cost per<br />
Employee of the ICT Industry<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
Figure 3.17: Growth of Unit Labour Cost per<br />
Employee of the ICT Industry<br />
CHAPTER 3<br />
Computed from:<br />
- Department of Statistics, Malaysia<br />
PRODUCTIVITY REPORT 2009 45
2009<br />
CHAPTER 3<br />
Box 3.1: Measuring Performance of Power Producers<br />
In line with the objective of the Government to increase the efficiency of power<br />
producers, several elements of performance encompassing factors such as reliability,<br />
reducing energy cost, minimising wastage and improving productivity and profitability<br />
were measured. The measurement of these factors were undertaken through<br />
benchmarking study for power producers. This study focused on 5 areas namely<br />
productivity, technical performance, safety, environmental impact and human resource<br />
of the participating power plants and the data collected is for the year 2008. The power<br />
producers were divided into 5 clusters comprised of Combined Cycle Gas Turbine<br />
(CCGT), Cogeneration (Cogen), Open Cycle, Coal and Hydro. This study enables the<br />
power producers to benchmark their performance with others and to identify “best in<br />
class” performance standards within the groups.<br />
Technical Performance Indicators 2009<br />
Indicators *CCGT Open Cycle Coal Cogen & Hydro<br />
Total Auxiliary Consumption (%) 1.80 2.46 5.90 1.98<br />
Plant Capacity Factor 1 (%) 71.33 37.49 53.76 49.7<br />
Plant Capacity Factor 2 (%) 76.63 23.78 55.91 55.31<br />
Thermal Efficiency (%) 47.85 25.02 34.86 62.87<br />
Forced Outage Rate (%) 1.96 4.36 4.01 3.63<br />
Availability 91.13 92.79 90.73 89.5<br />
Availability (Average) 5 years 18.04 18.05 16.53 17.22<br />
*CCGT - Combined Cycle Gas Turbine<br />
A total of 16 power plants took part in this benchmarking study. The consistent<br />
performance of CCGT power plants was due to the installation of gas turbine that<br />
resulted in the efficiency of electricity generation.<br />
46<br />
PRODUCTIVITY REPORT 2009
2009<br />
Environmental Impact Indicators 2009<br />
Indicators *CCGT Open Cycle Coal Cogen & Hydro<br />
Plant NOx Emission (ppm) 27.5 288.5 142 85.65<br />
Plant SO2 Emission (ppm) 0.13 15.67 120 0.65<br />
CHAPTER 3<br />
*CCGT - Combined Cycle Gas Turbine<br />
Likewise, plants operating as CCGT are less polluting and these plants emit the<br />
lowest level of nitrogen oxide (NOx) and sulphur dioxide (SO2) registering 27.5 and<br />
0.1 respectively.<br />
It was found that the overall performance of the power plants are basically affected by<br />
the size of licensed capacity of the plant, age of the plant and most importantly is type<br />
of technology used in generating the electricity.<br />
Box 3.2: Positioning SMEs Up the Value Chain through<br />
e-Commerce Adoption<br />
The development of a competitive, innovative and technologically strong Small<br />
and Medium Enterprises (SMEs) sector is pertinent for the growth of the domestic<br />
economy to compete in international markets and moving up the value chain. This can<br />
be achieved through the adoption of ICT and e-commerce application as consumers<br />
and businesses are relying more on internet-based business portals to source for<br />
various products and services.<br />
In this respect, <strong>MPC</strong> had undertaken a study on the "Impact of e-Commerce Adoption<br />
among SMEs" conducted in 2009 with the objectives to determine the extent of usage<br />
and the impact of e-commerce adoption among SMEs in Malaysia. Respondent profile<br />
was 52.1% from the manufacturing and 47.9% from services accounts. The study<br />
found that the highest impact of e-commerce adoption perceived by the respondents<br />
has enhanced company brand and corporate image.<br />
PRODUCTIVITY REPORT 2009 47
2009<br />
CHAPTER 3<br />
Stages of e-Commerce Adoption among SMEs<br />
14.3% at<br />
Enterprise<br />
Integration<br />
14.6% at<br />
Transaction<br />
Integration<br />
18.7% at<br />
Portal Stage<br />
52.5% at<br />
Presence Stage<br />
At the base of the pyramid above, half of the companies which embraced e-commerce<br />
were in the presence stage of e-commerce adoption with 52.5% and they are limited<br />
to perform only one-way communication to any potential user. In this stage, the<br />
e-commerce is used mostly to provide information on company’s products and services,<br />
contact information and other relevant information regarding their businesses through<br />
company's website.<br />
Moving up the pyramid is the portal stage consists of 18.7% respondents who are<br />
able to conduct two-way communication between businesses, customers or with<br />
other businesses. Interactions in terms of feedback form, product / service rating and<br />
shopping cart are widely used in this stage.<br />
The transaction integration stage and enterprise integration stage are different from<br />
the previous stages mainly by the presence of financial transactions between partners<br />
and high level of integration between customers and suppliers. Companies in these<br />
two stages are able to see the impact of e-commerce adoption particularly in terms of<br />
profitability. Around 14.6% and 14.3% of SMEs with e-commerce in this study claimed<br />
to be in the transaction integration stage and enterprise integration stage respectively.<br />
It is imperative for companies in stage 1 and 2 (Presence and Portal stage) of<br />
e-commerce adoption to move upwards into stage 3 (Transaction integration stage)<br />
and stage 4 (Enterprise integration stage). However, the transformation to a higher<br />
stage will pose several challenges to SMEs as it involves new operating environment<br />
of the firm, high investment is required and availability of ICT trained employees should<br />
be taken into consideration.<br />
48<br />
PRODUCTIVITY REPORT 2009
2009<br />
Box 3.3: A Study on Productivity of the Accounting Firms<br />
The Malaysia Productivity Corporation (<strong>MPC</strong>) has undertaken a study on Productivity<br />
of the Accounting Firms in 2009. The study analysed the financial performance, work<br />
practices, management trends and improvement strategies of 15 accounting firms.<br />
The firms ranged in size from sole practitioner firms to large second-tier multi partner<br />
firms located in Klang Valley.<br />
CHAPTER 3<br />
It was found that in terms of revenue generated by the firm, the highest turnover<br />
was RM1.63 million with the lowest was RM299,057. Firms with a profit margin of<br />
91% were mainly involved in the offering of tax investigation and other consultancy<br />
services whereas the profit margin of 11% came from firms concentrating on audit and<br />
assurance services. It was also proven that firms with profit margin of 30% and above<br />
were very much in the forefront of the industry offering consultancy services, either in<br />
the area of tax or other business consultancy.<br />
On the hours charged per accountant per annum, there was a huge range of diversity<br />
from 20,160 hours per annum to only 73 hours per annum which worked out to be only<br />
10 hours per month. It might indicate that the firm had such an effective supervisory<br />
system in place that the partner only went to the office for 10 hours a month and still<br />
made a decent operational profit.<br />
The percentage of bad debt written off ranged from 0% to 3.5% for the year 2007.<br />
However, the median of 0.5% was not something that the industry should be concerned.<br />
In any event, those with a higher bad debt ratio should consider interim billings to<br />
further lower down the bad debt experience.<br />
In the area of debtor’s turnover, the best result achieved was only 16 days as opposed<br />
to those that took an average of 99 days or about three months from the date of billings<br />
with the worst result being 198 days or more than 6 months from the date of billings.<br />
On the charge rate multiple, the firm recorded a rate between 1.91 to 92.5 with a median<br />
of about 4 times the remuneration (including EPF) paid. Based on our understanding<br />
of those offering auditing and assurance services, it was quite acceptable that for<br />
every RM1 paid out as salary plus EPF, the staff / accountant should help to generate<br />
for the firm about 4 times the net revenue.<br />
PRODUCTIVITY REPORT 2009 49
2009<br />
CHAPTER 3<br />
The following table is an overall summary of the main financial data<br />
Area of focus Lower Median Upper CoP<br />
quartile result quartile Benchmark<br />
Revenue per partner (RM) 441,111 838,072 1,142,321 1,627,000<br />
Revenue per full time 70,130 88,360 103,723 228,667<br />
employee (RM)<br />
Revenue per producer who 82,996 106,594 136,884 228,667<br />
is full time employee (RM)<br />
Profit before partners’ salaries 159,584 356,720 834,781 1,475,967<br />
& incentives (RM)<br />
Area of focus Lower Median Upper CoP<br />
quartile result quartile Benchmark<br />
Profit (before partners’ salaries 98,647 127,497 181,444 662,140<br />
& incentives) per partner (RM)<br />
Profit margin of firm (%) 0.25 0.33 0.48 0.91<br />
Leverage (people : partner) 5 11 14 30<br />
Hours charge per partner 776 1,040 1,600 20,160<br />
Percentage of bad debts 1.80 0.50 0.00 0.00<br />
written off per annum<br />
Debtors turnover days 123 99 55 16<br />
Charge rate multiple 2.28 4.07 8.97 92.50<br />
Producer retention ratio 0.30 0.50 3.40 7.70<br />
Percentage of staff turnover 40.00 20.00 13.00 0.00<br />
Cost of training per full time 1,076 875 566 231<br />
employee (RM)<br />
Cost of training per 1,368 1,053 875 231<br />
producer (RM)<br />
Ratio of training expenses 1.54 0.99 0.47 0.13<br />
to revenue<br />
Average monthly remuneration 425 875 1,200 1,736<br />
for fresh graduate audit<br />
assistant (RM)<br />
50<br />
PRODUCTIVITY REPORT 2009
2009<br />
Outlook for 2010<br />
• The services sector is expected to<br />
accelerate its productivity growth<br />
in 2010 in tandem with the global<br />
economic recovery. Among the services<br />
sectors that are given emphasis in New<br />
Economic Model (NEM) are tourism,<br />
logistics, education, energy and<br />
finance. Medical tourism, ecotourism<br />
and education are potential industries<br />
for greater expansion through domestic<br />
and regional partnership.<br />
• The tourism industry is expected to<br />
improve its productivity performance<br />
in 2010 with better air transport<br />
connectivity, innovative and attractive<br />
tourism packages and more tourism<br />
attractions such as the World Heritage<br />
sites.<br />
• Logistics industry should leverage<br />
on quality roads, ports and ICT<br />
infrastructure. The transport sub-sector<br />
is expected to experience further<br />
productivity growth benefiting from<br />
capacity expansion of air transport<br />
infrastructure and integrated transport<br />
services through enhanced land<br />
transportation services.<br />
• The ICT industry should embrace<br />
globalisation as there are huge<br />
opportunities for them to expand<br />
globally. In the local scenario, industries<br />
particularly small and medium sized<br />
industries are expected to spend on<br />
new hardware, broadband facility and<br />
cloud computing capabilities to reduce<br />
their operating cost and increase<br />
competitiveness of the industry. The<br />
introduction of high-speed-broadband<br />
(HSBB) network which aims to increase<br />
broadband and personal computer<br />
penetration in the country and the<br />
increasing demand of creative and<br />
digital content will drive the growth of<br />
the ICT industry.<br />
• The introduction of NEM is timely to<br />
accelerate higher productivity growth<br />
in services sector supported by the<br />
implementation of various initiatives by<br />
service providers. The services sector is<br />
poised to register a positive productivity<br />
growth of more than 4.1% in 2010.<br />
CHAPTER 3<br />
• The performance of utility sector can<br />
be further enhanced by alternative<br />
energy generation as well as energy<br />
saving services. This is in line with the<br />
quest for environmental sustainability<br />
and also to promote green productivity<br />
initiatives in the country.<br />
PRODUCTIVITY REPORT 2009 51
CHAPTER 4<br />
Productivity Performance of<br />
the Manufacturing Sector<br />
PRODUCTIVITY REPORT 2009 53
PRODUCTIVITY PERFORMANCE OF THE MANUFACTURING SECTOR<br />
<strong>Overview</strong><br />
• The manufacturing sector recorded<br />
a lower GDP growth of 9.3% in 2009<br />
while its manufacturing index grew<br />
marginally at 0.9%. Total trade for<br />
2009 was RM770.6 billion while export<br />
declined by 11.4% to RM411.4 billion.<br />
• Major export products were electrical<br />
& electronic products, chemicals<br />
& chemical products, machinery,<br />
appliances and parts and metal<br />
products. Electrical & electronic<br />
products remained as Malaysia’s<br />
leading export earner valued RM227.8<br />
billion or 41.2% of total export.<br />
• Total import of the sector declined by<br />
14.4% to RM359.2 billion. This was<br />
contributed mainly by lower imports of<br />
intermediate goods at 68.6%, capital<br />
goods at 15.1% and consumption<br />
goods at 7.2%.<br />
• Major import products were electrical<br />
& electronic products, chemicals<br />
& chemical products, machinery,<br />
appliances & parts, transport equipment<br />
and manufactures of metal. Total<br />
investment made amounted to RM32.6<br />
billion in 2009. The biggest investment<br />
was contributed by chemicals &<br />
chemical products (RM8.4 billion),<br />
followed by non-metallic mineral<br />
products (RM6.4 billion) and electrical<br />
& electronic products (RM4.7 billion).<br />
• Employment in the manufacturing<br />
sector increased by 2.2% to 1,363,801<br />
workers. The electrical & electronic<br />
industry remained as the largest<br />
employer contributing to 32.8% or<br />
453,495 workers of total manufacturing<br />
employment in 2009.<br />
• Added value in the manufacturing<br />
sector registered a negative growth of<br />
4.3% to RM110.0 billion (Figure 4.1)<br />
as compared with RM114.9 billion in<br />
2008. The drop in added value was<br />
largely due to decline in chemicals &<br />
chemical products of 18.1%, iron &<br />
steel of 13.2% and transport equipment<br />
of 6.9%.<br />
• However, fabricated metal products,<br />
wood & wood products, textiles &<br />
apparel and E&E industries registered<br />
a growth of 3.2%, 2.6%, 1.6% and<br />
0.01% respectively.<br />
Figure 4.1: Added Value Growth of the<br />
Manufacturing Sector, 2009<br />
-18.12<br />
-13.19<br />
-6.86<br />
-5.29<br />
-3.83<br />
-3.84<br />
-4.28<br />
-2.87<br />
Source: Malaysia Productivity Corporation (<strong>MPC</strong>).<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
-0.21<br />
0<br />
0.01<br />
1.59<br />
3.20<br />
2.57<br />
54<br />
PRODUCTIVITY REPORT 2009
2009<br />
• In terms of contribution, electrical &<br />
electronic products remained the largest<br />
contributor to added value, accounting<br />
for 41.1% of total manufacturing added<br />
value in 2009. The chemicals and<br />
chemical products was the second<br />
largest contributor accounting for<br />
12.0% followed by food & beverages of<br />
8.2% and transport equipment of 5.1%<br />
(Figure 4.2).<br />
Figure 4.2: Contribution of Industries to Total<br />
Manufacturing Sector’s Added Value, 2009<br />
5.08<br />
4.19<br />
3.45<br />
2.83<br />
2.77<br />
2.57<br />
2.45<br />
8.15<br />
11.97<br />
41.14<br />
CHAPTER 4<br />
• Both domestic and export oriented<br />
industries recorded lower added value<br />
growth in 2009 as compared with 2008.<br />
Slower product demand was due to the<br />
current global economic slowdown, rise<br />
in fuel price and raw materials which<br />
had affected the overall performance of<br />
manufacturing sector in 2009.<br />
0<br />
2.29<br />
1.21<br />
Source: Malaysia Productivity Corporation (<strong>MPC</strong>)<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
Productivity Performance of the<br />
Manufacturing Sector, 2009<br />
• In 2009, the manufacturing sector<br />
productivity declined by 6.3% which<br />
was very much affected by the global<br />
economic slowdown. However, wood<br />
& wood products, textiles and apparel<br />
and fabricated metal were the most<br />
productive industries due to their<br />
continuously upgrading of services<br />
as well as adoption of efficient work<br />
processes (Figure 4.3).<br />
• The improvement in the domestic<br />
industries namely, fabricated metal<br />
products and wood and wood products<br />
were due to strong demand from the<br />
domestic construction related activities.<br />
Figure 4.3: Productivity Growth of Manufacturing<br />
Industry, 2009<br />
-20.24<br />
-15.91<br />
-9.28<br />
-5.54<br />
-5.61<br />
-6.31<br />
-6.65<br />
-3.10<br />
-3.93<br />
Source: Malaysia Productivity Corporation (<strong>MPC</strong>)<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
-0.52<br />
0<br />
0.60<br />
2.92<br />
2.62<br />
PRODUCTIVITY REPORT 2009 55
2009<br />
CHAPTER 4<br />
• The chemicals & chemical products, iron<br />
& steel industries, transport equipment<br />
and plastics product industries<br />
registered a decline in productivity,<br />
below the manufacturing average.<br />
The chemicals & chemical products<br />
and iron & steel industries recorded a<br />
sharp decline in productivity of 20.2%<br />
and 15.9% respectively (Figure 4.3).<br />
However, in term of value, chemicals<br />
and chemical products and iron &<br />
steel recorded the value of RM249.2<br />
billion and RM147.0 billion respectively<br />
which surpassed the manufacturing<br />
average value of RM80.7 billion<br />
(Figure 4.4).<br />
• The manufacturing sector experienced<br />
a deterioration in its labour cost<br />
competitiveness as unit labour cost<br />
grew by 0.3%. It was further reflected by<br />
an increase of 1.8% in labour cost per<br />
employee which did not commensurate<br />
with a decline of 6.3% in productivity<br />
(Figure 4.5).<br />
Figure 4.4: Productivity Level of Manufacturing<br />
Industry, 2009<br />
Source: Malaysia Productivity Corporation (<strong>MPC</strong>)<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
Figure 4.5: Changes in Unit Labour Cost of the<br />
Manufacturing Industries, 2009<br />
-3.41<br />
33.73<br />
29.17<br />
26.88<br />
51.88<br />
99.81<br />
91.23<br />
82.42<br />
80.67<br />
76.13<br />
74.56<br />
73.15<br />
-0.78<br />
-0.36<br />
-0.10<br />
-0.01<br />
147.04<br />
0.28<br />
0.33<br />
0.61<br />
0.81<br />
1.18<br />
1.18<br />
2.80<br />
249.20<br />
4.01<br />
• However, wood & wood products,<br />
textiles and apparel and fabricated<br />
metal industries were able to sustain<br />
their labour cost competitiveness<br />
(Table 4.1).<br />
• Labour compensation as measured<br />
by labour cost per employee (LCE) in<br />
the manufacturing sector increased<br />
by 1.8%, higher than the previous<br />
year. Industries which recorded higher<br />
compensation above the manufacturing<br />
average were rubber and rubber<br />
products, chemicals and chemical<br />
products and iron & steel (Figure 4.6).<br />
Source: Malaysia Productivity Corporation (<strong>MPC</strong>)<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
Figure 4.6: Growth in Labour Cost per Employee of<br />
the Manufacturing Industries, 2009<br />
0<br />
0<br />
Source: Malaysia Productivity Corporation (<strong>MPC</strong>)<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
56<br />
PRODUCTIVITY REPORT 2009
2009<br />
International Comparison<br />
• Malaysian manufacturing sector<br />
recorded the highest productivity<br />
growth of 6.3% in 2008 among selected<br />
countries. Among the developed<br />
economies, the Republic of Korea,<br />
United States, Norway, Belgium and<br />
United Kingdom registered an increase<br />
in productivity ranging from 0.3% to<br />
1.2%. Productivity decreased in 12<br />
of the 18 economies with Singapore<br />
recording the highest productivity<br />
decline of 6.6%, followed by Denmark<br />
at 4.5% (Figure 4.7).<br />
• Malaysia was the only economy<br />
capable of sustaining its labour cost<br />
competitiveness as unit labour cost<br />
decreased by 4.7%. Other economies<br />
experienced a reduction in unit labour<br />
cost ranging from 0.8% to 8.3%. The<br />
highest unit labour cost of 8.3% was<br />
recorded by Denmark, followed by<br />
Singapore at 7.5% and Sweden at 6.9%<br />
(Figure 4.8).<br />
Table 4.1: Labour Cost Competitiveness, 2009<br />
Industries Productivity Labour Cost Unit Labour<br />
per Employee Cost<br />
Source: Malaysia Productivity Corporation<br />
Growth rate (%)<br />
Wood and wood 2.9 1.2 -0.4<br />
products<br />
Textiles and 2.6 0.9 -3.4<br />
apparel<br />
Fabricated metal 0.6 0.3 -0.8<br />
products<br />
Non-metallic -0.5 0.8 0.0<br />
mineral products<br />
Electrical and -3.1 1.4 -0.1<br />
electronics<br />
Rubber products -3.9 3.3 0.6<br />
Food and -5.5 1.6 0.8<br />
beverages<br />
Machinery and -5.6 1.7 1.2<br />
equipment<br />
Manufacturing -6.3 1.8 0.3<br />
Plastic products -6.6 1.6 0.3<br />
Transport -9.3 1.6 1.2<br />
equipment<br />
Iron & Steel -15.9 2.6 4.0<br />
CHAPTER 4<br />
Figure 4.7: Relative Comparison of Productivity<br />
Growth, 2008<br />
Figure 4.8: Percentage Change in Manufacturing<br />
Unit Labour Cost 2008<br />
-3.40<br />
-3.60<br />
-2.60<br />
-0.10<br />
-0.20<br />
-0.50<br />
-0.90<br />
-0.90<br />
-0.90<br />
-1.40<br />
1.20<br />
1.20<br />
0.70<br />
0.50<br />
0.30<br />
6.30<br />
-4.70<br />
0.80<br />
1.70<br />
1.70<br />
2.00<br />
2.20<br />
2.40<br />
2.70<br />
3.60<br />
3.80<br />
4.70<br />
4.80<br />
4.90<br />
5.80<br />
6.20<br />
6.90<br />
7.50<br />
8.30<br />
-4.50<br />
-6.60<br />
Source:<br />
- Productivity measures are based on national basis<br />
- Bureau of Labour Statistics News, 22 October 2009<br />
(Productivity figures refer to percent change in manufacturing output<br />
per hour worked. Malaysian figures refer to growth in Added Value<br />
per Employee, computed from Annual Survey of Manufacturing<br />
Industries, Department of Statistics, Malaysia)<br />
0<br />
Source:<br />
- Productivity measures are based on national basis<br />
- Bureau of Labour Statistics News, 22 October 2009<br />
(Productivity figures refer to percent change in manufacturing output<br />
per hour worked. Malaysian figures refer to growth in Added Value<br />
per Employee, computed from Annual Survey of Manufacturing<br />
Industries, Department of Statistics, Malaysia )<br />
PRODUCTIVITY REPORT 2009 57
2009<br />
CHAPTER 4<br />
Total Factor Productivity (TFP) of<br />
Selected Manufacturing<br />
Industries, 2005 – 2009<br />
• During the period of 2005-2009, the<br />
manufacturing sector recorded TFP<br />
growth of 0.5%. An increase in the TFP<br />
growth was observed in many industries<br />
except rubber products and textiles and<br />
apparel.<br />
• The favourable performance of the<br />
industries were mainly attributed to<br />
the continuous improvement in human<br />
capital, investment in technology as well<br />
as improvement in the management<br />
system. Adoption of state-of-the-art<br />
technology especially in the chemicals<br />
industry had contributed to its highest<br />
TFP growth (Figure 4.9).<br />
• Contraction in demand as a result of the<br />
global economy slowdown should not<br />
hamper the industry to move upward<br />
along the value chain. It is also a good<br />
time for the manufacturing companies<br />
to emphasis on products R&D as well<br />
as to enhance and upgrade skills and<br />
knowledge of the workforce.<br />
• Business transformation through<br />
innovation by focusing on aligning<br />
people, process and technology<br />
initiatives to the business strategy<br />
and vision could help to support and<br />
innovate new business strategies. In<br />
addition, better management system<br />
should be deployed to strengthen<br />
the business strategic plan by using<br />
productivity enhancement initiatives<br />
such as Total Quality Management.<br />
Figure 4.9: TFP Growth of the Manufacturing<br />
Industries, 2005 - 2009<br />
Chemicals and chemical products<br />
Processed food & beverages<br />
Non-metalic mineral products<br />
Fabricated metal<br />
Transport equipment<br />
Iron & steel<br />
Manufacturing average<br />
Wood & wood products<br />
Electrical & electronic products<br />
Plastic products<br />
Machinery & equipment<br />
Rubber products<br />
Textiles & apparel<br />
-0.4 -0.2 0 0.2 0.4 0.6 0.8 1.0 1.2 1.4<br />
Source: Malaysia Productivity Corporation (<strong>MPC</strong>).<br />
Computed from: Annual Survey of Manufacturing Industries,<br />
Department of Statistics, Malaysia<br />
• TFP is about synchronising both<br />
qualitative and quantitative factors in<br />
the business operation. Quantitative<br />
factors such as number of labour,<br />
capital investment or fixed assets could<br />
be easily monitored and measured.<br />
• However, qualitative factors such as<br />
skilled workforce, attitude, efficient<br />
management system applied in the<br />
business which also contributed directly<br />
to the operations is difficult to quantify.<br />
• In this new era, investment in human<br />
resource development is the most<br />
valuable asset to the companies.<br />
Upgrading in technology as well as<br />
upgrading skills of employee should<br />
be complemented by effective<br />
management system such as Total<br />
Quality Management (TQM), Total<br />
Productive Maintenance (TPM),<br />
and International Standardisation<br />
Organisation (ISO).<br />
58<br />
PRODUCTIVITY REPORT 2009
2009<br />
• TQM is fundamental to the continuous<br />
success of any organisation. It is a<br />
proven systematic approach to the<br />
planning and management of activities<br />
which contributes to company’s<br />
achievement. By applying some of the<br />
TQM tools such as Benchmarking,<br />
Force Field Analysis, ISO 9001:2008,<br />
JIT, Kanban and Kaizen, it could facilitate<br />
companies to improvise their quality,<br />
productivity and competitiveness.<br />
• Alternatively, TPM is a maintenance<br />
programme, which involves a newly<br />
defined concept for maintaining plants<br />
and equipment. The goal of the TPM<br />
programme is to markedly increase<br />
production while at the same time,<br />
enhancing employee morale and job<br />
satisfaction.<br />
• ISO standards provide requirements<br />
on good management practices. Of<br />
these, two had achieved global status<br />
and are now thoroughly integrated<br />
into the world economy namely, ISO<br />
9001:2008 and ISO 14001:2004. The<br />
widespread adoption of International<br />
Standards means that companies<br />
can develop and offer products and<br />
services with specifications and<br />
have wide international acceptance.<br />
Hence, businesses accreditated with<br />
International Standards can compete<br />
on a wider market globally.<br />
• Implementation of such systems could<br />
help companies to:<br />
- Manage the social,<br />
environmental and financial risks<br />
- Improve operational effectiveness<br />
- Reduce production cost<br />
- Increase customer and<br />
stakeholder satisfaction<br />
- Protect brand and reputation<br />
- Achieve continual improvement<br />
- Promote innovation<br />
- Increase opportunities into the<br />
global market<br />
- Bring clarity to the marketplace<br />
Outlook for 2010<br />
• Malaysia's GDP is anticipated to<br />
improve by 5.0% in 2010 due to<br />
rebound in manufacturing, construction,<br />
and services sectors. Stabilising global<br />
and domestic demand conditions will<br />
resuscitate manufacturing output. Large<br />
public expenditure towards expansion<br />
in both construction and services<br />
activities will also spur economic<br />
activities especially the manufacturing<br />
industries to expand their operations.<br />
• The new measure to be introduced<br />
to spur our country towards high<br />
income economy should emphasis on<br />
productivity enhancement through the<br />
