productivity performance of malaysia chapter 1 - MPC

16 th PRODUCTIVITY REPORT
MALAYSIA PRODUCTIVITY CORPORATION
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of the Malaysia Productivity Corporation.
May 2009
For further information, please refer to the:
Director General
MALAYSIA PRODUCTIVITY CORPORATION
(Perbadanan Produktiviti Malaysia)
P.O. Box 64, Jalan Sultan
46904 Petaling Jaya, Malaysia
Tel: 03-79557266, 79578068
Fax: 03-79540795
http://www.mpc.gov.my
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Statutory Requirements
In accordance with Section 7 of the Malaysia Productivity Council (Incorporation)
(Amendment) Act 1991, Malaysia Productivity Corporation hereby publishes and
submits to the Minister of International Trade and Industry the status of productivity in
Malaysia.

MESSAGE FROM THE MINISTER OF
INTERNATIONAL TRADE AND INDUSTRY
MALAYSIA
In 2008, the Malaysian economy recorded a GDP growth of 4.6%. Malaysia’s strong
economic fundamentals in terms of low inflation, full employment and low interest rates
as well as the diversified economic structure had enabled Malaysia to sustain its growth
momentum amidst the global economic slowdown. In tandem with the GDP growth, the
economy registered a productivity growth of 2.9% to a level of RM49,526. This growth
achievement was attributed to strong domestic consumption facilitated by the
government’s proactive approaches to stimulate economic growth as well as the
implementation of productivity and cost rationalisation measures by the private sector.
All economic sectors achieved positive productivity growth ranging from 1.5% for the
construction sector to 4.5% for the transport sector. At the international level, Malaysia
achieved a higher productivity growth than most Asian countries namely, Thailand
(2.0%), Hong Kong (1.6%), Taiwan (0.7%), and Singapore (-0.9%). Malaysia’s
productivity growth was also higher than many OECD countries such as the USA
(2.1%), Japan (0.8%) and Germany (0.1%). This continuous productivity growth is an
important element in converting Malaysia towards a high income economy.
The World Economic Forum (WEF) had identified Malaysia to be in the efficiency stage
of development. The efficiency stage is driven by higher education and training, efficient
goods market, well-functioning labour market, sophisticated financial market, a large
domestic or foreign market and the ability to harness the benefits of existing
technologies. However, Malaysia aspires to move towards the innovation-driven stage
of development where industries must compete through innovation and producing new
and different products and services using the most sophisticated production processes.
Among the factors that will contribute to a quantum leap in productivity level is Total
Factor Productivity (TFP) which encompasses enhancing efficiency of all factors of
production. TFP enhancement includes developing human capital capabilities through
knowledge based activities, inculcating a creative and innovative mindset, as well as
adopting new technologies and innovation to accelerate productivity growth. During the
period 1999-2008, TFP recorded a growth of 2.0%. With this achievement, the economy
will be able to achieve the targeted TFP growth of 2.2% by 2010 and 2.6% by 2020.

Productivity of the public sector is equally important to generate higher economic
growth. To further enhance productivity of the sector, the government is continuously
improving the public delivery system by nurturing a high performance work culture
among public sector employees, adopting benchmarking and best practices in the
public service administration, implementing Total Quality Management (TQM) initiatives
and developing KPIs and performance measures for continuous improvement. These
initiatives had resulted in a productivity growth of 3.8% in the public sector to RM32,073
in 2008.
For Malaysia to forge ahead to achieve developed nation status, strategic collaboration
between the public and private sectors is of utmost importance. I am happy to note that
there exists close collaboration between the public and private sectors which had
enabled Malaysia to attain a higher level of competitiveness. I would like to encourage
both the public and private sectors, academicians and the business community at large
to use this report as reference to benchmark and improve performance in their quest to
increase productivity and competitiveness.
DATO’ MUSTAPA BIN MOHAMED
Minister of International Trade and Industry
Malaysia

STATEMENT BY THE CHAIRMAN
The Productivity Report 2008 is the 16 th edition and it provides a comprehensive
analysis of the productivity performance at the industry, sectoral, national and
international levels. For the preparation of this Report, MPC had consulted with the
public and private sectors as well as the academia. Views, opinions and issues on
productivity, quality and competitiveness expressed during the dialogue sessions have
been incorporated into the Report.
To face the challenges of the current economic crisis, industries are of the opinion that
current systems and processes need to be reviewed and re-assessed to remove
inefficiencies. It was also acknowledged that industries need to focus on human capital
development and to embark on innovative practices to enhance productivity, quality and
competitiveness in preparation for the expected economic upturn.
It is in line with the thrusts of assisting the private sector in facing the crisis and in
building capacity for the future, the Malaysia Productivity Corporation (MPC) had
launched the Efficiency Enhancement Clinics (EECs). The EEC is an avenue where
advisory services, basic business diagnostics on efficiency enhancement as well as
cost rationalisation measures are provided to the public and business communities. I
urge industries to avail themselves of this unique facility offered by MPC.
In 2008, MPC had successfully reached out to 65,076 Small and Medium Enterprises
(SMEs). Among the programmes participated by SMEs are Productivity and Quality
Training and Systems Development, specifically in the areas of Total Quality
Management Model Companies, Innovative and Creative Circles, Quality Environment,
Business Enabling Skills Training, Company Productivity Assessment and the
Productivity-Linked Wage System. The participation rate of SMEs in MPC’s
programmes was 58.8%, while 30.9% was from the public sector and 10.3% from larger
corporation.

I would like to thank the Board Members, Chairmen and Members of Consultative
Panels and Taskforces, Members of Community of Practices as well as the
management team and staff of MPC for their dedication and commitment in developing
and implementing programmes to assist industries mitigate the adverse effect of the
global economic crisis. I would also like to extend my appreciation to the various
ministries and agencies, especially the Ministry of International Trade and Industry
(MITI), for their continuous support, guidance and assistance. Last but not least, my
thanks also to all who have contributed in one way or another to the successful
publication of this Report.
Tan Sri Dato’ Azman Hashim
Chairman
Malaysia Productivity Corporation

Malaysia Productivity Corporation
The Malaysia Productivity Corporation (MPC) was established to assume an
important role in the enhancement of productivity and quality of the country towards
achieving a higher national economic growth.
To realise the above, MPC has formulated a strategic operation based on
the following vision, mission and objectives.
VISION
The leading organisation in productivity enhancement for global
competitiveness and innovation.
MISSION
To deliver high impact services towards achieving performance excellence through
innovation for the betterment of life.
OBJECTIVES
Our corporate objectives are:
Providing value-added information on productivity, quality, competitiveness and best
practices through research activities and databases;
Developing human capital and organisational excellence for building a
knowledge-based society through training, systems development and best practices;
Nurturing innovative and creative culture through P&Q promotion and
partnership programmes.

CONTENTS
MESSAGE FROM THE MINISTER
STATEMENT BY THE CHAIRMAN
MALAYSIA PRODUCTIVITY CORPORATION
Vision, Mission and Objectives
REPORT HIGHLIGHTS ........................................................................... i
CHAPTER 1
PRODUCTIVITY PERFORMANCE OF MALAYSIA
Malaysia’s Economic and Productivity Performance ............................... 4
Overall Productivity Performance ............................................................ 5
Productivity Performance of the Economic Sectors ................................ 7
Box 1.1: Productivity Performance at the Regional Level ....................... 8
Box 1.2: Sustaining Competitiveness through the PLWS ........................ 11
International Productivity Comparison ..................................................... 12
Box 1.3: Malaysia’s Competitiveness Performance ................................ 14
Box 1.4: Attitude Towards Globalisation .................................................. 17
Outlook for 2009 ...................................................................................... 18
CHAPTER 2
TOTALFACTOR PRODUCTIVITY
Total Factor Productivity for Sustainable Economic Growth .................... 24
Box 2.1: Total Factor Productivity Framework ......................................... 26
Sources of Total Factor Productivity Growth ............................................ 27
Box 2.2: Malaysian Management Capability Index (MCI) ........................ 31
TFP Performance of Selected Economic Sectors ................................... 32
Total Factor Productivity Growth for Competitiveness ............................. 35
Box 2.3: Surviving the Economic Crisis through Efficiency Measures .... 37

CONTENTS
CHAPTER 3
PRODUCTIVITY PERFORMANCE OF THE MANUFACTURING SECTOR
Performance of the Manufacturing Sector, 2008 ..................................... 42
Productivity Performance of the Manufacturing Sector, 2008 ................. 45
Box 3.1: Kaizen: The Leading Edge in Cost Management and
Greater Efficiency ..................................................................................... 48
Labour Cost Competitiveness .................................................................. 49
Box 3.2: Linking Wages to Enhance Competitiveness of the
Manufacturing Sector ............................................................................... 50
International Comparison ......................................................................... 53
Total Factor Productivity (TFP) of Selected Manufacturing
Sub-sectors, 2004-2008 ........................................................................... 55
Box 3.3: Competitiveness in the Food and Beverages Industry .............. 56
TFP Growth of Selected Manufacturing Industries, 2004-2008 ............... 58
Box 3.4: The Impact of Automation and Modernisation in the
Manufacturing Sector ............................................................................... 60
Initiatives Taken to Overcome the Economic Slowdown ......................... 60
Outlook for 2009 ...................................................................................... 62
CHAPTER 4
PRODUCTIVITY PERFORMANCE OF THE SERVICES SECTOR
Performance of the Services Sector ........................................................ 66
Box 4.1: Innovative Practices in the Services Sector .............................. 67
Productivity Performance of the Services Sector .................................... 70
International Comparison in Selected Services Sectors .......................... 72
Box 4.2: Patient Safety in Private Hospitals ............................................ 73
Total Factor Productivity of the Services Sector ...................................... 75
Transport Sub-Sector ............................................................................... 76
Distributive Trade Industry ....................................................................... 78
Hotel Industry ........................................................................................... 80
Information and Communications Technology Industry (ICT) .................. 82
Competitive Advantage of the ICT Industry ............................................. 85
Box 4.3: The Performance of the ICT Services Sector ............................ 85
Box 4.4: Management of Technology ...................................................... 86
Initiatives and Measures to Mitigate the Impact of Global Crisis ............. 88
Capacity Development ............................................................................. 89
Private Finance Initiative (PFI) ...................................................................89
Outlook for 2009 ....................................................................................... 92
Box 4.5: Performance–Wage Linkages among Services Industries ...... 93

CONTENTS
CHAPTER 5
PRODUCTIVITY PERFORMANCE OF THE AGRICULTURE SECTOR
Agriculture Challenges ............................................................................. 98
Partial Productivity .................................................................................... 99
Land Productivity ...................................................................................... 99
Labour Productivity ................................................................................... 100
Capital Productivity ................................................................................... 100
Box 5.1: Comparison Between GLOBALGAP and SALM and its
Impact Towards Farm Productivity and Competitiveness ........................ 101
International Agricultural Productivity Comparison ................................... 102
Productivity Performance of the Fisheries Sub-sector ............................. 103
Productivity Performance of the Livestock Sub-sector ............................ 104
Box 5.2: Enhancing the Competitiveness of the Agricultural Sector
through Sustainable Practices ................................................................. 104
Productivity Initiatives in the Agriculture Sector ....................................... 105
Box 5.3: Marketing Options at the Farm Level ........................................ 108
Box 5.4: An Overview of the Global Production and Trade of
Tropical Fruits .......................................................................................... 110
Initiatives to Mitigate the Economic Slowdown ........................................ 112
Outlook for 2009 ....................................................................................... 113
CHAPTER 6
PRODUCTIVITY PERFORMANCE OF THE CONSTRUCTION SECTOR
Productivity of the Construction Sector .................................................... 118
Productivity of the Construction Sub-sectors ........................................... 120
Residential Sub-sector ............................................................................. 120
Non-Residential Sub-sector ..................................................................... 122
Civil Engineering Sub-sector .................................................................... 123
Productivity Initiatives in the Construction Sector .................................... 125
Measures to Mitigate the Impact of the Global Crisis from the
Construction Perspective ......................................................................... 127
Outlook for 2009 ...................................................................................... 127
Box 6.1: Skills Training in the Construction Industry ............................... 128
Box 6.2: Industrialised Building System (IBS) Centre .............................. 129

CONTENTS
CHAPTER 7
PRODUCTIVITY PERFORMANCE OF THE PUBLIC SECTOR
Public Sector Productivity ........................................................................ 134
Box 7.1: Best Practices in Land Offices ................................................... 135
Public Sector Revenue and Expenditure ................................................. 136
Productivity Performance of the Public Service Sub-sectors .................. 139
Economic Services ................................................................................... 140
Social Services Sub-sector ...................................................................... 144
Health Services ........................................................................................ 145
Poverty Eradication .................................................................................. 148
Education Services .................................................................................. 149
Creating a Critical Mass of Local Experts in Science and Engineering .. 151
Security Services Sub-sector ................................................................... 152
Public Safety ............................................................................................ 152
Infrastructure Facilities ............................................................................. 153
General Public Administration Sub-sector ............................................... 154
Box 7.2: Improving Service Delivery through Process Improvement
for Excellence (PRIME) ............................................................................ 157
Increasing eKL Initiative ........................................................................... 158
International Comparison on Efficiency of Public Administration .............. 158
International Best Practices on Public Administration Efficiency ............. 160
Enhancing Public Service Delivery .......................................................... 162
CHAPTER 8
PRODUCTIVITY PERFORMANCE OF THE SMALL AND MEDIUM INDUSTRIES
Small and Medium Industries in the Manufacturing Sector ..................... 168
Entrepreneurship and Skills Development Programmes ......................... 169
Moving SMIs Up the Value Chain ............................................................ 169
Productivity Performance ......................................................................... 171
Capital Intensity ........................................................................................ 172
Capital Productivity ................................................................................... 173
Labour Cost Competitiveness .................................................................. 174
Box 8.1: National SME Development Blueprint 2008 .............................. 176
Box 8.2: Productivity Enhancement through Quality Environment
Activities ................................................................................................... 177
Box 8.3: SMIs as Global Players ............................................................. 178
Outlook for 2009 ...................................................................................... 179

CONTENTS
CHAPTER 9
BENCHMARKING FOR COMPETITIVENESS
Benchmarking for Enhancing Competitiveness ....................................... 184
Malaysia Benchmarking Index (MBI) for Tracking Business
Performance ............................................................................................. 186
MBI Components ...................................................................................... 187
Performance of SME Manufacturing Companies in Selected
Industries Using MBI, 2008 ...................................................................... 191
International Comparison through MBI ...................................................... 194
Box 9.1: Benchmarking Community of Practices (CoPs) ........................ 199
Productivity and Quality Initiatives for Value Creation ............................. 199
Measures to Assist Industries Mitigate the Global Crisis ......................... 204
APPENDIX
Appendix A: Terminology and Definitions ................................................. 209
Appendix B: Deriving the Sources of Long-Term Economic
and Productivity Growth ..................................................... 215
MPC BOARD OF DIRECTORS ............................................................... 219
MPC CONSULTATIVE PANELS .............................................................. 220
MPC MANAGEMENT TEAM ................................................................... 226
MPC OFFICES ......................................................................................... 227
INDEX ...................................................................................................... 229

REPORT HIGHLIGHTS
PRODUCTIVITY PERFORMANCE OF MALAYSIA
National Productivity Performance
In 2008, the Malaysian economy remained resilient with a growth in Gross Domestic
Product (GDP) of 4.6%. In tandem with the GDP growth, productivity grew by 2.9% to
a level of RM49,526. This achievement was commendable in the context of the global
economic slowdown. The productivity growth attained was attributed to the strong
domestic consumption which was facilitated by the government’s proactive approaches
to stimulate economic growth. The productivity and cost rationalisation measures
adopted by the private sector further contributed to the higher productivity registered.
Productivity growth was broad-based, with all economic sectors registering growth.
Among the major economic sectors, the manufacturing sector registered a productivity
growth of 2.0% amidst unfavourable export market conditions especially during the
fourth quarter of 2008. The manufacturing performance was supported by strong growth
among domestic oriented-industries such as chemicals and chemical products, food
and beverages, non-metallic mineral products, transport equipment and machinery. The
export-oriented industries specifically E&E products, rubber products, iron and steel
products as well as appliances and parts, were however, affected by the slower export
demand.
The services sector which accounted for 46.3% of GDP attained a productivity growth
of 3.3%, attributed to commendable growth in the transport, trade and finance subsectors.
The transport and trade sub-sectors achieved a 4.5% and 4.3% productivity
growth respectively, arising from sustained domestic demand and increased tourist
arrivals. Productivity of the finance sub-sector continued to grow by 4.2% as higher
lending was recorded. High utilization of ICT in services further contributed to the
productivity growth of the services sector.
Productivity of the public sector is equally important to generate higher economic
growth. To enhance productivity of the sector, the government is continuously improving
efficiency and public delivery system through customer-centric approaches. Various
administrative circulars had been introduced to intensify the implementation of
productivity, quality and innovation initiatives in the public sector. Among the initiatives
are Total Quality Management, Benchmarking, Quality Control Circles, Key
Performance Indicators, Public Service Innovation Award, and Improving Customer
Service. These initiatives had resulted in a productivity growth of 3.8% in the public
sector to a level of RM32,073 in 2008.
PRODUCTIVITY REPORT 2008
i

REPORT
HIGHLIGHTS
International Comparison
Malaysia’s productivity growth of 2.9% was higher than selected Organisation for
Economic Cooperation and Development (OECD) countries such as the United States
(2.1%), Japan (0.8%), Australia (0.4%), Finland and Germany (0.1%), Canada and
Denmark (-0.9%) and Ireland (-1.7%). Among Asian countries, Malaysia registered
higher growth than Thailand (2.0%), Hong Kong (1.6%), Taiwan (0.7%), and Singapore
(-0.9%). Malaysia will continually strive for higher productivity growth to achieve
comparable productivity levels of the more developed economies.
Among Asian countries, Malaysia’s productivity level of USD13,033 was higher than
Thailand (USD4,844), Philippines (USD3,279), China (USD3,273), Indonesia
(USD2,476) and India (USD1,700). However, the productivity level achieved by
Malaysia was relatively lower than the OECD countries. Among the factors that had
contributed to the higher productivity levels registered by the more developed
economies are the adoption of sophisticated technology, higher innovation capacity and
capabilities as well as more intensified research and development activities.
Total Factor Productivity
Total Factor Productivity (TFP) measures the efficiency and effectiveness of all factors
of production. Among the factors that contribute to higher TFP are human capital
development, demand intensity through promotion and marketing, higher technology
adoption, strategic allocation of resources and innovation and creativity. For the period
1999-2008, GDP grew by 5.6% supported by TFP growth of 2.0%. The contribution of
TFP to GDP growth was due to initiatives undertaken by both the public and private
sectors to shift the economy from the efficiency stage of development to the innovation
stage. Higher investments in ICT and technology, training and retraining of employees,
branding and marketing efforts to increase exports as well as nurturing a culture of
innovation and creativity had contributed to higher TFP growth.
For the period 1999-2008, the manufacturing sector registered TFP growth of 2.3%,
contributing 34.4% to output growth. The improvements in TFP in the manufacturing
sector was mainly due to the adoption of capital intensive production processes as well
as the employment of skilled labour. In services, the transport sector registered a TFP
growth of 1.4%, trade sector 2.1% and finance sector 1.9%. The improvement of TFP
in the services sector was due to efficient utilization of equipment, application of cost
effective systems, better linkages and connectivity as well as innovative initiatives such
as outsourcing of non-core business operations. The agriculture sector recorded TFP
growth of 1.0%, attributed to adoption of good agricultural practices, agronomic farm
management practices, biotechnology, extensive R&D activities and improvement in
food preservation and packaging technologies.
ii PRODUCTIVITY REPORT 2008

Productivity of the Small and Medium Industries
In 2008, Small and Medium Industries (SMIs) produced 30.9% of total manufacturing
output, 26.5% of added value and 31.8% share of employment in manufacturing. SMIs
recorded a productivity growth of 4.6%, contributed mainly by chemicals and chemical
products, basic metals products, petroleum products, office, accounting and computing
machinery, wood and wood products, and food and beverages. Capital intensity of SMIs
grew by 2.6% attributed to high investments in fixed assets in chemicals and chemical
products, office, accounting and computing machinery, electrical machinery and
publishing, printing and reproduction of recorded media. Labour cost competitiveness
was also achieved by SMIs as reflected by a reduction in unit labour cost by 2.9%. The
cost of producing one unit of product or service by SMIs had decreased thereby
enhancing their competitiveness.
REPORT
HIGHLIGHTS
Benchmarking for Competitiveness
Benchmarking is a management tool for organizations to carry out self-assessment,
compare performance with the best, locally and internationally and create change to
enhance competitiveness. The benchmarking and best practices systems and
programmes offered by the Malaysia Productivity Corporation (MPC) includes the
Benchmarking On-Line Networking Database (BOND), the E-benchmark system, Best
Practices Net, Process Improvement for Excellence (PRIME), and the Malaysia
Benchmarking Index (MBI).
The MBI is a business performance diagnostic tool which enables companies to
compare their performance internationally using key performance indicators which are
based on the four elements of the Balanced Scorecard. The elements are finance,
customer, internal process and learning and growth. The MBI focuses on seven main
areas of sales and profit, market growth, value creation, customers, employees,
supplier management and future growth. Organisations can thus benchmark their
performance in these areas and thus identify measures that will enable them to be the
best.
Outlook for 2009
In 2009, economic growth is expected to be driven by the services and manufacturing
sectors. Domestic industries will assume a greater role in driving economic growth as
the export-oriented industries are expected to face greater challenges of weak external
demand. The slowdown will create opportunities for industries as it serve as an impetus
for industries to strive for higher efficiencies. Industries are encouraged to adopt
measures to enhance productivity through integrating work processes, improving
management systems, strengthening human capital, and nurturing a culture of creativity
and innovation. With the challenging environment, the economy is expected to achieve
a productivity growth of more than 1.0%.
PRODUCTIVITY REPORT 2008
iii

REPORT
HIGHLIGHTS
The services sector is expected to achieve a productivity growth of more than 2.8%.
The finance sector is expected to grow by more than 3.0% from higher application of
ICT and online systems as well as advancement in Islamic finance. The transport and
trade sectors are expected to grow by more than 2.5% and 2.0% respectively from
higher consumer spending and tourists arrivals. The manufacturing sector is anticipated
to achieve a moderate productivity growth of 1.0% due to the softening of external
demand. This is evidenced particularly by a weaker demand for E&E products. The
growth in manufacturing is expected to be from domestic-oriented industries, spurred
by the implementation of the economic stimulus packages by the government.
Similarly, the construction sector is expected to register productivity growth of more than
1.0% with implementation of projects from the stimulus packages and Ninth Malaysia
Plan. The agriculture sector is expected to achieve a relatively high productivity growth
of more than 3.0%. This performance will be supported by productivity improvements
through biotechnology, aquaculture development and intensive fruits and vegetables
farming.
iv PRODUCTIVITY REPORT 2008

CHAPTER 1
PRODUCTIVITY PERFORMANCE OF
MALAYSIA

Highlights
CHAPTER 1
PRODUCTIVITY PERFORMANCE OF MALAYSIA
• Productivity grew by 2.9% to RM49,526 in 2008.
• All economic sectors registered productivity growth ranging from 1.5% to 4.5%.
• Malaysia’s productivity growth was higher than selected OECD and Asian
countries.
• The productivity level of RM49,526 was higher than most ASEAN countries as well
as China and India.
• In the World Competitiveness ranking, Malaysia was ranked 19 th among 55
economies ahead of several developed economies.
• In 2009, the economy is targeted to achieve a productivity growth of more than
1.0%.
Key Statistics
Productivity Level 2008 2007
(RM)
(RM)
Malaysia 49,526 48,113
Agriculture, forestry and fishery 26,372 25,601
Mining and quarrying 974,925 949,079
Manufacturing 56,660 55,544
Construction 20,511 20,204
Government Services 32,073 30,905
Services 56,139 54,374
Utilities 162,606 156,413
Transport 70,607 67,557
Trade 40,027 38,362
Finance 124,262 119,244
Other Services 26,895 26,386
GDP Growth 4.6% 6.3%
Gross national savings (as % of GNP) 38.0% 38.18%
Total Trade RM1.2 trillion RM1.11 trillion
CPI (2005=100 (% change)) 4.4% 2.0%
PRODUCTIVITY REPORT 2008 3

CHAPTER 1
GDP grew by 4.6%
supported by favourable
domestic consumption
MALAYSIA’S ECONOMIC AND PRODUCTIVITY
PERFORMANCE
In 2008, the Malaysian economy remained resilient
with a Gross Domestic Product (GDP) growth of 4.6%.
This achievement was commendable in the light of
the economic slowdown of major world economies.
The growth was facilitated by continued pro-business
policies of the government and improvement in
domestic demand particularly from private
consumption. It was further enhanced by public
investment and higher fiscal spending by the
government (Figure 1.1).
The services sector registered
the highest growth of 6.6%
supported by an impressive
performance by the trade,
transport and finance
sub-sectors
Among the economic sectors, the services sector
registered the highest growth of 6.6%. This growth
was supported by impressive performance by the
trade, transport and finance sub-sectors which
grew by 9.4%, 6.7% and 5.6% respectively. These
sub-sectors had benefited from continued expansion
of businesses and increase in tourism activities. The
performance was further enhanced by vibrant
insurance and finance activities. The manufacturing
sector’s output grew by 1.3%, supported by strong
performance of domestic-oriented industries.
The construction sector registered an output growth of
2.1%. This growth was driven by the intensification of
infrastructure projects under the Ninth Malaysia Plan.
The agriculture sector continued to expand and grow
by 3.8% attributed to competitive commodity prices of
rubber and palm oil. The mining sector declined by
0.8% due to lower production of crude oil and natural
gas.
4 PRODUCTIVITY REPORT 2008

Figure 1.1: GDP Growth of National and Economic Sectors, 2008
10
9.36
CHAPTER 1
8
6.69
Percent
6
4
2
4.64
5.62
4.88
3.83
2.15
2.13
1.27
0
-2
-0.76
Malaysia
Trade
Transport
Finance
Other Services
Agriculture
Utilities
Construction
Manufacturing
Mining
Computed from:
- Economic Report, Ministry of Finance, Malaysia and Economic Planning Unit, Malaysia
OVERALL PRODUCTIVITY PERFORMANCE
In 2008, the economy registered a productivity growth
of 2.9% amid the challenging economic environment
experienced by major trading partners such as the
USA, Japan, Singapore, China, Thailand and Korea
(Figure 1.2). The productivity level improved to
RM49,526 from RM48,135 in 2007. Productivity
growth was broad-based with all economic sectors
registering growth led by the services, manufacturing
and agriculture sectors (Table 1.1). Malaysia’s
productivity growth of 2.9% was higher than that
registered by Hong Kong (1.6%), Taiwan (0.7%) and
Singapore (-0.9%).
Malaysia’s productivity grew by
2.9% to RM49,526 which was
higher than Hong Kong, Taiwan
and Singapore
PRODUCTIVITY REPORT 2008
5

CHAPTER 1
Figure 1.2: Malaysia’s Productivity Growth, 2004-2008
5
4.17
4
3.42
3.68
Percent
3
2.98
2.89
2
1
2004 2005 2006 2007 2008
Computed from:
- Economic report, Ministry of Finance, Malaysia and Economic Planning unit, Malaysia
Table 1.1: Productivity Growth and Level of Economic Sectors
National/Economic Productivity Productivity
Sectors Growth (%) Level (RM)
2007 2008 2007 2008
Malaysia 4.17 2.89 48,135 49,526
Agriculture 2.80 3.01 25,601 26,372
Mining 2.99 2.72 949,110 974,925
Manufacturing 2.65 2.01 55,544 56,660
Construction 1.51 1.52 20,204 20,511
Utilities 3.86 3.96 156,413 162,606
Transport 5.66 4.51 67,560 70,607
Trade 5.54 4.34 38,362 40,027
Finance 4.87 4.21 119,242 124,262
Other Services 1.77 1.93 26,386 26,895
Computed from:
- Economic Report, Ministry of Finance, Malaysia and Economic Planning Unit, Malaysia
6 PRODUCTIVITY REPORT 2008

PRODUCTIVITY PERFORMANCE OF THE
ECONOMIC SECTORS
All economic sectors registered productivity growth
ranging from 1.5% by the construction sector to 4.5%
by the transport sector. Overall, services registered
a growth of 3.3% led by the transport sector (4.5%)
followed by trade (4.3%) and finance (4.2%). The
construction sector recorded a productivity growth
of 1.5% (Figure 1.3).
All economic sectors registered
productivity growth ranging
from 1.5% by the construction
sector to 4.5% by the transport
sector
CHAPTER 1
Figure 1.3: Productivity Growth of the Economic Sectors, 2008
5
4
4.51
4.34
4.21
3.96
Percent
3
2
2.89
3.01
2.72
2.01
1.93
1.52
1
0
Malaysia
Transport
Trade
Finance
Utilities
Agriculture
Mining
Manufacturing
Other Services
Construction
Computed from:
- Economic Report, Ministry of Finance, Malaysia and Economic Planning Unit, Malaysia
In 2008, the productivity of the manufacturing sector
grew by 2.0% supported by strong performance of
domestic-oriented industries which grew by 6.2%.
Among the domestic-oriented industries that
registered productivity growth were chemicals and
chemical products, food and beverages, non-metallic
mineral products, transport equipment and machinery
The manufacturing sector grew
by 2.0% attributed to strong
performance of domesticoriented
industries
PRODUCTIVITY REPORT 2008
7

CHAPTER 1
Industries that achieved high
productivity levels were
chemicals and chemical
products, transport equipment
and machinery and equipment
and equipment. The industries that achieved high
productivity levels were chemicals and chemical
products (RM212,579), transport equipment
(RM133,697) and machinery and equipment
(RM127,698).
The export-oriented industries were affected by the
unfavourable economic development as shown by
an overall decline in exports particularly in the
fourth quarter of 2008. Among the export-oriented
industries that registered decline in productivity were
E&E products, machinery, appliances and parts,
rubber products and iron and steel products.
Box 1.1: Productivity Performance at the Regional Level
In 2008, the Southern Region of Malaysia recorded the highest manufacturing
productivity growth of 7.7% to RM57,216. The growth was contributed by rubber
and plastic products (14.8%) and chemicals and chemical products (11.0%). The
Central Region registered a productivity growth of 6.3% followed by the Northern
Region (5.5%), Sabah (4.5%), Eastern Region (4.2%) and Sarawak (2.9%). The
growth in the Central Region was contributed mainly by motor vehicles, trailers
and semi-trailers (15.9%) and other transport equipment (11.5%).
The Northern Region registered a productivity growth of 5.5% supported by basic
metals (10.2%), food products and beverages (9.8%); and office, accounting and
computing machinery (9.8%). Sabah registered a productivity growth of 4.5%
supported by food products and beverages (5.4%) and paper and paper products
(4.5%). Sarawak registered a productivity growth of 2.9% mainly contributed by
higher growth in chemicals and chemical products (8.6%) and motor vehicles,
trailers and semi-trailers (6.7%). In terms of productivity level, Sarawak registered
the highest productivity level of RM190,255.
8 PRODUCTIVITY REPORT 2008

Productivity Growth by Regions, 2008
CHAPTER 1
8
7.67
7
6.30
Percent
6
5
4
3
5.54
4.47
4.21
2.87
2
1
0
Southern
Central
Northern
Sabah
Eastern
Sarawak
Sources: Computed from Annual Industrial Survey, Department of Statistics
Productivity Level by Regions, 2008
200
190.25
RM Thousand
180
160
140
120
100
80
60
40
20
0
Sarawak
147.51
Eastern
110.15
Central
102.18
Northern
57.22
Southern
45.08
Sabah
Sources: Computed from Annual Industrial Survey, Department of Statistics
PRODUCTIVITY REPORT 2008
9

CHAPTER 1
The services sector registered
a productivity growth of 3.3%
to RM56,139
The services sector (which includes utilities, transport,
trade, finance and other services sub-sectors)
registered a commendable productivity growth of
3.3% to RM56,139. This was attributed to strong
performance by the transport, utilities, finance and
trade sub-sectors which were increasingly moving
towards E-systems.
The transport sub-sector
achieved a 4.5% productivity
growth while the trade subsector
recorded a growth
of 4.3%
Productivity growth of the
finance sub-sector was 4.2%
to RM124,262
Productivity performance of the
construction sector was further
enhanced with the application
of IBS
The growth of agriculture sector
was attributed to efficiencies in
production and high commodity
prices
The transport sub-sector achieved a 4.5% productivity
growth which had benefited from the robust domestic
demand attributed to increase in travel and traderelated
activities. The trade sub-sector’s productivity
improved by 4.3% to RM40,027 benefiting from an
increase in disposable income and competitive
interest rates arising from ample liquidity in the
market. The sector also benefited from increased
tourism spending.
Productivity growth of a the finance sub-sector was
4.2% and reached level of RM124,262. This
performance was attributed to an increase in demand
for loans and insurance. The year also witnessed
high bank lending, improved performance of the
insurance industry and high utilisation of information
and communication technology.
The construction sector recorded a 1.5% productivity
growth attributed to continuation of projects under
the Ninth Malaysia Plan. To further stimulate growth in
the sector, the government has allocated RM1,200
million to build low and medium cost houses. The
performance of the sector was further enhanced
with the application of the Industrialised Building
System (IBS) particularly for public buildings and the
exemption on import duty for cements and steel
products.
Productivity of the agriculture sector improved by
3.0% attributed to efficiencies in the production of
primary products and attractive prices of palm oil and
rubber. Productivity improvement initiatives such as
the use of better clones and systematic application
of fertiliser and continuous adoption of labour saving
technologies and biotechnology had enhanced the
performance of the sector.
10 PRODUCTIVITY REPORT 2008

