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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 />

13<br />

15<br />

15<br />

17<br />

22<br />

22<br />

24<br />

25<br />

28<br />

29<br />

29<br />

30<br />

30<br />

30<br />

30<br />

31<br />

33


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 />

83<br />

83<br />

84<br />

85<br />

86<br />

88<br />

90<br />

90<br />

92<br />

92<br />

93<br />

95<br />

96<br />

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 />

100<br />

102<br />

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 />

122<br />

122<br />

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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2009<br />

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


2009<br />

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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2009<br />

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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2009<br />

• 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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2009<br />

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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2009<br />

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


2009<br />

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 />

78<br />

PRODUCTIVITY REPORT 2009


2009<br />

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 />

84<br />

PRODUCTIVITY REPORT 2009


2009<br />

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 />

86<br />

PRODUCTIVITY REPORT 2009


2009<br />

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 />

88<br />

PRODUCTIVITY REPORT 2009


2009<br />

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 />

92<br />

PRODUCTIVITY REPORT 2009


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 />

94<br />

PRODUCTIVITY REPORT 2009


2009<br />

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 />

96<br />

PRODUCTIVITY REPORT 2009


2009<br />

• 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 />

98<br />

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 />

100<br />

PRODUCTIVITY REPORT 2009


2009<br />

• 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 />

102<br />

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 />

104<br />

PRODUCTIVITY REPORT 2009


2009<br />

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 />

PRODUCTIVITY REPORT 2009


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 />

PRODUCTIVITY REPORT 2009


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 />

112<br />

PRODUCTIVITY REPORT 2009


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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PRODUCTIVITY REPORT 2009


2009<br />

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 />

116<br />

PRODUCTIVITY REPORT 2009


2009<br />

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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2009<br />

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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2009<br />

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 />

PRODUCTIVITY REPORT 2009 125


2009<br />

CHAPTER 9<br />

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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2009<br />

CHAPTER 9<br />

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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2009<br />

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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2009<br />

CHAPTER 9<br />

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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PRODUCTIVITY REPORT 2009


2009<br />

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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2009<br />

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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2009<br />

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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2009<br />

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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2009<br />

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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2009<br />

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 />

138<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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2009<br />

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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2009<br />

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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2009<br />

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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2009<br />

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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2009<br />

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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2009<br />

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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2009<br />

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