use of skill and innovation, improved<br />
coordination, effective branding and<br />
compliance with International Standards<br />
and Intellectual Property Rights.<br />
• In an innovative economy, investment<br />
in new technology, multi-skilling,<br />
innovation and creativity are the drivers<br />
of both public and private sectors<br />
performance especially manufacturing.<br />
With the initiatives introduced by the<br />
Government coupled with efficiency<br />
initiatives being implemented, the<br />
manufacturing sector is anticipated to<br />
record a 2.3% growth in productivity in<br />
2010.<br />
CHAPTER 4<br />
PRODUCTIVITY REPORT 2009 59
2009<br />
CHAPTER 4<br />
Box 4.1: Productivity Improvement through Work Study :<br />
The Simplified Method Time Measurement (MTM)<br />
Work Study<br />
Work Study is a systematic study of an operation or process to ensure the best<br />
possible use of the human and material resource available. The prime aim is to<br />
improve productivity (BS 3139:1959). The object of applying work study is to obtain<br />
the optimum use of the human and other resources which are available to it. This<br />
involves the development of a new set of method of operation with a new ‘standard<br />
performance’ to be formulated to replace existing procedures.<br />
Figure 1: Components of Work Study<br />
Work Study<br />
Method Study:<br />
Examining a job and finding more<br />
efficient method to perform it<br />
Time Study:<br />
Determining the times necessary to<br />
perform a job and its elements<br />
Higher Productivity<br />
Improved Planning<br />
Source: International Labour Organisation (ILO)<br />
The Five Steps to Improve Productivity<br />
Step 1: Select a project<br />
The project selection is based on criteria set by the organisation. It must be supported<br />
with valid data. A lot of techniques can be deployed such as SMART, Toyota 7 Waste,<br />
Value Stream Mapping, etc.<br />
60<br />
PRODUCTIVITY REPORT 2009
2009<br />
Step 2: Record/method study<br />
Method study is an analysis of ways of doing work.<br />
Breakdown works into work elements:<br />
Example is a process of assembling parts<br />
Work Element<br />
WE1: Take part A<br />
WE2: Walk to get part B<br />
WE3: Assemble parts A&B<br />
Description<br />
• Get part A from part A box on the table<br />
• Stand up<br />
• Walk to part B table<br />
• Get 1 part B from the part B box<br />
• Sit down<br />
• Put the parts together<br />
• Release parts into packing box<br />
CHAPTER 4<br />
Step 3: Examine<br />
Time study is the application of a technique designed to establish the time for a<br />
qualified worker to carry out a specified job at a defined level of performance.<br />
The simplified method time measurement approach<br />
Work Element Description Simplified MTM* Time<br />
Measurement<br />
Unit (TMU)<br />
WE1: • Get part A from • Reach II (with hand • 1 x 20<br />
Take part A part A box on the motion) 20 inches<br />
table • Grasp simple • 3<br />
WE2: • Stand up • Stand up • 50<br />
Walk to get • Walk to part B table • Walk 3 steps • 17 x 3<br />
part B • Get 1 part B from • Reach II with hand<br />
the part B box motion, 6 inches • 1 x 6<br />
• Grasp simple • 3<br />
• Walk back • Walk back 3 step • 17 x 3<br />
WE3: • Sit down • Sit down • 40<br />
Assemble • Put the parts together • Position tight • 20<br />
part A&B • Release parts into • Reach II with hand<br />
packing box motion, 6 inches • 1 x 6<br />
* MTM Association copyright<br />
PRODUCTIVITY REPORT 2009 61
2009<br />
CHAPTER 4<br />
Time taken to perform one cycle of this job is 250 TMU which is equivalent to nine<br />
seconds, or one operator to produce one piece of the above product requires nine<br />
seconds.<br />
Step 4: Develop<br />
Think of motion of this work (Toyota 5 WHY-WHY analysis)<br />
1. Why necessary to walk every time?<br />
• Part B located far-off<br />
2. Why must be located far-off?<br />
• Cart box is too big to accommodate near the work bench<br />
3. Why must we use big box?<br />
• Big box came directly from supplier<br />
4. Why supplier use big box?<br />
• Easier for them to load and unload<br />
Step 5: Install (Improvement)<br />
Proposed solution<br />
• Working in standing position<br />
• Use smaller box for part B<br />
• Place part B near the work bench<br />
Work Element Description Simplified MTM* Time<br />
Measurement<br />
Unit (TMU)<br />
WE1: • Get part A from • Reach II (with hand • 1 x 20<br />
Take part A part A box on the motion) 20 inches<br />
table • Grasp simple • 3<br />
WE2:<br />
Take part B • Get 1 part B from • Reach II with hand<br />
the part B box motion, 20 inches • 1 x 20<br />
• Grasp simple • 3<br />
WE3:<br />
Assemble • Put the parts together • Position tight • 20<br />
part A&B • Release parts into • Reach II with hand<br />
packing box motion, 6 inches • 1 x 6<br />
* MTM Association copyright<br />
62<br />
PRODUCTIVITY REPORT 2009
2009<br />
Time taken to perform this job is 72 TMU which is equivalent to 2.59 seconds, a saving<br />
of 6.41 seconds as compared with the old cycle time (old cycle time is nine seconds).<br />
Step 6: Maintain (Standardisation)<br />
Rewrite the new working instruction and follow through to make sure its implementation.<br />
Give some time to allow learning process to take place.<br />
CHAPTER 4<br />
Box 4.2: Fundamental Waste in Toyota Production System<br />
Toyota Production System (TPS) was developed after World War II. During that period,<br />
competitors like Ford and GM used mass production in order to achieve economies of<br />
scale namely, to produce as many parts and as cheap as possible. On the other hand,<br />
Toyota’s market was small. It had to produce many models of vehicles on the same<br />
assembly line in order to satisfy its customers. By making lead time short and with<br />
flexible production line, Toyota realised it could actually attained higher quality, better<br />
customer responsiveness, higher productivity and better utilisation of equipment and<br />
space.<br />
Waste elimination is one of Toyota’s principles. It was originally developed by Toyota’s<br />
Chief Engineer Taiichi Ohno as the core of Toyota Production System who defined<br />
it as “any expenditure, time, money, material, effort, or other resource that does not<br />
generate perceptible value for the customer.” –“ the Toyota Ways.”<br />
Toyota has redefined the concept of waste and they are as follows;<br />
1. Waste from over-production<br />
Always aim to make exactly what the customer orders. Producing more than it<br />
needs for immediate used. Over-production leads to excess inventory, paperwork,<br />
handling, storage, space, interest charges, machineries, defects, people and<br />
overhead. Tight scheduling such as Just in Time (JIT), one process flow, small<br />
quantities were among the recommended solutions.<br />
2. Waste of time in waiting<br />
Waiting refers to the waste of goods that are not moving. Much of a product's life<br />
span is spent waiting for the next phase. They are waiting due to poor material flow,<br />
long production runs or travel distances. People may be waiting for parts, materials<br />
or instructions. The processes should minimise the waiting time and maximise the<br />
‘value adding’ time. They should aim for smooth flow, line balancing, etc.<br />
PRODUCTIVITY REPORT 2009 63
2009<br />
CHAPTER 4<br />
3. Transportation waste<br />
Unnecessary movement of products, materials or information is a waste. Poor<br />
layouts lead to things being moved multiple times. If things are not well arranged,<br />
they can be hard to find. It can aggravate alignment of processes. Minimise the<br />
amount of movement by arranging the processes, implement the one piece flow<br />
concept, place the materials near to workstations, etc.<br />
4. Over-processing waste<br />
Using more energy or activity than is needed to produce a product or adding more<br />
value than the agreed standard is a waste. The machine should be set to fully<br />
utilised its capability and capacity to achieve required quality standard. Additional<br />
effort has to be incurred due to an inefficient process.<br />
5. Inventory waste WIP<br />
Any raw materials, work in process or finish goods that exceed what is required to<br />
meet customer needs in time and to maintain process stability is a waste. Excessive<br />
inventory is a direct result of over-production and waiting. Having excessive inventory<br />
will lead to increased lead times, limited floor space and poor communication.<br />
6. Waste of motion<br />
Unnecessary movement of people such as walking, reaching or stretching is a waste.<br />
Removed unnecessary motion of the operations and improve the ergonomics of the<br />
workplace. This includes movement of people from simple action to geographical<br />
movement. Having everything on hand as it is required reduces motion.<br />
7. Waste from product defects<br />
Defects in the manufacturing process are a tremendous cost to a company. Any<br />
small defect directly impacts your bottom line and affects inventory, scheduling,<br />
inspection and other factors. A minor defect can cost your company more than<br />
the entire manufacturing cost to begin with. Minor defect causes rework, waste<br />
resources and upset a synchronised set of processes and delivery.<br />
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Definition of OJT<br />
Box 4.3: On-the-Job Training (OJT)<br />
On-the-job training (OJT) is a systematic coaching of employees by direct superiors<br />
or managers at the workplace while doing the actual work. It is often supported by<br />
formal classroom training or Off-the-job training (OOJT). It is an important and essential<br />
part of structural training for the employees.<br />
CHAPTER 4<br />
Purpose of OJT<br />
Off-the-job training (OOJT) is conducted outside the workplace by instructors or<br />
supervisors in a classroom and it is usually useful in disseminating basic knowledge<br />
and skills to a large group of people. OJT complements OOJT by effectively transfering<br />
specific job-related knowledge and skills through practical coaching by direct instructors<br />
or supervisors at the workplace.<br />
Advantage of OJT<br />
The advantages of OJT are as follows:-<br />
- Specific job knowledge and skills are transferred directly to employees.<br />
- Training is related to an employee’s job.<br />
- Employees are in direct contact with the direct superior who can observe, correct<br />
and reinforce skills.<br />
- Errors are corrected immediately.<br />
- Employees gain experience in the actual work environment.<br />
- Both supervisor and worker maintain good working relationship in the course of<br />
such training.<br />
Person in Charge of OJT<br />
The supervisor, line leader, foreman or manager is responsible for training or retraining<br />
of employees or subordinates who report directly to them.<br />
PRODUCTIVITY REPORT 2009 65
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CHAPTER 4<br />
Benefits of OJT<br />
By implementing OJT, a trained employee or subordinate can perform better and<br />
independently with lesser supervision. This will allow the supervisor to have more<br />
time to perform other supervisory functions such as planning, organising, controlling,<br />
directing activities or doing other supervisory work. Well trained employees will be<br />
able to provide better information or report any technical problem to their supervisors<br />
because of their familiarity with the job.<br />
Steps for OJT Implementation<br />
There are 10 steps to implement OJT:-<br />
Step 1: Identify Jobs for OJT<br />
Step 2: Conduct Task Analysis<br />
Step 3: Set Task Standards<br />
Step 4: Identify Skills and Knowledge<br />
Step 5: Set Training Guidelines<br />
Step 6: Identify Training Needs<br />
Step 7: Scheduled Training<br />
Step 8: Prepare to Coach<br />
Step 9: Coaching the Training<br />
Step 10: Evaluate and Review OJT<br />
SME on-the-job training for the unskilled<br />
The Government has introduced a special on-the-job training scheme for the unskilled<br />
workers in the small and medium scale entrerprise (SME) sector in 2009. The training<br />
scheme under Pembangunan Sumber Manusia Bhd (PSMB) is to help SMEs to train<br />
their workers and minimise disruption in sending a worker for external training. Working<br />
skills acquired through this programme is the precursor for trainers to continue in skills<br />
upgrading to attain higher accredited skills competency.<br />
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CHAPTER 5<br />
Productivity Performance of<br />
the Agriculture Sector
PRODUCTIVITY PERFORMANCE OF THE AGRICULTURE SECTOR<br />
<strong>Overview</strong><br />
• The agriculture sector recorded a<br />
lower Gross Domestic Product (GDP)<br />
contribution of 7.4% in 2009. The<br />
sector recorded a productivity growth<br />
of 0.4% amounting to RM26,466 in<br />
2009. The lower performance was<br />
due to the spillover of the global<br />
recession and the effects of global<br />
warming which had affected farm<br />
productivity. The lower output by 5%<br />
in the non-food sub-sector was due<br />
to contraction in the production of the<br />
major export commodities such as<br />
palm oil and rubber caused by adverse<br />
weather condition and the continuous<br />
replanting exercise undertaken by the<br />
plantation companies. To mitigate the<br />
impact of the global crisis, two stimulus<br />
packages amounting to RM17 billion<br />
were launched during the year whereby<br />
part of it was allocated to the agriculture<br />
sector to improve and rebrand it into a<br />
modernised business sector.<br />
• Nevertheless, the agriculture sector<br />
is still one of the key sectors which<br />
contributes to rural incomes. Great<br />
emphasis has been given by the<br />
Government to streamline the<br />
transformational efforts throughout<br />
the production processes from<br />
planting to marketing level. Numerous<br />
programmes being organised include<br />
nurturing youths and smallholders to<br />
be entrepreneurs, encourage farmers<br />
to adopt Good Agricultural Practices<br />
(GAP) as well as upgrading the<br />
agriculture infrastructure.<br />
• Institutional support focusing on human<br />
capital development will be continued<br />
with emphasis towards transforming the<br />
agriculture sector. As such, the National<br />
Agriculture Training Council has<br />
conducted many National Agriculture<br />
Training Programmes to cater to the<br />
requirements of the transformational<br />
programmes. Table 5.1 shows the<br />
number of trainees being trained under<br />
the programme while Table 5.2 shows<br />
the types of training attended. A total of<br />
698 trainees had been trained in 2009<br />
with the majority of them (225 trainees)<br />
achieving the basic Level 1 module<br />
on farm agronomics leading to the<br />
Malaysian Skill Certificate (MSC). The<br />
crops discipline was the most popular<br />
module for MSC with an enrolment of<br />
77 trainees followed by 53 trainees<br />
for food processing discipline and 45<br />
trainees for the veterinary discipline.<br />
Table 5.1: Number of Trainees, 2005 – 2009<br />
Enrolment<br />
*MSC - Malaysian Skill Certificate<br />
**MSD - Malaysian Skill Diploma<br />
***MSAD - Malaysian Skill Advanced Diploma<br />
Year<br />
2005 2006 2007 2008 2009<br />
MSC* Level 1 310 393 402 445 225<br />
Level 2 182 390 338 334 184<br />
Level 3 62 225 244 129 214<br />
MSD** Level 4 31 26 - 64 75<br />
MSAD*** Level 5 - - 1 - -<br />
Total 585 1,034 985 972 698<br />
Source: Ministry of Agriculture and Agro-based Industry, Malaysia<br />
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Table 5.2: Numbers of Trainees who Completed MSC, MSD and MSAD until Level 3<br />
Training Area 2007 2008 2009<br />
MSC MSD MSC MSD MSAD MSC MSD MSAD<br />
Aquaculture 38 11 35 - - 15 10 -<br />
Fruits 20 - - - - - - -<br />
Marketing - 1 74 5 - 41 15 -<br />
Food Processing 6 - 31 7 - 53 - -<br />
Food Distribution 6 10 - - - - - -<br />
Poultry - 2 - - - - - -<br />
Vegetables 22 - - - - - - -<br />
Crops 13 30 67 13 1 77 22 -<br />
Fisheries Captured - - 19 - - 9 - -<br />
Technology<br />
Veterinary 52 11 79 - - 45 8 -<br />
Total 157 65 305 25 1 240 55 0<br />
CHAPTER 5<br />
*MSC - Malaysian Skill Certificate, **MSD - Malaysian Skill Diploma, ***MSAD - Malaysian Skill Advanced Diploma<br />
Source: Ministry of Agriculture and Agro-based Industry, Malaysia<br />
• To further enhance the productivity<br />
growth of the agriculture sector, new<br />
farming technologies in collaboration<br />
with the relevant research institutions<br />
will be intensified. The utilisation<br />
of farming mechanisation in paddy<br />
plantation activities such as using<br />
mechanised transplanting machine<br />
for crop establishment has enabled<br />
the farmers to increase cropping<br />
intensities as well as enhancing the<br />
efficiency of farm management. Such<br />
mechanisation has enabled farm<br />
productivity to improve by at least 20%<br />
over conventional farming system.<br />
• Farmers are also encouraged to get<br />
their farms to be certified with Skim<br />
Amalan Ladang Baik Malaysia (SALM)<br />
which is a requirement if the farmers<br />
plan to export their products. The<br />
scheme which was introduced in 2002<br />
has benefited 247 farmers in producing<br />
quality and safe products without<br />
jeopardising the environment.<br />
• Whilst it is true that the increase in<br />
output was also attributed to increase<br />
in area for agriculture but in the<br />
foreseeable future, improvement in<br />
productivity will focus towards better<br />
farm agronomic management such<br />
as intensive cropping to optimise<br />
resources usage in view of the scarcity<br />
of farm inputs.<br />
PRODUCTIVITY REPORT 2009 69
2009<br />
CHAPTER 5<br />
Box 5.1: Innovation in Food Product Development<br />
Innovation is an activity to develop new product or process, improving existing product<br />
in terms of appearance, texture, taste and packaging thus resulting in a significant<br />
difference from the current products in the market. Innovation allows more choices<br />
to meet the requirements of the consumers. The food industry needs to constantly<br />
innovate in order to sustain its competitiveness. Malaysian Agricultural Research and<br />
Development Institute (MARDI) had embarked on numerous technologies to assist<br />
food industry to stay ahead of its competitors in the global market.<br />
Types of Innovation in Food Product Development<br />
Type<br />
Food<br />
Product<br />
Innovation<br />
Segment<br />
Fruits & Vegetables<br />
Meat-based Products<br />
Products from cereal<br />
and tubers<br />
Fishery Products<br />
Technologies developed<br />
• Production of fruit sauces into different<br />
flavour either sweet (dessert sauce) or spicy<br />
(savoury sauce) made from tropical fruits<br />
such as pineapple, mango and soursop.<br />
• Production of frozen coated fruits using<br />
tropical fruits such as banana, pineapple and<br />
cempedak.<br />
• Production of chilled or frozen ayam percik<br />
with marinate sauce<br />
• Improvement in processing and packaging<br />
have managed to extend dodol shelf life,<br />
reduce hardening, more nutritious (with<br />
additional rice bran) and easy-to-prepare<br />
(12-minute dodol).<br />
• Freezing technology applied to local kuih to<br />
extend their shelf life for wider distribution as<br />
well as convenience.<br />
• Highly nutritious sweet potato variety called<br />
Vitato which is rich in beta-carotene.<br />
• Smoked fish, surimi and surimi products,<br />
frozen products, chilled products, fermented<br />
fish, dried fish, sauces and canned products.<br />
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• Restructured fish fillet to produce a product<br />
similar to fresh fillet in terms of texture and<br />
taste but utilises small fillet or trimmings from<br />
filleting process, producing a natural high<br />
quality product which is Halal and safe.<br />
CHAPTER 5<br />
Other Food Products<br />
• Granola roselle bar with high antioxidant<br />
content prepared from roselle and cereals<br />
bind together with syrup.<br />
Innovations in<br />
Food Packaging<br />
Traditional food packaging<br />
designs<br />
Modified Atmosphere<br />
Packaging<br />
• Confectionery jellies based on fruit juices or<br />
herbal extracts with exotic fresh fruit taste and<br />
health benefits.<br />
• Low calories chocolate or no-sugar chocolate.<br />
• High moisture content traditional food can<br />
be kept chilled or frozen on a tray of oriented<br />
polypropylene/liner low density polyethylene<br />
(OPP/LLDPE).<br />
• Using oriented nylon/liner low density<br />
polyethylene (ONy/LLDPE) containing<br />
nitrogen and carbon dioxide gases.<br />
Process<br />
Innovations<br />
• Fabricate new machineries to cater for the specific products not available locally<br />
as well as adopting and adapting existing machineries.<br />
Innovation assumes an important role in the economy as it is the driver towards<br />
enhancing productivity and prosperity of the nation. Rapid changes in the global<br />
markets have resulted in a highly competitive environment. New economies are led<br />
by those who can innovate faster than their competitors in their search for new ideas<br />
and knowledge for the development of new products and services. In order to remain<br />
ahead and be sustainable, companies need to constantly innovate otherwise they will<br />
perish.<br />
Contributed by:<br />
Normah Binti Omar<br />
Food Technology Research Centre<br />
Malaysian Agricultural Research and Development Institute (MARDI)<br />
(<strong>MPC</strong> Agriculture Consultative Panel Member)<br />
PRODUCTIVITY REPORT 2009 71
2009<br />
Productivity Performance<br />
Figure 5.1: Growth in Land Productivity, 2005-2009<br />
CHAPTER 5<br />
• Productivity at the farm level can be<br />
measured in terms of land, labour and<br />
capital productivity. Land productivity<br />
is measured in terms of output per<br />
hectare, labour productivity measures<br />
the output per worker while capital<br />
productivity measures the output per<br />
ringgit investment.<br />
Land Productivity<br />
◦◦<br />
Land productivity grew by 0.8%<br />
in 2009 (Figure 5.1). The lower<br />
productivity growth as compared<br />
with previous year was due to<br />
adverse weather condition and<br />
tree stress which affected output.<br />
Production is anticipated to improve<br />
in the future with more immature<br />
areas being ready for harvesting.<br />
Labour Productivity<br />
◦◦<br />
Labour productivity also grew by<br />
0.4% in 2009 (Figure 5.2). The<br />
lower growth in productivity was due<br />
to lower yield caused by adverse<br />
weather condition. Productivity is<br />
expected to improve with more area<br />
being harvested in the near future.<br />
Computed from:<br />
- Ministry of Agriculture and Agro-based Industry,<br />
Malaysia<br />
Figure 5.2: Growth in Labour Productivity, 2005-2009<br />
Computed from:<br />
- Ministry of Agriculture and Agro-based Industry,<br />
Malaysia<br />
Figure 5.3: Growth in Capital Productivity, 2005-2009<br />
Capital Productivity<br />
◦◦<br />
Productivity growth of capital<br />
registered a decrease by 2.5% in<br />
2009 (Figure 5.3). The unfavourable<br />
growth was due to substantial<br />
capital investment being channelled<br />
to modernise agriculture sector<br />
as part of the stimulus package<br />
Computed from:<br />
- Ministry of Agriculture and Agro-based Industry,<br />
Malaysia<br />
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under the Ninth Malaysia Plan. This<br />
had temporary resulted in underutilisation<br />
of the farm machineries<br />
in their initial years of operation thus<br />
resulting in lower capital productivity<br />
for every ringgit invested in farm<br />
machineries. Capital productivity<br />
is anticipated to improve when<br />
the farm machineries are fully<br />
operationalised in the near future.<br />
CHAPTER 5<br />
International Agricultural<br />
Productivity Comparison<br />
• The productivity of Malaysian<br />
agricultural workers in 2008 registered<br />
a decline to USD18,895 (2007:<br />
USD19,077) but was still ahead of<br />
advanced country such as Korea<br />
(USD18,212). Japan remained ahead<br />
at USD22,672 and was able to record<br />
high productivity due to the continuous<br />
adoption of intensive cropping systems<br />
and optimal usage of farm resources.<br />
• Productivity is anticipated to improve<br />
in the near future as a result of the<br />
launching of the two stimulus packages<br />
which will provide the multiplier effect in<br />
accelerating economic growth for the<br />
agriculture sector.<br />
Figure 5.4: International Productivity Comparison for Selected Asian Countries (2008)<br />
USD Thousand<br />
Malaysia<br />
Source: World Competitiveness Yearbook, 2009<br />
PRODUCTIVITY REPORT 2009 73
2009<br />
CHAPTER 5<br />
Box 5.2: Good Agronomic Practices in Paddy Cultivation Activities<br />
Paddy plantation contributes significantly to the agriculture sector producing 2,353<br />
thousand metric tonnes of paddy in 2008. With an average yield of 3.6 metric tonnes<br />
per hectare from 656,602 hectares of planted paddy area nationwide, the industry<br />
provided employment to 296,000 farmers in the country. To further enhance the<br />
productivity of the industry, the Government has introduced various initiatives as well<br />
as carrying out extensive R&D activities in order to increase the national paddy yield.<br />
However, farm productivity is dependent upon both exogenous and endogenous<br />
factors. Exogenous such as adverse climate condition can have an adverse effect<br />
on yield. Similarly, endogenous factors such as the inculcation of Good Agronomic<br />
Practices (GAP) does have a positive impact on productivity. Some of the GAP which<br />
farmers need to observe in paddy cultivation are summarised below.<br />
Land Preparation<br />
The paddy planting activities ideally begin just after the harvest of the previous season’s<br />
crop. While the land is fallow, preparation for next crop takes place where the farmer<br />
cuts the stubble and burns it together with the straw strewn on the ground to eradicate<br />
paddy seeds dropped from the harvested crop and weedy rice seeds. Other activities<br />
in preparing the land include three rounds of ploughing to till and aerate the soil and<br />
to break down the soil into smaller clods. These activities are very important in land<br />
preparation as it is the basis of establishing uniformed seedlings which would lead to<br />
increase yield in the next season.<br />
Good Irrigation System<br />
Good and well managed infrastructure system has enabled every plot of paddy field to<br />
have a consistent supply of water as it is vital to optimise the plant’s growth. In some<br />
cases, the farmers have constructed quaternary canal within their plots to complement<br />
the existing canals. This would allow effective and quick irrigation and drainage thus<br />
ensuring the effective use of chemical inputs and fertilisers.<br />
Technology Utilisation<br />
The utilisation of farm machineries is a significant factor which contributes towards<br />
higher yield. The use of mechanised transplanting machines had benefited the farmers<br />
in ensuring the uniformity of planting of the paddy stalks as well as to shorten the<br />
process of transplanting the seedlings into the field. The other activities that can be<br />
highly mechanised include land preparation, harvesting and fertigation. The adoption<br />
of such mechanisation programme is to minimise labour usage and increase farm<br />
productivity.<br />
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Integrated Pest Management<br />
The integrated pest management programme is practiced to control pest and disease<br />
population. The application of such chemicals is at the recommended level when the<br />
population reaches an economic threshold while the monitoring aspect is conducted<br />
regularly. In addition, natural predators of the pests such as owls are encouraged to<br />