The productivity of the mining sector improved by
2.7% to RM974,925. The productivity of the utilities
sub-sector improved by 4.0% to RM162,606 attributed
to sustainable demand for electricity and water from
the commercial, industrial and household segments.
The mining and utilities sector’s
productivity grew by 2.7% and
4.0% respectively
CHAPTER 1
Box 1.2: Sustaining Competitiveness through the PLWS
In 2008, 1,011 companies had embarked on productivity/performance initiatives
and had linked these measures to their wage systems through the Productivity-
Linked Wage System (PLWS). The elements used to ensure a sustainable and
competitive wage structure are productivity/performance improvement, profitbased
bonuses, individual performance, target achievement, timeliness, discipline
and skills-based performance.
Collective Agreements (CAs) with Productivity/
Performance Linkages
Sector
No. of CAs
No./Percentage of CAs
with PLWS
No.
Percentage
Manufacturing 153 108 70.6
Services 112 81 72.3
Agriculture 5 5 100
Total 270 194 71.9
PRODUCTIVITY REPORT 2008
11

CHAPTER 1
PLWS Performance Measures
Elements %
Productivity/Performance 42.9
Improvement
Profit-Based Bonus 19.3
Individual Performance 24.1
Improvement
Commitment, Discipline 20.0
and Timeliness
Skills-based Performance 1.9
A wage system that incorporates PLWS will ensure job stability and reduce the
likelihood of retrenchment in difficult times. Both employers and employees will
benefit through the system as they strive together to enhance performance and
sustain overall competitiveness. Companies that had implemented the PLWS
recorded improvements in productivity from 2.64% to 5.17%, reduction in staff
turnover from 5.21% to 2.23%, reduction in absenteeism from 8.80% to 4.17%
and lower rejects and reworks from 5.33% to 2.85%.
INTERNATIONAL PRODUCTIVITY COMPARISON
Malaysia’s productivity growth
was higher than many OECD
countries
Malaysia’s productivity growth of 2.9% was higher
than selected Organisation for Economic Cooperation
and Development (OECD) countries such as the
United States (2.1%), Japan (0.8%), Australia (0.4%),
Finland and Germany (0.1%). Countries such as
Sweden (-0.4%), Norway (-0.5%), Canada and
Denmark (-0.9%), Italy (-1.2%) and Ireland (-1.7%)
experienced declining productivity growth
(Figure 1.4).
12 PRODUCTIVITY REPORT 2008

Figure 1.4: Productivity Growth of Malaysia and Selected
OECD Countries, 2008
CHAPTER 1
4.0
3.6
3.0
2.9
2.0
2.1
Percent
1.0
0.0
0.8
0.4
0.1
0.0
-1.0
-2.0
-0.4 -0.5
-0.5
-0.7
-0.9 -0.9
-1.2
-1.7
Rep. of Korea
Malaysia
USA
Japan
Australia
Germany
United Kingdom
Sweden
France
Norway
New Zealand
Canada
Denmark
Italy
Ireland
Computed from:
- Economic Report, Ministry of Finance, Malaysia, various issues
- OECD Economic Outlook, December 2008, Vol. 84,
- National Accounts of OECD Countries, Vol. IIa and IIb :Detailed Tables 1996-2006
Among Asian countries, Malaysia registered a higher
productivity growth than Thailand (2.0%), Hong Kong
(1.6%), Taiwan (0.7%), and Singapore (-0.9%).
However, China, Indonesia and India registered
higher growth at 7.8%, 3.5% and 3.4%
respectively. The productivity achievement of these
countries was attributed to efficient utilisation of
available natural resources, strong domestic demand
and technological advancement (Figure 1.5).
Malaysia’s productivity growth
continues to surpass that of
neighbouring countries
PRODUCTIVITY REPORT 2008
13

CHAPTER 1
Figure 1.5: Productivity Growth of Malaysia and Selected
Asian Countries, 2008
8.0
7.8
7.0
6.0
Percent
5.0
4.0
3.0
2.0
1.0
0.0
-0.1
-0.2
China
3.5
Indonesia
3.4
India
3.0
Philippines
2.9
Malaysia
2.0
Thailand
1.6
Hong Kong
0.7
Taiwan
-0.9
Singapore
Computed from:
- Economic Report, Ministry of Finance, Malaysia, various issues
- Country Data, The Economist Intelligence Unit
- Market Indicators and Forecast, The Economist Intelligence Unit
Box 1.3: Malaysia’s Competitiveness Performance
In the 2008 World Global Competitiveness Yearbook rankings, Malaysia was
ranked 19th ahead of several developed economies namely, United Kingdom
(21 st ), Japan (22 nd ), France (25 th ), Thailand (27 th ), Korea (31 st ) and Italy (46 th ).
Malaysia attained the 7 th position among 29 economies with population greater
than 20 million as shown:
14 PRODUCTIVITY REPORT 2008

Malaysia’s Competitiveness
(WCY 2008)
CHAPTER 1
Various Categories
Overall Global
Ranking
Asia–Pacific
Region
Countries with GDP
per capita less than
USD 10,000
Population greater
than 20 million
2008
2007
2008
2007
2008
2007
2008
2008
19/55
23/55
7/13
7/13
2/20
2/19
7/29
8/28
4 Factors
(By Overall)
2008
n=55
2007
n=55
4 Factors
(By Population
Size)
2008
n=29
2007
n=29
Economic
Performance
8 12
Economic
Performance
4 6
Government
Efficiency
19 21
Government
Efficiency
6 6
Business
Efficiency
14 15
Business
Efficiency
5 4
Infrastructure 25 26
Infrastructure 10 10
Malaysia’s performance has improved in all the four factors namely, Economic
Performance 8 th position, Government Efficiency 19 th position, Business
Efficiency 14 th position and Infrastructure 25 th position. The biggest improvement
recorded was in Economic Performance from 12 th to 8 th position. Under the
category of population greater than 20 million, Malaysia sustained its top 10 th
position in all factors among 29 economies. For Economic Performance, Malaysia
had improved to 4 th position while remaining unchanged for Government
Efficiency and Infrastructure.
PRODUCTIVITY REPORT 2008
15

CHAPTER 1
Malaysia’s productivity level
was at USD13,033, higher
than Asian countries such
as China, India, Indonesia,
Philippines and Thailand
Among Malaysia’s trading partners, Japan achieved
the highest productivity level of USD81,334. This was
followed by the USA (USD78,807), the United
Kingdom (USD55,172), Germany (USD51,885),
Singapore (USD50,744) and Korea (USD31,212).
Malaysia’s productivity level in 2008 was at
USD13,033, higher than Asian countries such as
China, India, Indonesia, Philippines and Thailand
(Table 1.2).
Table 1.2: Productivity Level and Growth, 2008
Productivity
Productivity Level
Country Growth (at 2000 constant
(%) prices in USD)
China 7.8 3,273
Korea 3.6 31,212
Indonesia 3.5 2,476
India 3.4 1,700
Philippines 3.0 3,279
Malaysia 2.9 13,033
USA 2.1 78,807
Thailand 2.0 4,844
Hong Kong 1.6 68,436
Japan 0.8 81,334
Taiwan 0.7 40,225
Australia 0.4 48,057
Finland 0.1 60,645
Germany 0.1 51,885
United Kingdom 0.0 55,172
Sweden -0.4 65,627
France -0.5 58,306
Norway -0.5 78,471
New Zealand -0.7 38,750
Canada -0.9 50,149
Denmark -0.9 62,506
Singapore -0.9 50,744
Italy -1.2 46,481
Ireland -1.7 65,777
Computed from:
- Economic Report, Ministry of Finance, Malaysia, various issues
- OECD Economic Outlook, December 2008, Vol. 84,
- National Accounts of OECD Countries, Vol. IIa and IIb :Detailed Tables 1996-2006
- Country Data, The Economist Intelligence Unit
- Market Indicators and Forecast, The Economist Intelligence Unit
16 PRODUCTIVITY REPORT 2008

Box 1.4: Attitude Towards Globalisation
CHAPTER 1
There is a need for industries to adopt new business approaches with renewed
vigour to sustain their competitive edge. Malaysian businesses have been
proactive in implementing new management practices to adapt to market
changes. In 2008, Malaysia was ranked 8 th in terms of adaptability to changes in
the market environment which was better than Germany, Japan and the United
Kingdom.
Adaptability of Industries to Change
Ranking
Country (population > 20
million)
Brazil 1
USA 2
Taiwan 3
Australia 4
Malaysia 8
Germany 9
Italy 11
India 12
Thailand 13
Japan 14
United Kingdom 15
Businesses in Malaysia have inculcated a positive attitude towards globalisation.
It was among the top five countries and performed better than Korea, Japan, the
United Kingdom and the USA.
PRODUCTIVITY REPORT 2008
17

CHAPTER 1
Attitude towards Globalisation
Ranking
Country (population > 20
million)
Taiwan 1
India 2
Australia 3
Malaysia 4
Korea 5
Japan 7
Thailand 9
United Kingdom 13
USA 14
Source: World Competitiveness Yearbook 2008
OUTLOOK FOR 2009
Malaysia is expected to
achieve a productivity
growth of more than 1.0%
driven by the services and
agriculture sectors
In 2009, the growth in the economy will be driven
mainly by the services and agriculture sectors. With
weak external demand, domestic demand will assume
a greater role in driving economic growth. This
scenario calls for concerted efforts in productivity
and quality enhancement initiatives such as
integrating work processes, utilising higher
technologies, improving management systems,
strengthening human resource capabilities and
nurturing creativity and innovation at all levels. The
economy is expected to achieve a productivity growth
of more than 1.0%.
18 PRODUCTIVITY REPORT 2008

The services sector comprising the trade, transport
and finance sub-sectors are expected to achieve a
productivity growth of 2.8%. The productivity of the
finance sub-sector is expected to grow by more than
3.0% while the transport and trade sub-sectors are
expected to grow by more than 2.5% and 2.0%
respectively. This growth will be supported by
household spending and improvement in the tourism
industry. The sector is also expected to benefit from
higher ICT utilisation and Islamic financing.
The services sector is expected
to grow by more than 2.5%.
The sector is expected to
benefit from higher ICT
utilisation and Islamic
financing
CHAPTER 1
The manufacturing sector’s productivity is expected
to register lower growth of 1.0% due to softening of the
export sector. The sector is expected to experience
weakness due to the slowdown of the E&E industries
and general decrease in demand. Among the
industries that are expected to achieve growth are
food and beverages, non-metallic mineral products,
chemicals and chemical products, iron and steel,
transport equipment and machinery and equipment.
The construction sector is expected to grow by 1.0%
supported by on-going Ninth Malaysia Plan projects,
intensifying the use of IBS methods in construction
activities and economic development in the economic
regional corridors. The stimulus package directed to
further improve infrastructure projects will enhance the
productivity of the sector.
Productivity growth of the agriculture sector is
forecasted at 3.0% supported by productivity
improvement initiatives implemented by the sector.
Productivity improvement activities in the areas
of biotechnology, livestock breeding programmes,
aquaculture development and intensive fruit and
vegetable farming, will positively contribute to the
productivity of the sector.
A lower productivity growth
of 1.0% is expected for the
manufacturing sector due to
the overall softening of export
demand
Productivity of the construction
is expected to grow by 1.0%
with the intensification of IBS
The agriculture sector is
forecasted to register a
productivity growth of 3.0%
PRODUCTIVITY REPORT 2008
19

CHAPTER 1
Economic Sector
Table 1.3: Productivity Growth, 2009
Productivity
Growth (%)
Malaysia 1.0 – 1.2
Agriculture 3.0 – 3.3
Mining 1.5 – 2.0
Manufacturing 0.5 – 1.1
Construction 1.0 – 1.2
Utilities 3.5 – 3.8
Transport 2.5 – 3.0
Trade 2.0 – 2.3
Finance 3.0 – 3.7
Other Services 1.0 – 1.2
20 PRODUCTIVITY REPORT 2008

CHAPTER 2
TOTALFACTOR PRODUCTIVITY

CHAPTER 2
TOTALFACTOR PRODUCTIVITY
Highlights
• For the period 1999-2008, the economy registered an annual. Total Factor
Productivity (TFP) growth of 2.0%, contributing 35.8% to GDP growth of 5.6%.
• All economic sectors registered TFP growth ranging from 1.0% by the
agriculture sector to 2.3% by the manufacturing sector.
• Initiatives had been undertaken by both the public and private sectors to shift
towards innovation, high-technology and increased efficiency of human capital.
• By 2010, TFP is expected to grow by 2.2%.
Key Statistics
1999 - 2008 2004 - 2008
GDP growth 5.61% 5.98%
TFP growth 2.01% 2.14%
TFP targets
9MP (2006-2010) 2.2%
OPP3 (2006-2020) 2.6%
2008
Total exports (RM billion) 663.51
Electrical and electronic products 253.81
Palm oil (crude and processed) 49.69
Crude petroleum 44.09
Liquefied natural gas 40.73
Total imports (RM billion) 521.50
Intermediate goods 379.00
Capital goods 69.96
Consumption goods 32.27
Total trade (RM trillion) 1.185
Capacity utilisation 78.7%
Gross fixed capital formation
Public (RM million) 65,385
Private (RM million) 68,286
PRODUCTIVITY REPORT 2008
23

CHAPTER 2
TOTALFACTOR PRODUCTIVITY FOR
SUSTAINABLE ECONOMIC GROWTH
Total Factor Productivity (TFP) measures the
efficiency and effectiveness of all factors of
production. The activities that contribute to TFP
growth include higher capacity utilisation,
advancement in technology, improvement in skills
and human capital capabilities and enhancing
knowledge through training and retraining.
For the period 1999-2008, TFP
grew by 2.0% contributing
35.8% to GDP growth
By 2010,TFP is expected to
grow by 2.2%
For the period 1999-2008, GDP grew at an
annual average of 5.6%. This performance was
supported by strong TFP growth of 2.0%, contributing
35.8% to GDP growth (Table 2.1). The contribution of
TFP to GDP was due to initiatives undertaken by both
the public and private sectors to shift the economy
towards higher value added activities through
innovation, high-technology and human capital
development. Higher investments in ICT, training and
retraining of employees and the increase in exports
have contributed to higher TFP growth.
The annual average TFP growth for the period
2004-2008 was 2.1% contributing to a productivity
growth of 3.7% and GDP growth of 6.0% (Table 2.1
and Figure 2.1). The productivity growth of 3.7%
for the period was contributed by TFP (57.5%) and
capital intensity by (42.5%). TFP is expected to grow
by 2.2% by 2010 with the intensified efforts by the
government through two stimulus packages
introduced at the end of 2008 and early 2009. Among
the thrusts that will enhance the TFP growth are
training and capacity building. Comparing the two subperiods
of 1999-2003 and 2004-2008, it is evident that
the efforts in enhancing human capital and
investments in capital and technology in the latter
period (2004-2008) had contributed to higher TFP and
GDP growth.
24 PRODUCTIVITY REPORT 2008

Table 2.1: The Growth of GDP, TFP, Capital and Labour
Growth (%)
Period Labour Capital TFP GDP
1999 - 2008 1.40 2.20 2.01 5.61
1999 - 2003 1.22 2.18 1.88 5.24
2004 - 2008 1.58 2.27 2.14 5.98
CHAPTER 2
Computed from:
- Economic Report, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
- Department of Statistics, Malaysia
Figure 2.1: TFP Contribution to Productivity Growth, 2004 - 2008
GDP
5.98%
PRODUCTIVITY
3.72%
EMPLOYMENT
2.26%
TFP
2.14
(57.53%)
CAPITAL INTENSITY
1.58
(42.47%)
Quality of Human
Capital
Quality of Capital
Input
Computed from:
- Economic Report, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
- Department of Statistics, Malaysia
PRODUCTIVITY REPORT 2008
25

CHAPTER 2
Box 2.1: Total Factor Productivity Framework
The emphasis towards TFP growth for competitiveness will ultimately lead to
improved economic performance and higher standard of living. Higher TFP
growth can be achieved through Human Capital Development, Demand Intensity,
Capital Structure, Economic Restructuring and Technical Progress.
Enhancing Competitiveness through TFP
Human Capital
Development
Demand Intensity
Capital Structure
INPUTS
Capital
&
Labour
Transformation
INPUTS
Higher quality
of labour
and Capital
HIGHER TFP
• Higher quality
products
• Excellent services
• Lower cost
• High customer
satisfaction
• Sustainable
economic growth
HIGHER GDP
• Greater wealth
• Higher standard
of living
Input-Driven
Growth
Productivity-
Driven Growth
Technical
Progress
Economic
Restructuring
The main sources of TFP growth are as follows:
Human Capital Development: Investment in human capital development
will increase the capacity and capabilities of the workforce. Trained and
knowledgeable workers will be more productive and be able to produce more
quality products and services that will contribute to higher TFP growth.
Capital Structure: Investment in new production technologies are required
to improve the quality of products and services. This would enhance
competitiveness and reduce cost of production. Through capital restructuring,
industries would be able to streamline their business plans for better operational
and production efficiencies.
26 PRODUCTIVITY REPORT 2008

Economic Restructuring: Economic restructuring involves the movement of
resources from less productive to the more productive sectors and industries to
produce higher value added products and services.
CHAPTER 2
Demand Intensity: An increase in both domestic and global demand for products
and services will lead to higher capacity utilisation of the economy. This will
contribute towards export competitiveness and higher TFP growth.
Technical Progress: The application of appropriate technologies, innovation,
R&D, efficient management and organisational systems and techniques will
improve technical progress.
Sources of Total Factor Productivity Growth
The present standard of living enjoyed by the nation
is the result of higher TFP growth, and had enabled
the economy to sustain a positive growth momentum.
The factors that support TFP growth are demand
intensity, human capital development, capital
structure, economic restructuring and technical
progress (Figure 2.2). For the period 2004-2008, TFP
grew by 2.1% driven mainly by demand intensity
(44.9%) and human capital development (26.2%).
TFP growth was driven
by demand intensity
(44.9%) and human
capital (26.2%)
Figure 2.2: Components of TFP Growth
(1999 – 2008) (2004 – 2008)
Demand
Intensity
39.67%
Human
Capital
Development
31.35% TFP
2.01
Capital
Structure
14.01%
Demand
Intensity
44.94%
Human
Capital
Development
26.17% TFP
2.14
Capital
Structure
10.43%
Technical
Progress
4.97%
Economic
Restructuring
10.00%
Technical
Progress
8.66%
Economic
Restructuring
9.80%
Computed from:
- Economic Report, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
- Department of Statistics, Malaysia
PRODUCTIVITY REPORT 2008
27

CHAPTER 2
For the period 2004-2008,
demand intensity contributed
44.9% to TFP growth
Demand Intensity indicates the extent of the
productive capacity of the economy. For the period
1999-2008, demand intensity contributed 39.7%
to TFP growth as a result of an increase in both
domestic and external demand. The contribution of
demand intensity for the period 2004-2008 increased
to 44.9%. The increase in contribution was a result of
initiatives undertaken by the government to improve
bilateral trade to facilitate exports. Total exports
increased from RM321.2 billion in 1999 to RM663.5
billion in 2008 (Table 2.2). The Government through
the Market Development Grant (MDG) provides
grants to companies to partially defray the high cost of
export promotion. Companies can obtain a 50%
reimbursable matching grant on the approved cost of
the eligible export promotion activities.
Table 2.2: Main Exports of Malaysia
RM Million
Exports
1999 2004 2008
Manufactured goods 272,653 395,127 491,930
Palm oil (crude and processed) 14,475 20,047 64,808
Crude petroleum 9,306 21,762 43,698
Liquefied natural gas 6,349 17,079 40,732
Total 321,181 480,740 663,494
Source: MATRADE
Human capital development
contributed 26.2% to TFP
growth during the period
2004-2008
Human Capital Development is one of the key
thrusts to ensure the country sustains competitiveness
in the global economy. Human capital development
facilitates skills upgrading and knowledge
enhancement. For the period 1999-2008, human
capital contributed 31.4% to TFP growth as compared
to 26.2% during the period 2004-2008. Human capital
development is accorded high priority in national
28 PRODUCTIVITY REPORT 2008

development under Malaysia's five-year development
plans. To date, there are 20 public and 18 private
universities as well as more than 500 colleges,
polytechnics and industrial training institutes that offer
courses at certificate, diploma, degree and postgraduate
levels. Higher investment by both the public
and private sectors had resulted in a larger pool of
technically trained and skilled workforce (Table 2.3).
Higher investment by both the
public and private sectors had
resulted in a large pool of
technically trained and
skilled workforce
CHAPTER 2
Table 2.3: Job Seekers Registered with Labour Department
by Educational Level, 2004-2008
Educational Level 2004 2005 2006 2007 2008
Degree & Above 22,209 37,447 31,682 28,971 40,356
Diploma 18,273 30,102 24,079 26,979 35,832
Skill
Level
Malaysian Skills
Certificate 8,910 7,688 6,114 6,890 8,805
(MLVK)
Other Skills
Certificate 427 734 551 532 740
Non-Technical
Skills 4,683 8,899 7,427 10,721 12,293
Certificate
Source: Ministry of Human Resource
Capital Structure reflects capital investments
which will improve production efficiency. For the period
1999-2008 and period 2004-2008, the contribution
of capital structure to TFP growth was 14.0% and
10.4% respectively. Total investments grew from
RM17,021 million in 1999 to RM62,785 million in
2008. This indicated that Malaysian industries were
increasingly shifting from labour-intensive operation to
more capital-intensive systems (Table 2.4).
Capital structure contributed
10.4% to TFP growth during
the period 2004-2008
PRODUCTIVITY REPORT 2008
29

CHAPTER 2
Table 2.4: Approved Investment in the Manufacturing Sector
Foreign Direct Domestic Total
Investment (Million) Investment
(Million)
(Million)
1999 4,746.9 12,273.8 17,020.8
2004 13,173.7 17,882.9 31,056.6
2008 46,098.8 16,686.2 62,785.0
Source: MIDA
During the period 2004-2008,
economic restructuring
contributed 9.8% to TFP
growth
Economic Restructuring measures the efficiency
in resource allocation among the economic sectors.
For the period 1999-2008 and 2004-2008, the
contribution of economic restructuring to TFP was
10.0% and 9.8% respectively. The economy was
successful in mobilising the workforce from low value
added activities to higher value added activities in
the various economic sectors. Share of employment in
the manufacturing and services sectors increased
from 32.6% and 19.3% in 1990 to 41.2% and 29.0%
respectively in 2008 while employment in the
agriculture sector contracted from 27.5% in 1990 to
12.0% in 2008 (Table 2.5).
Table 2.5: Employment Share of Economic Sectors
Years Agriculture Manufacturing Services
Sector Sector Sector
(%) (%) (%)
2008 11.97 29.03 41.16
2000 15.18 27.59 38.06
1990 27.49 19.30 32.57
Source: Economic Report, various issues.
30 PRODUCTIVITY REPORT 2008

Technical Progress indicates the efficient and
effective utilisation of technology, innovative practices,
management and organisational effectiveness. With
productivity initiatives being given greater emphasis
during the period 1999-2008, technical progress
contributed 5.0% to TFP growth. The improvement in
technical progress will create higher value-added
products and services. Creativity, innovation and a
positive mindset that are oriented towards the
accumulation, dissemination and utilisation of
knowledge had enhanced TFP growth. To date, 2,078
ICC projects involving 19,747 participants from 1,205
organisations had participated in ICC Conventions
resulting in total savings of RM738.2 million. The
involvement of many organisations in ICC projects
indicated that higher emphasis were given to
innovative and creative processes.
For the period 2004-2008,
technical progress contributed
8.7% to TFP growth. Creativity,
innovation and a positive
mindset had enhanced TFP
growth
CHAPTER 2
Box 2.2: Malaysian Management Capability Index (MCI)
The 2008 Malaysian MCI Study was a collaborative research effort between MPC
and the Malaysian Institute of Management (MIM). The main objective of the
study was to provide information on the performance ranking and to ascertain
and compare management capability among the 16 member countries of the
Asian Association of Management Organisations (AAMO).
Malaysia’s achievement based on the ten categories is shown in the table below:
No. Category Score
1. Integrity and corporate governance 75.2
2. Financial management 71.7
3. Performance leadership 70.0
4. Visionary and strategic leadership 69.3
5. Application of technology and knowledge 67.8
6. External relationships 67.1
7. People leadership 66.2
8. Organisation capability 65.6
9. Results and comparative performance 65.0
10. Innovation – products and services 64.9
2008 Malaysian Management Capability Index 67.7
PRODUCTIVITY REPORT 2008
31

CHAPTER 2
Overall, the Malaysian strengths were in integrity and corporate governance,
financial management and performance leadership. However, the four areas
which will have the greatest impact on improvement of Malaysia’s management
performance are "Innovation-Products and Services", "Organisation Capability",
"People Leadership" and "External Relationships".
TFP PERFORMANCE OF SELECTED ECONOMIC
SECTORS
High skilled labour and capitalintensive
production activities
enhanced TFP growth
For the period 1999-2008, the manufacturing sector
registered an annual average TFP growth of 2.3%
contributing 34.3% to output growth. During the subperiod
2004-2008, annual average growth of TFP was
1.4%. For the period 2004-2008, the highest
contribution of TFP to output growth was registered by
the trade sector at 42.1%, followed by utilities (40.8%),
agriculture (34.2%), mining 28.9%, finance (24.4%)
and manufacturing (23.9%) (Table 2.6 and Figures 2.3
and 2.4). The improvement in TFP was mainly due to
the adoption of capital-intensive production processes
as well as the employment of skilled labour.
Table 2.6: Performance of Total Factor Productivity by Sectors
Growth (%)
Sector TFP
1999 - 2008
TFP
1999 - 2003
TFP
2004 - 2008
Agriculture 1.01 1.03 1.26
Mining 1.26 1.48 0.41
Manufacturing 2.26 3.09 1.41
Utilities 1.63 1.13 2.13
Transport 1.36 1.27 1.44
Trade 2.12 0.40 3.82
Finance 1.87 1.72 2.02
Others 1.02 3.08 0.71
Computed from :
- Economic Report, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
- Department of Statistics, Malaysia
32 PRODUCTIVITY REPORT 2008

Percent
100
80
60
40
20
31.27
39.86
34.31
33.83
20.69
33.70
23.32
24.08
41.49
42.78
35.91
35.76 44.62 32.41
40.14
27.50
27.24
17.36
29.78
30.41
34.68
33.89
36.54
48.42
Figure 2.3: Contribution of TFP, Capital and Labour
to Output Growth, 1999 - 2008
CHAPTER 2
0
Agriculture
Mining
Manufacturing
Utilities
Transport
Trade
Finance
Capital Employment TFP
Others
Computed from:
- Economic Report, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
- Department of Statistics, Malaysia
Figure 2.4: Contribution of TFP, Capital and Labour
to Output Growth, 2004 - 2008
Percent
100
80
60
40
34.16
28.71
28.90
28.34
23.90
33.55
40.76
22.71
19.43
29.43
42.10
24.39
24.38
16.57
14.99
53.20
20
0
Agriculture
37.13
Mining
42.75
Manufacturing
42.55
36.53
Utilities
Transport
51.14
33.51
Trade
Capital Employment TFP
59.06
Finance
Others
31.81
Computed from:
- Economic Report, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
- Department of Statistics, Malaysia
PRODUCTIVITY REPORT 2008
33

CHAPTER 2
The TFP growth of 1.4% in
the sector was supported
by efficient utilisation of
equipment and innovation
TFP in the transport sector which grew by 1.4%
contributed 20.7% to output growth during 1999-2008.
The improvement in TFP growth was due to efficient
utilisation of equipment, application of cost effective
operating systems, better linkages and connectivity
among the transport operators.
Trade sector recorded TFP
growth of 3.8% for the
period 2004-2008
Outsourcing of non-core
business operations enhanced
the competitiveness of finance
sector improved the TFP
growth by 2.0% during the
period 2004-2008
TFP growth of the agriculture
sector was 1.3% during the
period 2004-2008
The trade sector recorded a TFP growth of 2.1% and
accounted for 33.8% of output growth. During the
period 2004-2008, TFP recorded annual average
growth of 3.8% and contributed 42.1% to output
growth. The growth was attributed to the adoption of
good marketing strategies and efficient service
delivery of goods and services by the wholesalers and
retailers to meet the changing expectations of
customers.
The finance sector recorded a TFP growth of 1.9%
during the period 1999-2008 and contributed 23.3% of
output growth. The growth was attributed to both
business resilience and regulatory measures
undertaken by the government to reshape the financial
landscape in order to enhance the competitive
capabilities of the sector. For the period 2004-2008,
TFP recorded an annual average growth of 2.0% and
contributed 24.4% to output growth which was due to
innovative initiatives such as outsourcing of non-core
business operations, data processing, improved
marketing of products and services and application of
information and communication technology.
The agriculture sector recorded a TFP growth of 1.0%
contributing 31.3% of output growth during the period
1999-2008. For the period 2004-2008, the agriculture
sector registered an annual average TFP growth of
1.3% contributing 34.2% to output growth. The growth
was attributed to adoption of Good Agricultural
Practices (GAP), good agronomic farm management
practices, application of biotechnology, strong
institutional support by the government, extensive
R&D activities, replanting and new planting of high
yielding clones, use of quality seeds, and
improvement in food preservation and packaging
technologies.
34 PRODUCTIVITY REPORT 2008

Total Factor Productivity Growth for
Competitiveness
As the economy moves towards an innovative and
knowledge-based economy, it is imperative that
competitiveness and higher economic growth be
sustained. This can be achieved through continuous
TFP improvement initiatives such as:
CHAPTER 2
i. Developing Human Capital
Human capital is one of the main avenues for
improving TFP. This is a necessity especially in
the current economic environment where there
will be strong competition for skilled labour
among the industries. To ensure a consistent
supply of a skilled and knowledgeable
workforce, a comprehensive manpower
development programme has been outlined
under both the Ninth Malaysia Plan and the
Third Industrial Master Plan.
ii. Intensifying Demand
Demand intensity will result in higher capacity
utilisation contributing to higher TFP growth. In
a highly competitive market environment there
is a need to adopt effective marketing
strategies, develop new products and strong
brands to build consumer loyalty and
preferences for products and services. Apart
from new products and branding, the market
requires consistency in the quality of products
and services offered as well as the assurance
of supply availability. The government has
provided initiatives to the local companies to
develop and market Malaysian products and
services globally. The initiatives include tax
incentives, financial assistance in the form
of grants, loans as well as the necessary
institutional support.
Development of human capital
improved the TFP of the
economy
Quality of products, effective
marketing, new product
development and branding
strengthened demand intensity
PRODUCTIVITY REPORT 2008
35

CHAPTER 2
New sources of growth
such as biotechnology,
tourism, education,
healthcare, renewable
energy and Islamic
finance lead to efficient
allocation of resources
iii. Efficient allocation of resources among the
sectors.
To achieve efficient allocation of resources
among the sectors, the government is currently
promoting new sources of growth for the
agriculture, manufacturing and services
sectors. The new sources of growth include
biotechnology, tourism, education, healthcare,
renewable energy and Islamic finance. Efforts
will also be taken to accelerate economic
growth in the five Economic Development
Corridors through the granting of both tax and
investment incentives to the industries.
Technological capabilities from
new trends in technology and
investment in green technology
iv. Enhancing technological capabilities
Investment in modern machinery and
equipment will increase the technological
capabilities and productive capacity of the
economy. Greater efforts need to be
undertaken to develop technological
capabilities to take advantage of new trends in
technology, application of ICT and capital
intensive processes to produce higher value
added products. To facilitate the industries in
undertaking restructuring, the government had
established the Industry Restructuring
Guarantee Fund Scheme. The scheme is to
assist viable medium and large enterprises
to secure financing to modernise and upgrade
business operations, particularly in automation,
energy efficiency and green technology.
36 PRODUCTIVITY REPORT 2008

v. Innovation and Creativity
TFP enhancement can be achieved through
continuous R&D and innovative activities,
increased utilisation of technologies, ICT and
enhancing skills and management capabilities
in all economic sectors. Innovative and creative
activities to produce higher value added
products and services will enhance
competitiveness. Malaysia will be able to move
from efficiency stage of development to
innovative stage of development with higher
emphasis on R&D.
R&D activities and productivity
initiatives enhance TFP growth
CHAPTER 2
Box 2.3: Surviving the Economic Crisis through Efficiency Measures
In line with the thrusts of assisting the private sector in facing the crisis and
building capacity for the future as announced in the Second Economic Stimulus
Package on March 2009, Malaysia Productivity Corporation (MPC) had launched
the Efficiency Enhancement Clinics (EEC). These clinics are held simultaneously
on every Thursday of the week at MPC’s Headquarters in Petaling Jaya and its
Centres of Excellence located in Kota Kinabalu, Kuching, Johore Baru, Penang,
and Kuantan. The main objective of the efficiency enhancement clinics is to assist
companies cope with adverse effects of the global crisis and more importantly, to
ensure that Malaysian industries emerge stronger during the anticipated
economic recovery.
The EEC is an avenue where advisory services, business diagnostics
on efficiency enhancement as well as cost rationalisation measures will be
provided to the public and business communities. Among the efficiency
enhancement tools that MPC provide to assist industries are: Quality
Environment; Innovative and Creative Circles; Total Quality Management Model
Companies; Company Productivity Assessment; the Productivity-Linked Wage
System; Process Improvement; Reduction of the Seven Wastes; and Productivity
and Quality Enhancement Training.
PRODUCTIVITY REPORT 2008
37

CHAPTER 2
These programmes have proven to be effective in enhancing efficiency and
reducing costs. As an example, the improved efficiency achieved through quality
environment practices had contributed to higher sales, reduction in operation
costs, improvements in productivity and quality of the workforce, visual
management and service delivery. Participation in MPC’s Innovative and Creative
Circles Convention in 2008 had resulted in total cost savings of RM88 million
through the development of new and innovative processes.
Another efficiency enhancement measure is the Productivity-Linked Wage
System. Among the benefits to companies who had implemented the system
are: improvements in productivity from 2.6% to 5.2%; reduction in staff turnover
from 5.2% to 2.1%; reduction in absenteeism from 8.8% to 4.2%; and reduction
in rejects and reworks from 5.3% to 2.9%. Companies who had participated
in MPC’s TQM Model Company Projects had been able to transform themselves
to venture successfully into the export markets.
In addition, to further encourage industries to make productive use of the "slack"
time during the economic crisis is to train and re-train employees. MPC is offering
special training rates of up to 80 percent off its normal course fees. Small and
Medium Enterprises need to pay only 20% while larger companies pay 50%
of the course fees. These special rates, formerly only available to SMEs, were
extended to larger companies as part of MPC’s efforts to foster an
industry-wide increase in productivity among Malaysian workers and
organisations. Efficiency enhancement measures once implemented will ensure
that the company not only survive the current crisis but emerge stronger and
become more competitive when the economy recovers.
38 PRODUCTIVITY REPORT 2008

CHAPTER 3
PRODUCTIVITY PERFORMANCE
OF THE MANUFACTURING SECTOR

CHAPTER 3
PRODUCTIVITY PERFORMANCE OF THE
MANUFACTURING SECTOR
Highlights
• The manufacturing sector recorded a productivity growth of 6.3%.
• Manufacturing added value rose by 4.7% to RM98.3 billion.
• E&E industries was the largest employer.
• Labour cost competitiveness improved as reflected by a decline of 4.7% in unit
labour cost.
• For the period 2004-2008, TFP of the sector grew by 2.1%.
Key Statistics
2008
Added value growth 4.7%
Productivity growth (Value added per employee) 6.3%
TFP growth (2004-2008) 2.1%
Total exports (RM billion)
RM663.5
Productivity & Competitiveness
Productivity Labour Cost Unit Labour
Sub-sector % per Employee Cost
% %
Manufacturing average 6.3 2.0 -4.7
Food and beverages 19.2 6.1 -8.2
Chemicals and chemical products 16.0 6.3 -3.9
Non-metallic mineral products 12.5 4.8 -7.1
Iron and steel 8.6 2.8 -0.5
Transport equipment 8.3 5.8 -1.6
PRODUCTIVITY REPORT 2008
41

CHAPTER 3
Total manufacturing exports
rose by 9.6% largely
contributed by E&E,
chemicals and chemical
products, machinery,
appliances and parts as
well as metal products
PERFORMANCE OF THE MANUFACTURING
SECTOR, 2008
The manufacturing sector registered an output growth
of 1.3% and an increase in the production index of
0.2% in 2008. Total trade reached RM1.2 trillion, an
increase of 6.8% from 2007 while total manufacturing
exports rose by 9.6% to RM663.5 billion. Major
exports include E&E products, chemicals and
chemical products, machinery, appliances and parts,
and metal products. E&E products remained as
Malaysia’s leading export earner and accounted for
38.3% of total exports. However, export revenue from
E&E decreased by 3.4% in 2008 due to lesser
demand from our major trading partners. Electronic
integrated circuit is a major component of E&E export,
accounting for 26.2% of total export of E&E products.
Increase in import of
intermediate and capital
goods accounted for 72.7%
of total imports
E&E, chemicals and chemical
products and refined petroleum
product industries recorded
decline in exports
Total imports of the sector increased by 3.3% to
RM521.5 billion. The increase was contributed by
higher imports of intermediate and capital goods. The
imports of intermediate goods amounted to RM379
billion constituted 72.7% of total imports. The main
components being parts and accessories of capital
goods excluding transport equipment amounted to
RM164 billion or 43.4% of intermediate goods. The
import of capital goods represent 13.4% of total
imports valued at RM70 billion. The high import of
intermediate goods and capital goods is an indication
that the country is moving towards the production of
higher value added products.
Growth in the manufacturing sector was supported by
continuous growth in domestic-oriented industries
especially from the transport equipment,
construction-related industries and food industries.
However, export oriented industries registered a
decline due to the slowdown in global demand.
Main industries which recorded decline in exports
were E&E (10.6%), chemicals and chemical products
(18.9%), and refined petroleum products (31.1%).
42 PRODUCTIVITY REPORT 2008

The E&E industry remained as the largest employer,
accounting for 34.2% of total manufacturing
employment in 2008. The industry which registered
growth in employment were chemicals and chemical
products, transport equipment, food and beverages,
iron and steel, and fabricated metal products. In
response to slower demand, industries were
reengineering their business operations and had
temporarily put major business expansions on hold.
The E&E industry remained
the largest employer and
accounted for 34.2% of total
manufacturing employment
CHAPTER 3
Added value in the manufacturing sector registered a
4.7% growth amounting to RM9.8 billion (Figure 3.1)
compared to 11.3% in 2007. Among the industries
which recorded double-digit growth in added value
were the iron and steel, food and beverages,
chemicals and chemical products, fabricated metal
products and transport equipment. In terms of
contribution, the E&E remained the largest contributor
to added value, accounting for 33.0% of total added
value in 2008. The chemicals and chemical products,
transport equipment, and iron and steel contributed
10.0%, 6.1% and 5.5% to total manufacturing added
value respectively (Figure 3.2).
Domestic-oriented industries performed better than
export-oriented industries in added value generation.
The construction related industries such as iron and
steel, chemicals, fabricated metals and non-metallic
mineral products continued to expand as a result of
domestic construction activities. The 13.1% growth in
transport equipment was attributed to improved sales
of new motor vehicles following the release of new
models. The food industry recorded added value
growth of 20.5%. The growth in added value was due
to the growing concern for health food, improved
packaging and increased demand for halal food.
Manufacturing added value
grew by 4.7% in 2008.
E&E remained the largest
contributor followed by
chemicals and chemical
products and transport
equipment sub-sectors
Construction related industries
continued to expand as a result
of domestic construction
activities
PRODUCTIVITY REPORT 2008
43

CHAPTER 3
Figure 3.1: Added Value Growth of the Manufacturing Sector, 2008
Iron and steel
Food and beverages
Chemicals and chemical products
Fabricated metal products
Transport equipment
Non-metallic mineral products
Manufacturing
Rubber products
Plastic products
Machinery and equipment
Wood and wood products
Textiles and apparel
Electrical and electronics products
-5.9
-7.0
-0.6
-0.7
-1.3
-3.4
4.7
9.7
14.4
13.1
20.5
18.9
24.8
-10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0
Percent
Computed from: Monthly Manufacturing Survey and Annual Industrial Survey, Department of Statistics
Figure 3.2: Contributions of Industries to Total Manufacturing
Sector’s Added Value, 2008
Electrical and electronics products
Chemicals and chemical products
Transport equipment
Iron and steel
Wood and wood products
Rubber products
Food and beverages
Non-metallic mineral products
Fabricated metal products
Plastic products
Textiles and apparel
Machinery and equipment
6.1
5.5
4.9
4.1
3.8
3.7
3.6
3.3
1.5
1.3
10.0
33.0
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0
Percent
Computed from: Monthly Manufacturing Survey and Annual Industrial Survey, Department of Statistics
44 PRODUCTIVITY REPORT 2008

Productivity Performance of the Manufacturing
Sector, 2008
The unfavourable global economic environment had
affected the performance of the manufacturing sector.
Nevertheless, productivity as measured by value
added per worker grew by 6.3%. Among the industries
which recorded high productivity growth were food
and beverages, chemicals and chemical products,
non-metallic mineral products (Figure 3.3). Various
measures and initiatives taken at the firm level such
as streamlining operations and processes, adoption
of quality management systems, improving inventory
and logistics management, and human resource
development had contributed to the productivity
growth.
The manufacturing sector
registered a productivity
growth of 6.3% with doubledigit
growth recorded by
food and beverages, chemicals
and chemical products and
non-metallic mineral products
CHAPTER 3
Figure 3.3: Productivity Growth of the Manufacturing Industries, 2008
Food and beverages
Chemicals and chemical products
Non-metallic mineral products
Iron and steel
Transport equipment
Fabricated metal products
Manufacturing
Machinery and equipment
Textiles and apparel
Rubber products
Plastic products
Wood and wood products
Electrical and electronics products
-10.0
-0.2
-2.9
2.6
1.3
1.3
12.5
8.6
8.3
7.3
6.3
5.4
19.2
16.0
-5.0 0.0 5.0 10.0 15.0 20.0 25.0
Percent
Computed from: Monthly Manufacturing Survey and Annual Industrial Survey, Department of Statistics
PRODUCTIVITY REPORT 2008
45

CHAPTER 3
Figure 3.4: Productivity Level of the Manufacturing Industries, 2008
Chemicals and chemical products
Iron and steel
Machinery and equipment
Transport equipment
Manufacturing
Food and beverages
Electrical and electronics products
Non-metallic mineral products
Fabricated metal products
Rubber products
Plastics products
Wood and wood products
Textiles and apparel
110.6
107.3
91.1
90.6
90.0
88.7
66.8
63.1
39.5
35.2
24.1
245.4
337.1
0 50 100 150 200 250 300 350 400
RM Thousand
Computed from: Monthly Manufacturing Survey and Annual Industrial Survey, Department of Statistics
The domestic-oriented
industries performed better
than export-oriented industries
Continous demand coupled
with various efforts undertaken
by the food and beverages
industry had contributed to
its high growth
The domestic-oriented industries achieved higher
productivity growth as compared with the exportoriented
industries. Food and beverages, chemicals
and chemical products and non-metallic mineral
products recorded a double-digit growth of 19.2%,
16.0% and 12.5% respectively. Other domesticoriented
industries such as iron and steel, transport
equipment, fabricated metal products and machinery
and equipment also recorded productivity growth.
The performance of these domestic-oriented
industries was due to strong domestic demand within
the domestic market for construction and agriculture
related industries.
The food and beverage industries recorded a
productivity growth of 19.2%. Modernisation and
application of best practices in the food production
system and good management systems had
contributed to the strong performance of the industry.
This is also in line with the move towards selfsufficiency
in food production as the nation aspires to
be a net food exporter by 2010.
46 PRODUCTIVITY REPORT 2008

The productivity of chemicals and other chemical
products improved of double-digit growth by 16.0% to
a level of RM337,100. All the sub-industries registered
increase in productivity growth ranging from 5.5% to
42.6% except for industrial gases. The performance of
these sub-industries was driven by strong demand in
both domestic and global markets. Increase in exports
was recorded in pesticides and other agrochemical
products as well as fertiliser and nitrogen compounds
products.
Productivity of chemicals and
other chemical products grew
by 16.0% driven by strong
market demand
CHAPTER 3
The non-metallic mineral products industry registered
a productivity growth of 12.5%. All sub-industries
recorded productivity growth ranging from 0.3%
to 31.4% except for the manufacture of other
non-metallic mineral products. The industry benefited
from expansion in other industries, particularly from
the construction and transport equipment industries.
Productivity of the transport equipment industry
increased by 8.3% to RM107,300. High capacity
utilisation due to strong demand across all industries
namely automotive, motor vehicles, parts and
accessories and motor cycles and scooters
contributed to the high performance of the industry. In
addition, skilled workers and good manufacturing
practices such as Kaizen (continuous improvement)
had further contributed to the performance.
Most of the export-oriented industries registered
lower productivity growth as compared with the
overall manufacturing average. Initiatives such as
improvement in the production and marketing aspects
were undertaken to overcome the declining demand.
A productivity growth of 0.6% amounting to RM23,600
was recorded by the textiles and apparel industry in
2008. The lower growth was attributed to the lower
capacity utilisation as a result of weaker external
demand for both textiles and apparel.
Overall, export-oriented industries experienced
declining demand due to the poor economic
performance among developed economies which had
affected the performance of the E&E industry. The
Expansion in other industries,
particularly from the
construction and transport
equipment industries
contributed to high productivity
performance of non-metallic
mineral products industry
Productivity of the transport
equipment industry increased
by 8.3%
Most of the export-oriented
industries registered lower
productivity growth as
compared to the
manufacturing average
Declining demand due to poor
economic performance of
developed economies had
affected E&E productivity
PRODUCTIVITY REPORT 2008
47

CHAPTER 3
Various measures such as
reducing direct cost and
realigning human resource
management had been
implemented
productivity of the industry declined by 2.9% to
RM90,600. Electric power cables and wires, other
insulated wires and cables, and domestic appliances
industries posted a productivity growth of 7.8%, 6.9%
and 5.3% respectively. Various measures such as
reducing indirect cost and realigning human resource
management had been implemented by the
industries. The audio visual products, semi-conductor
devices and computers and computer peripheral
products experienced a decline in productivity by
11.6%, 2.6% and 0.4% respectively. The reduction in
orders and cancellation especially in audio visual
products, semi-conductor devices, computers and
computer peripherals had contributed to the low
productivity performance of the industry.
Box 3.1: Kaizen: The Leading Edge in Cost Management
and Greater Efficiency
Kaizen is a life philosophy for continuous and incremental self improvement and
it is used for improvement to existing processes. Many industries have adopted
this concept to improve the quality of output and increase productivity levels.
Through Kaizen practice, operational costs can be reduced and a continuous
work improvement culture be internalised. Successful companies that had
implemented Kaizen recorded improvements in manpower, time and reject rates:
• The manpower at the production hydraulic zone was reduced from
3 to 2.
• The time taken to transport the raw material to the mixer was
reduced by 50%.
• The reject rate at the blow moulding zone was reduced to 0.35%
per 1,000 output as compared to 0.70% per 1,000 output before
implementing Kaizen.
48 PRODUCTIVITY REPORT 2008

The process of implementing Kaizen
CHAPTER 3
Identifying problem
Problem analysis
Action
Plan
Check
Do
Labour Cost Competitiveness
The manufacturing sector continued to strengthen its
labour cost competitiveness in 2008 as reflected by
a decline in unit labour cost of 4.7%. Unit labour cost
measures the labour cost of producing one unit of
output. Labour cost competitiveness of the sector was
enhanced with an achievement of higher productivity
growth of 6.3% as compared with labour cost growth
of 2.0%. One of the initiatives adopted by the
manufacturing sector to ensure competitiveness is
through the productivity-linked wage system.
Labour cost competitiveness
improved by a 4.7% decline in
unit labour cost
PRODUCTIVITY REPORT 2008
49

CHAPTER 3
Box 3.2: Linking Wages to Enhance Competitiveness
of the Manufacturing Sector
Linking wages to productivity/performance will ensure that firms remain resilient
and sustain labour cost competitiveness at all times. The Productivity-Linked
Wage System provides the flexibility to adjust wages according to
performance in line with economic changes. Productivity/performance
elements that had been identified include the following:
Productivity / Performance Elements
Productivity/
Performance
Improvement
– Identify key
performance
indicators
–Total output per
employee
– Added value per
employee
– Sales value per
employee
– Cost Savings
– Reduction in
rejects
Profit Based
Bonus example:
– Profit after text
– Return on sales
– Return on equity
– Return on
investment
– Return on assets
Individual
Performance
Improvement
example:
– Improving work
processes
– Achieving
performance
targets
– Quality conscious
–Quick response
to customer
complaints
– Innovative
Commitment,
Discipline,
Timelines:
– Able to work
independently
– Making the right
decisions
– Perform better
with less
supervision
– Possesses
initiative
–Time conscious
with regards to
work processes
– Achieving teambased
targets
Skills Incentives:
– Able to perform
more than one
type of job
function
– Able to handle
more than one
machine
– Having skills
qualification in
specific areas
50 PRODUCTIVITY REPORT 2008

Details on the number of performance elements implemented by manufacturing
companies are shown below:
CHAPTER 3
Performance Elements in the Manufacturing Sector, 2008
Performance Elements 2008
%
Productivity/Performance Improvement 38.6
Individual Performance Improvement 29.4
Commitment, Discipline, Timelines 24.8
Profit-Based Bonus 11.8
Skills Incentives 1.9
Table 3.1: Labour Cost Competitiveness, 2008
Industries Productivity Labour Cost Unit Labour
per Employee Cost
Growth rate (%)
Food and beverages 19.2 6.1 -8.2
Chemicals and chemical products 16.0 6.3 -3.9
Non-metallic mineral products 12.5 4.8 -7.1
Iron and steel 8.6 2.8 -0.5
Transport equipment 8.3 5.8 -1.6
Fabricated metal products 7.3 0.3 -2.3
Manufacturing 6.3 2.0 -4.7
Machinery and equipment 5.4 -2.5 -2.2
Textiles and apparel 2.6 1.5 -1.3
Plastic products 1.3 0.5 -1.6
Rubber products 1.3 0.1 -0.4
Wood and wood products -0.2 0.4 2.0
Electrical and electronics -2.9 0.1 6.5
PRODUCTIVITY REPORT 2008
51

CHAPTER 3
The food and beverage and
non-metallic mineral products
achieved higher labour cost
competitiveness
Among the industries, food and beverages and nonmetallic
mineral products recorded lower unit labour
cost as compared with the manufacturing average.
The labour cost competitiveness of E&E industry
declined as reflected by an increase in unit labour cost
of 6.5%.
Figure 3.5: Changes in Unit Labour Cost of the
Manufacturing Industries, 2008
Food and beverages
Non-metallic mineral products
Manufacturing
Chemicals and chemical products
Fabricated metal products
Machinery and equipment
Transport equipment
Plastic products
Textiles and apparel
Iron and steel
Rubber products
Wood and wood products
Electrical and electronics products
-8.2
-7.1
-4.7
-3.9
-2.3
-2.2
-1.6
-1.6
-1.3
-0.5
-0.4
2.0
6.5
-10.0 -0.8 -0.6 -4.0
-2.0 0.0 2.0 4.0
Percent
6.0 8.0
Computed from: Monthly Manufacturing Survey and Annual Industrial Survey, Department of Statistics
Industries that registered high
labour cost per employee
were chemicals and chemical
products, food and beverages,
transport equipment, nonmetallic
mineral products
and iron and steel
The non-metallic mineral products, food and
beverages, transport equipment and chemicals and
chemical products registered faster growth in labour
cost per employee ranging from 4.8% to 6.3% as
compared with the manufacturing average of 2.0%.
Machinery and equipment industry recorded a decline
in labour cost per employee of 2.5%. Several
measures such as reducing the number of employees,
number of working days and cutting down on overtime
in tandem with the slow demand for products,
especially for the last quarter of 2008 contributed to
the performance.
52 PRODUCTIVITY REPORT 2008

Figure 3.6: Growth in Labour Cost per Employee of the
Manufacturing Industries, 2008
CHAPTER 3
Chemicals and chemical products
Food and beverages
Transport equipment
Non-metallic mineral products
Iron and steel
Manufacturing
Textiles and apparel
Plastic products
Wood and wood products
Fabricated metal products
Electrical and electronics products
Rubber products
Machinery and equipment
-2.5
1.5
0.5
0.4
0.3
0.1
0.1
2.0
2.8
4.8
6.3
6.1
5.8
-4.0 -2.0 0.0 2.0 4.0 6.0 8.0
Percent
Computed from: Monthly Manufacturing Survey and Annual Industrial Survey, Department of Statistics
International Comparison
The Malaysian manufacturing sector recorded growth
of 8.0% in productivity. The performance was the third
highest after Republic of Korea and Taiwan which
recorded a growth of 8.7% (Figure 3.7). Productivity
growth in most of the other economies also improved
ranging from 0.7% to 8.7%. However, both Norway
and Italy recorded a contraction in its productivity
growth of 0.2% and 0.5% respectively.
Productivity growth for the
Malaysian manufacturing
sector was higher than
Germany and the
United States
PRODUCTIVITY REPORT 2008
53

CHAPTER 3
Figure 3.7: Productivity Growth (National Currency basis), 2007
10 8.7 8.7
8.0
8
Percent
6
4
2
5.0
4.1
3.8
3.1 2.8 2.8
2.6
2.5
2.1
2.1
0.9
0.7
0
-2
Rep. of Korea
Taiwan
Malaysia
Germany
United States
Spain
Australia
Netherlands
Japan
France
United Kingdom
Belgium
Canada
Sweden
-0.2 -0.5
Denmark
Norway
Italy
Source: - Bureau of Labour Statistics News, 26 September 2008
(Productivity figures refer to percent change in manufacturing output per hour worked while
Malaysian figures refer to growth in Added Value per Employee, computed from Monthly
Manufacturing Statistics, Department of Statistics, Malaysia )
Malaysia was the second
competitive economy in terms
of labour cost competitiveness
Malaysia is amongst the most competitive in terms of
unit labour cost. Malaysia achieved a 5.7% decline in
unit labour cost, indicating a lower cost of production.
Compared to selected Asian and OECD countries,
Malaysia’s labour cost competitiveness is second
to Taiwan (-6.5%). However, Malaysia is more
competitive than Germany, the USA, Japan and the
UK (Figure 3.8).
54 PRODUCTIVITY REPORT 2008

Figure 3.8: Percentage Change in Manufacturing Unit Labour Cost
(National Currency basis) 2007
Taiwan
Malaysia
Germany
Rep. of Korea
United States
Japan
United Kingdom
Netherlands
France
Belgium
Spain
Denmark
Canada
Sweden
Italy
Australia
Norway
-6.5
-5.7
-3.1
-0.9
-0.5
-0.3
-0.1
0.2
0.3
0.5
1.0
1.1
1.6
2.6
2.6
2.8
4.9
CHAPTER 3
-8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0
Percent
Source: - Bureau of Labour Statistics News, 26 September 2008
Malaysia figures: Computed from Monthly Manufacturing Statistics, Department of Statistics, Malaysia
TOTALFACTOR PRODUCTIVITY (TFP) OF
SELECTED MANUFACTURING SUB-SECTORS,
2004 – 2008
Total Factor Productivity (TFP) is crucial for both
economic and industrial growth which is achieved
through technology development, better management,
skills upgrading and ICT. The contribution of TFP
growth to the manufacturing sector output was 43.3%
while contributions from labour and capital were 23.7%
and 33.1% respectively.
The recent global economic slowdown had compelled
the manufacturing sector to improve their production
processes as well as human resource capabilities in
order to boost the TFP of the sector. During the period
2004-2008, TFP of the manufacturing sector grew by
2.1%. There are four sources of TFP growth in the
manufacturing sector namely, capital structure, quality
of labour, demand intensity and technical progress
(Figure 3.9).
Total Factor Productivity is
crucial for both economic and
industrial growth
For the period 2004-2008,
TFP of the manufacturing
sector grew by 2.1%
reflecting enhanced
efficiency of the sector
PRODUCTIVITY REPORT 2008
55

CHAPTER 3
Figure 3.9: Sources of Manufacturing TFP
Higher Productivity
Higher TFP
Capital
Structure
Quality of
Labour
Demand
Intensity
Technical
Progress
• Automation
• Modernisation
• ICT
•Training and
Development
• On-the-Job
Training
• Skills and
Knowledge
• Education
• Market Share
• Marketing
Strategies
• Product
Differentiation
•Technology
• Creativity
• Innovation
• R&D
• Management
System
Box 3.3: Competitiveness in the Food and Beverage Industry
The competitiveness criteria used to assess competitiveness in the Food and
Beverage Industry are organisation and culture, business measurement, plant
and equipment, product development process, quality, innovation and cycle time.
The criteria for organisation and culture includes beliefs, values, organisational
style, approaches and systems. Organisation and culture achieved a score of
68.3%. Business measurement which refers to market share, inventory turnover
and cash flow obtained a score of 68.2%. Plant and Equipment which reflects
management commitment and emphasis on a company’s appearance,
orderliness and cleanliness scored 67.6%. Product Development Process
involving product design attained a score of 67.3%.
56 PRODUCTIVITY REPORT 2008

Industry Competitiveness in the Food and Beverage Industry
According to Business Process Areas
CHAPTER 3
Organisation and Culture
Business Measurement
68.3
68.2
Plant and Equipment
Product Development Process
Quality
67.6
67.3
67.2
Innovation
64.4
Manufacturing Cycle Time
59.9
54.0 56.0 58.0 60.0 62.0 64.0 66.0 68.0 70.0
Percent
Quality assurance and safety achieved a score of 67.2%. It reflects reliability,
capability of processes, rejection or scraps, customer delivery as well as quality
of suppliers. Innovation scored 64.4%. The innovation score was 64.4%.
Innovative ideas through small group activities were assessed. The score for
Manufacturing Cycle Time was the lowest at 59.9%. Food and beverages need to
improve on their setting and adjustment times, as well as physical equipment
changes and cleaning activities. Change-over process needs to be planned
according to the company’s production schedules.
PRODUCTIVITY REPORT 2008
57

CHAPTER 3
Strong TFP growth was
achieved by transport
equipment, chemicals and
chemical products, nonmetallic
mineral products, food
and beverages and fabricated
metal products
TFP Growth of Selected Manufacturing
Industries, 2004-2008
Manufacturing industries which registered TFP growth
higher than the manufacturing average were transport
equipment at 3.0%, chemicals and chemical products
at 3.0%, non-metallic mineral products at 2.8%, food
and beverages at 2.5% and fabricated metal at 2.2%
(Figure 3.10). The high TFP growth of the transport
equipment industry was due to improvements in both
human capital as well as technology and production
processes. Likewise, the chemicals and chemical
products industry was able to sustain high TFP growth
due to its mainly capital intensive operations.
Figure 3.10: TFP Growth of Manufacturing Industries, 2004-2008
Transport equipment
Chemicals and chemical products
Non-metallic mineral products
Food and beverages
Electrical and electronic products
Fabricated metal products
Manufacturing
Iron and steel
Plastic products
Machinery and equipment
Textiles and apparel
Rubber products
Wood and wood products
1.1
1.0
1.9
1.7
1.5
2.5
2.3
2.2
2.1
2.0
2.8
3.0
3.0
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Percent
Computed from: Annual Industrial Survey, Department of Statistics
58 PRODUCTIVITY REPORT 2008

Iron and steel, plastic products, machineries and
equipment, textiles and apparel, rubber products as
well as wood and wood product industries registered
lower TFP growth than the manufacturing average.
These industries would need to implement a more
efficient system to enhance TFP.
More efficient systems and
processes needed to enhance
TFP
CHAPTER 3
Although the economic slowdown may curb new
investments in technology and machineries, it
provides an opportunity for industries to enhance and
upgrade their quality workforce instead of retrenching
them during this period of low demand. Such training
and retraining strategies will equip the employees with
the necessary skills to prepare them for the
anticipated economic recovery.
Employees would be an asset if they are multi-skilled
especially in skills that are relevant to the industries
needs. They can also acquire new skills to enable
them to be more marketable at the workplace.
Employees should also be conscientious, creative,
flexible and participate in company-wide projects
which add value to the organisation.
One of the main productivity enhancement initiatives
is improvement in human resources capabilities. This
includes involvement of frontline workers to selfmanage
their work activities and to solve work-related
problems. This leads to the establishment of
Innovative and Creative Circles (ICC) which focus on
improving work processes and finding solutions to
overcome bottlenecks, reduce wastages through
team problem-solving efforts among the members
to improve product quality, equipment efficiency,
eliminate bottlenecks and ultimately reduce cost. By
identifying bottlenecks at production line capacity
utilisation can be optimised. Thus, the organisation will
be able to produce high quality products as well as
reduce production cost. ICC is a strategic effort in
nurturing innovativeness and creativity among the
employees through their small group improvement
activities.
Training and retraining will
equip employees with the
necessary skills
Investment in human resource
development to upgrade
skills and capabilities of the
workforce had contributed to
the quality of labour
ICC activates which focuses on
improving work processes and
finding solutions to overcome
work related problems enable
organisation to improve work
processes, produce high quality
products as well as reducing
production cost
PRODUCTIVITY REPORT 2008
59

CHAPTER 3
Box 3.4: The Impact of Automation and Modernisation
in the Manufacturing Sector
A study on "Automation and Modernisation in the Manufacturing Sector" was
conducted in 2008 to identify benefits gained from the implementation of
new machinery and production lines across different industries. The use of
automation helps to overcome hazardous jobs especially in production lines
which involve welding and handling of molding processes.
With robotic arms, conveyors and pipelines, there is less human intervention
thus reducing handling accidents. The results from the study are as follows:
• Reduction in material wastage ranging from 3% to 22%.
• Reduction in production cost and unit labour cost by an average of
13% to 30% and 20% to 40% respectively. Other benefits include
cleaner environment, reduction in noise level and a conducive
working environment.
• The improvement in production processes has resulted in consistency
of material usage thus improving the overall quality of the products.
INITIATIVES TAKEN TO OVERCOME THE
ECONOMIC SLOWDOWN
Demand for manufacturing
products and FDI affected
Working Capital Guarantee
Scheme to provide working
capital to companies
The economic slowdown had affected the demand for
manufacturing products as well as the inflow of
Foreign Direct Investments (FDI). Among the
initiatives to assist industries to mitigate the global
crisis are:
• Working Capital Guarantee Scheme
amounting to RM5 billion to provide working
capital to companies with shareholder
equity below RM20 million. The maximum
loan amount will be RM10 million with a
maximum repayment period of five years to
allow credit flows to companies.
60 PRODUCTIVITY REPORT 2008

• Industry Restructuring Guarantee Fund
Scheme amounting to RM5 billion for loans
to increase productivity and value added
activities as well as the application of green
technology. The maximum loan is RM50
million payable over a period of 10 years.
Industry Restructuring
Guarantee Fund Scheme to
assist industries
CHAPTER 3
• Financial Guarantee to provide credit
enhancement to companies that intend to
raise funds from the bond market.
Financial Guarantee to provide
credit
• The Government will exempt levy payment
to the Human Resource Development Fund
(HRDF) for a period of 6 months for
employers in the textile as well as electrical
and electronic industries effective from
1 February 2009. The Government will
reduce the levy payment rate from 1% to
0.5% for all employers for a period of
2 years effective 1 April 2009. With this
reduction, employers will save RM390
million in business costs.
HRDF levy payment exemption
for selected industries
• Provide an additional allocation of RM200
million to the Automotive Development
Fund to continue supporting the
development of the automotive industry and
auto vendors as well as to establish the
Automotive Institute of Malaysia.
Automotive Development Fund
to assist the automotive
industry
PRODUCTIVITY REPORT 2008
61

CHAPTER 3
Launching of various
stimulus packages to assist
manufacturing industries
The productivity of the
manufacturing sector
is expected to grow
by about 1.0% in 2009
OUTLOOK FOR 2009
The stimulus packages introduced by the Government
coupled with efficiency initiatives implemented by
the manufacturing sector would enable the sector
to achieve a 1.0% growth. The government is also
providing incentives to stimulate growth of the sector
by voluntary deduction of 3% for a two-year period.
Import duties for the iron and steel industry and
approved permits for the import of iron and steel has
also been abolished. In addition an allocation
of RM200 million has been allocated under the
microcredit scheme to assist the manufacturing
sector. To ensure steady supply of foreign talent, work
permits will be continued to be given but restricted to
knowledge workers.
The P&Q initiative such as
Kaizen practices which
focus on cost reduction
and increased efficiency
will contribute to productivity
improvement
At the industry level firms should undertake P&Q
initiatives to increase productivity and competitiveness
of the sector. The initiatives include cost savings by
reduction in rejects and reworks, intensification in the
use of high technologies and investment in human
capital.
62 PRODUCTIVITY REPORT 2008

CHAPTER 4
CHAPTER 4
PRODUCTIVITY PERFORMANCE OF
THE SERVICES SECTOR
PRODUCTIVITY REPORT 2008
1

CHAPTER 4
PRODUCTIVITY PERFORMANCE OF THE SERVICES SECTOR
Highlights
• The services sector remained as the largest contributor to GDP at 46.3% in 2008.
• Productivity of the services sector grew by 3.3%, with the transport sub-sector
registering the highest growth of 4.5%, followed by trade, finance and utilities
sub-sectors.
• Services sector achieved TFP growth ranging from 1.0% to 2.1% due to efficient
utilisation of capital and labour.
• Malaysia’s services sector recorded higher productivity growth than Singapore and
Republic of Korea.
• The sector is expected to grow by 2.5% in 2009 supported by broad-based
expansion in all services sub-sectors.
Key Statistics
2008
Output Share of GDP (%) Growth (%)
Services 46.3 6.6
Transport 7.4 6.7
Finance 15.7 5.6
Utilities 2.9 2.2
Trade 14.8 9.4
Other Services 5.5 4.9
Productivity Level (RM) Growth (%)
Services 56,139 3.3
Transport 70,607 4.5
Finance 124,262 4.2
Utilities 162,606 4.0
Trade 40,027 4.3
Other Services 26,895 1.9
Total Factor Productivity Growth 1999 - 2008
Services 1.3
Transport 1.4
Finance 1.9
Utilities 1.6
Trade 2.1
Other Services 1.0
PRODUCTIVITY REPORT 2008
65