multiply so as to control the pest population naturally. Through this programme, crop<br />
losses could be minimised.<br />
CHAPTER 5<br />
Extra Efforts by the Farmers<br />
Instead of purely depending upon the Government for input subsidies, some farmers<br />
practiced good working capital management by setting aside part of their profits for<br />
purchasing additional input such as fertilisers for next planting season. Such good<br />
efforts coupled with knowledge and critical judgments by the farmers to determine<br />
the right dosage of fertilisers plus the use of growth hormone and the right timing<br />
of application had enabled them to obtain better yield. During harvesting, which is<br />
almost exclusively done by the combine harvester, some farmers even take the effort<br />
to closely supervise the operation of the harvesters to ensure minimum crop losses.<br />
Positive Work Attitude and Group Action<br />
Positive work attitudes such as hardworking and willingness to share information<br />
and problems related to paddy cultivation are vital among the farmers. Any decision<br />
pertaining to planting activities such as pesticide and fertilisers application will be<br />
decided collectively in order to enjoy economies of scale and a smoother work<br />
process. Such cooperation is usually initiated through local farmers’ organisations<br />
which emphasis the importance of teamwork. The cooperation together with good<br />
leadership will encourage more group efforts in coordinating planting and management<br />
activities within an area. As a result, the farmers were able to improve farm agronomic<br />
management practices thus leading to higher yield.<br />
PRODUCTIVITY REPORT 2009 75
2009<br />
CHAPTER 5<br />
Productivity Initiatives in the<br />
Agriculture Sector<br />
• To further enhance the food safety<br />
and security programme, several<br />
productivity initiatives have been<br />
initiated to expedite its implementation.<br />
As rice is the staple food, the first<br />
priority is to increase the national paddy<br />
production. Two additional granary<br />
areas for paddy cultivation have been<br />
identified in East Malaysia. Paddy<br />
production will be improved through the<br />
use of High Yielding Varieties (HYV’s)<br />
which will give higher yield per hectare.<br />
With the average yield of 3.6 metric<br />
tonnes per hectare, it is anticipated<br />
that through the use of HYV’s, paddy<br />
yield will be increased up to 10.7<br />
metric tonnes per hectare. This will<br />
subsequently increase the cropping<br />
intensities within the granaries as well<br />
as increase national production by 5%<br />
as anticipated.<br />
• Similarly, planting intensities for<br />
vegetables will be increased from the<br />
current 1.8 to more than three times<br />
for most of the planted vegetables.<br />
For vegetables with shorter cycles, the<br />
planting intensity may be increased<br />
to six times. High Density Planting<br />
(HDP) system will be established for<br />
fruits especially those intended for the<br />
export market (papaya, water melon,<br />
pineapple and star fruit). To support<br />
such production, more Permanent<br />
Food Production Parks (PFPP),<br />
furnished with the basic infrastructure<br />
will be established and leased to<br />
interested companies. To date, 52<br />
PFPP have been established involving<br />
the participation of 853 agropreneurs<br />
nationwide covering 4,691 hectares<br />
with total production of 141,250 metric<br />
tonnes. The home garden concept<br />
which covers a substantial proportion<br />
of the areas planted with fruits will be<br />
diversified by planting some of the<br />
exotic fruits in order to increase local<br />
consumption as well as for export.<br />
• More Aquaculture Industrial Zones (AIZ)<br />
will be identified and developed to boost<br />
fish production. Similarly, for poultry<br />
and swine industries, the intensive<br />
“factory farming” technologies, some<br />
with controlled environment production<br />
systems will be widely adopted to further<br />
enhance GAP. To further improve the<br />
efficiency of livestock industry, both<br />
vertical and horizontal integrations<br />
which involved the linkages between<br />
suppliers, processors and marketers<br />
have been successfully introduced.<br />
More Target Area Concentration (TAC’s)<br />
will be established to increase meat<br />
production for the ruminant industry.<br />
About 2,023.5 hectares of irrigated<br />
land had been identified for National<br />
Feedlot Programme which will involve<br />
the participation of private companies.<br />
The programme is anticipated to<br />
increase the self-sufficient level of meat<br />
production to 37% by 2010. To date,<br />
71 out of 310 satellite farms have been<br />
operationalised nationwide.<br />
• To ensure stable farm income, contract<br />
farming will be further intensified. In<br />
2009, a total of 25,640 hectares land<br />
involving 14,475 agropreneurs were<br />
operationalised through contract<br />
farming. The establishment of two<br />
National Food Terminals (TEMAN)<br />
will provide a greater market access<br />
of farm products. It is a public-private<br />
partnership programme which aims at<br />
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providing an integrated wholesale and<br />
distribution system as well as modern<br />
infrastructure to link pools of producers<br />
and suppliers to the consumers.<br />
Likewise, a total of 326 fresh fruits stalls<br />
involving 163 agropreneurs have been<br />
established to market fresh and quality<br />
fruits which will subsequently increase<br />
the per capita consumption of local<br />
fruits.<br />
• ICT development for the agriculture<br />
sector emphasis on greater application<br />
of commerce through agri-based portal.<br />
In 2009, transaction value amounting<br />
to more than RM3 million was offered<br />
through agri-bazaar portal. In addition,<br />
the Government has developed an<br />
ICT-based integrated monitoring<br />
system called Supply Demand Virtual<br />
Information (SDVI) to further improve<br />
the price mechanism of the agriculture<br />
sector through information technology.<br />
The system which was developed<br />
to match the supply and demand<br />
information according to consumers’<br />
needs has managed to overcome both<br />
surplus and shortage of supply thus<br />
stabilising the price at the market level.<br />
Outlook for 2010<br />
• The sector is anticipated to register a<br />
higher productivity growth in 2010 in<br />
view of global economic recovery. To<br />
expedite the recovery process, the<br />
focus will be towards rebranding the<br />
agriculture sector into a business sector<br />
through improvement in the institutional<br />
support as a result of the launching of<br />
the two stimulus packages in 2009.<br />
• Some of the major programmes<br />
include RM70 million being allocated<br />
to implement a brand new project at<br />
Paya Peda Dam in Terengganu, while<br />
RM82 million to help 1,150 participants<br />
to modernise the aquaculture industry.<br />
The programme also aims to develop<br />
livestock farming facilities to support<br />
the supply chain of the meat production<br />
industry.<br />
CHAPTER 5<br />
PRODUCTIVITY REPORT 2009 77
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CHAPTER 5<br />
Box 5.3: Agricultural Transformation towards Value Creation<br />
Today’s agriculture is transforming to increasingly following the manufacturing industry<br />
in the formation of more tightly aligned value or supply chains. One of the prime<br />
arguments for the value chain formation is the reward from responding to increased<br />
specificity in consumer demand. In Malaysia, it is generally observed that consumers<br />
increasingly demand for higher value and higher protein foods, and food away from<br />
home. The importance of rice as a staple food has decreased steadily. The substitution<br />
of calories obtained from non-staple for staple food sources has been substantial.<br />
Consumers also demand new food products, new packaging, more convenience, new<br />
delivery systems, safer and more nutritious foods. They also expect quality control<br />
and products with specific characteristics to be available when desired. Thus, the<br />
agricultural sector, in order to create more value, should not produce generic products<br />
in open markets, but differentiated products to gain profit margins and move-up the<br />
value chain.<br />
In order to succeed in the value chain formation, core competencies and barriers must<br />
be carefully managed. Evaluation of these dimensions in value chain formation and<br />
management will be helpful in assessing the opportunities for success of value chain<br />
in various segments of the agricultural industry.<br />
Core competencies and barriers in the value chain formation<br />
Core competencies<br />
• Market flexibility to meet<br />
changing consumer demand<br />
• Cost control and efficiency<br />
• Optimisation of the logistics<br />
and distribution system<br />
Barriers<br />
• Willingness to adopt a collaborative<br />
versus competitive business approach<br />
• Equitable sharing of the risk and rewards<br />
in the chain<br />
• Policy environment that does not<br />
constraint chain formation<br />
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Recent events, both in Malaysia and elsewhere, have emphasised beyond doubt the<br />
importance of an integrated agriculture and food chain approach to the production –<br />
from the farm to the consumer. This ‘plough-to-plate’ approach, in the case of food,<br />
requires an improved understanding of the essential links in the food chain and their<br />
relationship.<br />
CHAPTER 5<br />
Thus significant investment in today’s agricultural sector will only be meaningful if the<br />
new relationships in the value chain are recognised and responded to in Malaysia,<br />
as elsewhere. This investment will be encouraged, and must be increasingly driven,<br />
by a new agriculture concept which is technology oriented, business driven, and<br />
sustainability. It is also increasingly important to understand the changing role for the<br />
new agriculture in such a commercial and increasingly sophisticated market place.<br />
Contributor :<br />
Prof. Dr. Mad Nasir Shamsudin<br />
Professor of Agricultural and Resource Economics<br />
Dean, Faculty of Agriculture<br />
Universiti Putra Malaysia<br />
PRODUCTIVITY REPORT 2009 79
CHAPTER 6<br />
Productivity Performance of<br />
the Construction Sector
PRODUCTIVITY PERFORMANCE OF THE CONSTRUCTION SECTOR<br />
<strong>Overview</strong><br />
• The construction sector accounted for<br />
5.2% of the Gross Domestic Product<br />
(GDP) and complemented by a<br />
productivity growth of 5.0% amounting<br />
to RM21,529 in 2009. Activities<br />
within the construction sector can<br />
be categorised into two main areas.<br />
One is general construction which<br />
comprises residential construction,<br />
non-residential construction and civil<br />
engineering construction. The second<br />
area is specialised trade such as metal<br />
works, electrical, plumbing, sewerage<br />
and sanitary, refrigeration and airconditioning,<br />
painting, carpentry, tiling<br />
and flooring and glass works.<br />
• The construction sector serves as an<br />
enabler to the other economic sectors<br />
due to its extensive linkage in providing<br />
the necessary support services to these<br />
sectors especially with the current<br />
economic condition which provides<br />
the best opportunity for the industry<br />
players to take note of their position in<br />
the market and reassess their financial<br />
strength, technical expertise and<br />
branding.<br />
• The industry also needs to restructure<br />
itself by investing in new technologies<br />
and systems in order to remain<br />
competitive at both local and global<br />
level. The focus should be towards<br />
green design and technology as<br />
the way forward for the construction<br />
industry in order to be sustainable in<br />
terms of energy usage, materials used<br />
and technology adoption.<br />
Construction Sector Growth (%)<br />
Computed from:<br />
- Survey on Construction Industries<br />
- Department of Statistics, Malaysia<br />
6.0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
Figure 6.1: Productivity Indicators of the<br />
Construction Sector<br />
0<br />
-1.0<br />
-2.0<br />
-3.0<br />
Computed from:<br />
- Survey on Construction Industries<br />
- Department of Statistics, Malaysia<br />
2008 2009<br />
Output 4.0 5.2<br />
Productivity 1.5 5.0<br />
Productivity and Labour Cost Competitiveness<br />
Sub-sectors Added Value Labour Cost Unit Labour<br />
per Employee per Employee Cost (%)<br />
(%) (%)<br />
Residential 2.61 0.95 -1.94<br />
Non-Residential 2.15 1.67 -1.25<br />
Civil Engineering 1.38 0.98 -2.09<br />
Growth 2008<br />
Growth 2009<br />
Productivity<br />
Table 6.1: Key Statistics<br />
Total<br />
Output per<br />
Employee<br />
Added Value<br />
per Labour<br />
Cost<br />
Labour<br />
Cost per<br />
Employee<br />
Unit<br />
Labour<br />
Cost<br />
Added<br />
Value<br />
per Fixed<br />
Assets<br />
Fixed<br />
Assets per<br />
Employee<br />
82<br />
PRODUCTIVITY REPORT 2009
2009<br />
Productivity of the<br />
Construction Sub-sectors<br />
• The main sub-sectors are residential<br />
construction of houses, apartments<br />
and condominiums, the non-residential<br />
construction of commercial and<br />
industrial buildings and civil engineering<br />
which involves the construction of public<br />
infrastructure and amenities.<br />
Table 6.2: Total Output, Added Value and<br />
Employment of the Residential Sub-sector<br />
Value Share to the Growth<br />
Level* Construction (%)<br />
Sector (%)<br />
2008 2009 2008 2009 2009<br />
Total Output 16,281 17,812 30.28 30.42 9.40<br />
Added Value 4,612 4,882 29.00 28.47 5.85<br />
Employment 159,394 171,078 29.93 29.52 7.33<br />
*Value Level for Total Output and Added Value are in RM Million<br />
Computed from:<br />
- Survey on Construction Industries<br />
- Department of Statistics, Malaysia<br />
CHAPTER 6<br />
Residential Sub-sector<br />
◦◦<br />
The launching of two economic<br />
stimulus packages had resulted<br />
in some positive impact to the<br />
residential sub-sector as reflected<br />
by an output growth of 9.4%.<br />
Similarly, added value generated<br />
also recorded a 5.9% growth in<br />
2009 (Table 6.2). Labour cost<br />
competitiveness of the residential<br />
sub-sector was sustained as shown<br />
by a productivity growth of 2.6%<br />
and complemented by a growth of<br />
1.0% in labour cost per employee<br />
resulting a declined in unit labour<br />
cost of 1.9% (Figure 6.2).<br />
Figure 6.2: Productivity Indicators of the<br />
Residential Sub-Sector<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
0<br />
-1.0<br />
-2.0<br />
-3.0<br />
Growth 2008<br />
Growth 2009<br />
Added<br />
Value per<br />
Employee<br />
2.97<br />
2.61<br />
Total<br />
Output per<br />
Employee<br />
3.65<br />
3.43<br />
Added<br />
Value per<br />
Labour<br />
Cost<br />
1.53<br />
1.51<br />
Computed from:<br />
- Survey on Construction Industries<br />
- Department of Statistics, Malaysia<br />
Labour<br />
Cost per<br />
Employee<br />
1.19<br />
0.95<br />
Unit<br />
Labour<br />
Cost<br />
-1.90<br />
-1.94<br />
Added<br />
Value<br />
per Fixed<br />
Assets<br />
0.07<br />
-1.39<br />
Fixed<br />
Assets per<br />
Employee<br />
1.80<br />
2.83<br />
Non-Residential Sub-sector<br />
◦◦<br />
The non-residential sub-sector<br />
recorded an output growth of<br />
9.8% amounting to RM14.6 billion.<br />
Similarly, added value generated<br />
by the sub-sector grew by 8.8%<br />
amounting to RM4.7 billion while<br />
employment grew by 8.2%<br />
accounting for 28.6% of total<br />
employment in the construction<br />
sector (Table 6.3).<br />
Table 6.3: Total Output, Added Value and<br />
Employment of the Non-Residential Sub-Sector<br />
Value Share to the Growth<br />
Level* Construction (%)<br />
Sector (%)<br />
2008 2009 2008 2009 2009<br />
Total Output 14,634 16,061 27.21 27.43 9.75<br />
Added Value 4,304 4,683 27.07 27.31 8.81<br />
Employment 153,240 165,744 28.77 28.60 8.16<br />
*Value Level for Total Output and Added Value are in RM Million<br />
Computed from:<br />
- Survey on Construction Industries<br />
- Department of Statistics, Malaysia<br />
PRODUCTIVITY REPORT 2009 83
2009<br />
CHAPTER 6<br />
◦◦<br />
Labour cost competitiveness<br />
was sustained as shown by an<br />
improvement in added value per<br />
employment of 2.2% while labour<br />
cost per employee grew by 1.7%<br />
which was reflected by a decline<br />
in unit labour cost of 1.3% (Figure<br />
6.3). The growth was reinforced by<br />
the building of more industrial and<br />
office complexes to revitalise the<br />
business communities as part of<br />
the economic stimulus packages<br />
initiatives.<br />
Civil Engineering Sub-sector<br />
◦◦<br />
Civil engineering sub-sector<br />
includes the construction of all<br />
infrastructure and public amenities<br />
projects other than both residential<br />
and non-residential buildings.<br />
Output from the sub-sector grew<br />
by 7.9% amounting to RM24.7<br />
billion. Added value also grew by<br />
8.6% which amounted to RM7.6<br />
billion and it accounted for the<br />
largest share of employment in the<br />
construction sector at 41.9% (Table<br />
6.4).<br />
◦◦<br />
Added value per employee from<br />
the sub-sector grew by 1.4% which<br />
was commensurated by a 1.0%<br />
growth in labour cost per employee<br />
resulting a declined in unit labour<br />
cost of 2.1% (Figure 6.4).<br />
◦◦<br />
The growth was attributed to mainly<br />
from some of the mega projects<br />
initiated under the two economic<br />
stimulus packages to expedite the<br />
economy recovery.<br />
Figure 6.3: Productivity Indicators of the<br />
Non-Residential Sub-Sector<br />
3.5<br />
3.0<br />
2.5<br />
2.0<br />
1.5<br />
1.0<br />
0.5<br />
0<br />
-0.5<br />
-1.0<br />
-1.5<br />
Growth 2008<br />
Growth 2009<br />
2.37<br />
2.15<br />
0.98<br />
1.38<br />
2.99<br />
2.65<br />
1.68<br />
1.83<br />
Added<br />
Value per<br />
Labour<br />
Cost<br />
1.01<br />
1.63<br />
Computed from:<br />
- Survey on Construction Industries<br />
- Department of Statistics, Malaysia<br />
Added<br />
Value per<br />
Labour<br />
Cost<br />
0.64<br />
0.81<br />
1.98<br />
1.67<br />
0.82<br />
0.98<br />
-1.20<br />
-1.25<br />
-1.39<br />
-2.09<br />
Added<br />
Value<br />
per Fixed<br />
Assets<br />
0.13<br />
0.65<br />
Figure 6.4: Productivity Indicators of the<br />
Civil Engineering Sub-Sector<br />
Added<br />
Value<br />
per Fixed<br />
Assets<br />
0.03<br />
0.39<br />
2.03<br />
2.81<br />
Table 6.4: Total Output, Added Value and<br />
Employment of the Civil Engineering Sub-Sector<br />
Value Share to the Growth<br />
Level* Construction (%)<br />
Sector (%)<br />
2008 2009 2008 2009 2009<br />
Total Output 22,861 24,674 42.51 42.14 7.93<br />
Added Value 6,983 7,580 43.92 44.21 8.55<br />
Employment 219,978 242,702 41.30 41.88 10.33<br />
*Value Level for Total Output and Added Value are in RM Million<br />
Computed from:<br />
- Survey on Construction Industries<br />
- Department of Statistics, Malaysia<br />
2.5<br />
2.0<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 />
Growth 2008<br />
Growth 2009<br />
Added<br />
Value per<br />
Employee<br />
Added<br />
Value per<br />
Employee<br />
Total<br />
Output per<br />
Employee<br />
Total<br />
Output per<br />
Employee<br />
Labour<br />
Cost per<br />
Employee<br />
Labour<br />
Cost per<br />
Employee<br />
Unit<br />
Labour<br />
Cost<br />
Unit<br />
Labour<br />
Cost<br />
Fixed<br />
Assets per<br />
Employee<br />
Fixed<br />
Assets per<br />
Employee<br />
1.44<br />
1.72<br />
Computed from:<br />
- Survey on Construction Industries<br />
- Department of Statistics, Malaysia<br />
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Productivity Inititatives in the<br />
Construction Sector<br />
• In its quest towards reducing the<br />
dependency on foreign workers for<br />
the construction, the Government will<br />
continue with its effort to propagate the<br />
industry to move towards Industrialised<br />
Building System (IBS) implementation.<br />
Such system is capable of improving<br />
on-site productivity in terms of cost<br />
savings of up to 20% for some of the<br />
high-rise projects or even possible to<br />
reduce project completion time by as<br />
much as 30%.<br />
• To assist retrenched workers and the<br />
unemployed graduates, a total of 59<br />
Construction Industry Development<br />
Board (CIDB) Accreditate Training<br />
Centres have been established<br />
nationwide offering a total of 49<br />
construction training trade modules<br />
such as skill training programmes that<br />
are divided into two categories namely,<br />
Youth Skill Training which is designed<br />
to produce more local skill personnel<br />
catering for youth age between 16<br />
to 31. Over the past decade, about<br />
65,000 youth had been trained under<br />
this programme. The second category<br />
is Construction Personnel Skill Training<br />
which is open to existing construction<br />
personnel. The objective is to provide<br />
an avenue for them to acquire multiple<br />
construction skills. To date, about<br />
55,000 construction personnel had<br />
pursued such training programme.<br />
• To mitigate the impact of global<br />
warming, all building design and<br />
development should focus more<br />
towards green technology. This leads<br />
to the development of Green Building<br />
Index (GBI) which allows for easy<br />
public evaluation of what are real green<br />
buildings. It also serves as key design<br />
principles for architects and engineers<br />
to design green buildings as well as<br />
to set benchmarks for Total Building<br />
Performance. Some of the economic<br />
benefits associated with green building<br />
are saving in energy and materials<br />
usage while maintaining good indoor<br />
air quality.<br />
• It is also imperative to have an integrate<br />
quality system incorporating both<br />
ISO System and Quality Assessment<br />
System in Construction (QLASSIC)<br />
as part of the business transformation<br />
process at the industry level. Such<br />
integration of both quality management<br />
system and construction quality is to<br />
improve the QLASSIC score for the<br />
construction sector.<br />
CHAPTER 6<br />
PRODUCTIVITY REPORT 2009 85
2009<br />
CHAPTER 6<br />
Box 6.1: The Green Building Index Way to a<br />
More Sustainable Construction Industry<br />
Buildings utilised 1/3 of the world’s resources. Buildings are responsible for 40% of the<br />
world’s greenhouse and 40% of the solid waste generated globally. Recognising these<br />
trends, most the advanced nations began to implement greening policies for their<br />
building industry. These policies were set to ensure what we do today to provide for<br />
ourselves and our needs, does not result in damaging the ability of future generations<br />
to provide for themselves. When a process is sustainable, it can be carried out over<br />
and over again without negative effects or impossibly high costs. Sustainability in the<br />
context of the property and construction industry is realised through green building<br />
design, construction, refurbishment and operation.<br />
Realising that the Malaysian construction industry was not moving fast enough in<br />
the right direction, the Malaysian Institute of Architects - PAM and Association of<br />
Consulting Engineers – ACEM, began to develop the Green Building Index (GBI) in<br />
early 2008. The Green Building Index Malaysia was introduced on 3 rd January 2009 at<br />
the Green Design Forum held at Kuala Lumpur Convention Centre.<br />
Keynote speaker was the Minister of Climate Change and Water, Australia, the Hon.<br />
Senator Penny Wong. GBI was officially launched on 21 st May 2009 at the Kuala<br />
Lumpur Convention Centre by the Honourable Minister of Works Malaysia, YB. Dato’<br />
Shaziman Abu Mansor. In his speech, the Honourable Minister encouraged that<br />
GBI be given full support of all the players in the property, construction and housing<br />
industry and saw it as an indication that the Malaysian construction industry was ready<br />
to confront important critical issues such as global warming, carbon emission and<br />
climate change.<br />
The Honourable Prime Minister, YAB. Dato’ Sri Mohd Najib Bin Tun Haji Abdul Razak<br />
in his written message at the launch cited GBI as a timely effort for Malaysia and<br />
added that the Government is serious in its efforts to address the effects of climate<br />
change to ensure a better future for all Malaysians.<br />
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GBI Rating Based on Six Criteria:<br />
Energy<br />
Efficiency<br />
Sustainable<br />
Site Planning &<br />
Management<br />
Indoor<br />
Environmental<br />
CHAPTER 6<br />
Innovation<br />
Criteria for<br />
GBI Rating<br />
Water<br />
Efficiency<br />
Material &<br />
Resources<br />
• GBI is a point-based rating system that provides a comprehensive framework to<br />
evaluate the environmental impact and performance of buildings.<br />
• Achieving points in these targeted areas will mean that the building will be more<br />
environment-friendly than those that do not address the issues. Under the GBI<br />
assessment framework, points will also be awarded for achieving and incorporating<br />
environment-friendly features which are above current industry practice. Buildings<br />
will be awarded GBI Platinum, Gold, Silver or Certified ratings depending on the<br />
scores achieved.<br />
Ranking of award based on scores achieved<br />
POINTS<br />
GBI RATING<br />
86+ points Platinum<br />
76 to 85 points Gold<br />
66 to 75 points Silver<br />
50 to 65 points Certified<br />
Contributed by:<br />
Ar. Chan Seong Aun, Director of Arkitek Dayaseni Sdn. Bhd.<br />
PRODUCTIVITY REPORT 2009 87
2009<br />
CHAPTER 6<br />
Box 6.2: The Different Components of Industrialised Building System (IBS)<br />
IBS - Industrialised Building System or “Sistem Pasang Siap” is the system which<br />
the construction industry is concreting its efforts with the hope that it would bring our<br />
construction industry to the next level. Among the many advantages of IBS is a more<br />
organised construction process resulting in higher quality completed projects with less<br />
wastage and in many cases, a lower cost as IBS delivers better value and hence<br />
higher productivity.<br />
The five most commonly used IBS components are system block works, system<br />
formworks, pre-cast concrete, steel structures and pre-fabricated roof trusses.<br />
System Block Works<br />
It consists of lightweight blocks of MC or modular coordinated dimensions. When used<br />
for low rise buildings such as load bearing walls, it enables a simple construction<br />
process with better finishing and a lower overall cost. The advantage over common<br />
bricks is that the lower weight and a more consistent dimension result in a lower<br />
overall structural requirement and there is no requirement for plastering.<br />
System Formworks<br />
They are modular coordinated sized panels of steel or aluminium manufactured in<br />
a factory to replace the standard plywood and timber formworks commonly used for<br />
reinforced concrete framed buildings. Although system formworks cost more initially,<br />
they can be reused up to a maximum of 250 times compared to plywood formworks<br />
which can be used up to six times only. System formworks can be totally recycled at<br />
the end of their useful life compared with plywood which is burnt or sent to a solid<br />
waste dumpsite. Typically, when moving from one project to another, about 75 percent<br />
of the system formworks can be re-used without any alteration as they consist of<br />
standard panels.<br />
Precast Concrete<br />
It ‘shifts’ the entire building process to the factory. All the reinforced concrete building<br />
components are manufactured in a factory and transported to the site for assembly<br />