CHAPTER 4
The services sector remains
the key engine of growth at
6.6%
Performance of the Services Sector
The services sector is one of the key engines
of growth, contributing 46.3% to GDP in 2008
(Figure 4.1). The sector recorded an output growth of
6.6% in 2008 (Figure 4.2). The growth was attributed
to strong domestic consumption, investment in finance
and insurance sub-sector as well as tourism activities.
The trade sub-sector registered the highest
output growth of 9.4%, followed by the transport
sector of 6.7% and finance sector of 5.6%.
Figure 4.1: Contribution of Services Sub-Sectors to Output
50
Percent
40
30
20
10
0
2004 2005 2006 2007 2008
Transport 7.07 7.13 7.15 7.29 7.44
Trade 12.88 13.31 13.42 14.15 14.81
Finance 13.87 14.22 14.55 15.50 15.67
Utilities 2.99 3.00 3.00 2.92 2.86
Other Services 5.71 5.65 5.59 5.52 5.54
Overall Services 42.52 43.32 43.71 45.38 46.32
Year
Computed from:
- Economic Reports, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
66 PRODUCTIVITY REPORT 2008

Percent
Figure 4.2: Output Growth of Services Sector
16
14
12
10
8
6
4
2
0
2004 2005 2006 2007 2008
Transport 8.22 6.12 6.18 8.45 6.69
Trade 8.61 8.69 6.83 12.19 9.36
Finance 4.76 7.84 8.36 13.36 5.62
Utilities 6.66 5.73 5.63 3.86 2.15
Other Services 4.17 4.27 4.76 5.01 4.88
Overall Services 6.52 7.19 6.87 10.48 6.64
CHAPTER 4
Year
Computed from:
- Economic Reports, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
Box 4.1: Innovative Practices in the Services Sector
A survey was carried out by MPC to gauge the impact of innovative practices in
the services sector involving respondents from distributive trade (32.9%), logistics
(25.7%), business and professional (17.8%), tourism (12.1%), education and
training (7.9%), and health (3.7%) sub-sectors. The two main indices used were
the innovation practices index and the operational outcomes index. The former
assesses overall business improvements while the later assesses the extent to
which innovation practices have led to better results.
The findings showed that service firms generally took a more informal and
incremental approach towards innovation. Instead of investing in R&D, most firms
used training as a driver for new or improved products innovation. The findings
PRODUCTIVITY REPORT 2008
67

CHAPTER 4
also revealed that service firms were aware on the importance of innovation in
their business strategies but failed to put them into practice. The low levels of
innovation activities were due to lack of capital, skilled staff and limited market.
The majority of those in the services sector attained a relatively low score for
innovation practices. The result showed that only 16.7% achieved a score of 81 -
100, while 20.8% of them scored between 71 - 80 on innovation practices.
Innovation Practices Index for the Services Sector
30
Percent
20
10
3.32 2.90
5.20
8.18
11.58 12.27
19.38
20.44
11.93
4.86
0
0-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-100
Score
Large firms registered high scores on innovation practices compared to SME
firms. In addition, 26.5% of the large firms were at the top bracket with a score of
81 - 100. Meanwhile, a total of 13.8% of SME firms was at the top bracket. Most
of the large firms (27.6%) scored between 71 - 80 whereas, majority of SME firms
(19.1%) scored between 61-70.
68 PRODUCTIVITY REPORT 2008

Innovation Practices of the Services Sector by Firm Size
SME
Large
CHAPTER 4
30
28
Percent
20
10
6
9
20
19
13 13 11
7
18
10
19
8
4
4
1 1
1
4
4
0
0-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-100
Score
On the operational outcome, more than 50% of the firms agreed that their cost,
quality, service, flexibility, delivery time, customer satisfaction and employee
satisfaction were comparable to their major competitors. The study also found that
there was a positive correlation between innovation practices and operational
outcome. This implied that, more emphasis given to innovation practices
will eventually enhance operational outcomes of the service firms. As such, the
service firms in Malaysia are encouraged to place more focus on innovation
practices in order to improve performance and growth.
PRODUCTIVITY REPORT 2008
69

CHAPTER 4
Productivity performance of
services sector grew by 3.3%.
The Transport sub-sector
recorded productivity growth
of 4.5%
PRODUCTIVITY PERFORMANCE OF THE
SERVICES SECTOR
The services sector registered a productivity growth of
3.3% amounting to RM56,139 in 2008 (Figures 4.3
and 4.4). The growth was driven by sustainable
domestic consumption and trade related activities.
The productivity of the transport sub-sector recorded
the highest productivity growth of 4.5% amounting to
RM70,607 as compared to RM67,560 in 2007. Despite
high fuel prices and the cost of spare parts, the growth
remained healthy supported by continuous upgrading
and maintenance of infrastructure, increase in travel
and trade related activities in the maritime transport
services, improvement in capacity and efficiency
of port services, continuous improvement of public
transport facilities and increase in air traffic.
Trade sub-sector recorded
productivity growth of 4.3%
attributed to higher domestic
consumption, increased
investment and higher tourist
expenditure
Finance sub-sector registered
productivity growth of 4.2%
while the Utilities sub-sector
grew by 4.0%
The trade sub-sector achieved a productivity level of
RM40,027 in 2008 as compared to RM38,362 in 2007
thus attaining a growth of 4.3%. The growth was
due to higher domestic consumption, increased
investment and higher tourist expenditure in line with
the government efforts to promote tourism namely,
eco-tourism, health tourism, sports tourism and
homestay programmes. The "Visit Malaysia Year"
campaigns have also been successful in promoting
Malaysia as a preferred shopping destination. At
the retail level, the growth was supported by
the expansion of businesses especially shopping
outlets and the launching of more foreign-owned
hypermarkets and superstores.
Productivity of the finance sub-sector grew at 4.2% to
RM124,262 from RM119,242 in 2007. The sub-sector
expanded due to increased lending and fee-based
activities, continuous demand for housing loans,
businesses financing, expansion of Islamic banking
and increased demand for medical and health
insurance. Productivity of the utilities sub-sector
grew by 4.0% to RM162,606 as compared to
RM156,413 in 2007. The growth was due to
sustainable demand from industrial, commercial and
residential users.
70 PRODUCTIVITY REPORT 2008

Figure 4.3: Productivity Growth of Services Sub-Sectors
CHAPTER 4
Percent
6.00
5.00
4.00
3.00
2.00
1.00
0.00
2004 2005 2006 2007 2008
Transport 3.21 4.03 4.07 5.66 4.51
Trade 2.36 2.67 2.15 5.54 4.34
Finance 2.41 3.86 4.06 4.87 4.21
Utilities 2.90 4.92 4.52 3.86 3.96
Other Services 1.76 1.19 1.51 1.77 1.93
Overall Services 2.13 2.90 3.03 5.07 3.25
Year
Computed from:
- Economic Reports, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
Figure 4.4: Productivity Level of Services Sub-Sectors
RM Thousand
180
160
140
120
100
80
60
40
20
0
2004 2005 2006 2007 2008
Transport 59.06 61.44 63.94 67.56 70.61
Trade 34.66 35.58 36.35 38.36 40.03
Finance 105.21 109.27 113.70 119.24 124.26
Utilities 137.33 144.09 150.60 156.41 162.61
Other Services 25.24 25.54 25.93 26.39 26.90
Overall Services 48.81 50.23 51.75 54.37 56.14
Year
Computed from:
- Economic Reports, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
PRODUCTIVITY REPORT 2008
71

CHAPTER 4
Malaysia’s services sector
registered higher productivity
growth of 3.3%
INTERNATIONAL COMPARISON IN SELECTED
SERVICES SECTORS
In 2008, Malaysia’s services sector recorded a growth
of 3.3% in productivity which was ahead of Singapore
(1.1%) and Korea (-1.9%) (Table 4.1). This
performance was attributed to growth in the transport,
finance and trade sub-sectors while the unfavourable
growth of 1.9% experienced by Korea was caused by
a 6.3% decline in the other services despite a growth
of 7.7% and 4.2% in the transport and trade subsectors
respectively.
Table 4.1: Productivity Growth in the Services Sector for
Selected Asian Countries, 2008
Country
Growth (%)
Services Transport Finance Trade Others
Malaysia 3.25 4.51 4.21 4.34 1.93
Singapore 1.09 1.53 2.58 2.29 0.61
Republic of -1.85 7.73 1.25 4.22 -6.32
Korea
Source:
- Economic Reports, Ministry of Finance, Malaysia
- Economic Survey of Singapore, 2008
- Asean Development Bank
- Ministry of Labour, Korea
72 PRODUCTIVITY REPORT 2008

Box 4.2: Patient Safety in Private Hospitals
Private hospitals are continuously improving their quality of services to take
advantage of the government’s effort in promoting healthcare tourism as a new
source of growth. In this respect, MPC has established a Community of Practices
(CoPs) for Private Hospitals since 2002. This serves as a platform for private
hospitals to establish benchmarks in some of the functional areas.
CHAPTER 4
A benchmarking survey is carried out annually to gauge the performance of
private hospitals. The KPIs assessed are related to patient safety namely, clinical
outcome and patient satisfaction. Clinical outcome measures the clinical
management and/or outcome of patient care:
Key Performance Indicators 2008 2007 2006
Surgical patients who passed away within 0.7 0.7 0.6
14 days of surgery per 1000 patients
Percentage of elective LSCS with LOS 1.5% 2.3% 4.9%
of more than 5 days
Percentage of eligible AMI patients - 83% 87% 90%
within 1 hour
Rate of unscheduled return to the operating
theatre within 48 hours of operation per 1.0 0.7 1.0
1000 patients
Rate of patients fall in a year per 1000 1.4 1.1 1.8
inpatients admission
Rate of needle stick injury per staff 1.4% 1.4% 1.5%
Rate of MRSA cases per 1000 patients 0.6 0.3 0.5
admission
Rate of SSI per surgery per 1000 patients 2.4 0.7 0.7
Percentage of patients readmitted into ICU 0.5% 0.7% 0.4%
within 24 hours
PRODUCTIVITY REPORT 2008
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CHAPTER 4
Patient care is of utmost priority for hospitals as they are concerned in preventing
untoward incidents such as reducing the rate of patient fall in a year for every
1000 inpatients admission, whereby the rate had declined to a level of 1.4.
Another improved KPI is the percentage of elective LSCS with LOS of more than
5 days, reducing the level to 1.5%. The KPIs for patient satisfaction are as follows:
Key Performance Indicators 2008 2007 2006
Outpatient Department Waiting Time (minute) 26 26 26
Waiting time for admission (minute) 22 20 33
Waiting time for discharge (minute) 54 55 65
Total number of complaints recorded 137 145 262
Total number of feedbacks solved 126 117
Percentage of feedbacks solved 95% 90%
The private hospitals are striving to provide the best service experience to their
patients based on improvement in several of the KPIs. The waiting time for both
admission and discharge has reduced to 22 minutes and 54 minutes
respectively. In addition, they managed to provide solutions to 95% of feedbacks
received.
Note:
LSCS
LOS
AMI
MRSA
SSI
Lower Segment Caesarean Section
Length of Stay
Acute myocardial infarction
Methicillin-resistant staphyloccocus aureus
Surgical Site Infection
74 PRODUCTIVITY REPORT 2008

TOTALFACTOR PRODUCTIVITY OF THE
SERVICES SECTOR
During the period of 1999-2008, the services sector
registered a TFP growth of 1.3%. This growth
accounted for 20.6% of output growth with capital and
labour contributing 40.8% and 38.6% respectively
(Table 4.2). Within the services sector, the trade subsector
recorded the highest TFP growth of 2.1%,
contributing 33.8% to output growth. The contributions
from capital and labour were 32.3% and 33.9%
respectively. The growth in TFP was attributed to the
ability of the industry to respond to changes in
customers needs, service innovation in retailing, good
marketing practices and efficient service delivery.
TFP of the trade sub-sector
grew by 2.1% for the period
1999-2008
CHAPTER 4
Table 4.2: TFP Growth and Contribution (1999-2008)
Services TFP Growth Contribution to Output Growth
Sub-sector (%) TFP (%) Capital (%) Labour (%)
Services 1.33 20.56 40.81 38.63
Trade 2.12 33.79 32.32 33.89
Finance 1.87 23.30 40.16 36.54
Utilities 1.63 33.86 35.74 30.41
Transport 1.36 20.70 44.62 34.68
Computed from :
- Economic Report, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
- Department of Statistics, Malaysia
For the finance sub-sector, TFP grew by 1.9%,
contributing 23.3% to output growth. The contributions
from capital and labour were 40.2% and 36.5%
respectively. The TFP growth was due to continuous
launching of innovative banking products and services
such as Islamic banking as well as rapid progression
in ICT usage such as internet banking.
TFP of the finance sub-sector
grew by 1.9% for the period of
1999-2008
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CHAPTER 4
Utilities sub-sector TFP grew
by 1.6% for the period of
1999-2008
The Utilities sub-sector recorded a TFP growth of
1.6% which contributed 33.9% to output growth.
Labour and capital contributed 30.4% and 35.7%
respectively. The TFP increase was due to continuous
efforts in developing human capital through training
and retraining as well as investment in plant and
machineries for the power plants.
TFP of the transport sub-sector
grew by 1.4% during the
period of 1999-2008
The transport sub-sector registered a TFP growth of
1.4% and its TFP contribution to GDP growth was at
20.7%, with labour and capital contributing 34.7%
and 44.6% respectively. The improvement in TFP
growth was due to better utilisation of equipment,
improvement in business processes which are more
cost effective and improvement in connectivity through
incentive marketing.
The productivity growth of the
sector was largely due to
increase in intra-Asia trade
Improvement in facilities,
infrastructure and human
capital contributed to
growth in productivity
of the transport sub-sector
TRANSPORT SUB-SECTOR
The transport sub-sector includes water, air and land
transport as well as various related services. In
2008, the transport industry continued to record
improvement in productivity despite the economic
slowdown, where growth of 4.5% with RM70,607 was
recorded as compared to RM67,560 in 2007
(Figure 4.5 and Figure 4.6). The performance was
largely due to the increase in the intra-Asia trade, local
business activities and the volume of transshipment
to 10.2 million Twenty-Foot Equivalent Units (TEUs)
from 9.5 million in previous year.
Initiatives carried out by the sub-sector include
improvement in the ship turnaround time by the major
ports through better facilities and infrastructure as well
as employment of more skilled workers. Airlines have
improved their load factor through the offering of
competitive and value added services. In increasing
efficiency and customer satisfaction, airports also
have upgraded their facilities and infrastructure.
Improvements in land infrastructure such as new
highways have led to faster door to door delivery. More
systematic delivery operations and the implementation
of electronic systems such as e-freight had contributed
to road and rail transport efficiency.
76 PRODUCTIVITY REPORT 2008

Figure 4.5: Productivity Level of Transport Sub-Sector
CHAPTER 4
80
61.44
63.94
67.56
70.61
RM Thousand
60
40
20
59.06
0
2004 2005 2006 2007 2008
Year
Computed from :
- Economic Report, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
Figure 4.6: Productivity Growth of Transport Sub-Sector
Percent
8
7
6
5
4
3
2
1
0
5.66
4.03
4.07
4.51
2005 2006 2007 2008
Year
Computed from :
- Economic Report, Ministry of Finance, Malaysia
- Economic Planning Unit, Malaysia
PRODUCTIVITY REPORT 2008
77

CHAPTER 4
Distributive trade comprises
wholesale, retail and, motor
vehicle trade
DISTRIBUTIVE TRADE INDUSTRY
Distributive trade involves all related activities in the
transfer of goods and services through the supply
chain. It comprises wholesale, retail and motor vehicle
trade. The industry assumes an important role in
providing linkages for the growth of the services
sector as dynamics within this industry have
generated new activities and services to support
supply chain activities, greater networking and
outsourcing opportunities.
Higher consumer spending,
sustained domestic investment
and high tourist expenditure
contributed to growth
Productivity of the Distributive Trade Industry
The distributive trade industry performed favourably,
registering productivity growth of 11.3% in 2008 to
RM127,311 (Figure 4.7). The growth was supported
by higher consumer spending, sustained domestic
investment and high tourist expenditure. Factors that
have attracted consumers to increase their spending
are expansion and creation of new retail businesses
such as establishment of new outlets, promotion of
international brand outlets entering local retail
market, new concept of fashion designer goods and
participation of foreign retailers operating in the
country. Increased competition had compelled the
industry to offer more customer-centric services and
unique shopping experiences.
78 PRODUCTIVITY REPORT 2008

RM Thousand
Figure 4.7: Productivity of Distributive Trade Industry
200
180
160
140
120
100
80
60
40
20
0
98.96
114.41
Year
127.31
2006 2007 2008
CHAPTER 4
Computed from :
- Department of Statistics, Malaysia
Labour Cost Competitiveness
Labour cost competitiveness of the industry had
improved as shown by the increase in productivity of
11.3% which was higher than the growth in labour cost
per employee of 8.6%. The competitiveness of this
industry was due to enhanced workers’ skills and
technical capabilities in acquiring knowledge and new
operational methods. This improvement in labour cost
competitiveness is reflected in the decline of unit
labour cost of 2.1% (Figure 4.8).
Enhancing workers’ skills and
technical capabilities improved
competitiveness
PRODUCTIVITY REPORT 2008
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CHAPTER 4
Figure 4.8: Growth of Labour Cost Competitiveness of
Distributive Trade Services
18
16
14
12
10
8
6
4
2
0
-2
-4
2006 2007 2008
Productivity 13.34 15.61 11.28
Labour Cost per
Employee 10.84 14.21 8.63
Unit Labour Cost -0.63 -1.18 -2.12
Percent
Year
Computed from :
- Department of Statistics, Malaysia
HOTEL INDUSTRY
The Visit Malaysia Year 2008
was successful in attracting
22.05 million tourists generating
tourist receipts of RM50 billion
Malaysia was ranked 32 nd out of 130 countries by the
Travel and Tourism Competitiveness Report 2008.
Malaysia has benefited from its excellent price
competitiveness (ranked 3 rd ) with low hotel and fuel
prices, low ticket taxes, airport charges and a good
transportation system. As a result, Malaysia has
successfully drawn a total of 22.05 million tourists in
2008, surpassing the 21.5 million target set under the
Ninth Malaysia Plan. In addition, The Visit Malaysia
Year 2007 which was extended to 2008 had
contributed to an increase in tourist arrivals. The
increase generated tourist receipts of RM50 billion in
2008 as compared to RM46 billion in 2007.
80 PRODUCTIVITY REPORT 2008

Productivity of the Hotel Industry
The hotel industry recorded a productivity growth of
5.8% valued at RM47,011 in 2008 (Figure 4.9 and
Figure 4.10) due to more on-the-job training and
hiring of more skilled workers. The growth was also
facilitated by attractive room rates offered by hotels in
Malaysia which has led to an increase in average
length of stay to 6.4 nights in 2008.
Productivity of the hotel
industry grew by 5.8%
attributed to on-the-job
training and hiring of
more skilled workers
CHAPTER 4
Figure 4.9: Productivity of the Hotel Industry
50
48
47.01
RM Thousand
46
44
42
40
43.27
42.81
44.44
38
2005 2006 2007 2008
Year
Computed from :
- Department of Statistics, Malaysia
Labour Cost Competitiveness
Labour cost competitiveness of the hotel industry has
improved as shown by the productivity growth of 5.8%
which was higher than growth in labour cost per
employee (1.0%). The hotel industry recorded a
slightly higher growth in labour cost per employee as
compared to the previous year. This has resulted in
sustained improvement in unit labour cost.
The hotel industry recorded a
productivity growth of 5.8%
PRODUCTIVITY REPORT 2008
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CHAPTER 4
Figure 4.10: Growth of Labour Cost Competitiveness of the Hotel Industry
Percent
16
12
8
4
0
-4
-8
-12
2005 2006 2007 2008
Productivity 2.87 -1.06 3.81 5.78
Unit Labour cost 2.56 -4.70 -5.47 -2.77
Labour Cost per 8.69 -2.31 -1.87 0.95
Employee
Year
Computed from :
- Department of Statistics, Malaysia
INFORMATION AND COMMUNICATIONS
TECHNOLOGY INDUSTRY (ICT)
The two ICT sub-sectors are
computer services and
telecommunication services
The ICT industry includes computer and
telecommunications services. Computer services
include hardware consultancy, software consultancy
and supply, data processing services, database
activities, maintenance and repair, and other
computer related services, while telecommunication
services cover telephone services, broadcasting,
internet services and paging services.
Productivity of the Information and
Communications Technology (ICT) Industry
The productivity of ICT services
industry grew by 13.2%
The productivity of the ICT services industry grew
by 13.2% in 2008 with substantial growth in
telecommunications services at 18.6% and computer
services at 2.1% (Figure 4.11). The significant growth
of the telecommunication industry was attributed by
investments in infrastructure and development of
human capital. Emphasis on emerging technologies
like the development of local creative content also
contributed to the growth of the sector.
82 PRODUCTIVITY REPORT 2008

Figure 4.11: Productivity Growth of the ICT Industry
30.00
CHAPTER 4
20.00
10.00
Percent
0.00
-10.00
-20.00
2001 2002 2003 2004 2005 2006 2007 2008
Computer Services 14.61 -12.01 -1.63 0.12 -0.24 1.51 1.84 2.14
Telecommunication 6.35 22.50 6.56 -7.50 26.00 14.59 17.54 18.62
Services
Overall ICT Services 5.92 9.42 1.20 -8.20 14.90 9.03 11.68 13.16
Year
Computed from :
- Department of Statistics, Malaysia
Labour Cost Competitiveness
Labour cost per employee for the ICT services
industry grew by 2.0%, which reflects highly skilled
manpower employed in the ICT sector (Figure 4.12).
In 2008, the cost of producing one unit of product /
service in the ICT services industry decreased by
7.3%. Both computer services and telecommunication
services industry attained labour cost competitiveness
with significant reduction in unit labour cost of 4.5%
and 8.8% respectively (Figure 4.13). The growing
trend of outsourcing had contributed to the
competitiveness as end users were more receptive
towards outsourcing their ICT infrastructure to third
party vendors which provide efficient services at a
lower cost.
Growing trend of outsourcing
has led to efficient services
at lower cost
PRODUCTIVITY REPORT 2008
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CHAPTER 4
Figure 4.12: Growth of Labour Cost per Employee of the ICT Industry
Percent
20.00
10.00
0.00
-10.00
-20.00
2001 2002 2003 2004 2005 2006 2007 2008
Computer Services -15.02 -5.02 9.79 3.65 -7.49 -1.10 -0.81 -0.56
Telecommunication 11.45 7.58 17.02 2.56 -9.72 4.38 3.91 4.49
Services
Overall ICT Services 2.78 6.75 15.43 3.66 -7.30 2.13 1.82 2.00
Year
Computed from :
- Department of Statistics, Malaysia
Figure 4.13: Growth of Unit Labour Cost of the ICT Industry
40.00
Percent
20.00
0.00
-20.00
-40.00
2001 2002 2003 2004 2005 2006 2007 2008
Computer Services -28.35 -15.68 27.41 20.62 -7.58 -4.38 -4.44 -4.50
Telecommunication -2.12 -11.47 8.14 -3.61 -29.12 -8.64 -9.71 -8.79
Services
Overall ICT Services -9.77 -7.76 15.16 3.82 -19.99 -6.40 -7.43 -7.33
Year
Computed from :
- Department of Statistics, Malaysia
84 PRODUCTIVITY REPORT 2008

Competitive Advantages of the ICT Industry
The ICT industry must be able to turn every possible
threat into business opportunities. Among the
opportunities that arise during the global downturn
are increasing demand for mobile broadband and
solutions and consumers are sourcing for the most
efficient technology such as WiMAX.
ICT providers need to innovate,
optimise and improve
operational efficiency
CHAPTER 4
Thus, ICT providers need to innovate, optimise and
improve their businesses and operational efficiency in
order to produce cost effective quality solutions for the
benefits of the consumers.
Box 4.3: The Performance of the ICT Services Sector
The ICT spending is expected to grow by 4.4% in 2009. The positive outlook is
attributed to continuing focus and emphasis in developing the regional economic
development that require intensive ICT activities. These projects include Iskandar
Development Region (IDR); Northern Corridor Economic Region (NCER); East
Coast Economic Region (ECER); Sabah Development Corridor and Sarawak
Corridor for Renewable Energy (SCORE). The deployment of shared services
and outsourcing (SSO), content development, e-commerce and Internet based
services and solutions are expected to contribute significantly to the development
of the ICT sector.
The telecommunications industry is also expected to remain vibrant and
contribute effectively to national growth. Broadband has become a crucial and
fundamental parameter in pursuing a knowledge-based economy (KBE) that is
poised to provide a competitive edge in the global arena. Without adequate
scope and coverage of broadband, it will be a formidable task for Malaysia to
successfully implement elements of KBE such as e-commerce, e-learning,
e-governance, tele-working and distance learning. Companies should seriously
reconsider expanding their product and service offerings through e-commerce to
emerge stronger from the economic challenges ahead.
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CHAPTER 4
Recognising the significance of the ICT services sector, the Government had
allocated RM400 million for the provision of broadband, covering both wired and
wireless modes in the economic stimulus package. In particular, the High Speed
Broadband Project (HSBP) with a planned capacity of 10Mbps is being targeted
at areas experiencing high economic and population growth.
Box 4.4: Management of Technology
A study on the status of Management of Technology (MOT) among SMEs was
conducted in 2008 by MPC. Six factors were examined in the study:
(a) Technological Environment
Includes leadership, strategies adopted, organisational structure,
technology culture and human resource management.
(b) Technological Categorisation
The indicators related to technological catagorisation include the level
of knowledge, appreciation of own technologies, state-of-the-art and
emerging technologies.
(c) Market and Competitors
In terms of market and competitors, the assessment is made based on
market and information of customers changing needs.
(d) Innovation Process
Innovation process involves generating new ideas for improving
products and services. In implementing innovation processes,
employees are encouraged and empowered to participate in idea
generation by suggesting new ideas for products and services.
86 PRODUCTIVITY REPORT 2008

(e) Value-added Functions
Value-added functions include continuous improvement of the
processes to ensure quality products and services while ensuring
environmental sustainability.
CHAPTER 4
(f)
Acquisition and Exploitation of Technology
Factors to consider when acquiring and exploiting technology include
company’s standing, urgency of acquisition, investment, life-cycle
position, and technology categorisation. The technology and
knowledge need to be protected through patents, trademarks and
copyrights.
The findings of the study are as follows :
Distribution of Level 1 of MOT
(according to contributing factors)
Technological
Environment
Technological
Categorisation
Market &
Competitors
Innovation
Process
Value Added
Functions
Acquisition of
Technology
18.5 37.4
38.6
36.3 34.6
15.6 14.4 17.1 18.6 17.2
3.7 6.6 10.5
12.8
10.6
9.5 17.7
14.3 14 14.8
5.3 6.2 10.4
10.9
14.9
47.3 17.7 9.2 7.4 8
Level 1 Level 2 Level 3 Level 4 Level 5
1 Note: A five-point scale, ranging from “Always Practised” to “Not Practised at All” was used. In the analysis, the scores of
1 to 5 were converted to an overall score that were then calculated by adding all the individual score and then were
translated into five levels of MOT ranging from level 1 to 5.
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CHAPTER 4
- Level 1: MOT is in real infancy with opportunity for improvement;
- Level 2: MOT is at an early stage of development;
- Level 3: MOT is not practised fully, with significant room for improvement;
- Level 4: MOT is well developed and practised, with moderate scope for
improvement; and
- Level 5: MOT is highly refined and practised, with only limited scope for
enhancement.
The findings suggest that technological environment was not extensively
distributed (level 3; 38.6%), This indicates that SMEs in Malaysia need to further
inculcate teamwork, creativity and flexibility to provide favourable environment
for MOT. In terms of technological categorisation, 18.6% were at level 4 while
17.2% and 17.1% were at levels 5 and 3 respectively. The level of acquisition of
technology was still low among SMEs; at level 1 representing 47.3% of the total
respondents.
INITIATIVES AND MEASURES TO MITIGATE THE
IMPACT OF THE GLOBAL CRISIS
Various measures are being
undertaken by the government
to liberalise the services sector
In meeting the challenges to enhance productivity,
quality and competitiveness of the services sector,
various measures are being undertaken by the
government to liberalise the sector to attract more
investments, to bring more professionals and
technology as well as to strengthen competitiveness.
These efforts are also in line with Malaysia’s
commitments under the ASEAN Framework on
Services and the World Trade Organisation.
Industries need to tap on the opportunities and
incentives aimed at further service liberalisation
provided under the Second Stimulus Packages as
follows:
88 PRODUCTIVITY REPORT 2008

Capacity Development
The Service Sector Capacity Development Fund
(SSCDF) was established by the Government, with an
initial allocation of RM100 million, managed by the
Malaysian Industrial Development Authority (MIDA) to
reduce the impact of liberalisation through capacity
building and strengthening the competitiveness of
domestic service providers.
CHAPTER 4
Among the objectives are to enhance capacity building
of local companies facing intense competition by the
impact of liberalisation; to enhance competitiveness
of sectors that have been prioritised for liberalisation;
to encourage local companies to compete globally
through mergers and acquisitions, as well as
participation in overseas projects; and to improve
the productivity of the services sector. Capacity
building programmes qualified are training/outreach
programmes; accreditation; mergers & acquisitions;
and upgrading and modernization. In addition, the Soft
Loan Scheme for Services Capacity Development
(SLSCD) is being proposed aimed at improving the
productivity of the services sector.
Private Finance Initiative (PFI)
To further boost private investment activities, the
Government will assist the implementation of projects
through PFI and public-private partnerships by
providing funds amounting to RM2 billion. Projects to
be implemented must be in strategic sectors, such
as education, health and tourism, have high spillover
effects; create sustainable job opportunities; and
enhance the nation’s competitiveness.
• Monitoring investments by Foreign
Investment Committee (FIC)
FIC is adopting a more liberal approach
to nurture a more investor-friendly
environment to attract more investments.
At the micro level, FIC will continue to
formulate policy guidelines focusing mainly
in sectors of national interest, such as ports
PRODUCTIVITY REPORT 2008
89

CHAPTER 4
and airports, property, defence, public
transportation and telecommunication.
• Public-private partnership in education
To optimise existing capacity and improve
access to private education, the
government proposes to increase the
number of scholarships for entry into local
private universities. GLCs which also
operate private universities such as UTP,
UNITEN and MMU will establish 10 notfor-profit
private schools to enhance CSR
activities in human capital development.
• Promoting tourism
The tourism services sector being the
second largest source of foreign exchange
after the manufacturing sector, will intensify
the implementation of various programmes
to leverage competitive advantage in
eco-tourism, health and education tourism.
An allocation of RM200 million was to
upgrade infrastructure in tourist spots,
diversify tourism products, organize more
international conference and exhibitions in
Malaysia as well as improve the homestay
programme. In addition, the government will
strengthen the "Malaysia MySecond Home"
Programme and consider issuing work
permits to skilled spouses of the
programme participants.
• Transportation Industry
To attract more tourists from abroad,
concerted efforts will be taken to encourage
more airlines to operate from Malaysia. For
this, a rebate of 50% on landing charges will
be given for a period of 2 years effective
from 1 April 2009 to all airlines that operate
from Malaysia.
90 PRODUCTIVITY REPORT 2008

• Training in Retail or Distributive
Business
To develop more young entrepreneurs,
Perbadanan Usahawan Nasional Berhad
(PUNB) will expand the scope of the
Graduate PROSPER (Projek Pembangunan
Usahawan Dalam Bidang Peruncitan)
Programme to include those with skills and
technical certificates. An additional 400
graduates would benefit from the
programme. This programme was
implemented since June 2005 to assist
Bumiputera graduates in retail or
distributive business with training, financing
and business advisory services.
Participants are offered syariah-based
financing of between RM5,000 to RM50,000
with a repayment period of 3 to 7 years. To
date, a total of 334 businesses have been
successfully established.
CHAPTER 4
PUNB will also implement attachment
training programmes for graduates and
those with skills certificates. Participants will
be placed in PUNB investee companies for
a period of 6 months to a year. On
completion of training, qualified participants
will receive financial assistance from
PROSPER to venture into business. PUNB
targets 2,000 graduates to be trained under
the attachment programme. To encourage
graduates to venture into business activities
and add value to existing small and medium
enterprises (SMEs), a total of 500
graduates and SMEs will participate in the
Tunas Mekar programme.
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CHAPTER 4
Services to grow by 2.8%
OUTLOOK FOR 2009
The economic growth is expected to be continuously
driven by the services sector, although the effect of
global economic slow down is anticipated to continue
in the first half of 2009. The productivity for the
services sector is anticipated to grow at 2.8% in 2009
supported by broad-based expansion in all services
sectors and resilient domestic demand.
The commerce and trade subsector
is expected to grow at
a slower pace of 2.0%
The tourism industry is
expected to sustain
performance in 2009
Transport sub-sector to grow
by 2.5%
The commerce and trade sub-sector is expected to
experience a slower growth of 2.0% in view of the
current challenges of rising inflation due to higher food
and energy prices. The government’s continuous
efforts to undertake measures to ease the burden of
rising prices and introduction of the second stimulus
package is expected to contain inflationary pressures.
To stimulate retail spending, promotional and
marketing activities, service innovation, customer
service enhancement and development of human
capital should be continued.
The future and prospects of the tourism industry
largely depends on the sustainability of Malaysia as
an attractive tourist and business destination. The
tourism industry is expected to sustain its performance
in 2009 as Malaysia has received 1,871,099 tourists in
January 2009, an increase of 5.1% compared to the
same period in the previous year. Moreover, Malaysia
is a favoured destination for Middle East tourists. On
the other hand, domestic tourism will continue to be
an important economic activity, in the light of declining
foreign arrivals due to the current global slowdown.
For the transport sub-sector, it is expected that the
productivity will grow at a slower rate of 2.5% as
global trade continues to slow down. Innovation in
operation systems and intensifying the utilisation of
ICT as solutions for operational and cost effectiveness
will increase.
92 PRODUCTIVITY REPORT 2008

Box 4.5: Performance-Wage Linkages among Services Industries
The Productivity-Linked Wage System will provide the necessary linkages that
will enhance performance among firms in the service sector. By linking wages to
productivity, firms will be able to set targets to improve performance through a
process of continuous improvement. Examples of performance indicators among
service industries are as follows :
CHAPTER 4
Performance Indicators among Services Industries
Productivity /
Performance
Improvement:
- Performance
Improvement
example,
achieving
sales targets
- Non-financial
measures such
as customer
satisfaction and
service quality
Commitment,
Discipline,
Timelines:
- Able to work
and make
decisions
independently
with less
supervision
- Possesses
initiative
- Time
consciousness
with regards to
work
processes
Service
Incentives:
- Based on
department, e.g.
Housekeeping,
front office, etc.
- Group /
individual
performance
example
achieving group
/ individual
targets
Profit Based
Bonus:
- Profit before tax
or after tax
- Profit margin
- Return on
investment
- Return on
equity
Skills Incentives:
Individual
Performance
Improvement:
- Based on job
functions
- Increase in
customer base
- Improving
performance
gaps
- On time
service
delivery
- Performing
more than one
type of job
functions
- Able to speak
more than one
language
- Having
qualifications in
specific skills
PRODUCTIVITY REPORT 2008
93

CHAPTER 5
PRODUCTIVITY PERFORMANCE OF
THE AGRICULTURE SECTOR

CHAPTER 5
PRODUCTIVITY PERFORMANCE OF THE AGRICULTURE SECTOR
Highlights
• The agriculture sector recorded a productivity growth of 3.0% to RM26,372 in 2008.
• Land productivity grew by 3.7% and capital productivity grew by 1.2%.
• Agriculture export earnings amounted to RM108.7 billion.
• Malaysian agricultural workers generated higher productivity levels than Korea and
Taiwan.
• More granary areas will be established in Pahang, Sabah and Sarawak.
• The National Agriculture Training Programme was carried out to encourage the
younger generation to pursue a career in agriculture.
• New crops such as the cultivation of herbal products, kenaf and jatropha will be
intensified.
Key Statistics
Year
2007 2008
Share of GDP (%) 7.5 7.6
Exports (RM Billion) 82.30 108.7
Imports (RM Billion) 46.01 59.0
Per Capita Consumption of Major
Food Commodities
Crops
Rice (Kg./Year) 72.23 73.00
Vegetables (Kg./Year) 89.00 76.00
Fruits (Kg./Year) 105.00 104.00
Livestock
Beef (Kg./Year) 24.88 25.90
Mutton (Kg./Year) 8.75 9.15
Poultry (Kg./Year) 121.39 96.60
Poultry Eggs (Nos./Year) 111.38 125.58
Milk (Liter/Year) 4.69 4.80
Fisheries
Food Fish (Kg./Year) 92.90 95.20
PRODUCTIVITY REPORT 2008
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CHAPTER 5
Global warming, food crisis,
food security and competition
for resources usage were the
main challenges
High commodity prices during
the first half of 2008
Biofuels as alternative form of
energy to replace petroleum
AGRICULTURE CHALLENGES
The agriculture sector faced numerous challenges
such as global warming, food crisis, food security, and
competition for resources usage in 2008. Global
warming due to rapid industrialisation and
development had resulted in adverse climatic
conditions which subsequently affected farm yield and
led to a food crisis. To mitigate the impact of the food
crisis, the immediate challenge to ensure food security
was to boost food production by expanding the
granary areas and revitalising more idle land for
cultivation. The strong competition for the limited
agricultural resources had also resulted in high
commodity prices of the agricultural commodities in
the international market during the first half of 2008.
However the scenario changed with the surge in the
oil price during the second and third quarter of 2008
which compelled many countries to source for
cheaper forms of energy namely, biofuels which can
be produced from the feedstock of agricultural crops.
It is the competition for such resources usage that had
led to the ethical issues being raised worldwide as
to whether agriculture should continue with its
conventional role of feeding mankind or to support the
industry.
Productivity grew by 3.0%
leading to a value level of
RM26,372
Export earnings was high
despite volatile economic and
climatic conditions
The agriculture sector accounted for 7.6% share of
GDP supported by a productivity growth of 3.0% in
2008 despite the above-mentioned challenges. In
terms of value level, the productivity was RM26,372.
This was due to favourable commodity prices, better
usage of technology especially biotechnology and
better farm agronomic management. High commodity
prices during the first half of 2008 has led to a robust
export performance generating export earnings
amounting to RM108.7 billion. In the second half of
2008, the growth momentum was dampened due to
exogenous factors such as global warming, natural
disasters and rising fuel prices.
98 PRODUCTIVITY REPORT 2008

PARTIAL PRODUCTIVITY
Besides measuring productivity at the macro level,
partial productivity can be examined in terms of land,
labour and capital productivity respectively. Land
productivity is measured in terms of output per
hectare, labour productivity as output per worker,
while capital productivity in terms of output per Ringgit
investment.
Productivity can be measured
in terms of land, labour and
capital
CHAPTER 5
Land Productivity
Land productivity grew by 3.7% in 2008 (Figure 5.1).
The higher productivity growth as compared to 2007
was due to favourable commodity prices experienced
in the first half of 2008 which resulted in more idle land
being revitalised for agriculture purposes as well as
through rehabilitation and consolidation programmes
carried out by the relevant agencies to operate the
farms on a commercial scale.
Land productivity grew by 3.7%
Figure 5.1: Growth in Land Productivity (2004-2008)
8
7
6.80
6
5.53
Percent
5
4
3.60
3.68
3
2
1
0
1.04
2004 2005 2006 2007 2008
Computed from:
- Ministry of Agriculture and Agro-based Industry, Malaysia
PRODUCTIVITY REPORT 2008
99

CHAPTER 5
Land-labour ratio improved
as more idle land is being
revitalised for cultivation
Labour Productivity
Labour productivity increased by 3.0% in 2008 as
compared to 2007 (2.8%) following the improvement in
land-labour ratio as farm workers had to harvest a wider
area due to more idle land being consolidated and
rehabilitated for cultivation.
Figure 5.2: Growth in Labour Productivity (2004-2008)
4
3.40
Percent
3
2
2.50 2.60
2.80
3.01
1
0
2004
2005 2006 2007 2008
Computed from:
- Ministry of Agriculture and Agro-based Industry, Malaysia
Capital Productivity
Capital productivity grew by
1.2%
Numerous investment
incentives and stimulus
package to support the sector
Productivity growth of capital increased to 1.2% in
2008 as compared to 0.3% in 2007. This was due
to numerous investment incentives extended by
financial institutions to the farmers to continuously
invest in farming automation and modernisation in
order to achieve higher yields. Strong institutional
support was also extended by the Government
through the launching of the first stimulus package to
further improve the rural infrastructure and a better
quality of working life for the rural communities.
100 PRODUCTIVITY REPORT 2008

Percent
Figure 5.3: Growth in Capital Productivity (2004-2008)
2.00
1.07
1.21
0.00
0.12 0.33
-2.00
-4.00
-6.00
2004 2005 2006 2007 2008
CHAPTER 5
-8.00
-10.00
-12.00 -11.10
Computed from:
- Ministry of Agriculture and Agro-based Industry, Malaysia
Box 5.1: Comparison Between GLOBALGAP and SALM and its Impact
Towards Farm Productivity and Competitiveness
Globalisation and changes in consumer behavior had resulted in higher
expectation from customers on the needs and preference for quality food and other
agricultural products to be produced in a safe environment which is socially
accepted. Under such situation, it is imperative that Good Agricultural Practices
(GAP) be adopted through the value chain of food processing. GlobalGap which
was initially known as European Retailers and Producers Good Agricultural
Practices (EurepGap) is a set of European retail chain standards established by a
body of 118 major growers, exporters and importers of food products. The
establishment of such global partnership is to ensure the production of safe and
sustainable food production incorporating GAP. GAP in Malaysia is coordinated
and endorsed by the Malaysian Farm Certification Scheme for Good Agricultural
Practice (SALM) which focuses on traceability and good farm agronomic
management.
MALAYSIAN STANDARD ON GAP (SALM)
SALM is a certification scheme implemented by the Department of Agriculture to
recognise and certify farms which adopt GAP, operates in an environmentally and
worker-friendly way to achieve productivity, sustainability, quality in the production
PRODUCTIVITY REPORT 2008
101

CHAPTER 5
of safe produce suitable for human consumption. This scheme is based on the
SALM standard and the Malaysian Standard MS1784:2005 Crop Commodities.
The process of certification is achieved through farm visits to evaluate farming
practices, analysis of farm produce so that these are in conformance with
stipulated conditions imposed by standards, guidelines and regulations currently in
place and approved by the Farm Certification Committee. Three major aspects will
be evaluated before a farm is certified, namely, the environmental setting of the
farm, farmer’s adherence to GAP and the quality and safety of the farm produce.
These three aspects focus on 16 factors ranging from traceability to legal
requirements to be fulfilled in order to be certified with SALM.
Both systems are structured and documented standards of inculcating GAP. From
a qualitative perspective, productivity can be enhanced due to strict adherence
to workers’ safety, health, sanitary and phytosanitary improvement. From a
quantitative perspective, there is productivity improvement due to the monetary
savings associated with controlled usage of chemicals. Both GlobalGap and SALM
provide the platform for the farmers to achieve competitiveness in terms of having
wider export market as these are the prerequisites that exporters must acquire if
they wish to export to Europe while for regional market, SALM would suffice.
INTERNATIONAL AGRICULTURAL PRODUCTIVITY
COMPARISON
Malaysia’s agricultural
productivity was ahead of
Korea and Taiwan
The productivity of Malaysian agricultural workers in
2007 increased to USD19,077 (2006: USD16,040)
ahead of advanced countries namely, Korea
(USD18,282) and Taiwan (USD17,209). This was
attributed to higher commodity prices especially in oil
palm and rubber. Japan remained ahead at
USD22,981 and was able to record high productivity
due to the adoption of modern farming systems such
as intensive cropping system and the use of
sophisticated farm automation technologies.
102 PRODUCTIVITY REPORT 2008

Figure 5.4: International Productivity Comparison for Selected Asian
Countries, 2007
CHAPTER 5
25,000
22,981
20,000
19,077 18,282
17,209
USD
15,000
10,000
5,000
3,383 3,121 2,658 2,527 2,195
0
Japan
Malaysia Korea Taiwan Philippines Thailand Indonesia India China
Source: World Competitiveness Yearbook, 2008
PRODUCTIVITY PERFORMANCE OF THE
FISHERIES SUB-SECTOR
A total of 13 areas covering 4,252 hectares under the
Aquaculture Industrial Zones (AIZ) have been
established with an estimated total production of
6,102.6 metric tonnes worth RM32.4 million to boost
fish production in 2008. To expedite the production
programme, incentives are being extended to the
private sector to further boost investment in this
industry. Labour productivity of the fisheries subsector
was RM60,433 in 2008.
13 areas under AIZ have been
established and investment
incentives are being extended
to the private sector
PRODUCTIVITY REPORT 2008
103

CHAPTER 5
27 TAC projects will be
established through an
integrated farming system
PRODUCTIVITY PERFORMANCE OF THE
LIVESTOCK SUB-SECTOR
Labour productivity of the livestock sub-sector was
RM27,301 in 2008. Currently, the production of beef,
mutton and milk can only cater for 25%, 10%, and 5%
respectively of domestic needs. To boost meat
production, 27 more Target Area Concentration (TAC)
projects will be established in some of the oil palm
estates through an integrated farming system. A total
of 2,922 breeders were trained in various disciplines
of livestock management. The objective is to develop
a working group who are competent and
knowledgeable in both practical and technical aspects
of livestock health at the operational level.
Box 5.2: Enhancing the Competitiveness of the Agricultural Sector
through Sustainable Practices
Competitiveness has traditionally been measured by the cost of production. A
country that can produce goods at a lower cost is said to have a competitive edge
over other countries. However, competitiveness is now measured by the capacity
to add value to economic products, services and processes. This means that the
concept of competitiveness has changed from cost per unit to value creation. With
regards to the agricultural sector, the competitiveness of the sector must
incorporate sustainable agricultural systems that promote equality, farming profits,
agro-ecosystems and product attributes. Thus economic, social and environmental
aspects must be integrated into the agricultural development process in order for
the agriculture sector to be competitive. This is especially so when trade and
market access and competitiveness are linked to environmental protection.
Environmental protection is a basic element of sustainable agricultural
development. The environment supplies natural resources for agricultural
production activities and is shaped by these activities. The concern for the
environmental effects has caused the proliferating of environmental regulations.
Although environmental regulations often raise production costs and reduce
competitiveness in the short term, the long term effects will be more positive and
should contribute towards sustaining farm productivity without any adverse impact
on the environment.
104 PRODUCTIVITY REPORT 2008

On the demand side, economic growth implies higher income and increasing
demand for environmental protection and standards. On the supply side,
governments in developing economies have scarce amounts of resources and
human capital to address environmental issues. In view of this, the role of the
private sector and the relevant research institutions are imperative to develop the
necessary environmental technology in order to ensure sustainable practices in the
agriculture sector.
CHAPTER 5
The said governments are accumulating policy and institutional experiences as
institutional knowledge can be transferred across industries and borders. Hence,
the free movement of institutional knowledge reinforces the sustainability of
economic development. Environmental side-agreements to trade agreements
could facilitate such knowledge transfer. Cleaner technology innovation and
adoption in industrial countries have been driven by environmental regulation.
Combined with foreign direct investment (FDI) and the use of technology-laden
imported inputs, this cleaner technology can be transferred to developing
economies.
Contributed by: Prof. Dr. Mad Nasir Shamsudin (MPC Agriculture Consultative Panel member) Dean, Faculty of
Environmental Studies, UPM
PRODUCTIVITY INITIATIVES IN THE
AGRICULTURE SECTOR
To further enhance the food safety and security
programmes, seven productivity initiatives have been
initiated. As rice is the staple food, the first priority is
to increase the national paddy production. To achieve
this, new granary areas in Pahang, Sarawak and
Sabah will be developed together with improving the
existing infrastructure of some of the current granary
areas in Kelantan and Kedah. Infrastructural
development includes improvement to existing
drainage and irrigation systems and encouraging
more farm mechanisation as well as the provision of
incentives for various field preparation programmes.
In view of the productivity growth of paddy production
which has averaged at 3.47 metric tonnes per hectare
over the past few years, new farming technologies in
collaboration with the relevant research institutions
7 productivity initiatives have
been initiated to enhance
food safety and security
programmes.
New farming technologies will
be intensified to develop better
quality seeds
PRODUCTIVITY REPORT 2008
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CHAPTER 5
will be intensified to develop better quality seeds
capable of producing higher yield. It is anticipated that
paddy yield will increase to 4.48 metric tonnes per
hectare through such R&D efforts. In 2008, a total of
3,421 agropreneurs have been trained as compared
to 5,937 agropreneurs in 2007 and 20% of the
agropreneurs have been identified to further enhance
their product quality towards international standards.
National Agriculture Training
Programme was carried out
to encourage careers in
agriculture
The National Agriculture Training Programme under
the National Agriculture Training Council was carried
out to encourage the younger generation to pursue a
career in agriculture. Table 5.1 shows the number of
trainees being trained under this programme while
Table 5.2 shows the areas of training attended. A total
of 972 trainees have been trained in 2008 with the
majority of them (445 trainees) achieving the basic
Level 1 module on farm agronomics leading to the
Malaysian Skill Certificate (MSC). The veterinary
discipline was the most popular module for MSC with
an enrolment of 79 trainees followed by 74 trainees
for the marketing discipline and 67 trainees for the
crops discipline.
Table 5.1: Number of Trainees (2004 – 2008)
ENROLMENT
YEAR
2004 2005 2006 2007 2008
LEVEL 1 88 310 393 402 445
MSC* LEVEL 2 - 182 390 338 334
LEVEL 3 - 62 225 244 129
MSD** LEVEL 4 47 31 26 - 64
MSAD*** LEVEL 5 - - - 1 -
TOTAL 135 585 1,034 985 972
Source: Ministry of Agriculture and Agro-based Industry, Malaysia
106 PRODUCTIVITY REPORT 2008

Table 5.2: Numbers of Trainees Who Completed MSC,
MSD and MSAD until Level 3
YEAR
TRAINING
AREA 2006 2007 2008
CHAPTER 5
MSD MSC MSD MSC MSD MSAD
Aquaculture 7 38 11 35 - -
Fruits - 20 - - - -
Marketing 1 - 1 74 5 -
Food Processing 5 6 - 31 7 -
Food Distribution 7 6 10 - - -
Poultry 2 - 2 - - -
Vegetables - 22 - - - -
Crops 17 13 30 67 13 1
Fisheries Captured
Technology - - - 19 - -
Veterinary 8 52 11 79 - -
TOTAL 47 157 65 305 25 1
*MSC – Malaysian Skill Certificate, **MSD – Malaysian Skill Diploma, ***MSAD – Malaysian Skill Advanced Diploma
Source: Ministry of Agriculture and Agro-based Industry, Malaysia
Besides paddy production, other areas of food
production include three more Permanent Food
Production Parks (PFPP), covering 3,690 hectares to
be established to further boost vegetables and fruits
production. Likewise, about 12,347 hectares of
irrigated land had been identified to be suitable for
aquaculture which will involve the participation of
11,000 breeders.
To improve farm productivity, incentives such as the
supply of quality seeds and high yielding clones are
being extended to the farmers to enable them to
obtain higher yield. The productivity, efficiency and the
More areas to be developed
for PFPP and Aquaculture
activities
Supply of seeds, incentives and
price reduction of farm inputs to
sustain farm operations
PRODUCTIVITY REPORT 2008
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CHAPTER 5
income/wealth generating potential of the sector will
be enhanced through the wider application of modern
farming methods, strengthening R&D and innovation,
improved marketing capabilities and the development
of entrepreneurial farmers and skilled workers.
Box 5.3: Marketing Options at the Farm Level
The agriculture sector has a dualism system comprising the plantation companies
and the smallholders or farmers. The plantation companies are involved in the
cultivation of export-oriented crops such as oil palm, rubber and cocoa. They are
well managed and adopt a sophisticated and efficient management and marketing
system. On the contrary, the marketing system adopted by the farmers goes
through different levels of middlemen who adopt variable price systems. Hence the
farmers are just price takers with no control over price unless they can organised
among themselves through group farming, contract farming or cooperatives as
practised in many developed countries. A notable worldwide example is the orange
growers of California who are able to manage the whole spectrum of the supply
chain of their farm products in the global market.
As most of the farm products are easily perishable and with limited market
information, the farmers have to depend on the marketing facilities provided by
Government agencies such as the Federal Agricultural Marketing Authority (FAMA)
or participate in programmes organised by the Department of Agriculture (DOA),
Farmers’ Organisation Authority (FOA) or other state-owned agencies. However,
there are also well established agropreneurs who had successfully gained access
to the marketing network through their own channels or through anchor companies
with available collection and distribution facilities.
Alternatively, the farmers can also market their products through private middlemen
or the various local markets, supermarkets, hypermarkets, restaurants and
exporters. At this point, the products are very much consumer-driven and
marketing at this level is competitive and require sustainable supply of quality
products, good packaging and shelf-life. This calls for proper post-harvest
handling, grading at farms or collection centres and preferably supported by
unbroken cold chains and storage facilities. The value-adding processes, together
with the final product presentation and consumer expectations contribute to better
pricing and competitive advantage for retailers.
108 PRODUCTIVITY REPORT 2008

In this era of globalisation, trading of farm products can also be carried out through
e-commerce established by the Government through the Agri-bazaar portal which
enables the farmers to market their products directly to the consumers and
eliminate the involvement of the middlemen.
CHAPTER 5
To enable the farmers to have greater market access
for their products, seven new collection centres have
been established while two are currently in the
process of being upgraded. Similarly, two new
distribution centres will also be established while four
are currently in the process of upgrading. A total of 50
new farmer markets will be established in addition to
the 230 existing ones nationwide to ensure wider
outreach of farm products at the retail level. Besides
infrastructural support, trading through e-commerce
under the Agri-bazaar portal recorded a total business
value of RM286 million in 2008 and the number of
users had increased to 42,674 as compared to only
1,800 users during its launch in 2004.
The Green Book Programme which had been
reintroduced is a food subsistence programme to
encourage backyard farming by households as part of
the productivity initiatives to cut down on household
expenses. Under this Green Book Programme,
concepts of "kitchen gardens" and "edible
landscapes" are widely being promoted to encourage
households to grow their own food. The programme
has also been extended to the urban households and
schools to inculcate the importance of "producing your
own food."
Some of the idle land and abandoned ponds
nationwide will be revitalised for food production. To
date, some 34,360 hectares of idle land which has
been unattended for more than two years has been
identified for cultivation. Likewise, 1,964 fresh water
ponds covering 341 hectares and 733 brackish water
ponds covering 491 hectares can also be revitalised
for aquaculture production.
Seven new collection centres
have been established and 50
new farmer markets will be
established to ensure greater
market access
Green Book Programme was
reintroduced to cut down on
households expenses
Idle land and abandoned
ponds will be revitalised
for food production
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CHAPTER 5
2,255 hectares of land had
been revitalised under
Contract Farming
Programme
In 2008, under the Contract Farming Programme,
2,255 hectares of land had been revitalised with the
involvement of 960 participants. This project aims to
ensure the end-products of the targeted group are
marketable under competitive pricing and to train
agropreneurs to produce quality products.
Box 5.4: An Overview of the Global Production And Trade of Tropical Fruits
In many developing countries, the cultivation of tropical fruits is an important
livelihood in generating employment opportunities and income for the growers,
traders and fruit processors. Tropical fruits are important to the food security of
developing countries from the nutritional standpoint as a source of dietary
requirements for a healthy population.
Exports of Tropical Fruits from Malaysia, 2006
Lemon & Limes
13.03 mil.tonnes
5%
Pineapples
18.87 mil.tonnes
7%
Other Citrus
Fruits
7.14 mil.tonnes
2%
Papayas
6.94 mil.tonnes
2%
Grapefruit &
Pomelos
5.06 mil.tonnes
2%
Avocados
3.36 mil.tonnes
1%
Watermelons
93.17 mil.tonnes
32%
Other melons
26.10 mil.tonnes
9%
Mangoes
33.45 mil.tonnes
11%
Bananas
81.26 mil.tonnes
28%
Source: Food and Agriculture Organisation (FAO)
The major fruits produced in Malaysia are watermelons, bananas, papayas,
pineapples and mangoes. While these fruits are the focus of the 3 rd National
Agriculture Policy, with the exception of papayas, their production had declined
during the period 1998 - 2007. The yearly production of bananas and mangoes
110 PRODUCTIVITY REPORT 2008

had remained constant at about 530,000 tonnes and 20,000 tonnes respectively.
Watermelon production had declined by 40%, from 220,000 tonnes to 132,000
tonnes. Production of pineapples had declined by 24% to 69,600 tonnes in 2007
from 92,035 tonnes in 1998. While production of other fruits declined, papaya
production recorded an increase of 35.8%, from 53,000 tonnes in 1998 to 72,000
tonnes in 2007. Malaysia ranked 17 th position for the global production of papayas
in 2007.
CHAPTER 5
Exports of papayas and pineapples had recorded significant growth and
increases in terms of volumes shipped. During the period 1997 - 2006, Malaysia
continued to retain its 2 nd position after Mexico in the global papaya export market.
The exports of papaya increased by 53% from 33,000 tonnes in 1997 to 6.94
million tonnes. Malaysia’s papaya exports volume in 2006 accounted for 18.6% of
the total world papaya export. Fresh pineapple fruits exported by Malaysia
recorded an increase of 49.4% from 30,316 tonnes in 1997 to 18.87 million tonnes
in 2006. However, in the global pineapple export market, Malaysia had fallen from
its 6 th position in 1997 to a distant 14 th position in 2006. Malaysia ranked 10 th
position in the global watermelon export market in 2006 with an export volume of
93.17 million tonnes which accounted for 3.5% of total global watermelon export.
Major Tropical Fruits Importing Countries, 2006
Others
7.466 mil.tonnes
45%
USA
2.594 mil.tonnes
16%
Germany
1.479 mil.tonnes
9%
United Kingdom
1.204 mil.tonnes
7%
France
1.022 mil.tonnes
6%
Italy
704 mil.tonnes
4%
Japan
1.087 mil.tonnes
7%
Netherlands
1.009 mil.tonnes
6%
Source: Food and Agriculture Organisation (FAO)
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111

CHAPTER 5
The increase in tropical fruit trade can be attributed to the following:
i. Increased demand for exotic tropical fruits;
ii. Increasing consumer awareness on health benefits derived from the
consumption of tropical fruits, especially for their nutritional values in the form
of high fiber, phytochemicals and vitamin contents;
iii. Consumers’ demand for year-round availability of fresh fruits; and
iv. The enhancement in post-harvest handling technologies leading to better
storage, packaging and transportation of perishable fruits.
The government places high priority in expanding the fruit sector in terms of
production for the domestic market as well as for exports. There is also an
urgent need to aggressively promote local fruits in the overseas market through
exhibitions and agriculture shows particularly in major tropical fruit importing
countries in Europe.
Contributed by: Chua Piak Chwee,(MPC Agriculture Consultative Panel member)
INITIATIVES TO MITIGATE THE ECONOMIC
SLOWDOWN
Schemes to assist oil palm
and rubber smallholders in
re-planting, integrated farming
and livestock breeding
RM300 million microcredit
programme to assist farmers
and agro-based businesses in
the rural areas
For the agriculture sector, the focus will be towards
higher income generating activities such as cultivation
of herbal products, kenaf, and jatropha as well
as to create more job opportunities through the
agropreneurship programmes to encourage the rural
population to venture into agro-processing activities
especially among the housewives. The government
will continue to assist oil palm and rubber
smallholders whose incomes have been affected due
to declining commodity prices during the second half
of 2008. Assistance in the form of input subsidies and
cash incentives will also be provided through
re-planting, integrated farming and livestock breeding
schemes by the related agencies.
A total of RM300 million will be provided under the
microcredit programme coordinated by AgroBank to
assist farmers and agro-based businesses in the rural
areas. As part of the government’s efforts to promote
the agriculture sector as an engine of growth, priority
will be given to domestic investment which have high
112 PRODUCTIVITY REPORT 2008

multiplier effect and is capable of creating more job
opportunities. Agricultural projects to be implemented
under these funds include a 1,000-hectare prawn
aquaculture project in Setiu, Terengganu as well as a
200-hectare modern vegetable farming project in
Cameron Highlands.
CHAPTER 5
OUTLOOK FOR 2009
The agriculture sector is anticipated to face many
challenges in 2009 as a result of the global economic
slowdown. To cushion the impact of the slowdown, the
impetus for growth calls for greater participation of the
private sector to increase investment in food, animal
feed and fertilisers production. The agriculture sector
also needs to improve its technological capabilities to
ease business and work processes as well as to
improve the standard of living of the rural population.
Given the emphasis on R&D for the development of
new products such as herbal products, kenaf, and
jatropha will provide the multiplier effect of developing
new industries in these areas. To ensure that these
projects are viable and contribute to enhancing the
productivity of the sector, collaboration from both the
private and public sectors is essential.
Greater participation from the
private and public sectors to
overcome the crisis.
R&D to be intensified for the
development of new agricultural
products
PRODUCTIVITY REPORT 2008
113

CHAPTER 6
PRODUCTIVITY PERFORMANCE OF
THE CONSTRUCTION SECTOR

CHAPTER 6
PRODUCTIVITY PERFORMANCE OF
THE CONSTRUCTION SECTOR
Highlights
• The construction sector is classified into general construction and special trade.
• The sector contributed 4% to the Gross Domestic Product.
• Productivity of the sector grew by 1.5% to RM20,204.
• Labour cost competitiveness was sustained as reflected by a decline in unit labour
cost of 1.5%.
• The civil engineering sub-sector contributed 40.5% to total output of the sector.
• Total output of the residential sub-sector grew by 3.8% contributing 30% to total
output.
• The output growth in the non-residential sub-sector of 3.2% was attributed to the
building more hypermarkets and shopping complexes.
• Industrialised Building System being encouraged for cost savings and reduce
dependency on unskilled foreign labour.
Key Statistics
Growth (%)
Construction Sector 2007 2008
Output 4.6 4.0
Productivity 1.5 1.5
Productivity and Labour Cost Competitiveness
Sub-sectors Added Value per Labour Cost per Unit Labour
Employee (%) Employee (%) Cost (%)
Residential 3.0 1.2 -1.9
Non-Residential 2.4 2.0 -1.2
Civil Engineering 1.0 0.8 -1.4
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CHAPTER 6
Productivity grew by 1.5%.
Construction sector comprises
two categories: general
construction and special trade
PRODUCTIVITY OF THE CONSTRUCTION
SECTOR
The construction sector contributed 4.0% of GDP and
recorded a productivity growth of 1.5% to RM20,204 in
2008. The construction sector is classified into two
categories namely, general construction and special
trade. General construction comprises three subsectors
which are residential construction, nonresidential
construction and civil engineering
construction. The second category is special trade
which involves activities such as metal works,
electrical, plumbing, sewerage and sanitary,
refrigeration and air-conditioning, painting, carpentry,
tiling and flooring, and glass.
Productivity grew by 1.5%
and unit labour cost reduced
by 1.5%
Productivity of the construction sector grew by 1.5%
(Figure 6.1). Labour cost competitiveness of the
sector improved as reflected by a decline in unit labour
cost of 1.5%. Most of the construction activities
comprises houses for the poor, public schools, roads,
bridges and other public infrastructure.
Figure 6.1: Productivity Indicators of the Construction Sector
Percent
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
Total Output Added Value Labour Cost Unit Added Value Fixed Asset
Productivity per per Labour per Labour per Fixed per
Employee Cost Employee Cost Assets Employee
Growth 2007 1.50 3.76 1.26 1.33 -2.32 -0.03 2.64
Growth 2008 1.50 2.69 1.07 1.32 -1.46 0.09 1.86
Computed from:
- Survey of Construction Industries
- Department of Statistics, Malaysia
118 PRODUCTIVITY REPORT 2008

The construction sector is able to sustain growth due
to the numerous projects initiated under the Ninth
Malaysia Plan (9MP). During the Plan period
(2006-2010), a total of 709,400 new houses will be
constructed. Special emphasis will be given to
housing for the lower-income group where 38.2% of
total new houses constructed will be for low-mediumcost
houses. Under 9MP, a budget allocation of
RM233.1 million is allocated for the construction of
houses for the hardcore poor while a total of RM18.4
billion will be for housing development and urban
services.
Positive growth in construction
sector is supported by on-going
projects identified under 9MP
CHAPTER 6
Activities in the construction sector are further
sustained with on-going infrastructure projects and
development of five economic growth corridors.
The corridors are Iskandar Development Region
(IDR), Northern Corridor Economic Region (NCER),
East Coast Economic Region (ECER), Sabah
Development Corridor (SDC) and Sarawak Corridor
of Renewable Energy (SCORE). As a pioneer among
the five corridors, IDR has progressed well and
spurred the region’s economic activities.
The establishment of the
five economic corridors help
to spur the country’s economic
development
PRODUCTIVITY REPORT 2008
119

CHAPTER 6
The construction sectors
consist of residential,
non-residential and
civil engineering
PRODUCTIVITY OF THE CONSTRUCTION
SUB-SECTORS
The construction sector comprises residential
construction of houses and condominiums, the nonresidential
construction of commercial and industrial
buildings as well as civil engineering which involves
the construction of public infrastructure such as
bridges and highways.
Added value of the residential
sub-sector grew to RM4.5
billion and contributed 29.8%
of the total output in the
construction sector
Residential Sub-sector
In 2008, a total of 4,848 projects were completed of
which 1,115 projects came from the residential
category. Total output of the residential sub-sector
grew by 3.8% to RM13.3 billion, contributing to 30%
share of the construction sector’s total output. Added
value grew by 3.1%, amounting to RM4.5 billion and
contributing to 31.6% share of total added value
generated in the construction sector. Employment
grew marginally at 0.1% accounting for 27.5% of total
employment in the construction sector (Table 6.1).
Table 6.1: Total Output, Added Value and Employment
of the Residential Sub-Sector
Value Level* % Share to the Growth
Construction Sector (%)
2007 2008 2007 2008 2008
Total Output 12,784 13,267 31.14 29.80 3.78
Added Value 4,384 4,520 31.94 31.58 3.10
Employment 123,420 123,581 32.20 27.47 0.13
* Value Level for Total Output and Added Value are in RM Million
Computed from:
- Survey of Construction Industries
- Department of Statistics, Malaysia
120 PRODUCTIVITY REPORT 2008