only. With pre-stressed components, much greater spans and economy of materials is<br />
possible. The challenge is the higher cost of the standard concrete moulds. This can<br />
be overcome with innovative planning to reduce the type of moulds to the minimum.<br />
There is also no waste at the construction site as any waste collected can be sent to<br />
the factory for re-cycling.<br />
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Steel Structures<br />
They are usually implemented in high value buildings such as high rise offices, shopping<br />
malls, factories and special buildings. Steel is still not a mainstream structural material<br />
due to its higher initial cost. But its highly flexible nature and high strength to weight<br />
ratio has resulted in its used in many special and innovative buildings. Steel is also<br />
100% re-cycleable which adds to its advantage.<br />
CHAPTER 6<br />
Pre-Fabricated Roof Trusses<br />
They are used in almost all buildings today. Traditionally, timber roof trusses were<br />
fabricated at site from raw timber. Since the 2000’s however, almost all roof trusses<br />
have been changed to factory pre-fabricated trusses, either in timber or lightweight<br />
steel trusses. This is because of the higher quality and lower waste compared to<br />
traditional methods.<br />
The types of IBS components to be used or a combination of components used or any<br />
hybrid system used will depend on the project. To instill the necessary conditions and<br />
opportunities which encourage more extensive use of IBS, many more construction<br />
personnel will have to be trained in its design and construction process. Ultimately,<br />
it is IBS which results in higher productivity and a lower dependence on unskilled<br />
foreign labour in the construction industry.<br />
Contributed by:<br />
Ar. Chan Seong Aun, Director of Arkitek Dayaseni Sdn. Bhd.<br />
PRODUCTIVITY REPORT 2009 89
2009<br />
CHAPTER 6<br />
Measure to Mitigate the Impact of<br />
the Global Crisis<br />
• The economy was still suffering from the<br />
effect of the global economic slowdown.<br />
Bearing in mind the “ray of economic<br />
recovery” starts from the construction<br />
sector, a second stimulus package<br />
amounting to RM10 billion was launched<br />
by the Government of which RM8.4 billion<br />
was allocated to the construction sector<br />
to speed up the implementation of<br />
projects which have high local content<br />
and having the multiplier effect and<br />
can be implemented immediately.<br />
Some of the major projects include<br />
RM1.95 billion being allocated to build<br />
and improve facilities in 752 schools<br />
nationwide. Such stimulus package<br />
is an indication of the Government’s<br />
effort in helping the nation whether<br />
through the tough economic challenges<br />
while ensuring that the private sector<br />
is still being taken care of during such<br />
economic downturn.<br />
• To cushion the effect of the high prices<br />
of construction materials, import<br />
duties on many of these construction<br />
materials have been waived or reduced<br />
to help many construction companies<br />
which were struggling to maintain their<br />
profit. Notable deduction was the price<br />
of steel which during its peak, was<br />
price at RM4,000 per tonne and had<br />
subsequently been softened to around<br />
RM2,000 per tonne during the second<br />
half of 2009.<br />
Outlook for 2010<br />
• The launching of two stimulus packages<br />
during the last two years will provide the<br />
momentum for the construction sector<br />
to once again transform into a vibrant<br />
economic sector due to its linkages and<br />
multiplier effect with the other economic<br />
sector. This is reflected by the on-going<br />
construction of several mega projects<br />
especially in Sabah and Sarawak.<br />
90<br />
PRODUCTIVITY REPORT 2009
CHAPTER 7<br />
Productivity Performance of<br />
the Public Sector
PRODUCTIVITY PERFORMANCE OF THE PUBLIC SECTOR<br />
Public Sector Productivity<br />
• The Government is continuously<br />
enhancing productivity and efficiency<br />
of the public sector to transform the<br />
country from high middle income to<br />
high income economy by 2020.<br />
• The continuous efforts in productivity,<br />
innovation and competitiveness<br />
endeavours add value to the nation’s<br />
aspiration to realise the national<br />
mission of “1Malaysia, People First,<br />
Performance Now”. One of the<br />
crucial factors that contributes to a<br />
quantum leap in productivity level is by<br />
enhancing the efficiency of all factors<br />
of production.<br />
• The productivity improvement initiatives<br />
undertaken by the public sector such<br />
as developing and enhancing human<br />
capital capabilities namely Innovative<br />
and Creative Circles (ICC), Total Quality<br />
Management, Quality Environment,<br />
ISO 9000, Benchmarking, Key<br />
Performance Indicators and Service<br />
Innovation. These initiatives had<br />
enhanced efficiency and led in<br />
a productivity growth of 1.1% to<br />
RM32,440 in 2009 (Figure 7.1).<br />
Figure 7.1: Productivity Growth of the Public Sector<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
- Economic Planning Unit, Malaysia<br />
- Department of Statistics, Malaysia<br />
Figure 7.2: Government Revenue<br />
per Employee (Level)<br />
Public Sector Revenue and<br />
Expenditure<br />
• The development of external sector<br />
impacted on Government revenue<br />
which grew marginally by 1.4% to<br />
RM162,100 million. Government<br />
expenditure expanded by 1.3% to<br />
RM160,170 million while development<br />
expenditure increased by 8.9% to<br />
RM213,733 million.<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
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2009<br />
• Government revenue per employee<br />
recorded a marginal decline of 0.4%<br />
to RM126,988 in 2009 (Figure 7.2 and<br />
Figure 7.3).<br />
• Government development expenditure<br />
is specifically for security, social<br />
services (health, education, housing<br />
and poverty eradication), economic<br />
services (agriculture, public utilities,<br />
trade, transport and communication)<br />
and general administration. In 2009,<br />
total Government expenditure was at<br />
RM213,733 million (Figure 7.4).<br />
• The overall Government expenditure<br />
was for operating expenditure<br />
(RM160,170 million) while development<br />
expenditure increased to RM53,563<br />
million in 2009 from RM30,534 million<br />
in 2005 (Figure 7.4). Government<br />
expenditure as a percentage of GDP<br />
increased to 41.7% in 2009 from 37.2%<br />
in 2008 (Figure 7.5). The Government<br />
had also allocated 28% expenditure for<br />
developmental purposes particularly in<br />
education and training, defence and<br />
internal security, health, transportation,<br />
trade and industry as well as agriculture<br />
and rural development.<br />
Productivity Performance of the Public<br />
Service Sub-Sectors<br />
Figure 7.3: Government Revenue<br />
per Employee (Growth)<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Figure 7.4: Government Expenditure, 2005 - 2009<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Figure 7.5: Government Expenditure<br />
as a Percentage of GDP<br />
CHAPTER 7<br />
• The public service productivity is<br />
gauged by four sub-sectors namely<br />
economic services (agriculture and rural<br />
development; trade and industry; and<br />
transport), social services (education<br />
and training; health and housing),<br />
security services (defence and internal<br />
security), and public administration<br />
(Figure 7.6).<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
PRODUCTIVITY REPORT 2009 93
2009<br />
Figure 7.6: Public Service Sub-sectors<br />
CHAPTER 7<br />
Public Sector<br />
Productivity<br />
Economic<br />
Services<br />
Social<br />
Services<br />
Security<br />
Services<br />
Public<br />
Administration<br />
• Balance of<br />
payment<br />
• Ratio of trade<br />
to GDP<br />
• Export of<br />
goods<br />
• Per capita<br />
income<br />
• Rate of<br />
employment<br />
Health<br />
Services<br />
• No. of<br />
admission<br />
• Total patient<br />
days<br />
• Average length<br />
of stay<br />
• Life expectancy<br />
• Infant mortality<br />
rate<br />
Poverty<br />
Eradication<br />
• Poverty and<br />
hardcore poor<br />
Education<br />
Services<br />
• Total number<br />
of graduates<br />
• No. of<br />
graduates by<br />
programme<br />
• Literacy rate<br />
• Type of<br />
crime<br />
• Police to<br />
population<br />
• Crime per<br />
100,000<br />
population<br />
• Effective<br />
implementation<br />
of government<br />
decisions<br />
• Bribery and<br />
corruption<br />
• Bureaucracy<br />
• Transparency<br />
• Policy<br />
direction of the<br />
government<br />
• Legal and<br />
regulatory<br />
framework<br />
• Adaptability of<br />
government<br />
decisions to<br />
change<br />
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Table 7.1: Productivity of the Public Services Sub-Sectors<br />
Sub-sectors<br />
Public Sector<br />
Economic Services<br />
Social Services<br />
Security Services<br />
2006<br />
29,896<br />
28,216<br />
29,073<br />
24,588<br />
Productivity Level (RM)<br />
2007 2008<br />
30,905 32,073<br />
27,037 28,681<br />
30,178 30,764<br />
26,953 28,862<br />
2009<br />
32,440<br />
28,703<br />
31,284<br />
28,959<br />
Productivity Growth<br />
(%)<br />
2009<br />
1.14<br />
0.08<br />
1.69<br />
0.34<br />
CHAPTER 7<br />
General Public<br />
Administration<br />
62,265<br />
61,160<br />
64,129<br />
64,952<br />
1.28<br />
Computed from:<br />
- National Account, Various Issues, Department of Statistics<br />
- Economic Report, Various Issues<br />
- Labour Force Survey, Various Issues, Department of Statistics<br />
• The public level and growth of the public<br />
service sub-sectors are shown in Table<br />
7.1. Overall, the public sector recorded<br />
a growth of 1.1%. The productivity<br />
growth of the social sevices recorded<br />
the highest followed by general public<br />
administration at 1.3%. However, the<br />
productivity level in the general public<br />
administration recorded the highest<br />
at RM64,952 and followed by social<br />
services at RM31,284.<br />
Figure 7.7: Balance of Payments<br />
Economic Services Sub-Sector<br />
• The productivity level of the economic<br />
services was RM28,703 (Table 7.1).<br />
The Government has been sucessful in<br />
improving the economic condition of the<br />
country.<br />
• Among the indicators are balance of<br />
payments (BOP), ratio of trade to GDP,<br />
export of goods, per capita income, and<br />
unemployment. Balance of payments<br />
declined to RM92,000 million in 2009<br />
from RM130,000 million in 2008 (Figure<br />
7.7). Total trade to GDP ratio slightly<br />
decreased to 1:1.93 (Table 7.2).<br />
Source: Economic Report, Ministry of Finance, Malaysia<br />
Table 7.2: Ratio of Total Trade to GDP<br />
Year GDP Total Trade Total Trade : GDP<br />
(RM Million) (RM Million)<br />
2005 449,250 967,798 1 : 2.15<br />
2006 475,526 1,069,738 1 : 2.25<br />
2007 504,919 1,109,668 1 : 2.20<br />
2008 528,311 1,185,105 1 : 2.24<br />
2009 512,447 988,235 1 : 1.93<br />
Source: Economic Report, Ministry of Finance, Malaysia<br />
PRODUCTIVITY REPORT 2009 95
2009<br />
CHAPTER 7<br />
• Exports of goods in 2009 was<br />
RM553,295 million, while per capita<br />
income declined marginally to<br />
RM24,055 in 2009. In comparison per<br />
capita income in 2008 was RM25,784<br />
(Figure 7.8 and Figure 7.9).<br />
Figure 7.8: Exports of Goods<br />
• Unemployment rate remains low in the<br />
country (Figure 7.10). The Government<br />
has introduced incentives to improve<br />
human capital in the economy to<br />
enable them face the challenges of new<br />
environment.<br />
• Among the incentives are improving the<br />
infrastructure and access to education<br />
and training, more stringent selection<br />
criteria for quality teachers, encourage<br />
employers to upgrade technology,<br />
pay better wages and initiate other<br />
productivity enhancing measure.<br />
• Private sector is encouraged to invest in<br />
human capital development especially<br />
in the critical areas such as skilled<br />
training and inculcating productivity and<br />
quality culture at all organisations.<br />
Social Services Sub-Sector<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Figure 7.9: Per Capita Income<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
Figure 7.10: Rate of Unemployment<br />
• The social services sub-sector<br />
registered a growth of 1.7% to RM31,284<br />
in 2008. The Government is to ensure<br />
that the people will not be marginalised<br />
and the overall quality life be improved.<br />
Several development programmes<br />
have been developed to enhance this<br />
sector especially in health, education,<br />
information and communication<br />
technology and tourism.<br />
Percent<br />
Computed from:<br />
- Economic Report, Ministry of Finance, Malaysia<br />
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• The people especially in the rural areas<br />
will gain the benefits as access within the<br />
community will be increased. Business<br />
community will benefit from the ease of<br />
dealing with the Government through<br />
more efficient infrastructure and higher<br />
quality workforce.<br />
Figure 7.11: Admissions in Government Hospitals<br />
CHAPTER 7<br />
Health Services<br />
• The health services have been<br />
expanded all over the country to cater<br />
the needs of the public. The medical<br />
equipments were upgraded in improving<br />
the quality service to the patients.<br />
• The performance of health services in<br />
the government hospitals is indicated<br />
by the number of admissions and<br />
total patient days. The total number of<br />
admissions increased to 2.1 million in<br />
2008 as compared with 2.0 million in<br />
2007 as the facilities in the government<br />
hospitals improved (Figure 7.11).<br />
The total average patient days in the<br />
government hospital was at 8.2 days<br />
since 2004 (Figure 7.12).<br />
Source: Ministry of Health (MOH)<br />
Figure 7.12: Patient Days in Government Hospitals<br />
Source: Ministry of Health (MOH)<br />
• The life expectancy age for females<br />
improved from 75.9 years in 2004 to 76.4<br />
years in 2008. The life expectancy age<br />
for males also improved to 71.6 years<br />
in 2008 compared to 71.1 years in 2004<br />
(Figure 7.13). In terms of infant mortality<br />
rate, Malaysia has been experiencing<br />
low mortality at an average of 6.4 per<br />
1,000 live births (Figure 7.14).<br />
Age<br />
Figure 7.13: Life Expectancy in Malaysia<br />
Source: Economic Report, Ministry of Finance, Malaysia<br />
PRODUCTIVITY REPORT 2009 97
2009<br />
CHAPTER 7<br />
Poverty<br />
• The first step to tackle disparities in<br />
the socio-economic achievements<br />
of the country is poverty eradication.<br />
The Government is enhancing various<br />
capacity building programmes to ensure<br />
the effectiveness in uplifting households<br />
out of poverty. Under the Ninth Malaysia<br />
Plan, the Government aims at reducing<br />
rural-urban income ratio from 1:2.11 in<br />
2004 to 1:2.0 by 2010. Overall poverty<br />
declined to 3.6% in 2007 from 5.7%<br />
in 2006 while hardcore poverty was<br />
reduced to 0.7% in 2007 from 1.2% in<br />
2006. By 2010, hardcore poverty to be<br />
reduced by half to 2.5% (Figure 7.15).<br />
Figure 7.14: Infant Mortality Rate<br />
(per 1000 live births)<br />
Source: Economic Report, Ministry of Finance, Malaysia<br />
Figure 7.15: Incidence of Poverty and<br />
Hardcore Poverty<br />
• Among present poverty eradication<br />
strategies include increasing public<br />
healthcare to spur productivity and<br />
reduce absenteeism, providing<br />
housing, cooperation with nongovernmental<br />
organisations to improve<br />
the environment and living condition.<br />
Education Services<br />
• The world-class quality education<br />
system will nurture creativity and<br />
innovativeness among students and<br />
promote Malaysia as a centre of<br />
excellence. The education service in<br />
Malaysia is strategically planned in the<br />
Education Development Plan (2001-<br />
2010) to ensure all Malaysians from<br />
pre-school to tertiary level get the<br />
opportunities for quality education in<br />
terms of access, equity and quality.<br />
Source: Economic Report 2009/2010<br />
Figure 7.16: Number of Graduates<br />
from Public and Private Institutions<br />
Source: Ministry of Higher Education<br />
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PRODUCTIVITY REPORT 2009
2009<br />
• The total number of graduates increased<br />
to 153,757 in 2008 from 62,211 in 2004.<br />
The total number of graduates from the<br />
public universities increased to 75,236<br />
in 2008 from 43,826 in 2004 (Figure<br />
7.16).<br />
Figure 7.17: Number of Graduates<br />
by Types of Programmes<br />
CHAPTER 7<br />
• The number of graduates majoring in<br />
technical studies increased to 31,700<br />
graduates in 2008 from 9,886 graduates<br />
in 2004. This will meet the industries<br />
demand for skilled and technical<br />
workers (Figure 7.17). The literacy rate<br />
in Malaysia remained more than 90%<br />
(Figure 7.18).<br />
Security Services Sub-sector<br />
• A good infrastructure system in the<br />
country is a precondition to ensure<br />
public security. Security services<br />
recorded a productivity growth of<br />
0.3% to RM28,959 in 2009. The<br />
security services sub-sector comprises<br />
infrastructure and national security.<br />
Public Safety<br />
• Safety of the public is crucial in gaining<br />
the confidence of the investors and<br />
ensuring continuous economic growth<br />
in the country. The Government<br />
anticipated the number of police<br />
personnel to the ratio 1:500 in 2009<br />
(Table 7.3).<br />
• New approaches have been introduced<br />
to fight crime involving RELA and civil<br />
defense department. Among others<br />
are increasing the number of police<br />
personnel, upgrading the facilities and<br />
equipments, improving the performance<br />
of police services and installation of<br />
more CCTVs in crime prone areas.<br />
Source: Ministry of Higher Education<br />
Figure 7.18: Literacy Rate in Malaysia<br />
Source: Economic Report, Ministry of Finance, Malaysia<br />
Table 7.3: Total Number of Police to Population Ratio<br />
Year<br />
2006 2007 2008 2009<br />
Police : Population 1 : 278 1 : 251 1 : 307 1 : 500<br />
Source: Royal Malaysian Police<br />
PRODUCTIVITY REPORT 2009 99
2009<br />
CHAPTER 7<br />
Infrastructure Facilities<br />
• Efficient infrastructure system is<br />
essential to determine the effective<br />
economic activities in the country.<br />
Well-developed infrastructure will<br />
reduce delivery response time which<br />
enhances the competitive advantage.<br />
The Government has embarked on<br />
several major projects in improving<br />
rural infrastructure such as roads,<br />
communications and water.<br />
• Among 133 countries, Malaysia was<br />
ranked 27ᵗʰ for overall infrastructure,<br />
quality of port infrastructure (19ᵗʰ<br />
position), quality of roads (24ᵗʰ position),<br />
quality of air transport (27ᵗʰ position),<br />
quality of railroad infrastructure (19ᵗʰ<br />
position), as reported in the Global<br />
Competitiveness Report 2008-2009.<br />
General Public Administration<br />
Sub-sector<br />
• Public sector administrative efficiency<br />
performance is based on a perception<br />
survey on the following selected<br />
indicators namely, bureaucracy,<br />
transparency of government policy,<br />
government decision, bribery and<br />
corruption, legal and regulatory<br />
framework, and adaptability of<br />
government decisions (Figure 7.19).<br />
• Public sector administrative efficiency<br />
performance is analysed based on the<br />
ranking of 29 economies with population<br />
of more than 20 million (Table 7.4).<br />
• Based on the indicators, Malaysia was<br />
ranked 10ᵗʰ in terms of adaptability<br />
of Government and legal and<br />
regulatory framework policy followed<br />
by bureaucracy (16ᵗʰ), Government<br />
decisions (18ᵗʰ), bribery and<br />
transparency (31 st ) among selected<br />
Asian and OECD countries with<br />
population more than 20 million.<br />
• General public administration achieved<br />
a productivity growth of 1.3% to<br />
RM64,952. The Government continues<br />
implementing mechanisms to enhance<br />
the efficiency of the service delivery.<br />
• Continuous efforts have been initiated<br />
to improve public service delivery<br />
in enhancing transparency and<br />
streamlining processes and procedures<br />
such as reducing time for export<br />
clearance and property registration and<br />
facilitating e-Transactions. Rules and<br />
regulations will be closely monitored<br />
and reviewed with the objectives of<br />
improving perceptions and confidence<br />
of the public towards ease of doing<br />
business.<br />
International Comparison on Public<br />
Sector Performance<br />
• The international comparison on public<br />
sector performance in this section<br />
focuses on the following perspectives:<br />
comparison on Government efficiency<br />
based on competitiveness scoreboard;<br />
comparison on efficiency of public<br />
administration composite indicator for<br />
selected Asian and OECD countries;<br />
and comparison on public sector<br />
performance in terms of perceptual<br />
efficiency indicators.<br />
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PRODUCTIVITY REPORT 2009
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• Based on the performance indicator,<br />
Malaysia’s efficiency of public<br />
administration was higher than the rest<br />
of selected Asian economies except<br />
Singapore and Hong Kong. Malaysia’s<br />
performance was better than selected<br />
OECD countries such as Japan, UK and<br />
France. Overall, Denmark was leading<br />
in the efficiency of public administration<br />
in 2009 followed by Singapore and<br />
Finland (Table 7.5).<br />
CHAPTER 7<br />
Table 7.4: Ranking of Public Administration Efficiency with Population of More than 20 Million<br />
Government Bribery Legal and Adaptability Transparency Bureaucracy<br />
decision regulatory of government<br />
framework<br />
policy<br />
Malaysia 18 31 10 10 31 16<br />
Australia 9 5 6 4 9 7<br />
Canada 19 9 7 13 13 10<br />
Japan 47 18 39 43 44 26<br />
Korea 39 29 54 44 37 39<br />
Taiwan 26 28 26 23 35 15<br />
Thailand 28 41 21 16 29 23<br />
UK 44 15 25 27 32 35<br />
USA 38 23 19 29 26 27<br />
Source: World Competitiveness Yearbook 2009<br />
Figure 7.19: Framework for Measuring Efficiency in Public Administration<br />
Efficiency in<br />
Public<br />
Administration<br />
Government<br />
Decision<br />
Government<br />
Policy<br />
Transparency<br />
Bribery &<br />
Corruption<br />
Legal & Regulatory<br />
Framework<br />
Bureaucracy<br />
The extent to which government<br />
decisions are actively implemented<br />
The extent to which government policy<br />
is adaptable to change in the economy<br />
The extent to which government policy<br />
is transparent<br />
The extent of non-existence of high<br />
bribery and corruption<br />
The extent of the ability of the<br />
government to create conducive<br />
environment for enterprises to do<br />
business and invest<br />
The extent of bureaucracy not hindering<br />
business activities<br />
PRODUCTIVITY REPORT 2009 101
2009<br />
CHAPTER 7<br />
• Figure 7.20 shows the overall scores of<br />
Government efficiency in the selected<br />
Asian and OECD countries. Malaysia<br />
outperformed the selected Asian<br />
countries in all indicators. However for<br />
the legal and regulatory framework,<br />
Malaysia’s performance was lower than<br />
the OECD average score.<br />
• Overall, Malaysia’s performance based<br />
on the scores for the eight indicators<br />
ranged from 3.00 for non-existence<br />
of bribery and corruption as well as<br />
bureaucracy not hindering business<br />
activities to a score of 5.88 for fair<br />
accessible and efficient in terms of doing<br />
business process (Table 7.6). These<br />
scores need to be further improved as<br />
compared to the performance of the<br />
benchmark scores.<br />
Table 7.5: Efficiency of Public Administration among<br />
Selected Asian and OECD Economies in 2009<br />
RANK ECONOMIES PERFORMANCE*<br />
1 Denmark 7.51<br />
2 Singapore 7.51<br />
3 Finland 7.10<br />
4 Sweden 6.44<br />
5 Australia 6.38<br />
6 New Zealand 6.28<br />
7 Hong Kong 6.17<br />
8 Canada 5.74<br />
9 Ireland 5.40<br />
10 Malaysia 4.65<br />
11 United Kingdom 4.52<br />
12 France 4.49<br />
13 USA 4.46<br />
14 Japan 4.26<br />
15 Thailand 4.23<br />
16 Taiwan 4.17<br />
17 India 3.80<br />
18 Indonesia 3.33<br />
19 Korea 3.05<br />
20 Philippines 2.23<br />
Source: World Competitiveness Yearbook 2009<br />
* Score of 1-10, one being least efficient to 10 most efficient<br />
International Best Practices on Public<br />
Administration Efficiency<br />
• The public administration efficiency<br />
indicator provides the best practices<br />
on Public Service Administration for<br />
international comparison. Overall,<br />
Denmark and Singapore are the top<br />
two most efficient countries in public<br />
administration among 20 selected Asian<br />
and OECD economies (Table 7.7).<br />
• The Singapore government’s legal<br />
and regulatory framework creates a<br />
conducive environment for enterprises<br />
to do business and invest. The<br />
existing regulation also do not restrain<br />
companies from competing. This is a<br />
result of effective policy execution and<br />
policy options.<br />
Figure 7.20: Overall Government Efficiency<br />
Performance (2009)<br />
Source: World Competitiveness Yearbook 2009.<br />
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PRODUCTIVITY REPORT 2009
2009<br />
• Denmark should be benchmarked in<br />
terms of efficient justice process and<br />
transparency. In Denmark judicial<br />
independence is a requirement and<br />
is transparent through dialogue and<br />
collaboration. Disclosure of public<br />
information is also practised. Denmark<br />
also should be benchmarked in terms<br />
of reducing bribery and corruption.<br />
Enhancing Public Service Delivery<br />
• Overall Malaysia’s ranking in the World<br />
Bank’s Ease of Doing Business Report<br />
2010, decreased to 23 rd position in 2010<br />
from 21 st position in 2009. Malaysia<br />
was also ranked 1 st in terms of getting<br />
credit for business purposes and 4 th for<br />
protecting investors.<br />
• In 2009, improvements were made<br />
on many aspects to support growth<br />
and conducive business environment.<br />
Improvement initiatives have been<br />
implemented by the Government to<br />
coordinate and regulate activities of its<br />
various agencies to facilitate businesses.<br />
Examples are improvements in tax<br />
administration, establishing a one stop<br />
centre to expedite incorporation of<br />
companies, improving the processes<br />
for employing expatriates and skilled<br />
workers.<br />
Table 7.6: International Public Administration<br />
Efficiency Indicators<br />
Indicators Malaysia's Benchmark<br />
Performance Country and<br />
Performance<br />
Legal and Regulatory 5.82 Singapore (7.09)<br />
Framework<br />
Adaptability of Government 5.34 Singapore (8.18)<br />
Policy<br />
Ease of Doing Business 5.88 Singapore (7.85)<br />
Bribery and Corruption 3.00 Denmark (9.25)<br />
Government Decisions 4.48 Singapore (8.10)<br />
Transparency 3.94 Denmark (7.82)<br />
Bureaucracy 3.37 Denmark (6.12)<br />
Justice 5.37 Denmark (9.40)<br />
Source: World Competitiveness Yearbook 2009.<br />
Table 7.7: Ranking in Ease of Doing Business<br />
MALAYSIA<br />
Areas 2010 2009 Change in<br />
N=183 N=183 Ranking<br />
Overall 23 21 -2<br />
Starting a Business 88 76 -12<br />
Dealing with Construction 109 105 -4<br />
Permit<br />
Employing Workers 61 54 -7<br />