Percent
Figure 6.2: Productivity Indicators of the Residential Sub-sector
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
Added Value Total Output Added Value Labour Cost Unit Added Value Fixed Asset
per per per Labour per Labour per Fixed per
Employee Employee Cost Employee Cost Assets Employee
Growth 2007 3.23 4.35 1.90 1.20 -2.74 0.03 2.51
Growth 2008 2.97 3.65 1.53 1.19 -1.90 0.07 1.80
CHAPTER 6
Computed from:
- Survey of Construction Industries
- Department of Statistics, Malaysia
The residential sub-sector was able to sustain labour
cost competitiveness as shown by productivity growth
of 3.0% while labour cost per employee recorded a
growth of 1.2% resulting in a unit labour cost of -1.9%.
The growth momentum in the residential sub-sector
was contributed mainly by continuous housing
development in prime locations at major cities such as
Kuala Lumpur, Johor Bahru, Penang, Kota Kinabalu
and Kuching. Capital productivity grew by 0.1% while
capital intensity registered a growth of 1.8% as a result
of investment in ICT applications.
Growth mainly in prime
locations of major cities
PRODUCTIVITY REPORT 2008
121

CHAPTER 6
The non-residential sub-sector
registered an output growth of
3.2% despite high price of
building materials
Non-Residential Sub-sector
The sub-sector registered an output growth of 3.2%
to RM11 billion, contributing 24.7% share of the
construction sector’s total output. The sub-sector
generated an added value of RM3.6 billion,
contributing 25.4% share to the construction sector’s
total added value. The sub-sector employed 111,215
workers accounting for 24.7% of total employment in
the sector (Table 6.2).
Table 6.2: Total Output, Added Value and Employment
of the Non-residential Sub-sector
Value Level* % Share to the Growth
Construction Sector (%)
2007 2008 2007 2008 2008
Total Output 10,631 10,973 25.90 24.65 3.22
Added Value 3,538 3,630 25.77 25.36 2.60
Employment 110,966 111,215 28.95 24.72 0.22
* Value Level for Total Output and Added Value are in RM Million
Computed from:
- Survey of Construction Industries
- Department of Statistics, Malaysia
Added value per employee of
the non-residential sub-sector
grew by 2.4% complemented
with a decline in unit labour
cost of 1.2%
Output per employee grew by 3.0% (Figure 6.3). The
non-residential sub-sector was able to sustain its
labour cost competitiveness as shown by growth in
added value per employee of 2.4% while labour cost
per employee recorded a growth of 2.0% resulting in a
unit labour cost of -1.2%. The growth momentum in
the non-residential sub-sector was contributed mainly
by the building of several hypermarkets and shopping
complexes in major urban areas.
122 PRODUCTIVITY REPORT 2008

Percent
5.00
4.00
3.00
2.00
1.00
0.00
-1.00
-2.00
-3.00
Figure 6.3: Productivity Indicators of the Non-residential
Sub-sector
Added Value Total Output Added Value Labour Cost Unit Added Value Fixed Asset
per per per Labour per Labour per Fixed per
Employee Employee Cost Employee Cost Assets Employee
Growth 2007 2.70 4.13 1.29 2.12 -1.96 0.34 3.09
Growth 2008 2.37 2.99 1.01 1.98 -1.20 0.13 2.03
CHAPTER 6
Computed from:
- Department of Statistics, Malaysia
Civil Engineering Sub-sector
Civil engineering projects include the construction of
roads, bridges, tunnels, viaducts, highways, elevated
highways, railways, airfields, harbours, dams,
irrigation system, drainage and sewage system,
pipelines and other water projects, communication
and power lines, sports facilities such as stadium and
golf course, and other civil engineering projects.
The sub-sector’s total output grew by 2.3% to RM18
billion, contributing 40.5% share of the construction
sector’s total output. Such growth was derived from
major infrastructure projects initiated under 9MP such
as the construction of the East Coast Expressway
Phase 2 (LPT2). Added value grew by 1.6% to RM5.9
billion and accounted for 41.2% of the construction
sector’s added value while employment recorded
0.6% growth accounting for 33.3% of total
employment (Table 6.3).
Civil engineering was the
main contributor accounting
for 40.5% share of total
output in the construction
sector
PRODUCTIVITY REPORT 2008
123

CHAPTER 6
Table 6.3: Total Output, Added Value and Employment
of the Civil Engineering Sub-sector
Value Level* % Share to the Growth
Construction Sector (%)
2007 2008 2007 2008 2008
Total Output 17,631 18,037 42.95 40.52 2.30
Added Value 5,804 5,897 42.28 41.20 1.60
Employment 148,849 149,757 38.84 33.28 0.61
* Value Level for Total Output and Added Value are in RM Million
Computed from:
- Survey of Construction Industries
- Department of Statistics, Malaysia
Figure 6.4: Productivity Indicators of the Civil Engineering Sub-sector
Percent
3.00
2.00
1.00
0.00
-1.00
-2.00
-3.00
Added Value Total Output Added Value Labour Cost Unit Added Value Fixed Asset
per per per Labour per Labour per Fixed per
Employee Employee Cost Employee Cost Assets Employee
Growth 2007 1.13 2.06 0.63 0.67 -2.11 -0.43 2.35
Growth 2008 0.98 1.68 0.64 0.82 -1.39 0.03 1.44
Computed from:
- Survey of Construction Industries
- Department of Statistics, Malaysia
124 PRODUCTIVITY REPORT 2008

The civil engineering sub-sector was able to sustain
its labour cost competitiveness as shown by
productivity growth of 1.0% while labour cost per
employee recorded a growth of 0.8% resulting in a
unit labour cost of -1.4%.
Civil engineering sub-sector
was able to sustain its labour
cost competitiveness as shown
by a decline of 1.4% in unit
labour cost
CHAPTER 6
PRODUCTIVITY INITIATIVES IN THE
CONSTRUCTION SECTOR
The government has implemented several
programmes and initiatives to boost the sector’s
performance especially during the current economic
slowdown. To speed up the economic growth,
developers are encouraged to use Industrialised
Building System (IBS) components in the construction
of affordable homes and in government building
projects. By using IBS components in building
construction, completion time will be shortened
resulting in cost saving and reduce dependency on
unskilled labour.
Developers must also be innovative and able to adopt
new technologies. In line with this, the government
had established Construction Research Institute of
Malaysia (CREAM) with a mission to serve the
strategic research needs of the Malaysian
construction industry. Latest establishment by CREAM
was the development of "Makmal Kerja Raya" which
started operations in September 2008. This laboratory
provides facilities for heavy structural and material
testing focusing mainly on IBS components. The
laboratory also facilitates the verification, certification
and accreditation process of IBS components.
MPC had successfully organised four Round Table
Discussion (RTD) sessions in 2008. These sessions
were being conducted at regional level with the
theme ‘Promoting the Application of Standard IBS
Components to Increase Site Productivity’. The RTD
session brings together key players from various
government agencies, IBS component manufacturers,
Industrialised Building System
(IBS) involves the use of
components manufactured
at factories, transported and
then assembled into a
structure using minimum
workforce
Research and Development
(R&D) activities are crucial
in the construction sector to
sustain its competitiveness
Round Table Discussion (RTD)
sessions is one of MPC’s
initiatives to provide a platform
for construction key players
to discuss issues in IBS
implementation
PRODUCTIVITY REPORT 2008
125

CHAPTER 6
CI Portal provides real time
information on current issues
in the construction industry
Companies should maximise
the benefit from National
E-Tendering Initiatives in order
to speed up the tender process
and related construction associations to discuss the
issues and challenges and recommend initiatives to
improve site productivity.
The Construction Industry Development Board (CIDB)
had capitalised on information technology
development by introducing the Construction Industry
Portal known as CI Portal. The CI Portal provides real
time information on current happenings, issues and
information about the construction industry worldwide.
The portal is a realisation effort to meet the 6 th
Strategic Thrust requirement enlisted in the
Construction Industry Master Plan (CIMP) 2006-2015
which is to leverage on ICT in construction. Another
initiative by the government is to integrate and
bridge processes and components of the entire
construction tendering supply chain known as National
E-Tendering Initiatives (NeTI). By using NeTI, all
tendering processes are done electronically to
minimise human intervention in government projects
procurement procedures and to speed up the approval
process.
The objective of QLASSIC is to
encourage contractors towards
‘doing things right the first time
and every time’
Use of CICIS to improve the
cost of quality
In order to be more competitive, developers are
encouraged to use Quality Assessment System in
Construction (QLASSIC) to assess and measure the
workmanship quality of any construction work against
an approved standard. This is to ensure that it is being
done correctly the first time and every time.
The Construction Industry Standard (CIS 7:2006)
specifies the workmanship quality and assessment
procedures for building construction work. The system
was initiated by the Government to enhance quality
control of construction work.
The use of ICT has long been proven in enhancing
productivity and efficiency in the construction sector.
As such, the Construction Industry Cost Information
Services (CICIS) online information system was
developed to address the need to determine the cost
of quality in the construction sector.
126 PRODUCTIVITY REPORT 2008

MEASURES TO MITIGATE THE IMPACT OF THE
GLOBAL CRISIS FROM THE CONSTRUCTION
PERSPECTIVE
The effect of the economic slowdown has been slowly
melting into the economic climate putting pressure on
the government to mitigate the downward trend of
the economic performance. A pro-growth stimulus
package totalling RM7 billion was introduced in
November 2008. The main objective of the stimulus
package is to enhance domestic growth and improve
market confidence. From this stimulus package, the
construction sector will benefit in terms of additional
construction of 25,000 units of low-and medium-cost
houses while RM500 million was allocated to upgrade,
repair and maintain police stations, living quarters,
army camps and government quarters. In order to
address the problem of shortage of construction
projects, a further sum of RM600 million was
budgeted for minor projects under the public and
basic infrastructure project maintenance programme.
This includes maintaining village roads, building
community halls and small bridges, and improve
infrastructure of the public transport system (e.g. LRT,
commuter and city bus systems).
Stimulus package launched
to revitalise investment in
the construction sector
CHAPTER 6
OUTLOOK FOR 2009
The sector will benefit from the stimulus packages
through the government’s initiatives to enhance
construction activities. Among the efforts include
repair and roads maintenance, improving the
surroundings of public flats to ensure more
comfortable living conditions, painting, repairing of
lifts and improving waste disposal facilities. In addition,
renovation, maintenance and repairs of welfare
homes, fire and rescue stations and quarters and
public amenities especially in tourist areas will be
intensified. Allocation has also been given to build and
improve school facilities particularly in rural areas
especially in Sabah and Sarawak. Apart from this,
there are also plans to expand airports, ports,
upgrading of schools, the construction of training
centres and electricity transmission system as well.
More construction activities
to be undertaken in the near
future to stimulate domestic
investment
PRODUCTIVITY REPORT 2008
127

CHAPTER 6
Box 6.1: Skills Training in the Construction Industry
The technological advancement in building systems has compelled the industry
to source for knowledgeable workers. Through the state of the art construction,
management and systems, a knowledge workforce would be able to contribute
towards higher productivity growth. To enhance productivity growth, continuous
upgrading of skilled and semi-skilled workers is the norm and accounted for 36%
of the total employment in the construction sector. Most of the workers have been
trained and certified with at least a certificate of competency (Sijil Kemahiran
Malaysia level 1 & 2).
Total Employment According to Categories (2004-2008)
Total number of workers (nos.)
Category
2004 2005 2006 2007 2008 e
Construction Workers 249,647 298,647 356,385 419,951 509,792
Semi skilled workers 29,878 34,165 38,161 42,293 48,840
Skilled workers 94,274 101,242 111,087 123,460 136,557
Supervisors 54,806 58,374 62,868 73,017 80,588
Managers 37,705 40,067 43,593 48,503 52,990
Administration staff 51,271 65,776 89,587 119,616 156,027
e
estimate
Source: Construction Industry Development Board (CIDB), Malaysia
To ensure a consistent supply of skilled workforce, training programmes to
enhance the skills have been initiated by the government. Among the training
institutions which provide relevant skills training are the CIDB Akademi Binaan,
the Institut Kemahiran Mara and the Institut Kemahiran Belia Negara. The
modules in these programmes include drafting and designing, basic trade
and special trade to improve skills and enhance support services in the
construction industries such as plumbing, electrical and telecommunication
works.
128 PRODUCTIVITY REPORT 2008

Box 6.2: Industrialised Building System (IBS) Centre
The Industrialised Building System (IBS) will reduce dependency on unskilled
foreign workers, reduce cost and improve productivity. Realising the importance
of improving productivity through IBS, a one-stop reference centre on the
Industrialised Building System (IBS) was established in 2007 to provide training
and knowledge on IBS. The five main thrusts of the centre are:
CHAPTER 6
Thrust I - IBS Industry Planning
The centre acts as the main secretariat for IBS Roadmap and industry
coordination, supports the government to government (G2G) venture
development and functions as a gateway to market IBS globally and coordinates
Bumiputera development programmes.
Thrust II - IBS Promotion and Marketing
The centre manages training, seminars, road shows, resource centre, knowledgesharing
sessions, publications, gallery for exhibition and showcases on IBS
components applications.
Thrust III - IBS Technology
The centre is supported by the CIDB Construction Research Institute of Malaysia
(CREAM) on R&D, technology transfer programmes by local experts,
development of IBS-related Malaysian Standard (MS) and Construction Industry
Standards (CIS), general technical IBS advisory services, design systemisation
exercises and special incubation programmes for local IBS technopreneurs.
Thrust IV - IBS Certification and Verification
The centre handles the evaluation, certification and registration of IBS
practitioners in Malaysia such as the IBS manufacturers, consultants and
contractors. The IBS Manufacturers Status List and IBS Consultant List 2008
provide lists of manufacturing and consultant companies which had been certified
and verified for IBS practices.
Thrust V - IBS Training
The centre focuses on human capital development programmes
through training and vendor development. Training is provided to managers,
professionals, site supervisors, workers and installers. To complement the IBS
centre, a gallery has been established to provide information on IBS history,
technology, success stories, incentives and policies relating to IBS.
PRODUCTIVITY REPORT 2008
129

CHAPTER 7
PRODUCTIVITY PERFORMANCE
OF THE PUBLIC SECTOR

CHAPTER 7
PRODUCTIVITY PERFORMANCE OF THE PUBLIC SECTOR
Highlights
• Productivity of the public sector grew by 3.8% to RM32,073 in 2008.
• Various guidelines had been introduced to instill quality consciousness, measure
performance and inculcate an innovative and creative culture.
• Vision 2020 had set-out key strategies to establish a prosperous and resilient
economy.
• The government promotes lifelong learning to enhance employability of the
workforce.
• In the Ease of Doing Business Report 2009 Malaysia improved its ranking to 20 th
position.
Key Statistics
Productivity Level (RM)
Productivity
Growth (%)
Sub-sectors 2005 2006 2007 2008 2008
Economic Services 53,103 54,121 56,328 57,441 1.98
Social Services 27,083 28,572 28,998 30,178 4.42
Security Services 21,906 23,733 25,817 26,763 3.66
General Public 34,245 37,439 36,094 36,861 2.12
Administration
PRODUCTIVITY REPORT 2008
133

CHAPTER 7
Productivity of the public sector
grew by 3.8% to RM32,073
due to productivity and quality
improvement initiatives
Public Sector Productivity
To ensure the well-being of all Malaysians and to
facilitate businesses to grow so as to ensure a vibrant
economic environment, the public sector is constantly
enhancing productivity and adopting customer-centric
approaches. The public sector is continuously
improving efficiency by implementing quality
improvement initiatives such as, innovative and
creative circles (ICC), total quality management, ISO
9000, benchmarking, key performance indicators and
service innovation. These initiatives had enhanced
efficiency and resulted in a productivity growth of 3.8%
to RM32,073 in 2008.
Productivity and Quality
Improvement initiatives include
ICC, TQM, ISO, Benchmarking,
KPIs and Service Innovation
Various guidelines through administrative circulars
had been introduced to further intensify the
implementation of productivity, quality and innovation
initiatives. Among the guidelines are:
• "Guidelines on Quality Control Circles (QCC) in
the Public Service" that emphasises on
participative management in problem-solving
which had led to the improvement of quality and
productivity at the departmental level;
• "Guide on Total Quality Management in the
Public Service" which focuses on developing
quality of systems and work processes through
the development of performance measures;
• "Guidelines for Implementing MS ISO 9000 in the
Civil Service" to improve the quality of service
delivery through structured processes and
procedures;
• "Guidelines on the Implementation of
Benchmarking in the Civil Service" that focuses
on developing a systematic approach to
improving productivity and quality, as well as
identifying and adopting best practices in workrelated
processes;
134 PRODUCTIVITY REPORT 2008

• "Guidelines on Establishing Key Performance
Indicators (KPIs) and Implementing Performance
Assessment at Government Agencies" to set
performance targets for improvement and
measure level of achievement;
CHAPTER 7
• "Guidelines to implement Public Service
Innovation Award" to ensure an innovative and
creative culture which will improve efficiency and
reduce costs;
• "Guidelines on improving customer service"
where the basic objective of these guidelines is
"delighting the customer". A helpdesk is set-up
at each government agency to assist customers
in their queries and requests and to take the
appropriate action.
Box 7.1: Best Practices in Land Offices
One of the biggest challenges faced by the land office is to expedite the registration
of land transfer. Hence to identify the best practices, MPC conducted a study to
measure the speed of delivery for registration of land transfer in 14 selected land
offices nationwide to find out the causes of delay. Findings from the study revealed
the following:
• The Sarawak Land Office is the benchmark for registration of land transfer as
it uses a Single Unit Processing method (SUP) which eliminates unnecessary
waiting time by processing immediately an application once it is received,
without waiting for the whole batch at the end of the day. The practice is
complemented with an E-application system which is able to expedite the land
transfer process by reducing time taken by an average of 20%.
• In terms of staff efficiency, the Terengganu Land Office is the benchmark.
It utilises the "Sistem Pendaftaran Tanah Berkomputer (SPTB)" which is a
comprehensive checking procedure where all the checking is conducted by
the chief clerk alone instead of going through a process flow involving five
checking points.
• The Kelantan Land Office is the benchmark for Quality Environment (QE).
Quality culture was observed at the workplace thus providing a conducive
working environment for the employees.
PRODUCTIVITY REPORT 2008
135

CHAPTER 7
• The Johor Land Office is the benchmark for systematic file tagging. It focuses
on First in First out (FIFO) method through the implementation of colour codes
for month and number code for queuing. Through this method, staff is able to
monitor the flow of any file or backlog and detect any bottlenecks in the flow
process.
Public Sector Revenue and Expenditure
Government revenue per
employee recorded a growth
of 13.5% in 2008
Government revenue increased to RM161,558 million
in 2008 from RM99,397 million in 2004 while revenue
per government employee grew to RM127,532 in
2008 from RM90,476 in 2004 recording an overall
growth of 13.5% in 2008 (Figure: 7.1 and 7.2).
Figure 7.1: Government Revenue per Employee (Level)
150
RM Thousand
100
50
90,476 95,050
107,198 112,412
127,532
0
2004
2005 2006 2007 2008
Year
Computed from :
- Economic Report, Ministry of Finance, Malaysia
136 PRODUCTIVITY REPORT 2008

Figure 7.2: Government Revenue per Employee (Growth)
20
CHAPTER 7
Percent
15
10
12.78
13.45
5
5.06
4.86
0
0.25
2004 2005 2006 2007 2008
Year
Computed from :
- Economic Report, Ministry of Finance, Malaysia
The increase in government revenue over the years
had enabled the government to increase overall
development expenditure, specifically on social services
(health, education, housing and poverty eradication),
infrastructure (ICT, rural development, and R&D) and
environment (air and water quality). Total government
expenditure recorded an increase to RM197,211 million
in 2008 from RM120,162 million in 2004.
In terms of the breakdown in overall government
expenditure, government operating expenditure
increased to RM150,953 million in 2008 from
RM91,298 million in 2004 while the development
expenditure increased to RM46,258 million in 2008
from RM28,864 million in 2004 (Figure:7.3). Likewise,
government expenditure as a percentage of GDP
increased to 37.3% in 2008 from 22.2% in 2004
(Figure 7.4). The government had also allocated about
25.0% of total expenditure for developmental
purposes particularly in education and training,
defence and internal security, health, transportation,
trade and industry as well as agriculture and rural
development.
The increase in government
revenue led to an overall
increase in development
expenditure
Government operating
expenditure increased
to RM150,953 in 2008
PRODUCTIVITY REPORT 2008
137

CHAPTER 7
Figure 7.3: Government Expenditure, 2004-2008
250,000
200,000
150,000
100,000
50,000
0
2004 2005 2006 2007 2008
Computed from :
- Economic Report, Ministry of Finance, Malaysia
Figure 7.4: Government Expenditure as a Percentage of GDP
40
37.29
Percent
30
20
28.17
28.55
30.20
32.38
10
0
2004 2005 2006
Year
2007 2008
Computed from :
- Economic Report, Ministry of Finance, Malaysia
138 PRODUCTIVITY REPORT 2008

Productivity Performance of the Public Service
Sub-Sectors
The public service sub-sectors comprises economic
services (agriculture and rural development; trade
and industry; and transport), security services
(infrastructure, defence and internal security), social
services (education and training; health and housing)
and public administration (Figure 7.5).
The public service sub-sectors
include economic services
security services, social
services and public
administration
CHAPTER 7
Figure 7.5: Public Service Sub-sectors
Public Sector
Productivity
Economic
Services
Social
Services
Security
Services
Public
Administration
• Balance of
payment
• Ratio of trade to
GDP
• Export of goods
• Per capita income
• Rate of
employment
Health Services
• No. of admission
• Total patient days
• Average length of
stay
• Life expectacy
• Infant mortality
rate
Education Services
• Total number of
graduates
• No. of graduates
by program
• Literacy rate
• Poverty and
hardcore poor
• Type of crime
• Police to
population
• Crime per 100,000
population
• Effective
implementation
of government
decisions
• Bribery and
corruption
• Bureaucracy
• Transparency
• Policy direction of
the government
• Legal and
regulatory
framework
• Adaptability of
government
decisions to
change
The productivity level and growth of the public service
sub-sectors are shown in Table 7.1. The productivity
level recorded by the economic services sub-sector
was the highest at RM57,441 followed by general
public administration at RM36,861. The productivity
growth of the social services was the highest at 4.4%
while security services recorded a 3.7% growth. The
public sector as a whole, recorded a growth of 3.8%.
The social services recorded a
productivity growth of 4.4%
PRODUCTIVITY REPORT 2008
139

CHAPTER 7
Table 7.1: Productivity of the Public Service Sub-sectors
Productivity Level (RM)
Productivity
Growth (%)
2005 2006 2007 2008 2008
Public Sector 28,835 29,820 30,905 32,073 3.78
Economic Services 53,103 54,121 56,328 57,441 1.98
Social Services 27,083 28,572 28,998 30,178 4.42
Security Services 21,906 23,733 25,817 26,763 3.66
General Public 34,245 37,439 36,094 36,861 2.12
Administration
Computed from : National Account, Various Issues, Department of Statistics
Economic Services
The government is committed
in moving the economy up the
value chain and assumes a
pivotal role in facilitating socioeconomic
development
The aim of the government is to move the economy up
the value chain by enhancing productivity, innovation
and competitiveness. To enable private sector
businesses to be dynamic in a global environment, the
government has established several key economic
policies to support them. Vision 2020 had set-out
strategic challenges that would establish a prosperous
society that is supported by an economy that is
competitive, dynamic and resilient. In its quest
towards inculcating a conducive business enviroment,
the government assumes a pivotal role in facilitating
the nation’s socio-economic development,
strengthening internal resilience and international
competitiveness as well as promoting optimum
utilisation of available resources.
140 PRODUCTIVITY REPORT 2008

In 2008, the productivity level of economic services
was RM57,441 (Table 7.1). The government has been
successful in managing the economy as reflected in
the following indicators namely, balance of payments
(BOP), ratio of trade to GDP, export of goods, per
capita income, and the rate of unemployment. The
balance of payments improved to RM114,979 million
in 2008 from RM56,511 million in 2004 (Figure 7.6).
The total trade to GDP ratio was consistent at 1:2.2
since 2005 (Table 7.2).
Productivity level of economic
services was RM16,718 in
2008 attributed to effective
management by the
government
CHAPTER 7
Figure 7.6: Balance of Payments
140
120
100
93.419
100.410
114.979
RM Billion
80
60
40
56.511
75.681
20
0
2004 2005 2006 2007 2008
Year
Computed from : National Account, Various Issues, Department of Statistics
PRODUCTIVITY REPORT 2008
141

CHAPTER 7
Table 7.2: Ratio of Total Trade to GDP
GDP Total Trade Total Trade:
(RM) Million (RM) Million GDP
2004 426,508 880,885 1 : 2.07
2005 449,250 967,798 1 : 2.15
2006 475,192 1,069,738 1 : 2.25
2007 505,353 1,109,668 1 : 2.20
2008 533,910 1,185,017 1 : 2.22
Source : Economic Report, Ministry of Finance, Malaysia
Exports of goods in 2008 was RM503,998 million while per capita income increased
substantially to RM25,274 in 2008 from RM16,616 in 2004 (Figure 7.7 and Figure 7.8).
Figure 7.7: Exports of Goods
600
RM Billion
500
400
300
200
395.13
435.74
479.67 482.42
504.00
100
0
2004 2005 2006 2007 2008
Year
Source : Economic Report, Ministry of Finance, Malaysia
142 PRODUCTIVITY REPORT 2008

RM Thousand
30
25
20
15
10
Figure 7.8: Per Capita Income
23.114
20.841
18.039
16.616
25.274
CHAPTER 7
5
0
2004 2005 2006 2007 2008
Year
Source : Economic Report, Ministry of Finance, Malaysia
Malaysia has also been experiencing full employment in the last decade and in 2008,
the unemployment rate was 3.1% (Figure 7.9).
Figure 7.9: Rate of Unemployment
3.6
3.5 3.5
Percent
3.4
3.2
3.3
3.2 3.2
3.0
2004 2005 2006 2007 2008
Year
Source : Economic Report, Ministry of Finance, Malaysia
PRODUCTIVITY REPORT 2008
143

CHAPTER 7
Third Industrial Master Plan
strategies will enable Malaysia
to meet international trade
challenges
Eleven strategic thrusts have been identified in the
Third Industrial Master Plan to enable Malaysia to face
the challenges in international trade. The thrusts
include: intensifying exports of services; promoting
exports of targeted growth areas in the manufacturing
and services sectors; establishing Malaysia as a
leading supplier of halal products and services;
promoting the exports of indigenous E&E products;
promoting trade in motor vehicles, parts and
components; support for outsourcing services;
enhancing exports by complying with international
standards; providing effective financial assistance to
enhance exports; enhancing the policy framework to
facilitate trade; strengthening and expanding the
institutional support for the exporting community and
strengthening the role of the private sector as well as
trade and industry associations in enhancing exports.
The government has drawn up
initiatives to assist the rural
population. The social services
sub-sector registered a
productivity growth of 4.4%
to RM30,178.
Social Services Sub-Sector
The government is concerned about the needs of the
people especially those in the rural areas and has
initiated several development programmes within
the sector to ensure improvements and provide
opportunities for advancement in business. To ensure
a higher standard of living for the rural population,
the government has provided improvements to
infrastructure facilities, encouraged the development
and advancement of cottage and traditional craft
industries as well as improved farming methods
for higher productivity and increased output. To
complement these initiatives, flexible financial
packages and technology facilities have been put in
place to speed up the progress in the rural areas,
especially in agriculture-related trade, services, and
ecotourism. The social services sector registered a
growth of 4.4% to RM30,178 in 2008.
144 PRODUCTIVITY REPORT 2008

Health Services
For the health services, the indicators used are
number of admissions and total patient days. The total
number of admissions increased to 1,852,401 in 2006
from 1,804,697 in 2004 while total patient days
increased to 8,458,812 in 2006 from 8,169,835 in
2004 (Figure 7.10).
CHAPTER 7
Figure 7.10: Admissions and Patient Days in Government Hospitals
Million
10
8
6
4
7.92 8.17 8.33
8.46
Total Admissions
Total Patient Days
2
1.72
1.80 1.85 1.91
0
2003 2004 2005 2006
Year
Source: Ministry of Health (MOH)
According to the International Health Organisation,
Malaysia has one of the best rural health services in
the world. It was also reported that a clinic is available
within every 5km and more than 95% of the rural
population has access to health facilities. Health
services has improved since 2004 as indicated by the
improvement in doctors to population ratio.
Malaysia’s rural health facilities
are among the best in the
world
PRODUCTIVITY REPORT 2008
145

CHAPTER 7
Doctor to population ratio is
expected to be 1:600 by 2013
The ratio had improved to 1:1,145 patients in 2007
compared to 1:1,402 patients in 2004. This ratio is
currently at 1:1,200 and the government has
undertaken measures to improve the ratio to 1:600 by
2013. The average length of stay in government
hospitals was 4.5 days while the percentage of deaths
to total discharge was 2.0% for government hospitals
(Table 7.3).
Table 7.3: Health Services Indicators in Government Hospitals
2003 2004 2005 2006
Death to total discharge (%) 2.12 2.11 2.13 2.13
Average length of stay (days) 4.60 4.52 4.49 4.44
Source: Ministry of Health (MOH)
The life expectancy of
Malaysians is 74.1 years
Overall life expectancy of Malaysians has improved
to 74.1 years in 2007 from 73.3 in 2003. The life
expectancy age for males also improved to 71.9 years
in 2007 compared to 71.1 years in 2004 while the life
expectancy age for females improved to 76.3 years
in 2007 from 75.9 years in 2004 (Figure 7.11). In
terms of infant mortality rate, Malaysia has been
experiencing low mortality at an average of 6.5 per
1,000 live births (Figure 7.12).
146 PRODUCTIVITY REPORT 2008

Figure 7.11: Life Expectancy in Malaysia
CHAPTER 7
100
Number
80
60
75.6
70.9
75.9
71.1
76.2
71.8
76.3
71.8
76.3
71.9
Male
40
Female
20
0
2003 2004 2005 2006 2007
Year
Source : Economic Report, Ministry of Finance, Malaysia
Figure 7.12: Infant Mortality Rate (per 1000 Live Births)
10
8
Percent
6
4
5.8
6.5 6.7 6.6 6.7
2
0
2003 2004 2005 2006 2007
Year
Source : Economic Report, Ministry of Finance, Malaysia
PRODUCTIVITY REPORT 2008
147

CHAPTER 7
Telehealth connects doctors
and patients nation-wide
To educate the public on health issues and create
nation-wide awareness, the Ministry of Health has set
up tele-consultation through the MYHEALTH portal that
offers a wide range of health information and enables
individuals to discuss healthcare issues with the
experts. These services are also provided to community
and rural clinics thus connecting doctors and patients.
The National Social Policy has
been effective in reducing
poverty
Poverty Eradication
The National Social Policy has outlined several
strategies to assist the less fortunate. A social safety net
scheme that was introduced in 1990 to channel aid to
children, the aged and those with special needs has
been extended under the Ninth Malaysia Plan to
improve the quality of life. The initiatives under this
scheme include, giving priority to eradication of poverty,
affordable housing for low income earners and
improving the standard of living for marginalised
groups. The policy has been successful in reducing the
overall poverty rate to 3.6% in 2007 from 5.7% in 2004
while hardcore poverty was reduced to 0.7% in 2007
from 1.2% in 2004. The government has targeted to
reduce overall poverty to 2.8% while hardcore poverty
will be totally eradicated by 2010 (Figure 7.13).
Figure 7.13: Incidence of Poverty and Hardcore Poverty
10
8
8.7
8.5
Overall Poverty
(% of households)
Percent
6
4
6.0
5.7
3.6
Hardcore Poverty
(%)
2
2.1
1.9
1.0
1.2
0.7
0
2003 2004 2005 2006 2007
Year
Source : Economic Report 2008/2009
148 PRODUCTIVITY REPORT 2008

Under the second stimulus package, RM500 million
had been allocated to improve infrastructure in rural
areas. This funding would provide a comprehensive
infrastructure system, in terms of roads, electricity and
water that will assist in balanced growth for the
economy. Another RM1 billion has also been set aside
to improve sufficient housing facilities.
CHAPTER 7
Education Services
The National Education Blueprint was launched on 16
January 2007. The main objectives of the Blueprint
were to upgrade the implementation of education
programmes and to enhance the human resource
development process at all levels and on continuous
basis to obtain an output which will fulfill the national
and international requirements in relation to
Malaysia’s position in the global arena. The
government, in identifying human resources as one
of the country’s most valuable assets, continuously
works towards creating highly skilled and
knowledgeable workers and entrepreneurs.
Private sector participation
complemented government
efforts for higher education
opportunities
The education system is formulated to keep up with the
needs of the market. Beyond schools and universities,
the government also promotes lifelong learning to
enhance employability and productivity of the labour
force. Private sector participation in the education
sector has complemented efforts by the government to
provide higher education and training opportunities.
The total number of graduates had increased to 83,119
in 2008 from 62,211 in 2004. The total number of
graduates from the public universities increased to
59,471 in 2008 from 43,826 in 2004 (Figure 7.14).
To meet the industries demand for skilled and
technical workers, the number of graduates in
technical studies had increased by 50.6% to 14,885
graduates in 2007 from 9,886 graduates in 2004
(Figure 7.15). Accessibility to education had also
resulted in a higher literacy rate of more than 90%
(Figure 7.16).
Number of graduates in
technical studies increased
since 2004 to meet industries
demand
PRODUCTIVITY REPORT 2008
149