Registering Property 86 81 -5<br />
Getting Credit 1 1 0<br />
Protecting Investors 4 4 0<br />
Paying Taxes 24 21 -3<br />
Trading Across Borders 35 31 -4<br />
Enforcing Contracts 59 60 1<br />
Closing a Business 57 57 0<br />
Source: World Bank’s Ease of Doing Business Report 2010<br />
CHAPTER 7<br />
PRODUCTIVITY REPORT 2009 103
2009<br />
CHAPTER 7<br />
Box 7.1: Efficiency Enhancement for Public Sector - IMPaCT<br />
Innovative Malaysia: Productive and Creative Thinking (IMPaCT) is a comprehensive,<br />
systematic, integrated and advanced techniques or approaches to innovate the current<br />
processes, products and services of the public sector. The approach was adopted in<br />
selected land offices in Malaysia to improve the process by increasing the speed of<br />
delivery of land transfer for registration. Innovations done by using this technique<br />
include simplifying the forms, using online assessment systems, computerised<br />
property registration, and streamlining the processes by introducing the ‘One Piece<br />
Flow’ method. The impacts from the improvements were reductions in terms of time,<br />
procedures, costs, waste and also simplified procedures.<br />
IMPaCT<br />
(Innovative Malaysia: Productive and Creative Thinking)<br />
ISSUES<br />
IDEAS<br />
INNOVATION<br />
REVIEW<br />
REDESIGN<br />
RE-EVALUATE<br />
3I + 3R = IMPaCT<br />
Step 1:<br />
Issues<br />
Step 2:<br />
Review<br />
Step 3:<br />
Ideas<br />
Step 4:<br />
Redesign<br />
Step 5:<br />
Innovation<br />
Step 6:<br />
Re-evaluate<br />
Research<br />
◦◦<br />
Microsoft Excel, SPTB, Respective<br />
Record Book and SPSS<br />
Benchmarking<br />
◦◦<br />
Process Flow, Data Entry Process and<br />
Labour Productivity<br />
Training<br />
◦◦<br />
Process Flow, Simulation, Bar Coding,<br />
Training Module and Best Practice Visit<br />
Innovative Collaboration<br />
◦◦<br />
Redesign Process<br />
Implementation through Innovation<br />
◦◦<br />
Simulation and Visual Control System<br />
Performance Measurement<br />
◦◦<br />
Monitoring<br />
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Box 7.2: Government Transformation Programme<br />
The public sector plays a key role in anticipating, change and execute efficiently in<br />
ensuring the delivery of big fast results. The Prime Minister Dato’ Sri Najib Tun Razak<br />
in April 2009 had introduced the Government Transformation Programme (GTP)<br />
based on the principles of 1Malaysia, People First, Performance Now which is in line<br />
with the national mission of achieving Vision 2020 for Malaysia to become a fully<br />
developed nation. The objective of GTP is first, to transform the Government to be<br />
more effective in its delivery of services and accountable for outcomes that matter<br />
most to the rakyat and second, to move Malaysia forward to become an advanced,<br />
united, and just society with high standards of living for all. The six National Key Result<br />
Areas (NKRAs) identified to spearhead the Government's transformation are:<br />
CHAPTER 7<br />
• Reducing crime<br />
The Government will focus on three deliverables; reduced overall reported index<br />
crimes with focus on street crimes, improved public perception of safety through public<br />
participation and volunteerism and improve performance across the criminal justice<br />
system to build public confidence; and strengthen professional pride.<br />
• Fighting corruption<br />
In the efforts towards fighting against corruption, the Government has set the target to<br />
increase the CPI score from 4.5 to 4.9 by 2010 through three strategic actions; regain<br />
the public’s confidence in regulatory and enforcement agencies, reduce leakages in<br />
Government procurement; and tackle grand corruption.<br />
• Improving student outcomes<br />
Several focus areas have been identified to continuously improving student outcomes<br />
towards building a competitive workforce. The areas are to increase the pre-school<br />
enrolment rate of both 4+ and 5+ year-olds and improve the quality of the system;<br />
ensure that all children have acquired basic literacy and numeracy skills after three<br />
years of education; develop high performing schools and lift the performance of all<br />
schools in the system; significantly improve the performance of head teachers; and<br />
principals via performance management.<br />
PRODUCTIVITY REPORT 2009 105
2009<br />
• Raising living standards of low-income households<br />
CHAPTER 7<br />
A target of 2.8% from 3.6% has been set to completely eradicate hardcore poverty<br />
by end of 2010. In achieving the target, measures to enhance the productivity of lowincome<br />
households (LIH) who do not fall under the categories of poor and extreme<br />
poor will be undertaken. The initiatives are to standardise the definition of low-income<br />
groups; implement fast, high-impact initiatives immediately, lay the groundwork for<br />
longer-term actions; and put enablers in place to ensure delivery of initiatives.<br />
• Improving rural basic infrastructure<br />
Major rural basic infrastructure development programmes in Malaysia have been<br />
embarked to meet the requirements of the rural population. Over the next three years,<br />
the Government has targeted to build 11 times kilometres of the roads, construct 2.5<br />
times as many houses, 5 times houses with electricity, and connect 7 times as many<br />
houses to clean water as compared to 2006-2008.<br />
• Improving urban public transport<br />
Several areas have been identified to address the critical issues in public transport<br />
especially for urban Malaysians. Among them are to raise the modal share to 13%<br />
by 2010 and 25% by 2010 during peak period in Klang Valley; improve reliability and<br />
journey times; enhance comfort and convenience; and improve accessibility and<br />
connectivity such that the population living within 400 metres of a public transport<br />
route increases from 63% to 75% in 2010.<br />
Excerpt from: Government Transformation Programme<br />
106<br />
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CHAPTER 8<br />
Productivity Performance of the<br />
Small and Medium Industries<br />
(Manufacturing Sector)
PRODUCTIVITY PERFORMANCE OF THE<br />
SMALL AND MEDIUM INDUSTRIES (MANUFACTURING SECTOR)<br />
<strong>Overview</strong><br />
• The Small and Medium Industries<br />
(SMIs) assumed an important role<br />
in Malaysia industrial development<br />
through supply linkages and provide<br />
the foundation for strengthening the<br />
nation’s industrial base. The<br />
development of competitive and<br />
resilient SMIs is a key component of<br />
the Government’s economic growth<br />
strategy as outlined in the Ninth<br />
Malaysia Plan (9MP) and the Third<br />
Industrial Master Plan (IMP3).<br />
• The key strategies to enhance the<br />
capabilities of the SMIs include<br />
outsourcing programmes that<br />
facilitate technological transfer,<br />
skills development and marketing,<br />
inter-firm linkages to enhance SMIs<br />
competitiveness; and entrepreneurship<br />
and skills development programmes.<br />
• In 2010, SMIs is targeted to contribute<br />
37% to the country’s GDP. In terms<br />
of export, SMIs is to contribute 22%<br />
of total export of the economy<br />
Figure 8.1: SMIs Contribution to the Economy<br />
Source: SME Annual Report, 2008<br />
(Figure 8.1). This will be achieved<br />
through the modernisation of the<br />
sector by investing in human capital,<br />
advanced technology and effective<br />
marketing strategies to cater for<br />
domestic and external markets. To<br />
sustain further growth of the sector,<br />
the Government has allocated RM11.8<br />
billion for SMIs development under the<br />
second economic stimulus package.<br />
Table 8.1: Total Output, Added Value and Employment of SMIs<br />
Level*<br />
Contribution to<br />
Manufacturing Sector (%)<br />
Growth<br />
(%)<br />
2008<br />
2009<br />
2008<br />
2009<br />
2009<br />
Total Output<br />
100,010<br />
100,580<br />
30.89<br />
31.61<br />
0.57<br />
Added Value<br />
20,522<br />
20,444<br />
26.53<br />
26.70<br />
-0.38<br />
Employment<br />
421,186<br />
422,155<br />
31.78<br />
31.89<br />
0.23<br />
* Value Levels for Total Output and Added Value are in RM Million<br />
Computed from:<br />
- Annual Survey of Manufacturing Industries, Department of Statistics, Malaysia<br />
108<br />
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2009<br />
Performance of the SMIs in the<br />
Manufacturing Sector<br />
• In 2009, total output of SMIs grew<br />
by 0.6% to RM100,580 million<br />
and contributing 31.6% of total<br />
manufacturing output (Table 8.1). Most<br />
of the enterprises in the SMIs engaged<br />
in the manufacture of food products<br />
and beverages (32.7%), chemicals and<br />
chemical products (17.0%), rubber and<br />
plastics products (10.1%), fabricated<br />
metal products (6.4%) and basic metal<br />
products (5.9%) (Table 8.2). These subsectors<br />
accounted for 72.1% of SMIs<br />
total output valued at RM72,541 million.<br />
Table 8.2: Top-Five SMIs Sub-Sector’s<br />
Contribution to Total SMIs Output<br />
Computed from:<br />
- Annual Survey of Manufacturing Industries,<br />
Department of Statistics Malaysia<br />
Table 8.3: Top-Five SMIs Sub-Sector’s<br />
Contribution to Total SMIs Added Value<br />
CHAPTER 8<br />
• Added value declined by 0.4% to<br />
RM20,444 million and contributing<br />
26.7% of total manufacturing added<br />
value (Table 8.1). The major<br />
contributors were food products and<br />
beverages (22.4%), chemicals and<br />
chemical products (18.8%), rubber and<br />
plastics products (11.4%), fabricated<br />
metal products (7.8%) and non-metallic<br />
mineral products (5.2%) (Table 8.3).<br />
These sub-sectors contributed 65.5%<br />
of SMIs added value.<br />
• In 2009, a total of 422,155<br />
employees were engaged in the<br />
sector and contributing 31.9% of total<br />
manufacturing employment (Table 8.1).<br />
Most were employed in food products<br />
and beverages (17.0%), rubber and<br />
plastics products (12.7%), chemicals<br />
and chemical products (9.8%),<br />
fabricated metal products (6.2%) and<br />
wood and wood products (5.9%) (Table<br />
8.4). These sub-sectors contributed<br />
51.6% of total SMIs employment.<br />
Computed from:<br />
- Annual Survey of Manufacturing Industries,<br />
Department of Statistics Malaysia<br />
Table 8.4: Top-Five SMIs Sub-Sector’s<br />
Contribution to Total SMIs Employment<br />
Computed from:<br />
- Annual Survey of Manufacturing Industries,<br />
Department of Statistics Malaysia<br />
PRODUCTIVITY REPORT 2009 109
2009<br />
CHAPTER 8<br />
Box 8.1: SMIs towards Green Productivity<br />
Green Productivity (GP) is a method for achieving economic growth without harming<br />
the environment through the use of management programmes, techniques and tools,<br />
such as ISO 14001, benchmarking, control charts and the 3Rs (reuse, reduce, recycle).<br />
The ultimate aim is to achieve sustainable growth that has become more important<br />
today in light of dwindling resources, consumer-driven societies and current economic<br />
landscape.<br />
The 3Rs, under the wider scope of GP, help SMIs to lower the cost of production by<br />
reducing the amount of waste produced, reuse of resources and improving waste<br />
disposal methods. Manufacturing companies can minimise the environmental impact<br />
at the designing stage by using only materials that are needed. This can also potentially<br />
reduce manufacturing costs since fewer materials are used and the production process<br />
is simplified. The strategy is to ensure that innovative ideas are transformed not only<br />
into commercial gains but also to the benefits for the environment and community.<br />
From the company's perspective, it brings benefits in the form of better health and<br />
safety standards, higher quality products, and better regulatory compliance and<br />
improved environmental protection. Ultimately, it increases living standards, raise<br />
morale amongst workers and leads to a continuous loop of innovation, productivity<br />
and environmental conservation.<br />
In essence, GP allows SMIs to become competitive by doing more with less. So how<br />
can the 3Rs and GP help SMIs compete and be productive? One way of answering this<br />
is to go back to the concept of waste. Waste is a result of an inefficient process, or in<br />
other words, an excess of materials. Therefore, reducing waste increases efficiency,<br />
and the result of increased efficiency is increased productivity and profits.<br />
Companies can start off their waste management programmes by focusing on everyday<br />
activities. For instance, starting with reducing waste, companies can set their printers<br />
to print on both sides of paper by default. Today’s technology make paper files almost<br />
obsolete, so staff should make use of computer to create electronic documents, such<br />
as letters, notes, calendars and memos. Not only does this save paper, but it also<br />
saves office space and eliminates the need to buy bulky storage and filling cabinets.<br />
Companies can also seek how to reduce packing materials when sending products to<br />
customers and select suppliers that use minimal packaging.<br />
A typical office uses a lot of paper, so staff should ensure that paper used on only<br />
one side should be set aside so that it can be reused. Companies should consider<br />
investing in rechargeable batteries and battery charges for flashlights, remote controls,<br />
cameras and other devices. While the initial investment might seem expensive, it will<br />
save money in the long run and has less impact on the environment.<br />
110<br />
PRODUCTIVITY REPORT 2009
2009<br />
<strong>MPC</strong> collaborated with the Education Ministry and Green Purchasing Network<br />
Malaysia (GPNM) to establish a Smart Kids Project on Creating Green Values. The<br />
aim is to create awareness at school level on not only about the importance of a clean<br />
environment but also on how one can make profits from it. Kids are taught the 3Rs<br />
concept and how recycling can be a lucrative business. Materials that are recycled are<br />
turned into new items and later sold, with proceeds going into a fund called “Waste<br />
Banks”. The aim is to instill the values of the 3Rs concept in children and create a new<br />
generation of environmentally responsible entrepreneurs.<br />
CHAPTER 8<br />
Productivity Performance<br />
Added value per employee<br />
Figure 8.2: Productivity of SMIs, 2005-2009<br />
• In 2009, SMIs recorded a slight<br />
decline in productivity (as measured<br />
by added value per employee) at 0.6%<br />
to RM48,428 (Figure 8.2). The sector<br />
was successful in mitigating the impact<br />
of global economic slowdown through<br />
initiatives implemented among others<br />
enhancing work efficiency and reducing<br />
operational costs through minimising<br />
wastages and rework.<br />
• Among sub-sectors that registered<br />
growth were food products and<br />
beverages (1.7%), textiles (1.1%),<br />
rubber and plastics products (1.0%),<br />
wearing apparels (0.8%) and wood and<br />
wood products (0.7%) (Figure 8.3).<br />
• Export-oriented industries such as<br />
petroleum products (-6.4%), office,<br />
accounting and computing machinery<br />
(-5.9%), basic metals (-5.3%), chemicals<br />
and chemical products (-3.3%) and<br />
machinery and equipments (-1.9%)<br />
experienced contraction in productivity.<br />
Computed from:<br />
- Annual Survey of Manufacturing Industries,<br />
Department of Statistics Malaysia<br />
Figure 8.3: Productivity Growth of SMIs by<br />
Sub-sectors, 2009<br />
Food products & beverages<br />
Textiles<br />
Rubber & plastics products<br />
Wearing apparels<br />
Wood & wood products<br />
Motor vehicles, trailers & semi trailers<br />
Publishing & printing<br />
Non-metallic mineral products<br />
Electrical machinery & apparatus products<br />
Fabricated metal products<br />
SMIs average<br />
Radio, TV & communication equipments<br />
Paper & paper products<br />
Machinery & equipments<br />
Chemicals & chemical products<br />
Basic metals<br />
Office, accounting & computing machinery<br />
-5.9<br />
-5.3<br />
-3.3<br />
-1.9<br />
-0.6<br />
-0.6<br />
-0.6<br />
1.1<br />
1.0<br />
0.8<br />
0.7<br />
0.7<br />
0.6<br />
0.6<br />
0.5<br />
0.4<br />
1.7<br />
Petroleum products<br />
-6.4<br />
-8.0 -6.0 -4.0 -2.0 0 2.0<br />
Computed from:<br />
- Annual Survey of Manufacturing Industries,<br />
Department of Statistics Malaysia<br />
PRODUCTIVITY REPORT 2009 111
2009<br />
Capital intensity<br />
CHAPTER 8<br />
• The decline in manufactured exports<br />
reduce the production volume, resulting<br />
in lower capacity utilisation. In first<br />
quarter of 2009, capacity utilisation<br />
declined to 72%. However, the rate<br />
improved in the fourth quarter to 81%,<br />
taking the que from the recovery of the<br />
domestic and global economy. Capital<br />
intensity as measured by fixed assets<br />
per employee, registered a marginal<br />
growth of 0.7% to RM40,034 (Figure<br />
8.4).<br />
Figure 8.4: Capital Intensity of SMIs,<br />
2005-2009<br />
• Among the sub-sectors that recorded<br />
expansion in capital intensity were<br />
machinery and equipments (2.0%),<br />
non-metallic mineral products (1.9%),<br />
electrical machinery and apparatus<br />
products (1.8%), publishing and printing<br />
(1.4%) and basic metals (0.9%).<br />
Computed from:<br />
- Annual Survey of Manufacturing Industries,<br />
Department of Statistics Malaysia<br />
Figure 8.5: Capital Productivity of SMIs,<br />
2005-2009<br />
Capital productivity<br />
• In 2009, capital productivity as<br />
measured by added value per fixed<br />
assets, declined by 1.2% (Figure 8.5).<br />
Among the sub-sectors that registered<br />
positive growth in capital productivity<br />
were fabricated metal products (2.4%),<br />
wood and wood products (2.2%),<br />
textiles (1.5%), furniture (1.2%) and<br />
food products and beverages (0.9%).<br />
Computed from:<br />
- Annual Survey of Manufacturing Industries,<br />
Department of Statistics Malaysia<br />
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2009<br />
Labour cost competitiveness<br />
• Labour cost competitiveness of the<br />
SMIs was sustained as indicated by a<br />
marginal decline of 0.2% in unit labour<br />
cost. This was attributed to the business<br />
strategy of retaining employees in<br />
anticipation of economic recovery in<br />
2010. Labour cost per employee grew<br />
by 0.5% while labour productivity<br />
contracted by 0.6% (Figure 8.6).<br />
Figure 8.6: Labour Cost Competitiveness of<br />
SMIs, 2005-2009<br />
CHAPTER 8<br />
• Among the sub-sectors experiencing<br />
sustained labour cost competitiveness<br />
were non-metallic mineral products<br />
(-0.9%), textiles (-0.6%), motor vehicles,<br />
trailers and semi trailers (-0.5%),<br />
fabricated metal products (-0.4%) and<br />
food products and beverages (-0.4%)<br />
(Table 8.5).<br />
Computed from:<br />
- Annual Survey of Manufacturing Industries,<br />
Department of Statistics Malaysia<br />
Table 8.5: Labour Cost Competitiveness of SMIs, 2009<br />
Sub-Sector<br />
Productivity<br />
Labour Cost<br />
per Employee<br />
Growth (%)<br />
Unit Labour<br />
Cost<br />
SMIs Average<br />
-0.60<br />
0.57<br />
0.21<br />
Food products and beverages<br />
1.69<br />
0.70<br />
-0.38<br />
Textiles<br />
1.07<br />
0.51<br />
-0.57<br />
Rubber and plastics products<br />
1.04<br />
0.37<br />
-0.10<br />
Wearing apparels<br />
0.82<br />
0.38<br />
-0.36<br />
Wood and wood products<br />
0.73<br />
0.11<br />
-0.26<br />
Motor vehicles, trailers and semi trailers<br />
0.70<br />
0.20<br />
-0.45<br />
Publishing and printing<br />
0.56<br />
-0.16<br />
-0.31<br />
Non-metallic mineral products<br />
0.56<br />
0.25<br />
-0.88<br />
Electrical machinery and apparatus<br />
products<br />
0.52<br />
0.16<br />
-0.25<br />
Fabricated metal products<br />
0.45<br />
0.17<br />
-0.42<br />
Radio, television and communication<br />
equipments<br />
-0.58<br />
0.64<br />
1.62<br />
Paper and paper products<br />
-0.56<br />
0.62<br />
2.14<br />
Machinery and equipments<br />
-1.89<br />
0.75<br />
0.88<br />
Chemicals and chemical products<br />
-3.33<br />
0.41<br />
2.15<br />
Basic metals<br />
-5.29<br />
0.94<br />
3.13<br />
Office, accounting and computing machinery<br />
-5.94<br />
-1.24<br />
2.33<br />
Petroleum products<br />
-6.36<br />
0.26<br />
3.43<br />
Computed from:<br />
- Annual Survey of Manufacturing Industries, Department of Statistics Malaysia<br />
PRODUCTIVITY REPORT 2009 113
2009<br />
CHAPTER 8<br />
Box 8.2: Enhancing Productivity through Quality Environment Activities<br />
One of the activities which organisations can adopt for immediate results is the<br />
implementation of Quality Environment (QE) practices. QE practices involved sorting out<br />
materials to be stored in designated places, discarding unnecessary items, simplifying<br />
processes and continuously ensuring that the practices are continuously improved<br />
upon and maintained. A study conducted by <strong>MPC</strong> on the impact of implementing QE<br />
practices, showed that QE practices had contributed to improvement in productivity,<br />
quality of workforce, visual management and service delivery. 83.0% of the companies<br />
implementing QE practices reported reductions in reworks and optimisation of floor<br />
space with better shop floor layout, and 78.4% experienced increased employee<br />
creativity, teamwork and morale.<br />
68.8% of respondents achieved a reduction in customer complaints, 82.8% were<br />
happy with the improved visual management and more efficient material handling<br />
and retrieval time in the production area. The better efficiency achieved through QE<br />
practices had contributed to higher sales and reduction in operation costs.<br />
Among the practitioners of QE practices is Zamria Sdn. Bhd. which had converted a<br />
storage area into functional office space for meetings as well as setting up a cafeteria.<br />
The implementation of QE in Kiwi Manufacturing Sdn. Bhd. had contributed to a better<br />
organised warehouse. With the improved layout of the warehouse, the number of<br />
employees required to manage the warehouse was reduced to 14 from 21, reflecting<br />
an improved efficiency of 33%.<br />
<strong>MPC</strong> had certified a total of 703 organisations in QE. These certifications assess the<br />
ability of organisations in their attainment of quality standard in workplace environment<br />
management and their commitment to meet customer needs through continuous<br />
improvements.<br />
Outlook for 2010<br />
• In 2010, SMIs is expected to perform<br />
better by registering a productivity<br />
growth of more than 1.5%. SMIs need<br />
to further improve its capacity and<br />
capabilities by investing in appropriate<br />
technologies and enhancing human<br />
capital capabilities through training and<br />
retraining human capital.<br />
• The adoption of new technologies are<br />
crucial to enhance the capacity and<br />
capabilities of SMIs. ICT utilisation<br />
needs to be intensified in core function<br />
such as in production process, product<br />
design, production planning, inventory<br />
management, logistics as well as sales<br />
and marketing. These will assist SMIs<br />
to improve its operational flow, increase<br />
production rate, minimise wastages<br />
and improve quality of products and<br />
services.<br />
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Box 8.3: Importance of Product Development for SMIs<br />
Developing a distinctive product and marketing strategy are just two of the keys to<br />
success in today's competitive market. The strategy entails product development<br />
through which SMIs get to define and develop a competitive advantage over hundreds<br />
of other companies. SMIs also get to expand and diversify customer base and also<br />
stay in touch with customers and look to them for new product ideas and feedback.<br />
CHAPTER 8<br />
As technologies continue to advance, customers' expectation also increases. SMIs<br />
can no longer produce a standard line of products with occasional enhancement<br />
or innovation and expect to hold on to its customer base. SMIs must improve and<br />
innovate continuously to thrive and remain competitive in the market.<br />
Understanding Customers' Needs<br />
Pursuing new ideas or innovations is a challenge that can prove to be costly and timeconsuming.<br />
There are no guarantees of success but development of new product<br />
ideas must be supported by diligent researching and keeping up with industries and<br />
most importantly, meeting the demands of consumers. Understanding customers'<br />
needs requires not just talking to customers and conducting research but also visiting<br />
market sites and talking to operators involved in the business. This will help in market<br />
analysis, adaptation of technologies and development of strategies. Good strategic<br />
planning and effective implementation of plans facilitate growth and is often a key<br />
factor in the success of companies. One effective strategic plan is by creating value<br />
on products which competitors cannot match. One of the approaches is to focus on<br />
higher-end and higher-margin products supported by responsive customer service,<br />
speed and convenience. Customers' needs drive the product development process<br />
and it is imperative for companies to embark on development efforts and innovation<br />
involving customers.<br />
Innovation<br />
Innovation in itself is not the same as product development. Rather, it is a structured<br />
process encompassing product design and development, the development of new<br />
processes, organisational innovation, innovative customer service approaches and<br />
the development of innovative linkages with business partners and other companies<br />
such as suppliers and vendors. Successful product development within the context of<br />
innovation often leads to additional benefits for users, suppliers, industry partners as<br />
well as to the innovating SMIs.<br />
PRODUCTIVITY REPORT 2009 115
2009<br />
CHAPTER 8<br />
Innovative strategies often mean higher returns compared to strategies based on low<br />
pricing of products or services. SMIs that compete primarily on low price strategy are<br />
often more vulnerable to competition. No doubt, managing costs is crucial but low<br />
costs alone are not always sufficient to deal with competitiveness. Companies that<br />
adopt innovative product development, processes, marketing or even organisational<br />
methods can distinguish themselves in the light of competition and thrive better even<br />
when faced with low-cost challenge. SMIs that compete on innovation in products and<br />
processes rather than on low cost often earn higher profits and also benefit from the<br />
services of skilled employees.<br />
Product Planning<br />
SMIs must also continuously evaluate and tap potential opportunities which must<br />
be explicitly stated in product plans. Product planning as part and parcel of product<br />
development helps resolve issues related to the markets, the types of products and<br />
opportunities that the company can invest in and the resources required to support<br />
product development. Product planning is important for SMIs to:<br />
• Define an overall strategy for products to guide selection of development projects;<br />
• Define target markets, customers, competitive strengths and competition strategy;<br />
• Position planned products relative to competitive products and identifies what will<br />
differentiate or distinguish these products from the competition;<br />
• Rationalise competing development projects and establish priorities for development<br />
projects;<br />
• Provide a high-level schedule of various development projects; and<br />
• Estimate development resources and balance project resource requirements with a<br />
budget in the overall business plan.<br />
Product plans that are continuously reviewed and updated taking into consideration<br />
changing market conditions, new product opportunities and emergence of new product<br />
technologies will all have an impact on product development projects. For each project,<br />
a product plan that defines the target market and customers will lead to strategies to<br />
capture the market and fulfill customers' needs. SMIs that are able to specifically<br />
identify target customers and their needs and use appropriate mechanisms to collate<br />
and utilise information on the diverse customers' needs will very often able to develop<br />
successful products.<br />
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Product Development Projects<br />
The responsibility of defining customers' needs and product requirements is traditionally<br />
attributed to marketing, which very often tends to isolate product development and<br />
technical personnel from customers and from gaining a first hand understanding of<br />
customers' needs. By embarking on product development projects, SMIs will create<br />
opportunities for the development and technical team to better understand the<br />
customers and evaluate product attributes or shortcomings. This in turn will give a<br />
better perspective for development decisions and an insight into product performance.<br />
Customers' perspective on the competition relative to the proposed product will also<br />
very often comes forth during the product development process. This is important<br />
in addressing questions such as the ranking of competitive products against the<br />
proposed product or prototype.<br />
CHAPTER 8<br />
Customers' needs that are translated into product requirements can also address<br />
product performance requirements and technical characteristics as well as ease<br />
of use; ergonomics; styling and aesthetics; robustness; reliability; life cycle; and<br />
packaging, among others. With accurate translation of customers' needs, it is less<br />
likely that resulting specifications will be incomplete or ambiguous. However, product<br />
requirements must always be managed and evaluated depending on changing market<br />
and customers' demands as well as technological advancement.<br />
To be successful, a comprehensive, well-defined and continuous process is required<br />
from the starting point of product plan right to the stage of receiving customers' feedback<br />
or critique. SMIs cannot rest on their laurels by just depending on existing products,<br />
market and customers, as they must achieve sustainable growth and expand market<br />
share in order to stay in business.<br />
PRODUCTIVITY REPORT 2009 117
PART 3<br />
Strengthening<br />
Domestic Capabilities
CHAPTER 9<br />
Towards Global<br />
Competitiveness
TOWARDS GLOBAL COMPETITIVENESS<br />
Malaysia’s Competitiveness<br />
Performance<br />
• Malaysia’s competitiveness has often<br />
been referred in three closelymonitored<br />
international reports namely,<br />
the World Competitiveness Yearbook<br />
(WCY) by the Institute for Management<br />
Development (IMD), the Global<br />
Competitiveness Report (GCR) by the<br />
World Economic Forum (WEF) and the<br />
Doing Business Report (DB) by the<br />
World Bank.<br />
• In the year 2009, Malaysia’s ranking<br />
in the IMD World Competitiveness<br />
Yearbook was 18 th out of 57 economies,<br />
while Malaysia was ranked 24 th out of 133<br />
countries in the Global Competitiveness<br />
Report 2009-2010 and 23 rd out of 183<br />
countries in the Doing Business Report<br />
2010. Each of these reports has its<br />
own uniqueness and adopts differing<br />
approaches in ranking competitiveness<br />
performance among economies.<br />
A. World Competitiveness Yearbook<br />
by the Institute for Management<br />
Development (IMD)<br />
• The Institute for Management<br />
Development (IMD) is based in<br />
Lausanne, Switzerland. Since 1989,<br />
it has been publishing annually the<br />
IMD World Competitiveness Yearbook,<br />
which ranks nations according to its<br />
competitiveness index. The report is<br />
based on quantitative or statistical<br />
data and qualitative or perception data,<br />
obtained from feedback of the private<br />
sectors through the Executive Opinion<br />
Survey. The perception data is used<br />
to complement the statistical data to<br />
quantify issues that are not easily<br />
measured, for instance management<br />
practices and labour relations. The<br />
survey responses reflect opinions of<br />
the business community towards the<br />
competitiveness environment of an<br />
economy. The statistical data carries<br />
a weightage of two-thirds in the overall<br />
ranking, while the perception data<br />
represents a weightage of one-third.<br />
There are 135 statistical data and 110<br />
perception data, bringing a total of 255<br />
data which are ranked and analysed.<br />
• The IMD World Competitiveness<br />
presents competitiveness ranking in 4<br />
categories:<br />
• Global (overall)<br />
i. By size (Population exceeding 20<br />
million; and population less than 20<br />
million);<br />
ii. By wealth (GDP per capita greater<br />
than USD20,000 and GDP per<br />
capita less than USD20,000); and<br />
iii. By regions (Europe-Middle East-<br />
Africa, Asia-Pacific and the<br />
Americas).<br />
• The World Competitiveness Yearbook<br />
divides the national environment into<br />
four main factors namely Economic<br />
Performance, Government Efficiency,<br />
Business Efficiency and Infrastructure.<br />
Malaysia’s overall performance in the<br />
Yearbook is shown in Figure 9.1.<br />
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Various Categories 2009<br />
Figure 9.1: Malaysia’s Overall Performance in<br />
IMD World Competitiveness Yearbook 2009<br />
18/57<br />
1/29<br />
6/29<br />
6/13<br />
4 Factors<br />
(By Overall)<br />
Economic Performance<br />
Government Efficiency<br />
Business Efficiency<br />
Infrastructure<br />
4 Factors<br />
(By Population Size)<br />
Economic Performance<br />
Government Efficiency<br />
Business Efficiency<br />
Infrastructure<br />
2009<br />
n=57<br />
9<br />
19<br />
13<br />
26<br />
2009<br />
n=29<br />
4<br />
6<br />
4<br />
10<br />
CHAPTER 9<br />
B. Global Competitiveness Report<br />
by World Economic Forum<br />
(WEF)<br />
• The Global Competitiveness Report<br />
(GCR) by the World Economic<br />
Forum based in Switzerland was<br />
first launched in 1979 covering 16<br />
countries. The GCR examined factors<br />
enabling national economies to achieve<br />
sustained economic growth and long<br />
term prosperity through its 12 pillars of<br />
competitiveness involving 110 indicators<br />
of which 80% are perception data and<br />
only 20% are quantitative data. The 12<br />
pillars are:<br />
1. Institutions<br />
2. Infrastructure<br />
3. Macroeconomic Stability<br />
4. Health and Primary Education<br />
5. Higher Education and Training<br />
6. Goods Market Efficiency<br />
7. Labour Market Efficiency<br />
8. Financial Market Sophistication<br />
9. Technological Readiness<br />
10. Market Size<br />
11. Business Sophistication<br />
12. Innovation<br />
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CHAPTER 9<br />
• In the latest report, Malaysia, with a<br />
ranking of 24 th , remained at the top<br />
quartile of the overall ranking among<br />
133 countries. Malaysia’s performance<br />
in each of the pillars is reflected in<br />
Figure 9.2.<br />
• The 12 pillars are organised into 3 subindices<br />
of the Global Competitiveness<br />
Index which are then used to rank<br />
countries into 3 stages of development<br />
namely Factor-driven, Efficiencydriven<br />
and Innovation-driven.<br />
• Factor driven economies – Basic factor<br />
conditions such as low-cost labour<br />
and unprocessed natural resources<br />
are the dominant basis of competitive<br />
advantage and exports. Factor-driven<br />
economies are highly sensitive to world<br />
economic cycles, commodity prices,<br />
and exchange rate fluctuations.<br />
• Efficiency driven economies – A<br />
country’s advantage comes from<br />
producing more-advanced products and<br />
services efficiently. Heavy investments<br />
in efficient infrastructure, business<br />
friendly government administration,<br />
strong investment incentives, improving<br />
skills, and better access to investment<br />
capital allow major improvements in<br />
productivity.<br />
• Innovation driven economies – The<br />
ability to produce innovative products<br />
and services at the global technology<br />
frontier using the most advanced<br />
methods becomes the dominant source<br />
of competitive advantage. An innovationdriven<br />
economy is characterised by<br />
distinctive producers and a high share<br />
of services in the economy and is quite<br />
resilient to external shocks.<br />
Figure 9.2: Malaysia’s Competitiveness Landscape<br />
Basic Requirements Efficiency Enhancers Innovation Factors<br />
6<br />
43<br />
26<br />
42<br />
34<br />
41<br />
30 31<br />
37<br />
28<br />
24 24<br />
Pillar 12:<br />
Innovation<br />
Pillar 11:<br />
Business Sophistication<br />
Pillar 10:<br />
Market Size<br />
Pillar 9:<br />
Technological Readiness<br />
Pillar 8:<br />
Financial Market Sophistication<br />
Pillar 7:<br />
Labour Market Efficiency<br />
Pillar 6:<br />
Goods Market Efficiency<br />
Pillar 5:<br />
Higher Education & Training<br />
Pillar 4:<br />
Health & Primary Education<br />
Pillar 3:<br />
Macroeconomic Stability<br />
Pillar 2:<br />
Infrastructure<br />
Pillar 1:<br />
Institutions<br />
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• According to the report, Malaysia<br />
is in the efficiency-driven stage of<br />
development, with higher education<br />
and training; goods market efficiency,<br />
labour market efficiency, financial<br />
market sophistication, technological<br />
readiness and market size as the main<br />
contributing factors as shown in Figure<br />
9.3.<br />
CHAPTER 9<br />
Figure 9.3: Stage of Development - Malaysia<br />
1<br />
Factor Driven<br />
Transition<br />
1-2<br />
Transition<br />
2 3<br />
2-3<br />
Efficiency Driven<br />
Innovation Driven<br />
Business<br />
sophistication<br />
Market size<br />
Innovation<br />
Institutions<br />
7<br />
6<br />
5<br />
4<br />
3<br />
2<br />
1<br />
Infrastructure<br />
Macroeconomic<br />
stability<br />
Health and<br />
primary education<br />
Technological<br />
readiness<br />
Financial market<br />
sophistication<br />
Labour market<br />
efficiency<br />
Goods market<br />
efficiency<br />
Higher education and<br />
training<br />
Malaysia<br />
Efficiency-driven economies<br />
Source: Global Competitiveness Report 2009-2010, World Economic Forum<br />
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Box 9.1: Characteristics of the Top 3 Most Competitive Economies<br />
1. Switzerland 2. United States 3. Singapore<br />
Switzerland is ranked the<br />
world’s most competitive<br />
economy in 2009. Switzerland’s<br />
economy continues to be<br />
characterised by an excellent<br />
capacity for innovation and a<br />
very sophisticated business<br />
culture, ranked 3 rd for its<br />
business sophistication and 2 nd<br />
for its innovation capacity.<br />
The country is characterised<br />
by high spending on<br />
R&D. Switzerland’s scientific<br />
research institutions are<br />
among the world’s best, and the<br />
strong collaboration between<br />
the academic and business<br />
sectors ensures that much<br />
of this research is translated<br />
into a marketable products<br />
and processes, reinforced by<br />
strong intellectual property<br />
protection.<br />
Switzerland’s public institutions<br />
are rated among the most<br />
effective and transparent in the<br />
world, ensuring a level playing<br />
field and enhancing business<br />
confidence. These include<br />
an independent judiciary; a<br />
strong rule of law; and a highly<br />
accountable public sector.<br />
On the other hand, the<br />
university enrollment rate<br />
of 47% continues to lag<br />
behind other high-innovation<br />
countries. Although gaps are<br />
currently being filled through<br />
immigration, efforts should be<br />
made to boost higher education<br />
attainment to ensure sufficient<br />
national talent.<br />
The United States continues<br />
to be endowed with many<br />
structural features that make its<br />
economy extremely productive<br />
and that place it on a strong<br />
footing to ride out business<br />
cycle shifts and economic<br />
shocks.<br />
The United States is home<br />
to highly sophisticated<br />
and innovative companies<br />
operating in very efficient<br />
factor markets. The country<br />
is also endowed with an<br />
excellent university system<br />
that collaborates strongly with<br />
the business sector in R&D.<br />
Combined with the scale<br />
opportunities afforded by the<br />
sheer size of its domestic<br />
economy – the largest in the<br />
world by far - these qualities<br />
continue to make the United<br />
States very competitive.<br />
Labour markets are highly<br />
ranked, characterised by ease<br />
and affordability of hiring and<br />
significant wage flexibility.<br />
The country’s goods markets<br />
are also characterised by low<br />
levels of distortion within the<br />
context of a very competitive<br />
environment.<br />
The country’s greatest overall<br />
weakness continues to be<br />
related to its macroeconomic<br />
stability. The United States has<br />
built up large macroeconomic<br />
imbalances over recent years<br />
and repeated fiscal deficits<br />
have led to burgeoning levels<br />
of public indebtedness.<br />
Singapore remains the highestranked<br />
country from Asia. The<br />
country’s institutions continue<br />
to be ranked as the best in<br />
the world: at a time when<br />
confidence in governments in<br />
many countries has diminished,<br />
Singapore is assessed even<br />
more strongly than in the past<br />
years.<br />
Singapore places 1 st for the<br />
efficiency of its goods and<br />
labour markets and 2 nd for its<br />
financial market sophistication,<br />
ensuring the proper allocation<br />
of these factors to their best<br />
use.<br />
Singapore also has worldclass<br />
infrastructure, leading<br />
the world in the quality of its<br />
roads, ports, and air transport<br />
facilities.<br />
In addition, the country’s<br />
competitiveness is propped up<br />
by a strong focus on education,<br />
providing highly skilled<br />
individuals for the workforce.<br />
In order to strengthen its<br />
competitiveness further,<br />
Singapore could encourage<br />
even stronger adoption of the<br />
latest technologies, especially<br />
broadband internet as well as<br />
the innovative capacity of its<br />
companies.<br />
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C. Doing Business by World Bank<br />
• The Doing Business Report has<br />
been carried out since 2004 with the<br />
objective of assessing regulations (legal<br />
requirements) and their enforcement<br />
towards enhancing the ease of doing<br />
business. The Doing Business provides<br />
a quantitative measure of regulations for<br />
10 indicators as they apply to domestic<br />
small and medium-size enterprises. The<br />
Doing Business project encompasses 2<br />
types of data. The first are readings of<br />
laws and regulations while the second<br />
are based on time and motion indicators<br />
that measure the efficiency in achieving<br />
a regulatory goal (such as granting the<br />
legal identity of a business).<br />
• In the Doing Business 2010, Malaysia<br />
achieves an overall ranking of 23 rd out<br />
of 183 countries globally and Malaysia’s<br />
ranking in the 10 areas covered are<br />
shown in Table 9.1.<br />
CHAPTER 9<br />
Table 9.1: Malaysia in Doing Business Report, 2010<br />
Malaysia<br />
Overall Ranking<br />
10 Areas<br />
1. Starting a Business<br />
Covers all generic procedures that are officially required for an<br />
entrepreneur to start up an industrial or commercial property.<br />
2. Dealing with Construction<br />
Records all procedures officially required for an entrepreneur<br />
in the construction industry to build a warehouse, including<br />
procedures for obtaining utility connections.<br />
3. Employing Workers<br />
Measures the flexibility in the regulations of hiring and firing,<br />
working hours and dismissal in a manner consistent with the<br />
conventions of the International Labour Organisation (ILO).<br />
4. Registering Property<br />
Covers all procedures necessary to transfer the property title<br />
from the seller to the buyer, when a business purchases land<br />
and buildings.<br />
5. Getting Credit<br />
Measures the degree to which collateral and bankruptcy laws<br />
protect the rights of borrowers and lenders and facilitate<br />
lending.<br />
Rank<br />
23<br />
88<br />
109<br />
61<br />
86<br />
1<br />
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6. Protecting Investors<br />
Measures the strength of minority shareholder’s protection<br />
against directors’ misuse of corporate assets for personal gain.<br />
7. Paying Taxes<br />
Covers the taxes and mandatory contributions that a small and<br />
medium-sized company must pay in a given year as well as<br />
measures the administrative burden of paying taxes and<br />
contributions.<br />
8. Trading Across Borders<br />
Covers procedural requirements for trading a standard shipment<br />
of goods by ocean transport, including documents and<br />
signatures required.<br />
9. Enforcing Contracts<br />
Measures the efficiency of the judicial (or administrative) system<br />
in resolving a commercial dispute, following the step-by-step<br />
evolution of a commercial sale dispute before local courts.<br />
10. Closing a Business<br />
Identify weaknesses in the bankruptcy law as well as the main<br />
procedural and administrative bottlenecks in the bankruptcy<br />
process.<br />
4<br />
24<br />
35<br />
59<br />
57<br />
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Box 9.2: Malaysia's Competitiveness Strengths and Opportunities<br />
for Improvement<br />
International<br />
Competitiveness<br />
Reports<br />
World<br />
Competitiveness<br />
Yearbook<br />
3 Main Strengths<br />
1. Unemployment legislation<br />
(provides an incentive to look<br />
for work)<br />
2. Unit labour costs in the<br />
manufacturing sector (% change)<br />
3. Science in schools<br />
(is sufficiently emphasised)<br />
3 Main Areas of Concern<br />
1. Government budget deficit<br />
(% of GDP)<br />
2. Secondary school enrollment<br />
(% of relevant age group receiving<br />
full-time education)<br />
3. Employment (% of population)<br />
CHAPTER 9<br />
Global<br />
Competitiveness<br />
Report<br />
Ease of Doing<br />
Business Report<br />
1. Legal rights index (degree of<br />
legal protection of borrowers'<br />
and lenders' rights)<br />
2. FDI and technology transfer<br />
(to what extent does foreign direct<br />
investments (FDI) bring new<br />
technology into your country?)<br />
3. Pay and productivity (to what<br />
extent is pay in your country<br />
related to productivity?)<br />
Indicator (rank)<br />
1. Getting credit (1)<br />
Strength of legal rights: 0-10 (10)<br />
Depth of credit information<br />
index: 0-6 (6)<br />
Public registry coverage:<br />
% of adult (48.5)<br />
Private bureau coverage:<br />
% of adults (82.0)<br />
2. Protecting investors (4)<br />
Extent of disclosure index:<br />
0-10 (10)<br />
Extent of director liability index:<br />
0-10 (9)<br />
Ease of shareholder suits index:<br />
0-10 (7)<br />
Strength of investor protection<br />
index: 0-10 (8.7)<br />
3. Paying taxes (24)<br />
Payments: number per year (12)<br />
Time: hours per year (145)<br />
Total tax rate: % of profit (34.2)<br />
1. Female participation in labour<br />
force (female-to-male participation<br />
ratio in the labour force)<br />
2. Business costs of crime and<br />
violence (does the incidence of<br />
crime and violence impose costs<br />
on businesses in your country?)<br />
3. Government debt (government<br />
gross debt as a percentage of<br />
GDP)<br />
Indicator (rank)<br />
1. Dealing with construction permit<br />
(109)<br />
Procedures: number (25)<br />
Time: days (261)<br />
Cost: % of income per<br />
capita (7.1)<br />
2. Starting a business (88)<br />
Procedures: number (9)<br />
Time: days (11)<br />
Cost: % of income per<br />
capita (11.9)<br />
Minimum capital: % of income<br />
per capita (0)<br />
3. Registering property (86)<br />
Procedures: number (5)<br />
Time: days (144)<br />
Cost: % of property value (2.6)<br />
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Challenges in Sustaining<br />
Malaysia’s Competitiveness<br />
• Notwithstanding short term urgencies,<br />
Malaysia would be emphasising on longterm<br />
competitiveness fundamentals<br />
to weather business cycle downturns.<br />
The focus is to prepare Malaysia’s<br />
conversion into a high income,<br />
innovation-driven economy. Among the<br />
challenges to be addressed include:<br />
1. Creating employment opportunities<br />
and providing training for<br />
employability.<br />
2. Strengthening economic growth<br />
through investment and new sources<br />
of growth.<br />
<strong>MPC</strong>’s Initiatives in Enhancing<br />
Competitiveness<br />
• For both the WCY and GCR, <strong>MPC</strong><br />
has established itself as the ranking<br />
agencies’ Partner Institute through<br />
the signing of the Memorandum of<br />
Understanding (MoU). As partner<br />
institute, <strong>MPC</strong> endeavours to obtain<br />
respondents who are industry leaders<br />
or who are in senior management<br />
positions to participate in the Executive<br />
Opinion Survey. <strong>MPC</strong> also conducts<br />
seminars, workshops and round table<br />
discussions throughout Malaysia, in<br />
order to share with industries Malaysia’s<br />
competitiveness performance as well<br />
as best practices of highly competitive<br />
countries.<br />
3. Enhancing business resilience of<br />
small and medium-sized enterprises<br />
for diversified and export markets.<br />
4. Enhancing efficiency and productivity<br />
through public and private sector<br />
collaboration to reduce the costs of<br />
doing business.<br />
5. Improving infrastructure to drive<br />
higher growth in the economy and<br />
develop green technology.<br />
6. Improving inadequately educated<br />
workforce and poor work ethics in<br />
national labour force.<br />
• <strong>MPC</strong> is in constant engagement with<br />
both agencies to review and relook<br />
at issues of concern especially to<br />
Malaysia. <strong>MPC</strong> has had several<br />
meetings and discussions with IMD<br />
and WEF and has also invited research<br />
experts from these two organisations<br />
to Malaysia to share their experiences,<br />
competitiveness model, methodology<br />
and best practices with our industries.<br />
Bringing the research experts to<br />
Malaysia had the added value of<br />
providing first hand experience and allow<br />
them to appreciate the development<br />
and dynamism in Malaysia. The close<br />
collaboration between <strong>MPC</strong> and these<br />
reputable agencies would create the<br />
positive perception to the Malaysian<br />
public and understanding.<br />
• It is also a practice by <strong>MPC</strong> that<br />
the information from the reports are<br />
shared and disseminated to the<br />
Malaysian business community and<br />
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public at large through media releases<br />
by the MITI Minister and through<br />
seminars and conferences held at<br />
<strong>MPC</strong>’s regional offices throughout the<br />
country. Permission for <strong>MPC</strong> to publish<br />
abstracts of Malaysia’s Competitiveness<br />
Performance were also obtained from<br />
both IMD and WEF. The booklets entitled<br />
“Malaysia in the World Competitiveness<br />
Yearbook” and “Malaysia in the Global<br />
Competitiveness Report” published<br />
were widely distributed.<br />
Transformation, Innovation &<br />
Productivity through Partnership<br />
• In line with the call by the Government<br />
for a high income economy,<br />
Malaysia Innovative 2010 and<br />
the recommendation by the World<br />
Economic Forum that for Malaysia to<br />
maintain its competitive edge, Malaysia<br />
now needs to prepare its conversion<br />
into an innovation-driven country<br />
where companies compete through<br />
innovation, producing new value added<br />
and different goods using the most<br />
sophisticated production processes.<br />
• In this context <strong>MPC</strong> has developed<br />
various programmes to enhance<br />
industry’s competitiveness. This is<br />
duly reflected in <strong>MPC</strong>’s new corporate<br />
tagline of “Transformation, Innovation,<br />
Partnership” that signifies the<br />
expanding scope of <strong>MPC</strong> in tandem<br />
with the Government’s aspiration to<br />
transform the nation into a high income<br />
economy. <strong>MPC</strong> emphasises on process<br />
and social innovation to strengthen an<br />
innovation culture which will lead to<br />
business innovation and excellence.<br />
• <strong>MPC</strong> has been serving the industry<br />
for more than 40 years through<br />
productivity and quality management<br />
training programmes, research<br />
on current productivity issues,<br />
development of productivity databases,<br />
benchmarking and best practices.<br />
Promotional programmes to proliferate<br />
the understanding and application<br />
of productivity, innovation and<br />
competitiveness was also held on a<br />
regular basic. <strong>MPC</strong>'s scope was further<br />
expanded to include global linkages in<br />
the area of competitiveness and <strong>MPC</strong><br />
is currently the partner institute to the<br />
Institute for Management Development<br />
(IMD) and World Economic Forum<br />
(WEF) on the World Competitiveness<br />
Yearbook as well as the Global<br />
Competitiveness Report.<br />
• <strong>MPC</strong> had further expanded its scope and<br />
had began restructuring its programmes<br />
and activities based on "Transformation,<br />
Innovation and Partnership". This is to<br />
ensure that businesses are transformed<br />
through productivity and innovative<br />
tools, processes and systems as well<br />
as to create the multiplier effect to reach<br />
out to the masses through partnerships<br />
with both local and global partners.<br />
To transform businesses, <strong>MPC</strong> had<br />
implemented the Business Excellence<br />
Framework (BEF) programme where<br />
1,000 small and medium enterprises<br />
are expected to be nurtured through a<br />
spectrum of productivity and innovative<br />
tools, processes and systems.<br />
CHAPTER 9<br />
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CHAPTER 9<br />
• <strong>MPC</strong> is currently emphasising on<br />
process and social innovation to<br />
strengthen an innovation culture that<br />
will contribute to quantum leap in<br />
productivity and efficiency. Innovation<br />
programmes such as the Innovative<br />
Creative Circle Conventions and<br />
Innovation race will contribute towards<br />
nurturing productive and innovative<br />
mindset. In terms of partnerships, <strong>MPC</strong><br />
will expand its connectivity and linkages<br />
to include more local and international<br />
partners for wider outreach.<br />
• <strong>MPC</strong> will focus the initiatives on six<br />
leading programmes:<br />
1. Innovation and Creative Circle<br />
(ICC) Convention<br />
2. Quality Environment<br />
Convention<br />
3. Inno Race and Best Practices<br />
Showcase<br />
4. Creativity and Innovation<br />
Conference<br />
5. Productivity Performance and<br />
Awards<br />
6. Competitiveness<br />
Conference<br />
To support these programmes, <strong>MPC</strong> has<br />
also established the Case Study Clearing<br />
House and the Publication House.<br />
Publications on Innovation, Productivity<br />
and Quality as well as case books were<br />
published and widely disseminated<br />
(Table 9.2).<br />
Table 9.2: <strong>MPC</strong>'s Programmes on Transformation, Innovation and Partnership<br />