CHAPTER 7
Thousands
Figure 7.14: Number of Graduates from Public and Private Institutions
70
60
50
40
30
20
43,826
18,385
51,771
20,294
55,524
27,176
59,471
23,648
Number of
Graduates from
Public Institutions
of Higher Learning
Number of
Graduates from
Private Institutions
of Higher Learning
10
0
2004 2005 2006 2007
Year
Source: Ministry of Higher Education
Figure 7.15: Number of Graduates by Types of Programmes
100
Science
80
25,701
21,215
Technical
Thousands
60
40
17,928
9,886
24,689
12,297
14,266
42,733
14,885
47,019
Arts
20
34,379
35,079
0
2004 2005 2006 2007
Year
Source: Ministry of Higher Education
150 PRODUCTIVITY REPORT 2008

100
Figure 7.16: Literacy Rate in Malaysia
91.80 92.00 92.70 92.30
CHAPTER 7
80
Percent
60
40
20
0
2004 2005 2006 2007
Year
Source : Economic Report, Ministry of Finance, Malaysia
During this period of economic slowdown, it is
pertinent that human capital development be given
more emphasis as outlined in the Ninth Malaysia Plan.
To help workers gain employability, the government is
providing 100,000 training opportunities and job
placements that will be a joint effort between the
government and the private sector. The training will be
implemented through various government agencies
including government-linked companies (GLCs) and
the private sector, including private training institutes.
Human capital development to
be given more emphasis during
the economic slowdown
Creating a Critical Mass of Local Experts in
Science and Engineering
For Malaysia to shift to the innovation stage of
development, it is crucial that there exists a steady
supply of skilled and research based employees. The
Government had provided various support programmes
to promote local research activities. The
Commercialisation of the R&D Fund (CRDF) was
established to provide grants to qualified R&D projects
undertaken by local tertiary institutions, research
institutes and industry for commercialisation of R&D
findings. In 2008, 22 projects were approved for various
22 R&D projects were
approved in 2008 for various
clusters such as industrial
products, biotechnology,
recycle based and E&E
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CHAPTER 7
198 high impact S&T research
projects were granted in 2008
clusters such as industrial products, biotechnology,
recycle based, and electrical and electronics.
The Technology Acquisition Fund (TAF) was
introduced to further promote efforts by the private
sector to acquire new technology and enhance their
technological capabilities and production processes.
For 2008, eight projects were approved for electrical
and electronics, biotechnology, food, and advanced
material. MOSTI has granted 198 high impact Science
and Technology (S&T) research projects involving
various researchers and universities.
Security Services Sub-sector
Productivity of security services
grew by 3.7% to RM17,503
The security services sub-sector comprises infrastructure
and national security. Security services recorded a
productivity growth of 3.7% to RM17,503 in 2008.
A good infrastructure system in the country is
prerequisite to ensure public security.
Public Safety
To ensure continuous economic growth and to attract
more investments to the country, safety of the public is
of paramount importance. The police to population
ratio in 2008 was 1:307. This ratio was comparable
with other developed countries such as the USA
(1:323) and Germany (1:329) (Table 7.4).
Table 7.4: Total Number of Police to Population Ratio
Year
Police : Population
2006 1 : 278
2007 1 : 251
2008 1 : 307
Source: Royal Malaysian Police
152 PRODUCTIVITY REPORT 2008

Initiatives to improve public safety apart from the
recruitment of more police personnel include the
installation of more CCTVs in crime prone areas,
investment in new equipment and setting up more
mobile police stations in residential areas. Other
programmes implemented were "The Neighbourhood
Watch Scheme" (Rukun Tetangga), "Police Volunteer
Reserve" and "Rakan Cop".
Neighbourhood Watch
Scheme, Police Volunteer
Reserve and Rakan Cop were
among the various programmes
to curtail crime
CHAPTER 7
Infrastructure Facilites
Awell connected infrastructure system will ensure that
businesses have the right support to enhance their
competitive advantage. An intricate range of
infrastructural facilites and amenities will boost
economic growth by reducing delivery response time.
The government has undertaken long-term integrated
planning and coordination of projects affecting roads,
bridges, urban transport and rail, ports airports,
communications and water and sewerge. Malaysia
was among the top 20 among 131 countries for overall
infrastructure (18 th position), quality of port
infrastructure (13 th position), quality of roads (14 th
position), quality of air transport (15 th postion), quality
of railroad infrastructure (17 th position), as reported in
the Global Competitiveness Report 2008-2009.
To ensure security in terms of energy supply, the
government had formulated the National Energy
Policy towards adequate, secure and cost-effective
supply of energy. The policy additionally promotes
efficient utilisation of energy and focuses on
environment protection in the production and
utilisation of energy.
Malaysia was ranked among
the top 20 countries for overall
infrastructure facilities
National Energy Policy to
ensure secure and costeffective
supply of energy
PRODUCTIVITY REPORT 2008
153

CHAPTER 7
The government strives to
create change in the public
service delivery
General Public Administration Sub-sector
General public administration achieved a productivity
growth of 1.4% to RM37,007. The government strives
to provide excellent service and places strong
emphasis on initiatives to create change in the public
service delivery system. Public sector administrative
efficiency performance is based on a perception
survey on the following selected indicators namely,
bureaucracy, transparency of government policy,
government decision, bribery and corruption, policy
direction of the government, legal and regulatory
framework, and adaptability of government decisions
(Figure 7.17). Public sector administrative efficiency
performance is analysed based on the ranking of 28
economies with population of more than 20 million
(Table 7.5).
Table 7.5: Public Administration Efficiency with Population
of More than 20 Million
Government Bribery Legal and Adaptability Transparency Bureaucracy Policy
decisions regulatory of direction
framework government
policy
Malaysia 7 9 4 2 8 4 6
Australia 1 1 1 1 1 1 2
Canada 2 2 2 5 2 2 4
France 9 5 20 13 4 14 10
Japan 13 7 15 24 18 7 22
Korea 11 11 26 20 15 20 17
Taiwan 12 10 8 16 20 3 21
Thailand 15 18 16 10 24 6 25
UK 19 6 10 18 10 16 19
USA 6 4 3 7 6 5 14
Source: World Competitiveness Yearbook 2008
154 PRODUCTIVITY REPORT 2008

Based on the indicators, Malaysia was ranked 2 nd in
terms of adaptability of government policy to changes
in the economy followed by legal and regulatory
framework (4 th ), bureaucracy (4 th ), policy direction
(6 th ), government decisions (7 th ) and bribery (9 th )
among selected Asian and OECD countries with
population more than 20 million. Various initiatives
were undertaken to improve public service delivery
such as improvement in systems and procedures of
government procurement to enhance transparency.
Malaysia’s public administration
efficiency was ranked among
the top 10 in various areas
CHAPTER 7
A Foreign Investment Committee was set up and
guidelines on foreign participation in the distributive
trade sector were developed. The government
continued to facilitate business activities by
streamlining procedures on approval permits,
licences, and simplify property registration. To curtail
bribery and corruption, the government has
established the Malaysian Anti Corruption
Commission (MACC). With the setting up of this
commission, it is expected that Malaysia’s ranking in
terms of bribery will improve.
The government continued to
facilitate business activities and
curtail bribery
PRODUCTIVITY REPORT 2008
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CHAPTER 7
Figure 7.17: Framework for Measuring Efficiency in Public Administration
Government
Decision
The extent to which government
decisions are actively implemented
Government
Policy
The extent to which government
policy is adaptable to change in
the economy
Policy
Direction
The extent to which the policy
direction of the government is
consistent
Efficiency in
Public
Administration
Transparency
The extent to which government
policy is transparent
Bribery &
corruption
The extent of non-existence of
high bribery and corruption
Legal & Regulatory
Framework
The extent of the ability of the
government to create conducive
environment for enterprises to do
business and invest
Bureaucracy
The extent of bureaucracy not
hindering business activities
156 PRODUCTIVITY REPORT 2008

Box 7.2: Improving Service Delivery through Process Improvement for
Excellence (PRIME)
CHAPTER 7
Process Improvement for Excellence (PRIME) is an improvement technique to
measure the performance of public agencies. The programme focuses on
improving service delivery of both local authorities and the district offices.
Performance measures had been established for 30 core processes in which
public agencies assess and compare to improve performance. The core processes
are application for licences, healthcare services, development control, safety,
customer complaints and enforcement. A step-by-step implementation of PRIME
and the KPIs identified are shown below:
Step-by-step Implemention of PRIME
PRIME
(Process Improvement for Excellence)
Step 1
Process measurement
using PRIME software
• Prepares process description and flow chart
• Measures key process indicator
• Finalises KPI for all critical processes
Step 2
Step 3
Benchmark performance
using e-Benchmark
Best Practices sharing
using Best Practices Net
• Generates Benchmarking Report
• Overall Report
• Ranking Report
• Competitive Report
• On-line Best Practices Database
• Regular Best Practices Rountable
• Best practise visit to BIC organisation
Step 4
Process improvement
through various P&Q
interventions
• Problem-solving approach
• Process Improvement training
• Process performance monitoring through the BOND
system
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157

CHAPTER 7
PRIME KPIs
• Average waiting time
• Average no. of customers per day
• Average cycle time
• Average time for application
• Total output produced
• Targeted output vs. total
output produced
Effectiveness
Efficiency
Quality
Productivity
• Percentage of errors
• Percentage of customer
complaints resolved
• Average response time to
manage complaints
• Staff productivity
Increasing eKL initiatives
eKL to improve service delivery
systems of government
agencies within the Klang
Valley
The eKL is a government project to improve the
service delivery systems of government agencies
within the Klang Valley. It is one of the initiatives to
intensify the implementation of electronic government
to ensure efficient, fast, quality, safe and people
friendly services that will improve the public’s
perception of the services provided. Once fully
implemented by 2010, it will be used as a benchmark
for the rest of the country to follow. Ultimately, eKL will
ensure that Malaysia’s competitive edge improves.
International Comparison on Efficiency of Public
Administration
The international comparison on public sector
performance focuses on the following perspectives,
158 PRODUCTIVITY REPORT 2008

comparison on efficiency of public administration
composite indicator for selected Asian and OECD
countries based on perceptual efficiency indicators.
Based on the performance indicator, Malaysia’s
efficiency of public administration was higher than the
rest of the selected Asian economies except Singapore
and Hong Kong. Malaysia’s performance was better
than selected OECD countries such as, Japan, UK and
France. Overall, Singapore was leading in the efficiency
of public administration in 2008 followed by Denmark
and Australia (Table 7.6).
Malaysia ranked higher than
Japan, France and the UK
for efficiency of public
administration
CHAPTER 7
Table 7.6: Efficiency of Public Administration Among Selected
Asian and OECD Economies
Rank Economies Performance
1 Singapore 7.71
2 Denmark 7.00
3 Australia 6.80
4 Hong Kong 6.64
5 Sweden 6.28
6 New Zealand 6.28
7 Canada 6.06
8 Finland 6.04
9 Ireland 5.85
10 USA 5.15
11 Malaysia 4.67
12 Japan 4.56
13 France 4.34
14 UK 4.24
15 Taiwan 4.12
16 India 3.67
17 Thailand 3.55
18 Indonesia 3.42
19 Korea 3.16
20 Philippines 2.28
Source: World Competitiveness Yearbook 2008
* Score of 1-10, one being least efficient to 10 most efficient
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CHAPTER 7
Malaysia out performed
selected Asian and OECD
countries in government
efficiency
Figure 7.18 shows the overall scores of government
efficiency in the selected Asian and OECD countries.
Malaysia outperformed the selected Asian countries in
all the eight indicators. However, for the legal and
regulatory framework and regulation intensity,
Malaysia’s performance was lower than the OECD
average score. Overall, Malaysia’s performance
based on the scores for the eight indicators ranged
from 3.77 for non-existence of bribery and corruption
as well as bureaucracy not hindering business
activities to a score of 5.96 for fair accessible and
efficient justice process and responses. These scores
need to be further improved as compared to the
performance of the benchmark scores.
Figure 7.18: Overall Government Efficiency Performance, 2008
Score
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Max
OECD
ASIAN
Malaysia
Min
Bureaucracy
Transparency
Government
Decision
Bribery and
corruption
Justice
Public Service
Legal and
regulatory
framework
Regulation
intensity
Source: World Competitiveness Yearbook 2008
INTERNATIONAL BEST PRACTICES ON
PUBLIC ADMINISTRATION EFFICIENCY
Malaysia should benchmark
Denmark for justice and
transparency practices, and
New Zealand for bribery and
corruption reduction practices
The Public Administration Efficiency Indicator provides
the best practices on Public Service Administration for
international comparison. Overall, New Zealand,
Denmark and Singapore are the top three most efficient
countries in public administration among 20 selected
Asian and OECD economies.
160 PRODUCTIVITY REPORT 2008

Table 7.7: International Public Administration Efficiency Indicators
Indicators Malaysia’s Performance Benchmark Country and
performance
CHAPTER 7
Bureaucracy
Transparency
3.85
4.53
Singapore (6.93)
Singapore (7.7),
Denmark (7.7)
Government decision 4.65 Singapore (9.28)
Bribery and corruption 3.77 New Zealand (8.89)
Justice 5.96 Denmark (8.91)
Public service 3.96 Denmark (6.18)
Legal and regulatory 5.35 Singapore (8.65)
framework
Regulation intensity 5.25 Singapore 7.49
Source: World Competitiveness Yearbook 2008
The Singapore government’s legal and regulatory
framework creates a conducive environment for
enterprises to do business and invest. The existing
regulations also do not restrain companies from
competing. This is a result of effective policy execution
and policy options.
Denmark should be benchmarked in terms of efficient
justice process and transparency. In Denmark judicial
independence is a requirement and is transparent
through dialogue and collaboration. Disclosure of
public information is also practised.
New Zealand should be benchmarked in terms of
reducing bribery and corruption. In New Zealand, a
specific business compliance cost statement system
(BCCS) is prepared for all regulatory proposals having
‘red tape’. This is to ensure that compliance cost is
kept as low as possible.
PRODUCTIVITY REPORT 2008
161

CHAPTER 7
Based on the World Bank’s
Ease of Doing Business
Report, Malaysia improved its
ranking to 20 th position in 2009
Enhancing Public Service Delivery
To support growth and a conducive business
environment, special effort has been made by the
government to coordinate and regulate activities of its
various agencies. This led to the setting-up of
PEMUDAH which is the special taskforce to facilitate
business. With improved work processes and
collaborative efforts, Malaysia’s ranking in the World
Bank’s Ease of Doing Business Report 2009,
improved to 20 th position in 2009 from 25 th position in
2008 . Malaysia was also ranked 1 st in terms of getting
credit for business purposes and 4 th for protecting
investors (Table 7.8). Improvement in public service
efficiency is reflected by the positive change in the
rankings of the indicators namely, paying taxes,
starting a business and closing a business.
Table 7.8: Ranking in Ease of Doing Business
MALAYSIA
Areas 2009 2008 Change in
n=181 N=178 Ranking
Overall 20 25 +5
Starting a Business 75 82 +7
Dealing with Construction Permits 104 106 +2
Employing Workers 48 46 -2
Registering Property 81 73 -8
Getting Credit 1 1 0
Protecting Investors 4 2 -2
Paying Taxes 21 60 +39
Trading Across Borders 29 24 -5
Enforcing Contracts 59 60 +1
Closing a Business 54 57 +3
Source: World Bank Report on Ease of Doing Business 2009.
Note:+ improvement
- decline
162 PRODUCTIVITY REPORT 2008

In 2008, improvements were made on many aspects,
specifically on enhancing transparency and
streamlining processes and procedures such as:
• Reducing the time taken for clearance of exports
to facilitate trade;
To improve public sector
efficiency, improvements were
made to enhance transparency
and streamline procedures
CHAPTER 7
• Reducing the time taken for property registration
through improvement of processes and enabling
on-line applications for property registration;
• Improvements in tax administration;
• Facilitating e-Payment;
• Establishing a one stop centre to expedite
incorporation of companies; and
• Improving the processes for employing
expatriates and skilled workers.
These iniatitives had enabled the government to
facilitate a conducive business environment to
enhance efficiency of the public sector.
PRODUCTIVITY REPORT 2008
163

CHAPTER 8
PRODUCTIVITY PERFORMANCE
OF THE SMALL AND MEDIUM
INDUSTRIES

Highlights
CHAPTER 8
PRODUCTIVITY PERFORMANCE OF THE SMALL AND
MEDIUM INDUSTRIES
• Small and Medium Industries (SMIs) constitute 99.2% of total business
establishments.
• SMIs recorded added value growth of 6.5% to RM20,507 million and
contributed 26.5% share of total manufacturing added value.
• Productivity of SMIs grew by 4.6 % in 2008 to RM47,719.
• Industries which registered productivity growth were chemicals and chemical
products, basic metals, petroleum products, radio, television and communication
equipment and apparatus, office, accounting and computing machinery and wood
and wood products.
• SMIs remained competitive in terms of labour cost as shown by a 2.9% reduction in
unit labour cost.
Key Statistics
Productivity, Added Value, Total Output and Employment of SMIs in the
Manufacturing Sector, 2008
Level Growth (%)
Productivity (RM) 48,719 4.62
Added Value (RM Million) 20,507 6.52
Total Output (RM Million) 100,299 6.30
Employment 420,917 1.82
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167

CHAPTER 8
The development of SMIs is
top on national development
agenda
SMALL AND MEDIUM INDUSTRIES IN THE
MANUFACTURING SECTOR
Small and Medium industries (SMIs) constitute 99.2%
of total business establishments in Malaysia. It is
therefore important for the nation to build a viable SMI
sector in order to broaden the sources of economic
growth and sustain the growth momentum. The
development of SMIs is top on the national
development agenda, as reflected in the Ninth
Malaysia Plan (9MP: 2006-2010) and the Third
Industrial Master Plan (IMP3: 2006-2020).
Competitive, innovative and
technologically strong SMIs to
strengthen domestic economy
Collaborative ventures
between GLCs and SMIs to
facilitate knowledge transfer
SMIs to become reliable
suppliers for global
outsourcing networks
The SMI policy as outlined under the 9MP
is the development of a competitive, innovative and
technologically strong SMI sector capable of
contributing to the domestic economy and competing
in international markets. Among the strategies
identified include the acquisition of technologies to
propel SMIs up the value chain across all sectors
of the economy from manufacturing and services
to agriculture.
This is being done through several measures
including:
Outsourcing: outsource programmes are aimed
at nurturing SMIs as research and development (R&D)
partners in order to develop commercially viable
products. Multinational Corporations (MNCs) and
Government linked-companies (GLCs) are also
encouraged to form collaborative ventures with SMIs
as this will facilitate technology transfer, skills
development and marketing in order to help SMIs
grow.
Inter-firm linkages: building SMIs also entails efforts
to make them more competitive in both the domestic
and international marketplace. Creating business
linkages between SMIs, MNCs and GLCs will help
SMIs to compete better and also enable them to
become more reliable suppliers for global outsourcing
networks. This in turn will help spur the expansion of
Malaysia’s trade.
168 PRODUCTIVITY REPORT 2008

Entrepreneurship and Skills Development
Programmes
SMIs which participate in the Government’s
Entrepreneurship and Skills Development
Programmes including advisory and outreach services
channeled through relevant ministries and agencies
will be exposed to new and improved management
and business practices, production methods, quality
improvement, marketing and distribution. Towards this
end, MPC offers productivity and quality (P&Q)
training programmes to help build SMIs and enhance
their competitiveness through the propagation of P&Q
culture for organisation excellence.
Government provides advisory
and outreach services to SMIs
CHAPTER 8
MOVING SMIs UP THE VALUE CHAIN
In order to help SMIs compete better in the
marketplace, the government has always urged SMIs
to move up the value chain. Among the measures
that must be taken by SMIs is to enhance ICT
application and e-commerce. Strong ICT capabilities
are crucial because today’s businesses are relying
increasingly on internet-based business-to-business
community portals to source for various products and
services. In fact, more customers are using the
internet to make their purchases. The internet savvy
group represents a new market segment for SMIs to
tap on.
To nurture SMIs and help them to move up the value
chain, the government has introduced various plans to
strengthen the infrastructure, improve the capacity of
enterprises, enhance access to financing, increase
market access and enhance growth and
competitiveness.
In 2008, SMIs produced RM100,299 million or 30.9%
of total manufacturing output. Most of the SMIs were
involved in food and beverages (32.2%), chemicals
and chemical products (17.2%), rubber and plastics
products (10.1%), fabricated metal products (6.4%),
and basic metals products (6.1%). These industries
ICT and e-commerce to
enhance SMIs’ capabilities
Various plans to strengthen
infrastructure, capasity and
financing for SMIs
SMIs contributed 30.9% of
total manufacturing output
PRODUCTIVITY REPORT 2008
169

CHAPTER 8
SMIs contributed 26.5%
share of total added value
produced RM72,096 million of output or 72% of total
manufacturing output.
SMIs recorded added value growth of 6.5% to
RM20,507 million and contributing 26.5% share
of total manufacturing added value. The major
contributors were food and beverages (21.7%),
chemicals and chemical products (19.2%), rubber
and plastics (11.3%), and fabricated metal products
(7.7%). These industries accounted for RM12,287
million or 60% of SMIs added value.
Employment in SMIs increased
by 1.8% to 420,917
Employment in the SMIs increased by 1.8% with a
total workforce of 420,917. Most of the workers were
in food and beverages (16.9%), rubber and plastics
products (12.8%), furniture (10.9%), fabricated metal
products (9.8%), and chemicals and chemical
products (6.1%). These industries employed 237,617
workers which accounted for 56.5% of total
employment of SMIs.
Table 8.1: Total Output, Added Value and Employment of SMIs, 2007-2008
Level* Share of Manufacturing Growth
Sector (%) (%)
2007 2008 2007 2008 2008
Total Output 94,356 100, 299 30.74 30.9 6.30
Added Value 19,251 20,507 26.33 26.5 6.52
Employment 413,397 420, 917 31.62 31.8 1.82
* Value Levels for Total Output and Added Value are in RM Million
Computed from:
Annual Survey of Manufacturing Industries, Department of Statistics, Malaysia, various issues
170 PRODUCTIVITY REPORT 2008

Productivity Performance
Productivity improvement is essential for SMIs to shift
to a higher growth path. In 2008, SMIs recorded a
productivity growth of 4.6% to RM48,719 from
RM46,568 in 2007 (Figure 8.1). Among the industries
which registered growth were chemicals and chemical
products, (8.5%), basic metals products, (5.9%),
petroleum products, (5.6%), office, accounting and
computing machinery, (5.4%), wood and wood
products, (4.8%), and food and beverages (4.7%).
Productivity grew by 4.6% to
RM48,719. High growth was
recorded in chemicals and
chemical products, basic
metals and petroleum products
CHAPTER 8
The resource-based industries benefited from an
increase in demand as shown by the growth in output
of chemicals and chemical products, (10.6%), paper
and paper products, (7.3%), food and beverages,
(6.0%), and wood and wood products (5.7%).
Figure 8.1: Productivity of SMIs, 2004-2008
60
7.0
50
6.0
RM Thousand
40
30
20
5.0
4.0
3.0
2.0
Percent
10
1.0
0
2004 2005 2006 2007 2008
0.0
Level 39.42 42.00 44.22 46.57 48.72
Growth 6.48 6.54 5.28 5.31 4.62
Computed from:
Annual Survey of Manufacturing Industries,
Department of Statistics, Malaysia
PRODUCTIVITY REPORT 2008
171

CHAPTER 8
Capital intensity grew by 2.6%
to RM39,757
Capital Intensity
Capital intensity of the SMIs grew by 2.6% to
RM39,757 in 2008 (Figure 8.2). Among the industries
which recorded high capital intensity growth were
office, accounting and computing machinery (5.7%),
electrical machinery and appratus products (5.6%),
publishing and printing (4.8%), machinery and
equipments (3.4%) and food and beverages (2.9%).
Figure 8.2: Capital Intensity, 2004-2008
40
2.8
39
2.7
RM Thousand
38
37
36
2.6
2.5
2.4
Percent
35
2.3
34
2004 2005 2006 2007 2008
2.2
Level 35.94 36.81 37.8 38.75 39.76
Growth 2.75 2.42 2.70 2.52 2.59
Computed from:
Annual Survey of Manufacturing Industries,
Department of Statistics, Malaysia
172 PRODUCTIVITY REPORT 2008

Capital Productivity
In 2008, SMIs recorded efficient utilisation of fixed
assets. Capital productivity grew by 2.0% with several
industries recording growth such as wood and wood
products (5.3%), basic metals products (3.9%),
fabricated metal products (3.7%), textiles (2.7%), and
chemicals and chemical products (2.2%).
Capital productivity grew by
2.0% led by wood and wood
products and basic metal
products
CHAPTER 8
Figure 8.3: Capital Productivity, 2004-2008
1.25
4.5
Pure Number
1.20
1.15
1.10
1.05
4.0
3.5
3.0
2.5
2.0
1.5
1.0
Percent
1.00
2004 2005 2006 2007 2008
0.0
Level 1.10 1.14 1.17 1.20 1.23
Growth 3.64 4.03 2.51 2.72 1.98
Computed from:
Annual Survey of Manufacturing Industries,
Department of Statistics, Malaysia
PRODUCTIVITY REPORT 2008
173

CHAPTER 8
SMIs remained competitive
in terms of labour cost with
2.9% decline in Unit Labour
Cost
Labour Cost Competitiveness
SMIs managed to sustain its competitiveness through
reduction in unit labour cost of 2.9% in 2008.
Productivity grew by 4.6% while labour cost per
employee grew by 1.4% (Figure 8.4). Industries
which registered improvement in labour cost
competitiveness were chemicals and chemical
products, radio, television and communication
equipment, office, accounting and computing
machinery, wood and wood products, basic metal
products and petroleum products (Table 8.2).
Figure 8.4: Labour Cost Competitiveness of the SMIs, 2004-2008
8.00
6.00
5.94
6.48
6.54
5.28
5.31
4.62
4.00
Percent
2.00
0.00
-2.00
1.35
0.73
1.58 1.54
1.30 1.39
2003 2004 2005 2006 2007 2008
-4.00
-6.00
-3.92
-5.69
-4.46
-3.81
-2.68
-2.89
-8.00
Productivity
Labour Cost per
Employee
Unit Labour
Cost
Computed from:
Annual Survey of Manufacturing Industries,
Department of Statistics, Malaysia
174 PRODUCTIVITY REPORT 2008

Table 8.2: Labour Cost Competitiveness of the SMIs
Growth (%)
Industry Productivity Labour Cost Unit Labour
per
Cost
Employee
CHAPTER 8
SMIs Average 4.62 1.39 -2.89
Chemicals and chemical 8.52 2.53 -4.76
products
Basic metal products 5.85 2.83 -2.93
Petroleum products 5.60 0.76 -5.70
Radio, television and 5.49 2.70 -3.55
communication equipment
Office, accounting and 5.42 2.76 -6.23
computing machinery
Wood and wood products 4.82 2.15 -3.03
Food and beverages 4.66 1.26 -2.20
Paper and paper products 3.92 1.93 -2.31
Rubber and plastics products 3.74 1.05 -2.12
Machinery and equipment 3.51 1.71 -2.15
Publishing, printing and
reproducing of recorded 2.93 0.71 -1.60
media
Electrical machinery 2.91 1.44 -1.80
Textiles 2.79 0.54 -1.86
Wearing apparel 2.79 1.33 -0.61
Fabricated metal products 2.32 1.11 -0.30
Computed from:
Annual Survey of Manufacturing Industries, Department of Statistics, Malaysia
PRODUCTIVITY REPORT 2008
175

CHAPTER 8
Box 8.1: National SME Development Blueprint 2008
Under the National SME Development Blueprint 2008, a total of 198 key
programmes with financial commitment of RM3.2 billion have been identified
to assist SMIs in 2008. These programmes will assist SMIs across all economic
sectors, in the areas of enhancing the supporting infrastructure for SMIs,
building to strengthen SMIs, and in improving access to financing. The main focus
for 2008 will be to promote SMIs in the services, primary agriculture and
agro-based based sectors, in line with strategies formulated in the 9MP and IMP3.
The key programmes in capacity building are focused on entrepreneurship
and human capital development, marketing and promotion and provision of
advisory services to SMIs. In providing the supporting infrastructure to SMIs,
the government will provide more business premises, factories, business stalls
and incubation centres for SMIs. These include the establishment of Halal Parks
and centres for packaging, distribution and marketing of agriculture products at
strategic locations.
In the area of financing, banking and development financial institutions are
expected to approve a total of RM70 billion financing to 140,000 SMIs accounts
in 2008. This will be complemented by other Government financial assistance
programmes including the Rural Economy Funding Scheme and the Franchise
Financial Scheme.
It is also pertinent to highlight the policy thrust for SMIs development in the 9MP
that include strategies focusing on the establishment of high performance
and high value added SMIs with technical, competitive and innovative
capability as well as managerial and business skills. Strategies are also directed
at acquiring technologies that will propel SMIs up the value chain. Some
advanced economies have succeeded in doing this because SMIs form a
fundamental part of their economy, contributing substantially to employment and
gross domestic product. Likewise in Malaysia, SMIs contribute significantly to the
country’s economy and provide a strong foundation for the growth of
new industries as well as strengthening existing ones for Malaysia.
176 PRODUCTIVITY REPORT 2008

Box 8.2: Productivity Enhancement through
Quality Environment Activities
CHAPTER 8
One of the activities which organisations can adopt for immediate results is
the implementation of Quality Environment (QE) practices. A study on the impact
of Implementing Quality Environment Practices conducted recently by the
Malaysia Productivity Corporation (MPC), showed that Quality Environment (QE)
practices had contributed to improvements in productivity, quality of workforce,
visual management and service delivery. 83.7% of the companies that had
implemented QE practices reported reductions in reworks and optimisation of
floor space with better shop floor layout, while 78.4% experienced increased
employee creativity, teamwork and morale.
On implementation of QE practices, 68.8% of respondents achieved a reduction
in customer complaints, 82.8% were happy with the improved visual
management and more efficient material handling and retrieval time in the
production area. The better efficiency achieved through QE practices had
contributed to higher sales and reduction in operation costs. QE practices
involved sorting out materials to be stored in designated places, discarding
unnecessary items, simplifying processes and continuously ensuring that
the practices are continuously improved upon and maintained.
Among the practitioners of QE practices, Zamria Sdn. Bhd. had converted a
storage area into functional office space for meetings as well as setting up a
cafeteria. The implementation of QE in Kiwi Manufacturing Sdn. Bhd. had
contributed to a better organised warehouse. With the improved layout of the
warehouse, the number of employees required to manage the warehouse was
reduced to 14 from 21, reflecting an improved efficiency of 33%.
In 2008, the Malaysia Productivity Corporation (MPC) had certified a total of
222 organisations in Quality Environment. These certifications are reflective
of organisations attainment of quality standards in the workplace environment
management and their commitment to meet customer needs through continuous
improvements.
PRODUCTIVITY REPORT 2008
177

CHAPTER 8
Box 8.3: SMIs as Global Players
SMIs AS GLOBAL PLAYERS
PRODUCTIVITY
EFFICIENCY
COMPETITIVENESS
INNOVATION
SYSTEMS
HUMAN CAPITAL
• Management Innovation
• Best Practices
• Service Innovation
• Information
Management
System & ICT
Applications
• Process Innovation
• Certification
• Standards
• Procedures
• Measurement
• Quality Management
System
• Leadership
• Talent Development
• Centres of Excellence
• Vendor Programme
• BEST
• Value Creation
The productivity improvement initiatives for SMIs include capacity building, quality
system development and certification, industry excellence award, development of
excellent company programme: model company, best practices management,
performance/productivity measurement and information management
systems and ICT application.
A study that was carried by MPC to assess the impact of productivity improvement
initiatives revealed the following:
• 90% SMIs surveyed recorded between 2%-10% growth in
productivity, sales and profitability;
• 86% SMIs achieved a reduction of 5%-10% in accident rate; and
• 40% SMIs reported between 7%-10% reduction in customer
complaints, absenteeism, rework and reject rates.
178 PRODUCTIVITY REPORT 2008