Core Areas<br />
Transformation<br />
Innovation &<br />
Productivity<br />
Partnership<br />
Programmes<br />
• Talent Management for SME Development<br />
• Effective Leadership and Interpersonal Skill for Supervisors<br />
• Managing Leadership Talent for Organisational Competitiveness<br />
• Strategic Creative Thinking<br />
• Strategic Innovative Leadership<br />
• Step by Step ISO 9001:2008 Documentation<br />
• Internal Auditor Training for ISO 9001:2008<br />
• Hazard Analysis Critical Control Point (HACCP)<br />
• Quality Environment Internal Audit (5S)<br />
• Effective Implementation on Corrective /<br />
Preventive Action and Analysis<br />
• Strategic Creative Thinking<br />
• Introduction to Creativity and Innovation<br />
• Breaking from the Pack through Service Innovation<br />
• Enhancing Competitiveness through Process Innovation<br />
• Productivity Improvement Programme through Workstudy -MTCP<br />
• System Development for Small and Medium Enterprise -MTCP<br />
• International Convention on Quality Circle (ICQCC)<br />
• Enhancement Knowledge and Capacity Building of<br />
Human Resource for OIC<br />
• Training Course on Promotion of Organisational Excellence and<br />
Competitiveness OIC Countries - MTCP / OIC<br />
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Box 9.3: Business Excellence Framework –<br />
Key to Organisational Transformation<br />
Excellent organisations are managed through structured and strategically aligned<br />
process using fact-based decision making to create balanced and sustained results.<br />
The Business Excellence (BE) initiative helps organisations to know where they are<br />
on the excellence journey and what they need to do to achieve a higher level of<br />
performance. This is done through an assessment of an organisation’s performance<br />
against the requirements of an internationally benchmarked business excellence<br />
framework. It also recognises organisations for their performance in the business<br />
excellence journey.<br />
CHAPTER 9<br />
The BE is based on universal accepted standards that are found in the US Malcolm<br />
Baldrige National Quality Award, the European Quality Award, the Australian<br />
Business Excellence Award, Singapore Quality Award and the Japan Quality Award.<br />
As a symbol of world-class business excellence, the BE programme encourages<br />
organisations to strengthen their management systems and capabilities to enhance<br />
their competitiveness.<br />
The Business Excellence Framework (BEF) is about adopting a holistic approach<br />
to strengthen the management systems and processes of an organisation towards<br />
achieving superior business performance and competitiveness. The BE initiative<br />
helps organisations to strengthen the management systems and processes for high<br />
performance. It is based on an internationally comparable and holistic model for<br />
managing an enterprise for excellence. The Malaysia Productivity and Innovation<br />
Class (MPIC), Quality Management Excellence Award (QMEA) and Prime Minister<br />
Industry Excellence Award (PMIEA) are key milestone of overall performance on the<br />
BEF. Organisations could use the BE to enhance their capabilities based on specific<br />
needs and strategy.<br />
BEF has seven dimension of excellence. They are Leadership, Planning, Information,<br />
Customers, People, Processes and Results. These dimensions are embodied in three<br />
main categories namely driver, system and result.<br />
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CHAPTER 9<br />
Malaysia Business Excellence Framework<br />
TRANSFORMATION<br />
LEADERSHIP<br />
PLANNING<br />
INFORMATION<br />
CUSTOMER<br />
PEOPLE<br />
PROCESSES<br />
RESULT<br />
INNOVATION AND LEARNING<br />
DRIVER<br />
SYSTEM<br />
RESULT<br />
DRIVER – It focuses on leadership ability to guide and sustain organisation to<br />
address issues on corporate governance that includes ethical, legal and community<br />
responsibilities. These elements evaluate at how organisations develop strategic<br />
objectives and action plans. It also focuses on how selected strategic objectives and<br />
action plans are deployed and adjusted according to changes; and how progress is<br />
measured.<br />
SYSTEM – The system covers the following dimensions: Planning, Information,<br />
Customers, People and Processes. These dimensions evaluate how organisations<br />
determine requirements, expectations and preferences of customers and markets.<br />
RESULT – It measures organisation’s performance and improvement in key business<br />
areas such as product and service outcomes, customer satisfaction, financial and<br />
marketplace performance, human resource capabilities, operational performance,<br />
leadership and social responsibility.<br />
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2009<br />
THE BUSINESS EXCELLENCE JOURNEY:<br />
Step by Step of the Business Excellence Journey<br />
5<br />
Participating in the Quality Management Excellence Award (QMEA)<br />
and Prime Minister Industry Excellence Award (PMIEA)<br />
Award<br />
Winner<br />
CHAPTER 9<br />
4<br />
Certify as Malaysia Productivity and Innovation Class with minimum<br />
score of 700 points<br />
Certification<br />
3 Nurturing Process<br />
Nurturing<br />
2<br />
Participating in the Malaysia Productivity and Innovation Class (MPIC)<br />
- with minimum score of 400 points<br />
Productivity<br />
and Innovation<br />
Class<br />
1 Self - assessment<br />
Assessment<br />
Benefits of Business Excellence Framework<br />
• Create visionary and inspirational leadership;<br />
• Achieve stronger financial performance;<br />
• Drive innovation in products and services;<br />
• Focus on customer service and satisfaction;<br />
• Create effective business planning processes; and<br />
• Raise productivity and reduce operating cost.<br />
Implementation of BEF requires the involvement of all spectrum of employment<br />
in an organisation as well as effective partnership with suppliers and customers.<br />
Good management systems and practices need to be employed organisation-wide,<br />
beginning from having a vision up to maintaining a safe and healthy workplace. This<br />
means having well-trained and motivated employees, standardised work procedures,<br />
effective production control as well as ensuring the quality of external suppliers<br />
and operating a fast and efficient after-sales services. Thus, every function in the<br />
organisation should support the BEF programme for effective implementation.<br />
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CHAPTER 9<br />
Box 9.4: Benchmarking for Enhancing Competitiveness<br />
Organisations need to benchmark against the best both locally and internationally.<br />
Benchmarking is a proactive and structured approach to improve business operation<br />
towards achieving innovation and higher performance. Benchmarking is a management<br />
tool for organisations to carry out self-assessment, compare performance against peers<br />
in the industries and create change for improvement. The benchmarking strategydriven<br />
allows faster decisions, improve speed to the market and guaranteed success<br />
through business continuous improvement process. Companies need to continuously<br />
improve products, services, processes, technologies and management practices so<br />
as to create new significant values for stakeholders, internal and external customers.<br />
The Malaysia Benchmarking Index (MBI) is an extensive benchmarking resource to<br />
help improve the competitiveness and profitability for Small and Medium Enterprise<br />
(SME). MBI is a business-focused performance diagnostic tool which comprises 29<br />
performance indicators. The indicators are used to measure 4 perspectives namely<br />
Financial, Customers, Learning and Growth and Internal Process. The company<br />
participates in the MBI programme will be given Benchmarking report. By doing this<br />
the companies will be able to compare their performance with in the sub-sectors<br />
domestically and globally. MBI approach enables local companies to enhance on<br />
existing position to develop and improve area that required improvement.<br />
MBI Approach for Enhancing Competitiveness<br />
MBI Approach<br />
A holistic approach combining software, skills development and ongoing support,<br />
maximising the potential for innovation and success<br />
MBI Data<br />
Collection<br />
Business Process<br />
Improvement<br />
Adaptation and<br />
Implementation<br />
• Project Briefing<br />
• Data Collection<br />
• Generation of MBI Benchmarking Report<br />
• Community of Innovation (Col)<br />
• Business Advisory / Consultation<br />
• Best Practices Sharing Col Showcase<br />
• Action Plan and Improvement<br />
• Standardisation<br />
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2009<br />
Currently data for 817 SME companies were used to produce the benchmark for<br />
Malaysia's manufacturing and services sectors. The benchmark report compares both<br />
sector performance locally and internationally. The report will be extended to each<br />
participating companies. The international data was obtained from the Fraunhofer<br />
Institute, German and the Benchmarking Index, United Kingdom. From 817 SME<br />
companies participated in MBI, 25 companies have selected for Business Process<br />
Improvement under Community of Innovation (CoI) programme.<br />
CHAPTER 9<br />
Community of Innovation is a group of companies with a common areas of interest;<br />
• Regularly use MBI to monitor benchmark performance;<br />
• Undertake business improvement programmes; and<br />
• Conduct regular sharing of best practices for innovation and breakthrough ideas.<br />
CoI provides an excellent vehicle for process owners in learning and knowledge<br />
sharing using MBI. CoI programme focuses on how SMEs improve their Business<br />
Process performance before and after using MBI. The framework for Implementation<br />
of CoI programme is as shown below.<br />
Benchmarking Process<br />
MALAYSIAN BENCHMARKING<br />
INDEX<br />
Monitoring<br />
Register for<br />
COMMUNITY OF<br />
INNOVATION<br />
MBI<br />
Data<br />
Entry<br />
MBI<br />
Company<br />
Report<br />
Ongoing use of the Col platform<br />
Improved<br />
Business<br />
Process<br />
(3 - 4 months)<br />
Consulting Process<br />
Consulting Workshop<br />
and Development of<br />
Roadmap<br />
Following<br />
Consulting<br />
Feedback and Support from Col Consultants<br />
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CHAPTER 9<br />
Companies participating in CoI Programme will undertake Business Process<br />
Improvement (BPI). BPI enables organisations in reviewing and redesigning existing<br />
process or to design a new process, improving quality, productivity, and response time,<br />
by removing non-value adding activities and costs through incremental enhancements<br />
or radical change in the process. BPI involves five problem-solving steps; indentify<br />
the problem, analyse, evaluate alternatives, test-implement and standardised. By<br />
participating in BPI, companies will be able to improve strategic business objectives,<br />
business performance, improving the service delivery system, developing talent and<br />
capabilities of employees and competitiveness.<br />
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APPENDIX
APPENDIX A<br />
TERMINOLOGY AND DEFINITION<br />
1.<br />
2.<br />
Added Value<br />
Added value measures the wealth generated by collective efforts of those who work in an<br />
enterprise (the employees) and the capital providers (e.g. investors and shareholders).<br />
Added value is different from sales revenue or value of production because it does not<br />
include the wealth created by the suppliers to the enterprise.<br />
Methods Of Added Value Calculation<br />
There are two ways added value can be calculated:<br />
(i) Addition Method<br />
This is called the wealth distribution method.<br />
Added Value = Labour Cost + Interest + Tax + Depreciation + Profit<br />
It is called wealth distribution because the added value created is used to pay<br />
those who have contributed to its creation in terms of wages & salaries(labour cost)<br />
for the employees, interest and loan for capital providers, taxes to the Government,<br />
depreciation for capital equipment usage and profits to the owner.<br />
(ii) Subtraction Method<br />
This is called the wealth creation method.<br />
Added Value = Total Output less Bought-In Materials and<br />
Services (BIMS)<br />
In order to produce goods or services, a company has to purchase the necessary<br />
raw materials and other inputs. The difference between the total value of output<br />
and total cost of inputs (all inputs and services bought from another company) is<br />
called added value.<br />
Total Output<br />
It is defined as value of products manufactured (ex-factory value) + value of<br />
construction work done + change in Work-In-Progress (WIP) + capital expenditure<br />
on own construction + income from services rendered + income from sales of goods<br />
purchased in same condition.<br />
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APPENDIX A<br />
3.<br />
Total Input<br />
It is defined as value of materials consumed + value of supplies consumed + cost of<br />
printing + cost of goods sold in same condition + water + electricity + fuels + lubricants<br />
+ supplies + salaries and wages + fees paid to non-working directors + payments<br />
to contractors + payment in kind to paid employees + value of free wearing apparel<br />
+ employer’s contribution to government funds + payments for industrial work done<br />
by others + payments for non-industrial services + interest charges + depreciation +<br />
indirect taxes.<br />
4.<br />
5.<br />
6.<br />
Labour Cost<br />
It is defined as payments in the form of gross salary and wages, bonuses, and other cash<br />
allowances paid to employees + salaries, allowances, fees, bonuses and commissions<br />
paid to working directors + fees paid to non-working directors for their attendance at<br />
the Board of Directors’meetings + payments in kind to paid employees + value of free<br />
wearing apparel provided + employer’s contribution to government funds.<br />
Bought-In Materials and Services (BIMS)<br />
It is defined as Bought-In Materials plus Bought-In Services, where Bought-In Materials<br />
is the value of materials consumed in production (including transport charges incurred<br />
and taxes and duties paid on the materials); while Bought-In Services is the value<br />
of supplies consumed such as packaging materials,consumable stores (including<br />
stationery and office supplies, materials for repairs and maintenance) + cost of printing<br />
+ lubricants + cost of goods sold in same condition as purchases + water + electricity<br />
+ fuels + payments to contractors + payments for industrial work done by others +<br />
supplies + payments for non-industrial services.<br />
Total Factor Productivity (TFP)<br />
TFP measures the efficiency of the utilisation of both capital and human resources. It<br />
is also regarded as a measure of the degree of technological advancement associated<br />
with economic growth. Higher TFP growth indicates efficient utilisation and management<br />
of resources, materials and inputs necessary for the production of goods and services.<br />
At the national level, Total Factor Productivity (TFP) growth reflects the portion of the<br />
growth in the Gross Domestic Product (GDP) that is not explained by the growth in<br />
inputs such as employment, capital investment and natural resources.<br />
At the firm level, TFP growth implies the upgrading of skilled and technical manpower,<br />
application of technology and creation of new technologies, adoption of best<br />
management practices and developing corporate culture and work ethics.<br />
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7.<br />
Productivity Indicators<br />
7.1 Labour Cost Competitiveness<br />
7.2 Labour Productivity<br />
7.3 Capital Productivity<br />
7.4 Capital Intensity<br />
7.5 Process Efficiency<br />
7.6 Added Value Content<br />
APPENDIX A<br />
7.1<br />
Labour Cost Competitiveness<br />
Competitiveness in terms of labour cost indicates the comparability of the industry<br />
in producing products or services at the lower possible labour cost. Three<br />
competitiveness ratios, which include Added Value per Labour Cost, Labour Cost<br />
per Employee and Unit Labour Cost are described below.<br />
RATIO UNIT WHAT IT TELLS<br />
1.<br />
Added Value<br />
per Labour Cost<br />
Pure Number<br />
This ratio indicates how<br />
competitive the enterprise is in<br />
terms of labour cost.<br />
= Added Value<br />
Labour Cost<br />
A low ratio indicates high labour<br />
cost which does not<br />
commensurate with added value<br />
creation.<br />
2.<br />
Labour Cost per<br />
Employee<br />
RM<br />
This ratio measures the average<br />
remuneration per employee.<br />
= Labour Cost<br />
Number of Employees<br />
A high ratio means high returns to<br />
individual workers and vice-versa.<br />
3.<br />
Unit Labour Cost<br />
Pure Number<br />
This ratio indicates the propotion<br />
of labour cost to total output.<br />
=<br />
Labour Cost<br />
Total Output<br />
A high ratio indicates high labour<br />
cost. This could be due to labour<br />
shortage and lack of skilled<br />
labour, or poor labour mix. It<br />
could also be due to high labour<br />
turnover.<br />
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APPENDIX A<br />
7.2<br />
Labour Productivity<br />
It can be used as one of the ways of gauging the productivity performance of the<br />
industry. The commonly used indicator is added value per employee.<br />
RATIO UNIT WHAT IT TELLS<br />
1.<br />
Added Value<br />
per Employee<br />
=<br />
Added Value<br />
Number of Employees<br />
RM<br />
Reflects the amount of wealth<br />
per employee created by<br />
the company, relative to the<br />
number of employees it has. It is<br />
influenced by:<br />
- Management efficiency<br />
- Work attitudes<br />
- Price effects<br />
- Demand for the products<br />
A high ratio indicates the<br />
favourable effects of labour factor<br />
in the wealth creation process.<br />
A low ratio means unfavourable<br />
working procedures such as:<br />
- High bought-in materials and<br />
services<br />
- Wastages of time and materials<br />
- Inadequate salary/wages rates<br />
2.<br />
Total Output per<br />
Employee<br />
RM<br />
The size of output generated by<br />
employee each employee of the<br />
enterprise.<br />
Give an indication of efficiency<br />
and/or marketing capability.<br />
=<br />
Total Output<br />
Number of Employees<br />
A high ratio reflects a good<br />
marketing strategy adopted by<br />
the enterprise.<br />
A low ratio indicates:<br />
- Deliberate business policy of<br />
having low turnover but high<br />
profit margin/added value.<br />
- Low product profiles and<br />
quality.<br />
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7.3<br />
Capital Productivity<br />
Capital productivity indicates the degree of utilisation of fixed assets and their<br />
efficiency with which assets are utilised. It is defined as added value generated per<br />
ringgit of fixed assets. High ratio indicates better performance of enterprise.<br />
APPENDIX A<br />
RATIO<br />
Added Value<br />
per Fixed Assets<br />
UNIT<br />
Pure Number<br />
WHAT IT TELLS<br />
Indicates the degree of utilisation<br />
of tangible fixed assets.<br />
=<br />
Added Value<br />
Fixed Assets<br />
A high ratio indicates the<br />
efficiency of assets utilisation.<br />
A low ratio reflects poor assets.<br />
7.4<br />
Capital Intensity<br />
Capital intensity is the ratio measuring the amount of fixed assets allocated<br />
to each employee. It is also known as fixed assets per employee or simply<br />
capital-to-labour ratio. This ratio is used to measure whether an industry is<br />
relatively capital-intensive or labour-intensive.<br />
RATIO<br />
Fixed Assets<br />
per Employee<br />
UNIT<br />
RM<br />
WHAT IT TELLS<br />
This ratio indicates whether an<br />
enterprise adopts a capitalintensive<br />
or labour-intensive policy.<br />
=<br />
Fixed Assets<br />
Number of Employees<br />
A high ratio indicates the high<br />
capital intensity.<br />
A low ratio means:<br />
- Dependence on labourintensive<br />
methods<br />
- Low technological inputs<br />
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APPENDIX A<br />
7.5<br />
Process Efficiency<br />
Process Efficiency measures how efficient the business utilises its own resources<br />
namely labour, plant and machinery and capital to generate added value and<br />
minimise the bought-in materials and services.<br />
RATIO<br />
Process Efficiency<br />
= Added Value<br />
[(Total Input) -<br />
(Bought-in Materials<br />
and Services)]<br />
UNIT<br />
Pure Number<br />
WHAT IT TELLS<br />
This ratio indicates the efficiency<br />
and effectiveness of the process,<br />
which is normally affected by<br />
production techniques used,<br />
technological innovation,<br />
managerial and labour skills.<br />
A high ratio indicates an efficient<br />
and effective process system and<br />
vice-versa.<br />
7.6<br />
Process Efficiency<br />
The level of productivity of an enterprise can also be assessed by analysing at the<br />
major components of added value and total output.<br />
RATIO<br />
Added Value Content<br />
=<br />
Added Value<br />
Total Output<br />
x 100<br />
UNIT<br />
Percent<br />
WHAT IT TELLS<br />
This ratio can be used to gauge<br />
the degree of utilisation of<br />
bought-in materials and services<br />
and changes in the price<br />
differentials between products<br />
and purchases.<br />
A high ratio indicates efficient<br />
usage of purchase or favourable<br />
price differentials.<br />
A low ratio means:<br />
- High costs of bought-in<br />
materials and services<br />
- Poor products quality<br />
- Low price competition<br />
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APPENDIX B<br />
DERIVING THE SOURCES OF LONG-TERM<br />
ECONOMIC AND PRODUCTIVITY GROWTH<br />
SOURCES OF LONG-TERM ECONOMIC GROWTH<br />
A production function is used to compute the sources of economic and productivity<br />
growth:<br />
Q = f( K,L ) (1)<br />
where<br />
Q = Output or GDP<br />
K = Capital<br />
L = Number of workers<br />
By including a time variable (due to technical progress), the resulting shifts of the<br />
production can be represented by:<br />
Qt = f( Kt , Lt , t ) (2)<br />
thus implying that the same input quantities yield a different output at different points of<br />
time.<br />
Assuming that technical progress is both neutral and disembodied (Solow, 1957), the<br />
production function (2) can be expressed as:<br />
Qt = A(t ) . f( Kt , Lt ) (3)<br />
where<br />
Qt , Kt and Lt = output and factor inputs during period t<br />
A(t ) = technical progress or TFP as a function of time<br />
Differentiating (3) with respect to time and denoting the derivatives by putting a dot over<br />
the variable, hence<br />
dQ/dt =<br />
Q we have<br />
Q = A . f ( Kt , Lt ) + A . ∂ f . K + A . ∂ f . L (4)<br />
∂ K ∂ L<br />
Dividing throughout by Q leads to an expression for the proportionate rate of change in<br />
output:<br />
Q = A . f( Kt , Lt )/Q + A . ∂ f . K + A . ∂ f . L (5)<br />
Q ∂ K Q ∂ L Q<br />
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APPENDIX B<br />
Q = A . f (K t<br />
, L t<br />
)/Q + A . ∂ f . K . K + A . ∂ f . L . L (6)<br />
Q ∂ K Q K ∂ L Q L<br />
Solow (1957) assumed that factors are paid the value of their marginal products under<br />
competitive equilibrium conditions, so that<br />
∂ Q = A. ∂ f = r<br />
∂ K ∂K p<br />
∂ Q = A. ∂ f = w<br />
∂ L ∂L p<br />
where<br />
p = prices of output<br />
r = prices of capital inputs<br />
w = prices of labour inputs<br />
Q = A + r K . K + wL . L (7)<br />
Q A pQ K pQ L<br />
In Solow’s notation, the shares of capital and labour are denoted by wK= r.K/p.Q and<br />
wL = w.L/p.Q respectively, thus with this assumption the equation (7) becomes:<br />
Q/Q = A/A + w K<br />
. K/K + w L<br />
. L/L (8)<br />
Further, assuming constant returns to scale, where percentage change in inputs leads to<br />
the same percentage change in output, the following holds:<br />
wK + wL = 1<br />
Therefore equation (8) becomes:<br />
Q/Q = A/A + w K<br />
. K/K + ( 1- w K<br />
) . L/L (9)<br />
where<br />
Q/Q = Proportionate rate of change of output<br />
.<br />
A/A = Proportionate rate of change of technical progress of TFP<br />
.<br />
K/K = Proportionate rate of change of capital<br />
.<br />
L/L = Proportionate rate of change of labour<br />
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SOURCES OF LONG-TERM PRODUCTIVITY GROWTH<br />
Subtracting L/L from both sides of equation (9) to express the equation in terms of<br />
productivity:<br />
Q/Q - L/L = A/A + w K<br />
. K/K + ( 1 - w K<br />
) . L/L - L/L<br />
APPENDIX B<br />
Therefore<br />
Q/Q - L/L = A/A + wK . ( K/K - L/L )<br />
q/q = A/A + w K<br />
. k/k (10)<br />
where<br />
q/q = Q/Q - L/L = Proportionate rate of change of productivity<br />
A/A = Proportionate rate of change of technical progress or TFP<br />
k/k = K/K - L/L = Proportionate rate of change of capital to labour ratio<br />
Equation (10) denotes that changes in productivity over time are therefore the result of<br />
neutral technical progress (or TFP) and of increases in capital to labour ratio (capital<br />
intensity).<br />
SOURCES OF LONG-TERM ECONOMIC GROWTH EXPRESSED IN TERMS OF<br />
PRODUCTIVITY GROWTH<br />
Subtracting (10) from (9) to derive the relation between economic growth and<br />
productivity growth<br />
Q/Q - q/q<br />
= wK . K/K + ( 1 - wK ) . L/L - wK . k/k<br />
= wK . K/K + L/L - wK . L/L - wK . k/k<br />
= wK . k/k + L/L - wK . k/k<br />
= L/L<br />
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Therefore<br />
APPENDIX B<br />
Q/Q = q/q + L/L (11)<br />
where<br />
Q/Q = Proportionate rate of change of output<br />
q/q<br />
L/L<br />
= Proportionate rate of change of productivity<br />
= Proportionate rate of change of labour<br />
Alternatively, equation (11) can be written as:<br />
Q/Q = A/A + wK . k/k + L/L (12)<br />
Equation (11) expresses economic growth in terms of productivity growth and an increase<br />
in labour input (employment expansion), while that of equation (12) expresses it in terms<br />
of TFP growth and an increase in labour and capital inputs.<br />
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APPENDIX C<br />
THE CONTRIBUTION BY SUB - SECTORS, 2009<br />
Code<br />
Sub- Sectors<br />
Total<br />
Output<br />
(RM Million)<br />
Share of<br />
Total<br />
Output (%)<br />
Added<br />
Value<br />
(RM Million)<br />
Share of<br />
Added<br />
Value (%)<br />
Number<br />
of<br />
Employee<br />
Share<br />
of<br />
Employee (%)<br />
Labour<br />
Cost<br />
(RM Million)<br />
Share of<br />
Labour<br />
Cost (%)<br />
D<br />
15<br />
16<br />
17<br />
18<br />
19<br />
20<br />
21<br />
22<br />
23<br />
24<br />
25<br />
26<br />
27<br />
28<br />
29<br />
30<br />
31<br />
Manufacturing<br />
Food Products and<br />
Beverages<br />
Tobacco Products<br />
Textiles<br />
Wearing Apparel;<br />
Dressing and dyeing<br />
of Fur<br />
Tanning and<br />
Dressing of Leather;<br />
Manufacture<br />
of Luggage,<br />
Handbags,<br />
Saddlery, Harness<br />
and Footwear<br />
Wood and Products<br />
of Wood and Cork,<br />
Except Furniture;<br />
Manufacture of<br />
Articles of Straw and<br />
Plaiting Materials<br />
Paper and Paper<br />
Products<br />
Publishing, Printing<br />
and Reproduction of<br />
Recorded Media<br />
Coke, Refined<br />
Petroleum Products<br />
and Nuclear Fuel<br />
Chemicals and<br />
Chemical Products<br />
Rubber and Plastic<br />
Products<br />
Other Non- Metallic<br />
Mineral Products<br />
Basic Metals<br />
Fabricated Metal<br />
Products, Except<br />
Machinery and<br />
Equipment<br />
Machinery and<br />
Equipment n.e.c.<br />
Office, Accounting<br />
and Computing<br />
Machinery<br />
Electrical Machinery<br />
and Apparatus n.e.c.<br />
585,152<br />
56,299<br />
1,595<br />
7,943<br />
4,453<br />
429<br />
5,079<br />
9,881<br />
6,052<br />
28,000<br />
53,755<br />
29,179<br />
11,103<br />
25,955<br />
14,285<br />
13,425<br />
107,809<br />
15,548<br />
100.00<br />
9.62<br />
0.27<br />
1.36<br />
0.76<br />
0.07<br />
0.87<br />
1.69<br />
1.03<br />
4.79<br />
9.19<br />
4.99<br />
1.90<br />
4.44<br />
2.44<br />
2.29<br />
18.42<br />
2.66<br />
110,020<br />
8,965<br />
332<br />
1,512<br />
1,011<br />
92<br />
1,334<br />
1,886<br />
2,276<br />
2,107<br />
13,167<br />
6,164<br />
3,800<br />
5,167<br />
4,607<br />
2,935<br />
8,813<br />
4,010<br />
100.00<br />
8.15<br />
0.30<br />
1.37<br />
0.92<br />
0.08<br />
1.21<br />
1.71<br />
2.07<br />
1.92<br />
11.97<br />
5.60<br />
3.45<br />
4.70<br />
4.19<br />
2.67<br />
8.01<br />
3.64<br />
1,363,801<br />
98,271<br />
10,321<br />
31,790<br />
54,667<br />
6,724<br />
39,549<br />
33,544<br />
31,868<br />
3,651<br />
52,837<br />
174,630<br />
46,106<br />
38,133<br />
60,518<br />
41,733<br />
96,100<br />
57,022<br />
100.00<br />
7.21<br />
0.76<br />
2.33<br />
4.01<br />
0.49<br />
2.90<br />
2.46<br />
2.34<br />
0.27<br />
3.87<br />
12.80<br />
3.38<br />
2.80<br />
4.44<br />
3.06<br />
7.05<br />
4.18<br />
36,045<br />
2,377<br />
176<br />
542<br />
780<br />
120<br />
779<br />
800<br />
1,058<br />
212<br />
2,432<br />
3,701<br />
1,249<br />
1,329<br />
1,510<br />
1,554<br />
3,206<br />
1,494<br />
100.00<br />
6.59<br />
0.49<br />
1.50<br />
2.16<br />
0.33<br />
2.16<br />
2.22<br />
2.93<br />
0.59<br />
6.75<br />
10.27<br />
3.46<br />
3.69<br />
4.19<br />
4.31<br />
8.89<br />
4.15<br />
PRODUCTIVITY REPORT 2009 151
2009<br />
APPENDIX C<br />
Code<br />
32<br />
33<br />
34<br />
35<br />
36<br />
37<br />
Sub- Sectors<br />
Radio, Television<br />
and Communication<br />
Equipment and<br />
Apparatus<br />
Medical, precision<br />
and Optical<br />
Instruments,<br />
Watches and Clocks<br />
Motor Vehicles,<br />
Trailers and Semi-<br />
Trailers<br />
Other Transport<br />
Equipment<br />
Furniture;<br />
Manufacturing n.e.c<br />
Recycling<br />
Total<br />
Output<br />
(RM Million)<br />
151,026<br />
4,077<br />
18,436<br />
6,295<br />
14,410<br />
117<br />
Share of<br />
Total<br />
Output (%)<br />
25.81<br />
0.70<br />
3.15<br />
1.08<br />
2.46<br />
0.02<br />
Added<br />
Value<br />
(RM Million)<br />
32,199<br />
1,155<br />
3,690<br />
1,896<br />
2,889<br />
12<br />
Share of<br />
Added<br />
Value (%)<br />
29.27<br />
1.05<br />
3.35<br />
1.72<br />
2.63<br />
0.01<br />
Number<br />
of<br />
Employee<br />
294,747<br />
20,117<br />
48,294<br />
28,080<br />
94,793<br />
307<br />
Share<br />
of<br />
Employee (%)<br />
21.61<br />
1.48<br />
3.54<br />
2.06<br />
6.95<br />
0.02<br />
Labour<br />
Cost<br />
(RM Million)<br />
8,144<br />
512<br />
1,395<br />
1,048<br />
1,615<br />
12<br />
Share of<br />
Labour<br />
Cost (%)<br />
22.59<br />
1.42<br />
3.87<br />
2.91<br />
4.48<br />
0.03<br />
152<br />
PRODUCTIVITY REPORT 2009
APPENDIX D<br />
PRODUCTIVITY INDICATORS -<br />
MANUFACTURING SECTOR, 2009<br />
Code<br />
Sub- Sectors<br />
Added Value<br />
per<br />
Employee<br />
(RM)<br />
Labour Cost<br />
per<br />
Employee<br />
(RM)<br />
Unit Labour<br />
Cost<br />
(Pure Number)<br />
Added Value<br />
per<br />
Fixed Asset<br />
(Pure Number)<br />
Fixed Assets<br />
per<br />
Employee<br />
(RM)<br />
D<br />
15<br />
151<br />
15111<br />
15119<br />
15120<br />
15131<br />
15139<br />
15142<br />
15143<br />
15144<br />
15149<br />
152<br />
15201<br />
15202<br />
153<br />
15311<br />
15312<br />
15319<br />
15322<br />
Manufacturing<br />
MANUFACTURE OF<br />
FOOD PRODUCTS AND<br />
BEVERAGES<br />
Production, Processing and<br />
Preservation of Meat, Fish,<br />
Fruit, Vegetables, Oils and<br />
Fats<br />
Processing and preserving<br />
of poultry and poultry<br />
products<br />
Production, processing and<br />
preserving of other meat<br />
products<br />
Processing and preserving<br />
of fish and fish products<br />
Pineapple canning<br />
Canning and preserving of<br />
other fruits and vegetables<br />
Manufacture of crude palm<br />
oil<br />
Manufacture of refined<br />
palm oil<br />
Manufacture of palm kernel<br />
oil<br />
Manufacture of other<br />
vegetable and animal oils<br />
and fats<br />
Manufacture of Dairy<br />
Products<br />
Manufacture of condensed,<br />
powdered and evaporated<br />
milk<br />
Rice milling<br />
Manufacture of Grain Mill<br />
Products, Starches and<br />
Starch Products, and<br />
Prepared Animal Feeds<br />
Flour milling<br />
Manufacture of other flour /<br />
grain mill products<br />
Manufacture of glucose and<br />
glucose syrup, maltose<br />
Manufacture of sago and<br />
tapioca flour / products<br />
80,671<br />
91,228<br />
83,896<br />
44,779<br />
56,783<br />
35,634<br />
41,334<br />
24,519<br />
110,884<br />
49,877<br />
119,980<br />
107,243<br />
124,174<br />
44,200<br />
138,445<br />
186,681<br />
161,253<br />
205,903<br />
42,930<br />
152,794<br />
26,429<br />
24,185<br />
21,400<br />
29,778<br />
23,407<br />
14,308<br />
20,885<br />
14,553<br />
17,533<br />
44,205<br />
33,729<br />
38,252<br />
42,288<br />
25,408<br />
45,300<br />
33,600<br />
21,508<br />
44,424<br />
17,367<br />
41,592<br />
0.0616<br />
0.0422<br />
0.0249<br />
0.0708<br />
0.0679<br />
0.0928<br />
0.2004<br />
0.2701<br />
0.0224<br />
0.0138<br />
0.0116<br />
0.0271<br />
0.0577<br />
0.1312<br />
0.0547<br />
0.0417<br />
0.0376<br />
0.0475<br />
0.1189<br />
0.0975<br />
0.8435<br />
0.8851<br />
0.9730<br />
0.9363<br />
9.1707<br />
2.9572<br />
3.1451<br />
5.1496<br />
2.4630<br />
0.2945<br />
0.1603<br />
0.4761<br />
0.6299<br />
3.8072<br />
0.6013<br />
1.2282<br />
3.4682<br />
0.5596<br />
5.1124<br />
5.1801<br />
95,642<br />
103,067<br />
86,223<br />
47,826<br />
6,192<br />
12,050<br />
13,142<br />
4,761<br />
45,020<br />
169,346<br />
748,451<br />
225,246<br />
197,129<br />
11,610<br />
230,232<br />
151,995<br />
46,495<br />
367,960<br />
8,397<br />
29,496<br />
PRODUCTIVITY REPORT 2009 153
2009<br />
APPENDIX D<br />
Code<br />
15323<br />
15330<br />
154<br />
15411<br />
15412<br />
15420<br />
15431<br />
15432<br />
15440<br />
15491<br />
15492<br />
15493<br />
15494<br />
15495<br />
15496<br />
15497<br />
15499<br />
155<br />
15510<br />
15541<br />
15542<br />
16<br />
160<br />
16000<br />
17<br />
171<br />
17111<br />
17112<br />
17121<br />
17122<br />
172<br />
17210<br />
Sub- Sectors<br />
Manufacture of other starch<br />
products<br />
Manufacture of prepared<br />
animal feeds<br />
Manufacture of Other Food<br />
Products<br />
Manufacture of biscuits and<br />
cookies<br />
Manufacture of bread, cake<br />
and other bakery products<br />
Manufacture of sugar<br />
Manufacture of cocoa<br />
products<br />
Manufacture of chocolate<br />
products and sugar<br />
confectionery<br />
Manufacture of macaroni,<br />
noodles and similar<br />
products<br />
Manufacture of ice<br />
Manufacture of coffee<br />
Manufacture of tea<br />
Manufacture of spices and<br />
curry powder<br />
Manufacture of nut and nut<br />
products<br />
Manufacture of sauces<br />
including flavouring extracts<br />
Manufacture of snack<br />
Manufacture of other food<br />
products<br />
Manufacture Of Beverages<br />
Distilling, rectifying and<br />
blending of spirits<br />
Manufacture of soft drinks<br />
Production of mineral<br />
waters<br />
MANUFACTURE OF<br />
TOBACCO PRODUCTS<br />
Manufacture of Tobacco<br />
Products<br />
Manufacture of tobacco<br />
products<br />
MANUFACTURE OF<br />
TEXTILES<br />
Spinning, Weaving and<br />
Finishing of Textiles<br />
Natural fibre spinning;<br />
weaving of textiles<br />
Man-made fibre spinning;<br />
weaving of textiles<br />
Dyeing, bleaching, printing<br />
and finishing of yarns and<br />
fabrics (excluding batek)<br />
Batek making<br />
Manufacture of Other<br />
Textiles<br />
Manufacture of madeup<br />
textile articles except<br />
apparel<br />
Added Value<br />
per<br />
Employee<br />
(RM)<br />
25,497<br />
216,850<br />
75,301<br />
25,096<br />
30,272<br />
150,083<br />
160,936<br />
88,839<br />
49,177<br />
36,573<br />
61,362<br />
60,819<br />
66,654<br />
41,767<br />
260,750<br />
50,657<br />
168,082<br />
121,090<br />
90,586<br />
151,383<br />
29,867<br />
32,202<br />
32,202<br />
32,202<br />
47,548<br />
44,889<br />
24,214<br />
39,643<br />
88,994<br />
14,993<br />
77,542<br />
86,880<br />
Labour Cost<br />
per<br />
Employee<br />
(RM)<br />
19,649<br />
31,811<br />
21,170<br />
14,447<br />
12,493<br />
50,648<br />
51,755<br />
22,196<br />
14,010<br />
22,257<br />
20,098<br />
14,968<br />
19,902<br />
9,879<br />
82,180<br />
19,959<br />
26,767<br />
38,901<br />
19,499<br />
48,523<br />
12,790<br />
17,006<br />
17,006<br />
17,006<br />
17,053<br />
17,151<br />
22,565<br />
12,669<br />
20,813<br />
6,738<br />
17,288<br />
13,702<br />
Unit Labour<br />
Cost<br />
(Pure Number)<br />
0.1354<br />
0.0326<br />
0.0790<br />
0.1716<br />
0.0959<br />
0.0477<br />
0.0315<br />
0.0935<br />
0.1319<br />
0.4704<br />
0.1285<br />
0.0582<br />
0.0962<br />
0.0676<br />
0.0967<br />
0.0915<br />
0.0644<br />
0.0664<br />
0.0583<br />
0.0654<br />
0.0895<br />
0.1100<br />
0.1100<br />
0.1100<br />
0.0683<br />
0.0571<br />
0.1066<br />
0.0310<br />
0.1047<br />
0.0532<br />
0.0931<br />
0.1168<br />
Added Value<br />
per<br />
Fixed Asset<br />
(Pure Number)<br />
0.2016<br />
5.4637<br />
1.0849<br />
0.5619<br />
0.6609<br />
1.8689<br />
2.7064<br />
1.7263<br />
2.7384<br />
1.5647<br />
1.9621<br />
22.7104<br />
2.7143<br />
3.3934<br />
0.1496<br />
0.4413<br />
3.4817<br />
0.3551<br />
28.7020<br />
0.3425<br />
0.2802<br />
0.4624<br />
0.4624<br />
0.4624<br />
0.2450<br />
0.1633<br />
0.6176<br />
0.2251<br />
0.9970<br />
0.0021<br />
1.8569<br />
8.3873<br />
Fixed Assets<br />
per<br />
Employee<br />
(RM)<br />
126,473<br />
39,689<br />
69,406<br />
44,663<br />
45,803<br />
80,308<br />
59,466<br />
51,462<br />
17,958<br />
23,374<br />
31,273<br />
2,678<br />
24,557<br />
12,308<br />
1,742,879<br />
114,793<br />
48,275<br />
341,033<br />
3,156<br />
442,009<br />
106,607<br />
69,647<br />
69,647<br />
69,647<br />
194,089<br />
274,906<br />
39,207<br />
176,082<br />
89,258<br />
7,155,181<br />
41,759<br />
10,358<br />
154<br />
PRODUCTIVITY REPORT 2009
2009<br />
Code<br />
17220<br />
17230<br />
17291<br />
17299<br />
173<br />
17300<br />
18<br />
181<br />
18101<br />
18102<br />
18109<br />
19<br />
191<br />
19110<br />
19120<br />
192<br />
19200<br />
20<br />
201<br />
20100<br />
202<br />
Sub- Sectors<br />
Manufacture of carpets and<br />
rugs<br />
Manufacture of cordage,<br />
rope, twine and netting<br />
Handicraft spinning and<br />
weaving<br />
Manufacture of other<br />
textiles n.e.c<br />
Manufacture of Knitted and<br />
Crocheted Fabrics and<br />
Articles<br />
Manufacture of knitted<br />
and crocheted fabrics and<br />
articles<br />
MANUFACTURE OF<br />
WEARING APPAREL;<br />
DRESSING AND DYEING<br />
OF FUR<br />
Manufacture of Wearing<br />
Apparel, Except Fur Apparel<br />
Manufacture of clothings<br />
Custom tailoring and<br />
dressmaking<br />
Manufacture of<br />
miscellaneous wearing<br />
apparel n.e.c<br />
TANNING AND<br />
DRESSING OF LEATHER;<br />
MANUFACTURE OF<br />
LUGGAGE, HANDBAGS,<br />
SADDLERY, HARNESS<br />
AND FOOTWEAR<br />
Tanning and Dressing<br />
of Leather; Manufacture<br />
of Luggage, Handbags,<br />
Saddlery and Harness<br />
Tanning and dressing of<br />
leather<br />
Manufacture of luggage,<br />
handbags and the like,<br />
saddlery and harness<br />
of leather and leather<br />
substitutes<br />
Manufacture of Footwear<br />
Manufacture of footwear<br />
MANUFACTURE OF<br />
WOOD AND PRODUCTS<br />
OF WOOD AND CORK,<br />
EXCEPT FURNITURE;<br />
MANUFACTURE OF<br />
ARTICLES OF STRAW<br />
AND PLAITING<br />
MATERIALS<br />
Sawmilling and Planing of<br />
Wood<br />
Sawmilling and planning of<br />
Wood<br />
Manufacture of Products<br />
of Wood, Cork, Straw and<br />
Plaiting Materials<br />
Added Value<br />
per<br />
Employee<br />
(RM)<br />
55,051<br />
131,393<br />
52,955<br />
46,625<br />
41,222<br />
41,222<br />
18,488<br />
18,488<br />
17,210<br />
20,828<br />
37,969<br />
13,644<br />
7,518<br />
13,282<br />
7,000<br />
15,647<br />
15,647<br />
33,726<br />
27,848<br />
27,848<br />
37,675<br />
Labour Cost<br />
per<br />
Employee<br />
(RM)<br />
22,245<br />
15,027<br />
19,086<br />
19,969<br />
16,714<br />
16,714<br />
14,263<br />
14,263<br />
14,157<br />
10,960<br />
17,575<br />
17,811<br />
14,985<br />
16,139<br />
14,881<br />
18,735<br />
18,735<br />
19,691<br />
18,776<br />
18,776<br />
20,305<br />
Unit Labour<br />
Cost<br />
(Pure Number)<br />
0.0863<br />
0.0918<br />
0.1582<br />
0.0788<br />
0.1084<br />
0.1084<br />
0.1751<br />
0.1751<br />
0.1743<br />
0.2342<br />
0.1723<br />
0.2793<br />
0.1869<br />
0.0374<br />
0.3061<br />
0.3208<br />
0.3208<br />
0.1533<br />
0.1536<br />
0.1536<br />
0.1532<br />
Added Value<br />
per<br />
Fixed Asset<br />
(Pure Number)<br />
0.6800<br />
3.5937<br />
1.6436<br />
0.7707<br />
0.6601<br />
0.6601<br />
1.9012<br />
1.9012<br />
2.2464<br />
39.9535<br />
0.7996<br />
1.2683<br />
0.6462<br />
0.8350<br />
0.6222<br />
1.4943<br />
1.4943<br />
1.5617<br />
2.9171<br />
2.9171<br />
1.2689<br />
Fixed Assets<br />
per<br />
Employee<br />
(RM)<br />
80,962<br />
36,562<br />
32,219<br />
60,500<br />
62,445<br />
62,445<br />
9,724<br />
9,724<br />
7,661<br />
521<br />
47,484<br />
10,758<br />
11,635<br />
15,908<br />
11,251<br />
10,471<br />
10,471<br />
21,595<br />
9,547<br />
9,547<br />
29,692<br />
APPENDIX D<br />
PRODUCTIVITY REPORT 2009 155
2009<br />
APPENDIX D<br />
Code<br />
20211<br />
20212<br />
20220<br />
20230<br />
20291<br />
20299<br />
21<br />
210<br />
21010<br />
21020<br />
21091<br />
21092<br />
21093<br />
21095<br />
21096<br />
21097<br />
21099<br />
22<br />
221<br />
22110<br />
22120<br />
22130<br />
Sub- Sectors<br />
Manufacture of veneer<br />
sheets and plywood<br />
Manufacture of laminboard,<br />
particle board and other<br />
panels and board.<br />
Manufacture of builders’<br />
carpentry and joinery<br />
Manufacture of wooden<br />
and cane containers<br />
Manufacture of charcoal<br />
Manufacture of other<br />
products of wood, cane,<br />
articles of cork, straw<br />
and plaiting materials<br />
MANUFACTURE OF<br />
PAPER AND PAPER<br />
PRODUCTS<br />
Manufacture of Paper and<br />
Paper Products<br />
Manufacture of pulp, paper<br />
and paperboard<br />
Manufacture of corrugated<br />
paper and paperboard and<br />
containers of paper and<br />
paperboard<br />
Manufacture of carbon<br />
papers<br />
Manufacture of<br />
envelopes, letter cards,<br />
correspondence cards or<br />
plain postcards<br />
Manufacture of toilet<br />
papers, cleansing tissues,<br />
towels, serviettes<br />
Manufacture of sanitary<br />
towels and tampons<br />
disposable napkins and<br />
napkin liners for babies<br />
Manufacture of gummed or<br />
adhesive paper in strips or<br />
rolls and labels, wall paper<br />
Manufacture of effigies,<br />
funeral paper goods, joss<br />
papers<br />
Manufacture of other<br />
articles of paper and<br />
paperboard, n.e.c. (e.g.<br />
cigarette papers and<br />
Chinese lanterns)<br />
PUBLISHING, PRINTING<br />
AND REPRODUCTION OF<br />
RECORDED MEDIA<br />
Publishing<br />
Publishing of books,<br />
brochures, musical books<br />
and other publications<br />
Publishing of newspapers,<br />
journals and periodicals<br />
Publishing of recorded<br />
media<br />
Added Value<br />
per<br />
Employee<br />
(RM)<br />
20,309<br />
79,661<br />
39,444<br />
27,618<br />
36,761<br />
36,116<br />
56,218<br />
56,218<br />
81,063<br />
53,612<br />
25,121<br />
24,636<br />
51,625<br />
52,254<br />
58,394<br />
13,929<br />
25,220<br />
71,428<br />
91,769<br />
65,635<br />
33,711<br />
61,126<br />
Labour Cost<br />
per<br />
Employee<br />
(RM)<br />
16,159<br />
31,207<br />
21,117<br />
16,678<br />
18,854<br />
18,640<br />
23,864<br />
23,864<br />
34,013<br />
18,372<br />
24,821<br />
33,057<br />
25,099<br />
19,231<br />
31,982<br />
14,478<br />
37,891<br />
33,190<br />
42,872<br />
29,596<br />
50,641<br />
20,170<br />
Unit Labour<br />
Cost<br />
(Pure Number<br />
0.1700<br />
0.1259<br />
0.1440<br />
0.1706<br />
0.2615<br />
0.1935<br />
0.0810<br />
0.0810<br />
0.0951<br />
0.0637<br />
0.0869<br />
0.1364<br />
0.1077<br />
0.0570<br />
0.1050<br />
0.0804<br />
0.1262<br />
0.1748<br />
0.1680<br />
0.1488<br />
0.1894<br />
0.1112<br />
Added Value<br />
per<br />
Fixed Asset<br />
(Pure Number)<br />
1.5147<br />
0.6452<br />
1.8612<br />
3.4392<br />
3.6668<br />
4.6688<br />
0.4054<br />
0.4054<br />
0.2248<br />
0.6964<br />
0.1366<br />
0.4453<br />
0.5619<br />
0.7544<br />
0.2907<br />
1.8428<br />
0.1718<br />
0.3195<br />
0.2056<br />
1.0531<br />
0.0282<br />
0.3690<br />
Fixed Assets<br />
per<br />
Employee<br />
(RM)<br />
13,408<br />
123,476<br />
21,192<br />
8,030<br />
10,026<br />
7,736<br />
138,659<br />
138,659<br />
360,644<br />
76,988<br />
183,952<br />
55,329<br />
91,878<br />
69,268<br />
200,892<br />
7,559<br />
146,799<br />
223,534<br />
446,410<br />
62,326<br />
1,196,499<br />
165,640<br />
156<br />
PRODUCTIVITY REPORT 2009
2009<br />
Code<br />
22190<br />
222<br />
22210<br />
22220<br />
23<br />
232<br />
23200<br />
24<br />
241<br />
24111<br />
24119<br />
24120<br />
24130<br />
242<br />
24210<br />
24221<br />
24222<br />
24230<br />
24240<br />
24290<br />
25<br />
251<br />
25111<br />
Sub- Sectors<br />
Other publishing<br />
Printing and Service<br />
Activities Related to Printing<br />
Printing<br />
Service activities related to<br />
printing<br />
MANUFACTURE OF<br />
COKE, REFINED<br />
PETROLEUM PRODUCTS<br />
AND NUCLEAR FUEL<br />
Manufacture of Refined<br />
Petroleum Products<br />
Manufacture of refined<br />
petroleum products(2)<br />
MANUFACTURE OF<br />
CHEMICALS AND<br />
CHEMICAL PRODUCTS<br />
Manufacture of Basic<br />
Chemicals<br />
Manufacture of industrial<br />
gases, whether<br />
compressed, liquefied or in<br />
solid state<br />
Manufacture of other basic<br />
industrial chemicals except<br />
fertilizers and nitrogen<br />
compounds<br />
Manufacture of fertilizers<br />
and nitrogen compounds<br />
Manufacture of plastics<br />
in primary forms and of<br />
synthetic rubber<br />
Manufacture of Other<br />
Chemical Products<br />
Manufacture of pesticides<br />
and other agrochemical<br />
products<br />
Manufacture of paints,<br />
varnishes and similar<br />
coatings and mastics<br />
Manufacture of printing ink<br />
Manufacture of<br />
pharmaceuticals, medicinal<br />
chemicals and botanical<br />
products<br />
Manufacture of soap and<br />
detergents, cleaning and<br />
polishing preparations,<br />
perfumes and toilet<br />
preparations<br />
Manufacture of other<br />
chemical products n.e.c.<br />
MANUFACTURE OF<br />
RUBBER AND PLASTIC<br />
PRODUCTS<br />
Manufacture of Rubber<br />
Products<br />
Manufacture of rubber tyres<br />
and tubes<br />
Added Value<br />
per<br />
Employee<br />
(RM)<br />
155,931<br />
56,175<br />
46,076<br />
63,600<br />
577,192<br />
577,192<br />
577,192<br />
249,197<br />
371,011<br />
1,137,459<br />
222,325<br />
210,488<br />
289,832<br />
135,680<br />
92,440<br />
121,415<br />
129,423<br />
59,937<br />
149,565<br />
278,699<br />
35,298<br />
51,884<br />
45,607<br />
Labour Cost<br />
per<br />
Employee<br />
(RM)<br />
45,606<br />
25,930<br />
22,123<br />
28,728<br />
58,135<br />
58,135<br />
58,135<br />
46,032<br />
59,613<br />
69,712<br />
67,105<br />
52,376<br />
48,688<br />
33,376<br />
26,118<br />
42,034<br />
51,778<br />
20,991<br />
25,860<br />
48,785<br />
21,196<br />
21,008<br />
29,347<br />
Unit Labour<br />
Cost<br />
(Pure Number)<br />
0.1615<br />
0.1839<br />
0.1705<br />
0.1924<br />
0.0076<br />
0.0076<br />
0.0076<br />
0.0452<br />
0.0357<br />
0.0259<br />
0.0444<br />
0.0408<br />
0.0315<br />
0.0819<br />
0.0587<br />
0.0954<br />
0.1069<br />
0.1684<br />
0.0501<br />
0.0672<br />
0.1269<br />
0.0965<br />
0.1130<br />
Added Value<br />
per<br />
Fixed Asset<br />
(Pure Number)<br />
1.9258<br />
0.9956<br />
0.5166<br />
1.9672<br />
0.1521<br />
0.1521<br />
0.1521<br />
0.3859<br />
0.3782<br />
0.3733<br />
0.4651<br />
1.1876<br />
0.3113<br />
0.4069<br />
3.2571<br />
11.7327<br />
7.3279<br />
6.5231<br />
1.1655<br />
0.1915<br />
0.8548<br />
1.2986<br />
0.5400<br />
Fixed Assets<br />
per<br />
Employee<br />
(RM)<br />
80,969<br />
56,421<br />
89,194<br />
32,330<br />
3,794,007<br />
3,794,007<br />
3,794,007<br />
645,829<br />
981,009<br />
3,047,421<br />
477,972<br />
177,237<br />
931,076<br />
333,480<br />
28,381<br />
10,348<br />
17,662<br />
9,188<br />
128,325<br />
1,455,593<br />
41,294<br />
39,953<br />
84,463<br />
APPENDIX D<br />
PRODUCTIVITY REPORT 2009 157
2009<br />
APPENDIX D<br />
Code<br />
25112<br />
25191<br />
25192<br />
25193<br />
25199<br />
252<br />
25201<br />
25202<br />
25203<br />
25204<br />
25205<br />
25206<br />
25209<br />
26<br />
261<br />
26100<br />
269<br />
26910<br />
26920<br />
26930<br />
26941<br />
26942<br />
26951<br />
26959<br />
26960<br />
26990<br />
27<br />
Sub- Sectors<br />
Retreading and rebuilding<br />
of rubber tyres<br />
Rubber remilling and latex<br />
processing<br />
Rubber smokehouses<br />
Manufacture of rubber<br />
gloves<br />
Manufacture of other rubber<br />
products, n.e.c<br />
Manufacture of Plastic<br />
Products<br />
Manufacture of plastic blow<br />
moulded products<br />
Manufacture of plastic<br />
extruded products<br />
Manufacture of plastic bags<br />
and films<br />
Manufacture of plastic<br />
product rigid fibre reinforced<br />
Manufacture of plastic foam<br />
products<br />
Manufacture of plastic<br />
injection moulded<br />
components<br />
Manufacture of other plastic<br />
products n.e.c<br />
MANUFACTURE OF<br />
OTHER NON- METALLIC<br />
MINERAL PRODUCTS<br />
Manufacture of Glass and<br />
Glass Products<br />
Manufacture of glass and<br />
glass products<br />
Manufacture of Non-<br />
Metallic Mineral Products<br />
n.e.c.<br />
Manufacture of nonstructural<br />
non-refractory<br />
ceramic ware<br />
Manufacture of refractory<br />
ceramic products<br />
Manufacture of structural<br />
non-refractory clay and<br />
ceramic products<br />
Manufacture of hydraulic<br />
cement<br />
Manufacture of lime and<br />
plaster<br />
Manufacture of ready-mix<br />
concrete<br />
Manufacture of other<br />
articles of concrete, cement<br />
and plaster<br />
Cutting, shaping and<br />
finishing of stone<br />
Manufacture of other nonmetallic<br />
mineral products,<br />
n.e.c<br />
MANUFACTURE OF<br />
BASIC METALS<br />
Added Value<br />
per<br />
Employee<br />
(RM)<br />
88,517<br />
74,775<br />
60,043<br />
58,193<br />
35,791<br />
26,876<br />
35,901<br />
29,071<br />
18,216<br />
23,719<br />
45,465<br />
29,314<br />
25,475<br />
82,421<br />
110,078<br />
110,078<br />
76,105<br />
29,097<br />
66,745<br />
29,947<br />
348,197<br />
49,436<br />
80,625<br />
71,179<br />
47,369<br />
64,956<br />
135,491<br />
Labour Cost<br />
per<br />
Employee<br />
(RM)<br />
25,858<br />
20,934<br />
10,227<br />
18,441<br />
21,796<br />
21,291<br />
22,177<br />
25,900<br />
24,152<br />
20,979<br />
18,415<br />
22,510<br />
18,877<br />
27,080<br />
30,067<br />
30,067<br />
26,397<br />
17,936<br />
24,591<br />
23,446<br />
60,824<br />
23,865<br />
33,090<br />
21,871<br />
18,443<br />
31,400<br />
34,843<br />
Unit Labour<br />
Cost<br />
(Pure Number)<br />
0.1060<br />
0.0217<br />
0.0566<br />
0.1159<br />
0.1818<br />
0.1505<br />
0.1855<br />
0.1207<br />
0.1259<br />
0.2555<br />
0.1460<br />
0.1520<br />
0.1642<br />
0.1125<br />
0.0904<br />
0.0904<br />
0.1201<br />
0.2758<br />
0.1766<br />
0.2624<br />
0.0644<br />
0.1148<br />
0.0682<br />
0.1080<br />
0.1412<br />
0.1631<br />
0.0512<br />
Added Value<br />
per<br />
Fixed Asset<br />
(Pure Number<br />
1.1627<br />
1.7860<br />
49.8563<br />
1.4695<br />
1.4730<br />
0.6403<br />
1.4854<br />
0.2343<br />
0.2941<br />
4.5419<br />
0.8130<br />
0.4344<br />
1.4562<br />
0.5162<br />
0.4871<br />
0.4871<br />
0.5266<br />
1.3140<br />
0.5755<br />
0.6479<br />
0.2932<br />
2.0208<br />
6.6765<br />
3.2998<br />
0.9980<br />
0.6554<br />
0.8205<br />
Fixed Assets<br />
per<br />
Employee<br />
(RM)<br />
76,130<br />
41,866<br />
1,204<br />
39,600<br />
24,299<br />
41,975<br />
24,169<br />
124,094<br />
61,933<br />
5,222<br />
55,923<br />
67,485<br />
17,494<br />
159,674<br />
225,991<br />
225,991<br />
144,528<br />
22,144<br />
115,988<br />
46,225<br />
1,187,691<br />
24,463<br />
12,076<br />
21,571<br />
47,466<br />
99,107<br />
165,130<br />
158<br />
PRODUCTIVITY REPORT 2009
2009<br />
Code<br />
271<br />
27100<br />
272<br />
27209<br />
273<br />
27310<br />
27320<br />
28<br />
281<br />
28110<br />
28120<br />
289<br />
28910<br />
28920<br />
28930<br />
28991<br />
28992<br />
28993<br />
28999<br />
29<br />
291<br />
Sub- Sectors<br />
Manufacture of Basic Iron<br />
and Steel<br />
Manufacture of basic iron<br />
and steel products<br />
Manufacture of Basic<br />
Precious and Non-Ferrous<br />
Metals<br />
Manufacture of other basic<br />
precious and non-ferrous<br />
metals<br />
Casting of Metals<br />
Casting of iron and steel<br />
Casting of non-ferrous<br />
metals<br />
MANUFACTURE OF<br />
FABRICATED METAL<br />
PRODUCTS, EXCEPT<br />
MACHINERY AND<br />
EQUIPMENT<br />
Manufacture of Structural<br />
Metal Products, Tanks,<br />
Reservoirs and Steam<br />
Generators<br />
Manufacture of structural<br />
metal products<br />
Manufacture of tanks,<br />
reservoirs and containers<br />
of metal<br />
Manufacture of Other<br />
Fabricated Metal Products;<br />
Metal Working Service<br />
Activities<br />
Forging, pressing, stamping<br />
and roll-forming metal;<br />
powder metallurgy<br />
Treatment and coating of<br />
metals, general mechanical<br />
engineering on a fee or<br />
contract basis<br />
Manufacture of cutlery,<br />
hand tools and general<br />
hardware<br />
Manufacture of tin cans and<br />
metal boxes<br />
Manufacture of wire,<br />
wire products and metal<br />
fasteners<br />
Manufacture of brass,<br />
copper, pewter and<br />
aluminium products<br />
Manufacture of other<br />
fabricated metal products<br />
n.e.c.<br />
MANUFACTURE OF<br />
MACHINERY AND<br />
EQUIPMENT N.E.C.<br />
Manufacture of General<br />
Purpose Machinery<br />
Added Value<br />
per<br />
Employee<br />
(RM)<br />
147,039<br />
147,039<br />
154,972<br />
154,972<br />
80,473<br />
85,184<br />
61,739<br />
76,132<br />
87,627<br />
90,392<br />
71,883<br />
72,581<br />
34,330<br />
66,156<br />
60,608<br />
117,342<br />
91,548<br />
85,514<br />
45,485<br />
70,318<br />
80,522<br />
Labour Cost<br />
per<br />
Employee<br />
(RM)<br />
36,119<br />
36,119<br />
37,522<br />
37,522<br />
28,034<br />
27,909<br />
28,529<br />
24,948<br />
25,389<br />
23,592<br />
35,616<br />
24,811<br />
21,102<br />
23,972<br />
22,501<br />
36,949<br />
25,963<br />
26,187<br />
19,984<br />
37,239<br />
38,614<br />
Unit Labour<br />
Cost<br />
(Pure Number)<br />
0.0478<br />
0.0478<br />
0.0476<br />
0.0476<br />
0.0804<br />
0.0763<br />
0.1013<br />
0.1057<br />
0.1002<br />
0.0982<br />
0.1085<br />
0.1075<br />
0.1740<br />
0.1029<br />
0.1417<br />
0.0997<br />
0.0826<br />
0.0963<br />
0.1700<br />
0.1158<br />
0.1118<br />
Added Value<br />
per<br />
Fixed Asset<br />
(Pure Number)<br />
0.7721<br />
0.7721<br />
0.7735<br />
0.7735<br />
1.4673<br />
1.4080<br />
1.9084<br />
2.2608<br />
2.7444<br />
3.5525<br />
1.0441<br />
2.1214<br />
1.8825<br />
1.3169<br />
1.3225<br />
2.9634<br />
1.9324<br />
2.7248<br />
1.9917<br />
1.2968<br />
1.0173<br />
Fixed Assets<br />
per<br />
Employee<br />
(RM)<br />
190,449<br />
190,449<br />
200,363<br />
200,363<br />
54,844<br />
60,500<br />
32,352<br />
33,674<br />
31,929<br />
25,445<br />
68,850<br />
34,213<br />
18,236<br />
50,238<br />
45,827<br />
39,597<br />
47,375<br />
31,383<br />
22,838<br />
54,225<br />
79,151<br />
APPENDIX D<br />
PRODUCTIVITY REPORT 2009 159
2009<br />
APPENDIX D<br />
Code<br />
29110<br />
29120<br />
29130<br />
29140<br />
29150<br />
29191<br />
29199<br />
29