OUTLOOK FOR 2009
To sustain the growth momentum, SMIs need to
promote their products and services aggressively in
both the local and international markets. The domestic
market is expected to remain strong driven by
various initiatives under the government’s economic
stimulus packages. At the same time, SMIs should
expand their horizons and capture international
markets in anticipation of a better future global
environment.
CHAPTER 8
To assist SMIs, various grants such as the Market
Development Grant (MDG), and Brand Promotion
Grant will enable industries in the furniture, processed
food, and building and construction materials and
hardware to venture into international markets. At the
same time, there is a need to build home-grown SMI
brands so that they are at the same level playing field
as other international brands. For this venture, the
Brand Promotion Grant will assist industries especially
those from fashion, apparel, silverware, furniture,
jewellery and confectionary.
Nevertheless, to ensure brand value, SMIs must also
be strong in the area of P&Q. MPC is providing
special training for P&Q programmes to SMIs
whereby SMEs pay only 20% of the normal course
fees. Tailor-made programmes for Bumiputera SMIs
such as Quality Management Systems, Certification
on Quality Environment, Innovative & Creative Circles,
TQM and benchmarking are also available.
PRODUCTIVITY REPORT 2008
179

CHAPTER 9
BENCHMARKING FOR
COMPETITIVENESS

Highlights
CHAPTER 9
BENCHMARKING FOR COMPETITIVENESS
• Organisations need to benchmark against the best both locally and internationally
to be competitive.
• The Malaysia Benchmarking Index (MBI) provides a worldwide perspective on
benchmarks with more than 100,000 datasets.
• The MBI assists companies to track performance.
• There are 28 indicators in seven areas of sales and profit, market growth, value
creation, customers, employees, supplier management and building for the future.
• MBI for SME manufacturing companies allows benchmarking activities in four
selected industries.
• MPC’s core activities, strategies focus and target groups are as depicted:
MPC Core Activities
PRODUCTIVITY REPORT 2008
183

CHAPTER 9
Benchmarking enhances
competitiveness
Benchmarking for Enhancing Competitiveness
Benchmarking is a management tool for organisations
to carry out self-assessment, compare their
performance against their peers in the industries and
create change for improvement. To be competitive,
organisations need to benchmark against the best
both locally and internationally.
Through benchmarking, the following can be achieved :
• Industries will be able to benchmark and
compare against the best-in-class or world class
organisations;
• Develop a systematic approach in monitoring
performance and chart out new improvement
strategies; and
• Identify business areas for enhancing business
performance.
At the firm level, organisations need to critically review
and improve business operations to remain relevant
to their customers and stakeholders. This would involve
re-engineering business processes, improving the
service delivery system, developing talent and
capabilities of employees and fostering collaborations
with other organisations. These approaches call for the
application of benchmarking and best practices sharing
to enhance organisational competitiveness.
The main benchmarking and best practices systems
and programmes are :
• Benchmarking On-Line Networking Database
(BOND) is a gateway that provides users with
information on best practices using the internet
as enabler to improve organisational
performance.
• E-benchmark system is an interactive system
to assist organisations in measuring and
184 PRODUCTIVITY REPORT 2008

evaluating business operations, functions
and processes against best-in-class
performers. With this system, Communities of
Practices (CoPs) members will be able to
compute indicators, rank and benchmark
performance.
• Best Practices Net (BP Net) is a collaborative
portal for management systems and an avenue
for discussion, teamwork, sharing and
exchange of knowledge on best practices
among CoP members.
Main activities in benchmarking
and best practices include
Benchmarking On-line Network
database, E-benchmark
system, public sector best
practises, Best Practises Net,
the Malaysia Benchmarking
Index, process improvement for
excellent and network with
international institution
CHAPTER 9
• Best Practices Public Sector (BPPS) is a website
developed for the public sector to facilitate
information sharing.
• Process Improvement for Excellence (PRIME)
is a tool for public sector organisations to
measure and improve service delivery
performance.
• Malaysia Benchmarking Index (MBI) provides
the link to international databases for
Malaysian companies to benchmark and gauge
their business and operational performances.
• Compilation and dissemination of international
and local best practices and benchmarks to
enable firms to improve the performance
management process.
• Networking with other international institutions
such as Global Benchmarking Network and
Fraunhofer Institute, local trade associations
and MPC Consultative Panels to promote
benchmarking and sharing of best practices.
The existing key benchmarking and best practices
programmes and systems are continuously improved
and enhanced in line with the changing global
business environment.
PRODUCTIVITY REPORT 2008
185

CHAPTER 9
MBI allows companies to
compare performance on
finance, customer, internal
process and learning and
growth
Malaysia Benchmarking Index (MBI) for Tracking
Business Performance
MBI is a business performance diagnostic tool which
enables companies to track performance. MBI was
developed through partnership with Fraunhofer
Institute of Germany and Winning Moves Ltd of the
United Kingdom. MBI allows companies to compare
their performance internationally by using key
performance indicators based on the four elements of
the Balanced Scorecard Model. The four elements are
finance, customer, internal process, and learning and
growth. This process involves collection of KPIs on the
four elements from individual company of which the
feedback is given in the form of a benchmarking
report. The report is made available to all participating
companies and information is treated with strictest
confidence (Figure 9.1).
Figure 9.1: MBI Framework
186 PRODUCTIVITY REPORT 2008

A sample of a benchmarking report from the customer
perspective is shown in Figure 9.2. The report will
indicate the company’s actual performance against
the weakest among participating companies. This will
provide information to the company to take action for
further improvements and strive to achieve the best
performance possible.
Benchmarking report to provide
information for further action
CHAPTER 9
Figure 9.2: Benchmarking Report
MBI COMPONENTS
The MBI component focuses on seven main areas
comprising sales and profit, market growth, value
creation, customers, employees, supplier
management and future growth (Figure 9.3).
PRODUCTIVITY REPORT 2008
187

CHAPTER 9
Figure 9.3: MBI Components
SMEs can compare
performance based on 28
indicators
From these seven areas, a total of 28 indicators were
developed for SMEs to compare performance with
other SMEs internationally. The 28 KPIs under the
seven areas are shown as follows:
188 PRODUCTIVITY REPORT 2008

Performance KPI Definition
Sales & Profit
Sales Turnover per
Employee (RM)
Indicates sales generated by
each employee.
CHAPTER 9
Market Growth
Value Creation
Pre-Tax Profit per
Employee (RM)
Percentage of Total Turnover
from New Products and/or
Service (%)
Customer Growth (%)
Return on Capital
Employed (%)
Return on Net Assets (%)
Acid Test (No.)
Cash in Bank to
Turnover (%)
Interest Cover (No.)
Debtor Days (No.)
Direct to Indirect (No.)
Indicates profit before tax
generated by each employee.
Indicates revenue generated
from new product/services as
compared to total turnover.
Percentage of customer growth
as compared to last year
performance.
Indicates the percentage return
generated on the total capital
invested.
Indicates the return being
generated on equity
shareholder’s investment.
Indicates the ability to pay back
its short-term liabilities with its
short-term assets.
Indicates the accessibility of
cash.
Indicates the safety margin in
terms of being able to meet its
interest obligations.
Indicates how many days on
average it takes a business to
get rid for what it sells.
Number of employees directly
involved in output-related
activities compared with
supporting activities.
PRODUCTIVITY REPORT 2008
189

CHAPTER 9
Performance KPI Definition
Value Creation
FTE Employees per
FTE Manager (No.)
Number of employees to each
manager.
Customers
Employees
Supplier
Management
Complaints per
Customer (%)
Complaints per Order (%)
Order Rejected During
Warranty (%)
New Employee Perspectives/
Total Employees
Total Leavers/
Total Employees (%)
Early Leavers/
Total Employees (%)
Day Lost to Absenteeism per
Employees (%)
Accidents per Employee (%)
Percentage of Sub Standard
Supplies (%)
Average number of
complaints per customer.
Indicates customer
satisfaction with the products
and services supplied.
Percentage of orders that
have failed during the
warranty period.
Indicates the relative retention
level of a workforce.
Indicates staff turnover.
Indicates the extent to which
the business has been
successful in recruiting and
selecting people who are right
for the position and the
organisation.
Indicates the amount of time
that people spent away from
work due to sickness,
unexplained absence etc.
Indicates the number of
accidents per employee.
Indicates the ability of the
business’s suppliers to deliver
quality goods as a percentage
of total purchases.
190 PRODUCTIVITY REPORT 2008

Performance KPI Definition
Supplier
Management
Percentage of Supplies
Delivered on Time (%)
Indicates the ability of the
business’s suppliers to deliver
on time as a percentage of
total purchases.
CHAPTER 9
Building for the
Future
Supplier Effectiveness (RM)
Capital Investment to
Turnover
R&D Expenditure to
Turnover (%)
Training Expenditure to
Turnover
FTE Graduates per FTE
Employee (%)
Marketing Expenditure to
Turnover
Indicates the average value of
business for each supplier.
Indicates the level of
investment in the business’s
asset base relative to its
turnover.
Indicates the business’s
willingness to invest in the
future and its capacity to be
innovative.
Indicates the business’s
investment in its employees.
Percentage of graduates to all
employees.
Indicates the business’s
investment in its marketing
activity.
Performance of SME Manufacturing Companies
in Selected Industries using MBI, 2008
Based on the MBI from four selected industries,
namely fabricated metals, electrical and electronics
(E&E), petrochemicals and transport equipment
industries, the following KPIs were developed. These
KPIs are used by the industries as benchmarks to
improve performance.
KPIs for four selected
industries had been developted
PRODUCTIVITY REPORT 2008
191

CHAPTER 9
Table 9.1: MBI for SME Manufacturing Companies in Selected Industries
No Performance
KPI
Performance
Fabricated
Metals
E&E
Petrochemicals
Transport
Equipment
1.
Sales and
Profit
Sales Turnover per
Employee (RM)
81,000
173,947
105,299
193,533
Pre-tax Profit per
Employee (RM)
2,000
5,750
1,444
9,227
2.
Market
Growth
Percentage of Total
Turnover from New
Products and/or
Service (%)
6.01
0.62
39.50
0.30
Customer Growth (%)
17.50
35.64
17.86
11.11
3.
Value
Creation
Return on Capital
Employed (%)
14.40
12.17
15.80
2.75
Return on Net
Assets (%)
6.40
14.35
13.81
3.45
Acid Test (No.)
1.21
0.70
0.99
1.41
Cash in Bank to
Turnover (%)
4.41
3.54
3.55
8.28
Interest Cover (No.)
4.01
1.96
0.08
5.05
Debtor Days (days)
78
66.28
54.89
82
Direct to Indirect (No.)
3.44
1.25
2.61
1.30
FTE Employees per
FTE Manager (No.)
12.32
9.33
16.92
20.50
192 PRODUCTIVITY REPORT 2008

No
Performance
KPI
Fabricated
Metals
Performance
E&E
Petrochemicals
Transport
Equipment
CHAPTER 9
4.
Customer
Complaints per
Customer (%)
0.1
1.20
0.33
0.36
Complaints per
Order (%)
0.25
5.43
0.28
1.04
Order Rejected During
Warranty (%)
0.28
1.22
0.08
3.96
5.
Employee
New Employee/Total
Employees (%)
17.42
7.05
21.11
18.26
Total Leavers/Total
Employees (%)
18.46
7.14
28.61
24
6.
Supplier
Management
Percentage of Sub
Standard Supplies (%)
na
13.99
na
na
Percentage of
Supplies Delivered on
Time (%)
na
5.78
155.01
91.99
Supplier Effectiveness
(RM)
79,000
97,250
109,348
325,000
7.
Building for
Future
Capital Investment to
Turnover (%)
4.75
26.93
8.18
2.08
R&D Expenditure to
Turnover (%)
na
3.03
na
0.4
Training Expenditure
to Turnover (%)
0.22
1.38
0.15
0.1
FTE Graduates per
FTE Employee (%)
10.43
17.86
24.72
17.65
Marketing Expenditure
to Turnover (%)
0.67
0.45
0.36
0.27
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193

CHAPTER 9
The indicators allow companies
to compare within the industry
as well as inter-industry
Table 9.1 shows a total of 25 indicators used to
measure the seven performance factors of four
selected industries. For example, under the sales and
profit performance factor, two KPIs namely sales
turnover per employee and pre-tax profit per employee
were provided for companies to benchmark. The sales
turnover per employee by industries show that
transport equipment had the highest value of
RM193,533 as compared to the other industry.
Similarly, the pre-tax profit per employee of the
transport equipment had the highest value of RM9,227
as compared to other industries. This showed that in
terms of sales and profit performance, the transport
equipment had generated more profit and better
achievement.
These figures will allow companies in the industry to
compare with this performance and at the same time
allows for inter-industry comparison.
International Comparison through MBI
Malaysia’s SMEs performed
better in various areas
The MBI provides a worldwide perspective on
benchmarks with more than 100,000 datasets from
25 benchmarking centres worldwide. It enables local
enterprises to build on existing strengths as well as
working to develop areas that require improvement.
The MBI showed that Malaysia’s manufacturing SMEs
performed better in the areas of turnover for new
products and services (8.5%), customer growth
(20.0%), complaints per order (0.2%), days lost to
absenteeism per employee (0.2%), accident per
employee (0.0%), capital investment to turnover
(4.5%) and training expenditure to turnover (0.2%).
The detailed comparison is shown in the table below:
194 PRODUCTIVITY REPORT 2008

Table 9.2: Comparison of KPIs in Selected Countries, 2007/2008
CHAPTER 9
No
Performance
KPI
Performance
Malaysia
International
1.
Sales and
Profit
Sales Turnover
per Employee
(RM)
140,000
872,000
(USA)
534,000
(Germany)
481,000
(United
Kingdom)
Pre-tax Profit
per Employee
(RM)
11,138
28,195
(Singapore)
26,066
(Italy)
20,312
(Ireland)
2.
Market
Growth
Percentage of
Total Turnover
from New
Products and/or
Service (%)
8.49
8.49
(Malaysia)
8.3
(USA)
5.2
(Germany)
Customer
Growth (%)
20
20
(Malaysia)
17.24
(Australia)
16.67
(United
Kingdom)
3.
Value
Creation
Return on
Capital
Employed (%)
9.55
24.6
(Singapore)
17.6
(Italy)
16.6
(United
Kingdom)
Return on Net
Assets (%)
6.28
13.8
(Singapore)
12.6
(United
Kingdom)
12.2
(Australia)
Acid Test (No.)
0.92
1.1
(Ireland)
1.0
(Spain)
0.9
(Australia)
PRODUCTIVITY REPORT 2008
195

CHAPTER 9
No
Performance
KPI
Malaysia
Performance
International
Value
Creation
Cash in Bank to
Turnover (%)
3.48
4.1
(United
Kingdom)
3.6
(Spain)
3.48
(Malaysia)
Interest Cover
(No.)
2.07
6.6
(Singapore)
4.9
(Ireland)
4.4
(United
Kingdom)
Debtor Days
(days)
83
37
(United
Kingdom)
39
(Germany)
47
(USA)
Direct to
Indirect (No.)
2.75
3.7
(Australia)
3.3
(Ireland)
2.9
(United
Kingdom)
FTE Employees
per FTE
Manager (No.)
11.50
13.1
(Singapore)
11.50
(Malaysia)
10.4
(Germany)
4.
Customer
Complaints per
Customer (%)
0.14
0.1
(United
Kingdom)
0.14
(Malaysia)
0.3
(Italy)
Complaints per
Order (%)
0.17
0.17
(Malaysia)
0.4
(United
Kingdom)
0.5
(Australia)
Order Rejected
During
Warranty (%)
0.06
0.00
(Italy)
0.00
(Spain)
0.00
(United
Kingdom)
196 PRODUCTIVITY REPORT 2008

No
Performance
KPI
Malaysia
Performance
International
CHAPTER 9
5.
Employee
New Employee
/ Total
Employees (%)
18.87
10.0
(Spain)
11.6
(Germany)
14.3
(Italy)
Total
Leavers/Total
Employees (%)
16.02
1.8
(Spain)
6.9
(Germany)
7.1
(Italy)
Early
Leavers/Total
Employees (%)
5.88
0.00
(United
Kingdom)
0.00
(Italy)
0.00
(Spain)
Day Lost to
Absenteeism
per Employees
(%)
0.17
0.17
(Malaysia)
0.5
(Singapore)
2.0
(Italy)
Accidents per
Employee (%)
0.00
0.00
(Malaysia)
0.01
(Singapore)
0.03
(Germany)
6.
Supplier
Management
Percentage of
Sub-Standard
Supplies (%)
0.9
0.00
(USA)
0.00
(United
Kingdom)
0.00
(Australia)
Percentage of
Supplies
Delivered on
Time (%)
91.87
97.0
(Australia)
95.4
(Singapore)
92.3
(Spain)
Supplier
Effectiveness
(RM)
119,000
2,200,000
(USA)
411,000
(Singapore)
340,000
(Ireland)
PRODUCTIVITY REPORT 2008
197

CHAPTER 9
No
Performance
KPI
Malaysia
Performance
International
7.
Building for
the Future
Capital
Investment to
Turnover (%)
4.49
4.49
(Malaysia)
3.0
(Spain)
2.6
(Ireland)
R&D
Expenditure to
Turnover (%)
0.13
1.0
(USA)
0.3
(Germany)
0.2
(Ireland)
Training
Expenditure to
Turnover (%)
0.22
0.22
(Malaysia)
0.2
(Ireland)
0.2
(United
Kingdom)
FTE Graduates
per FTE
Employee (%)
13.64
13.9
(USA)
13.64
(Malaysia)
10.6
(Singapore)
Marketing
Expenditure to
Turnover (%)
0.53
0.7
(Germany)
0.6
(Ireland)
0.6
(United
Kingdom)
Malaysia is in the top 3 country
in development of new
products, reduction in customer
complaints, high capital
intensity and training
The international benchmark countries are selected
based upon their performance among the top three
countries. Seven performance areas had been
identified comprising 28 KPIs. Based on the KPIs,
Malaysia is one of the top three countries in terms of
development of new products/services, reduction in
customer complaints, expansion of labour force,
reduction in absenteeism, low accident rates, high
capital intensity and training.
198 PRODUCTIVITY REPORT 2008

Box 9.1: Benchmarking Community of Practices (CoPs)
Community of Practices (CoPs) comprises a group of organisations with common
interest to establish performance indicators and identify benchmarks for
continuous improvement. Benchmarks developed through the CoPs provide useful
information and best practices for organisations to emulate. The CoPs is a
community network of organisations with common interest or problems that get
together and explore ways of working to identify best solutions and share good
practices across the private and public sector.
CHAPTER 9
CoPs provides a collaborative network for organisations via information and
knowledge sharing. Specifically this community can:
• Measure and compare performance within the group;
• Encourage the development and sharing of new ideas and strategies;
• Support faster problem-solving; and
• Improve efficiency and effectiveness.
MPC has initiated 18 CoPs comprising 8 from the public sector and 10 from the
private sector involving 394 organisations and 310 KPIs.
Productivity and Quality Initiatives for Value
Creation
Productivity and Quality (P&Q) initiatives need to be
intensified at all levels of the organisation for value
creation. To achieve this, various programmes and
activities are being implemented by MPC in the areas
of productivity, quality, innovation and competitiveness.
This will help industries to move up the value chain for
sustainable growth. New initiatives by MPC include the
Efficiency Enhancement Clinic (EEC) which provides
opportunities for the public and business communities
to seek advisory services on basic business
diagnostics, efficiency enhancement as well as cost
rationalisation measures. Details of the programmes
according to MPC’s core areas are as follows:
Implementation of P&Q
initiatives will enable industries
to move up the value chain
PRODUCTIVITY REPORT 2008
199

CHAPTER 9
Core Areas
P&Q
Research
Programmes
Provides reliable and comprehensive information and data on
productivity, quality, innovation and competitiveness for strategy
planning and decision making. This involves continuous updating of
existing P&Q databases at the sectoral, national and international
levels. Among the research focus areas are:
• Productivity and Quality Management;
• Productivity Growth and Trends at the Sectoral, National and
International Levels;
• Total Factor Productivity;
• Public Sector Productivity;
• Sectoral, National and International Competitiveness;
• Human Capital Development;
• Performance of Small and Medium Industries;
• Information and Communication Technology;
• Innovation and Creativity;
• Productivity–Linked Wage System;
• Benchmarking and Best Practices.
• P&Q case studies.
The research outputs are disseminated through both printed and
electronic publication. More information can be obtained through MPC’s
website at www.mpc.gov.my.
200 PRODUCTIVITY REPORT 2008

Core Areas
P&Q Training
and Systems
Development
Programmes
P&Q training and systems development programmes are
conducted for human capital development and organisational
excellence. The main programmes offered are:
CHAPTER 9
• Productivity and Quality Enhancement Programmes such as Six
Sigma Improvement Methodology and Tools, Enterprise
Resource Planning, and Just-In-Time;
• Total Productive Maintenance (TPM), KAIZEN, Total Quality
Management and Organisational Excellence, and the
Productivity-Linked Wage System (PLWS);
• Leadership Skills and Management Development programmes
such as creative thinking, interpersonal effectiveness, effective
communication skills, team effectiveness for higher
performance, and leadership skills;
• Quality Management Systems Programmes namely, internal
auditors training for ISO 9001:2000; integrated quality
management systems; ISO 22000:2005 Food Safety
Management System; and Environmental Management System
(EMS 14000);
• Customer Excellence which include Customer Relationship
Management, Process Improvement, Productivity Analysis and
Financial Management, Marketing Strategies, and Sales
Management;
• Performance Measurement which encompasses Productivity
Measurement and Analysis, Company Manual for Productivity
Assessment (COMPASS), and Balanced Scorecard;
• Process Improvement Programmes such as Quality
Environment (5S) and Strengthening Lean Manufacturing
through Kaizen Practices;
• Innovative SGA Programmes which include ICC for facilitators,
Quality Improvement tools, and Process Innovation: A creative
way of Managing Innovation;
• Business Enabling Skills Training (BEST) that includes
Leadership, Learning, Communication, and Personal and
Professional Effectiveness.
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CHAPTER 9
Core Areas
Productivity
and Quality
(P&Q) Promotion
Programmes
The continuous promotion of productivity and quality to ensure the
development of a P&Q culture for organisational excellence. This
includes sharing of best practices through:
• Weekly Efficiency Enhancement Clinics;
• Awards and recognitions such as Prime Minister Industry
Excellence Award (PMIEA), Quality Management Excellence
Award (QMEA), Productivity Award, and the National 5S Award;
• Networking and partnership with international institutions such
as Asian Productivity Organisation (APO), Institute for
Management Development (IMD), World Economic Forum
(WEF), Japan International Cooperation Agency (JICA),
INSEAD, the Institute of Public Administration (IPA), Ireland and
Fraunhofer Institute, Germany;
• Regional and National Innovative and Creative Circles (ICCs)
Conventions which are held on an annual basis;
• Conventions, seminars, conferences, workshops, and
exhibitions on P&Q;
• Publication of P&Q resource materials such as Productivity
Journals, P&Q Magazines, Industry Newsletters, Quarterly
Productivity Statistics, Productivity Report, Benchmarking
Handbooks, Guidebooks on Information and Communication
Technology, Best Practices Digest, Interactive Productivity-
Linked Wage System, TQM Casebook, P&Q Case Studies,
SMEs On The Move, and Measuring Up Series of publications;
• Promotion programmes to inculcate creativity and
innovativeness;
202 PRODUCTIVITY REPORT 2008

Core Areas
Programmes
CHAPTER 9
Benchmarking
and Best
Practices
Benchmarking is a self-assessment management tool for
organisations to compare performance and adapt best practices
towards achieving best-in-class performance. Among the benefits
are improvements in quality and performance, lower costs of
production, exposure employees to new ideas, as well as to
encourage and stimulate innovation. The main activities in
benchmarking and best practices are:
• Malaysia Benchmarking Index (MBI) which can be used to
benchmark companies performance locally and internationally
based on the finance, customers, learning and growth as well as
internal process perspectives;
• Benchmarking On-Line Networking Database (BOND) and the
e-Benchmark system to facilitate participation of Community of
Practices (CoPs);
• Compiling international and local industry best practices and
benchmarks through survey reports and case studies;
• Disseminating best practices and benchmarks through
seminars, publications, forums, and sharing of best practices
from award winners;
• Preparing periodic reports for CoP members and disseminate
best practices and benchmarks through Best Practices Net and
Public Sector Best Practices Portal;
• Networking with other international best practices institutions,
trade associations and MPC Consultative Panels to promote
benchmarking and sharing of best practices. MPC is also
affiliated with several global benchmarking institutes such as,
Global Benchmarking Network (GBN), and Fraunhofer Institute,
Germany.
PRODUCTIVITY REPORT 2008
203

CHAPTER 9
Measures to Assist Industries Mitigate the
Global Crisis
To mitigate the impact of the global economic crisis,
MPC has undertaken various measures to help
industries. Among the measures undertaken are:
• Efficiency Enhancement Clinics (EEC)
The EEC is an avenue where the public and
business communities can seek advisory
services on efficiency issues such as cost
savings, process improvement, team
effectiveness, quality improvement initiatives
and performance measurement. The key aim
is to provide ideas and possible solutions to
the private sectors as well as assisting to
building capabilities for the future. The EEC
covers the following business issues such as
P&Q diagnostic, operational efficiency and
quick P&Q solutions.
• Special Training Rates
Special Training Rates are being offered for
both SMEs and larger organisation. SMEs
continue to pay only 20 percent of the normal
course fees while larger organisation are now
offered special rates of 50 percent off the normal
course fees.
• Tailored-Made Programmes for SMEs
P&Q Enhancement Programmes which are
being refocused to meet the specific needs of
Bumiputera SMEs include programmes on
Quality Management System, Certification in
Quality Environment, Innovative and Creative
Circles, TQM Model Company and
Benchmarking.
204 PRODUCTIVITY REPORT 2008

• Business Enabling Skills Training (BEST)
This is to complement technical knowledge with
soft skills such as communication and
leadership, innovation and creativity to ensure
employability.
CHAPTER 9
• Entrepreneurship Development
Programmes (EDP)
This is to nurture fresh/unemployed graduates in
entrepreneurship skills for self-employment.
• Productivity Application Tools
Productivity Application tools are being
developed and or up-graded to intensify the
implementation of productivity initiatives at the
firm level. Among the tools are the Company
Manual for Productivity Assessment
(COMPASS), the Interactive Productivity-Linked
Wage System (i-PLWS), E-learning modules,
diagnostic tool at enterprise level: Enterprise
TFP, and the Malaysian Benchmarking Index.
PRODUCTIVITY REPORT 2008
205

APPENDIX

APPENDIX A
TERMINOLOGY AND DEFINITION
1. Added Value
Added value measures the wealth generated by collective efforts of those who
work in an enterprise (the employees) and the capital providers (e.g. investors and
shareholders). Added value is different from sales revenue or value of production
because it does not include the wealth created by the suppliers to the enterprise.
Methods Of Added Value Calculation
There are two ways added value can be calculated:
(i)
Addition Method
This is called the wealth distribution method.
Added Value = Labour Cost + Interest + Tax + Depreciation + Profit
It is called wealth distribution because the added value so created is used to
pay those who have contributed to its creation in terms of wages & salaries
(labour cost) for the employees, interest and loan for capital providers, taxes
to the Government, depreciation for capital equipment usage and profits to
the owner.
(ii)
Subtraction Method
This is called the wealth creation method.
Added Value = Total Output less Bought-In Materials and
Services (BIMS)
In order to produce goods or services, a company has to purchase the
necessary raw materials and other inputs. The difference between the total
value of output and total cost of inputs (all inputs and services bought
from another company) is called added value.
2. Total Output
It is defined as value of products manufactured (ex-factory value) + value of
construction work done + change in Work-In-Progress (WIP) + capital expenditure
on own construction + income from services rendered + income from sales of
goods purchased in same condition.
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APPENDIX A
3. Total Input
It is defined as value of materials consumed + value of supplies consumed + cost
of printing + cost of goods sold in same condition + water + electricity + fuels +
lubricants + supplies + salaries and wages + fees paid to non-working directors +
payments to contractors + payment in kind to paid employees + value of free
wearing apparel + employer’s contribution to government funds + payments for
industrial work done by others + payments for non-industrial services + interest
charges + depreciation + indirect taxes.
4. Labour Cost
It is defined as payments in the form of gross salary and wages, bonuses, and
other cash allowances paid to employees + salaries, allowances, fees, bonuses
and commissions paid to working directors + fees paid to non-working directors
for their attendance at the Board of Directors’ meetings + payments in kind to paid
employees + value of free wearing apparel provided + employer’s contribution to
government funds.
5. Bought-In Materials And Services (BIMS)
It is defined as Bought-In Materials plus Bought-In Services, where Bought-In
Materials is the value of materials consumed in production (including transport
charges incurred and taxes and duties paid on the materials); while Bought-In
Services is the value of supplies consumed such as packaging materials,
consumable stores (including stationery and office supplies, materials for repairs
and maintenance) + cost of printing + lubricants + cost of goods sold in same
condition as purchases + water + electricity + fuels + payments to contractors +
payments for industrial work done by others + supplies + payments for nonindustrial
services.
6. Total Factor Productivity (TFP)
TFP measures the efficiency of the utilisation of both capital and human resources
It is also regarded as a measure of the degree of technological advancement
associated with economic growth. Higher TFP growth indicates efficient utilisation
and management of resources, materials and inputs necessary for the production
of goods and services.
At the national level, Total Factory Productivity (TFP) growth reflects the portion of
the growth in the Gross Domestic Product (GDP) that is not explained by the
growth in inputs such as employment, capital investment and natural resources.
At the firm level, TFP growth implies the upgrading of skilled and technical
manpower, application of technology and creation of new technologies, adoption
of best management practices and developing corporate culture and work ethics.
210 PRODUCTIVITY REPORT 2008

7. Productivity Indicators
7.1 Labour Competitiveness
7.2 Labour Productivity
7.3 Capital Productivity
7.4 Capital Intensity
7.5 Process Efficiency
7.6 Added Value Content
APPENDIX A
7.1 Labour Competitiveness
Competitiveness in terms of labour cost indicates the comparability of the
industry in producing products or services at the lower possible labour cost.
Three competitiveness ratios, which include Added Value per Labour Cost,
Labour Cost per Employee and Unit Labour Cost are described below.
RATIO UNIT WHAT IT TELLS
1. Added Value Pure Number This ratio indicates how
per Labour Cost
competitive the enterprise is in
terms of labour cost.
= Added Value A low ratio indicates high labour
Labour Cost
cost which does not
commensurate with added value
creation
2. Labour Cost per RM This ratio measures the average
Employee
remuneration per employee.
= Labour Cost A high ratio means high returns to
Number of Employees
individual workers and vice-versa.
3. Unit Labour Cost Pure Number This ratio indicates the propotion
of labour cost to total output.
= Labour Cost A high ratio indicates high labour
Total Output
cost. This could be due to labour
shortage and lack of skilled
labour, or poor labour mix. It
could also be due to high labour
turnover.
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APPENDIX A
7.2 Labour Productivity
It can be used as one of the ways of gauging the productivity performance of
the industry. The commonly used indicator is added value per employee.
RATIO UNIT WHAT IT TELLS
1. Added Value RM Reflects the amount of wealth
per Employee
created by the company, relative
to the number of employees it
has. It is influenced by:
- Management efficiency
- Work attitudes
= Added Value - Price effects
Number of Employees
- Demand for the products
A high ratio indicates the
favourable effects of labour factor
in the wealth creation process.
A low ratio means unfavourable
working procedures such as:
- High bought-in materials and
services
- Wastages of time and materials
- Inadequate salary/wages rates
2. Total Output per RM The size of output generated by
Employee
each employee of the enterprise.
= Total Output
Number of Employees
Give an indication of efficiency
and/or marketing capability.
A high ratio reflects a good
marketing strategy adopted by
the enterprise.
A low ratio indicates:
- Deliberate business policy of
having low turnover but high
profit margin/added value.
- Low product profiles and
quality.
212 PRODUCTIVITY REPORT 2008

7.3 Capital Productivity
Capital productivity indicates the degree of utilisation of fixed assets and
their efficiency with which assets are utilised. It is defined as added value
generated per ringgit of fixed assets. High ratio indicates better performance
of enterprise.
APPENDIX A
RATIO UNIT WHAT IT TELLS
Added Value Pure Number Indicates the degree of utilisation
per Fixed Assets
of tangible fixed assets.
= Added Value
Fixed Assets
A high ratio indicates the
efficiency of assets utilisation.
A low ratio reflects poor assets
7.4 Capital Intensity
Capital intensity is the ratio measuring the amount of fixed assets allocated
to each employee. It is also known as fixed assets per employee or simply
capital-to-labour ratio. This ratio is used to measure whether an industry is
relatively capital-intensive or labour-intensive.
RATIO UNIT WHAT IT TELLS
Fixed Assets RM This ratio indicates whether an
per Employee
enterprise adopts a capitalintensive
or labour-intensive
policy.
= Fixed Assets A high ratio indicates the high
Number of Employees
capital intensity.
A low ratio means:
- Dependence on labourintensive
methods
- Low technological inputs
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213

APPENDIX A
7.5 Process Efficiency
Process Efficiency measures how efficient the business utilises its own
resources namely labour, plant and machinery and capital to generate added
value and minimise the bought-in materials and services.
RATIO UNIT WHAT IT TELLS
Process Efficiency Pure Number This ratio indicates the efficiency
and effectiveness of the process,
which is normally affected by
= Added Value production techniques used,
[(Total Input) -
technological innovation,
(Bought-in Materials
managerial and labour skills.
and Services)]
A high ratio indicates an efficient
and effective process system and
vice-versa.
7.6 Process Efficiency
The level of productivity of an enterprise can be also assessed by analysing
at the major components of added value and total output.
RATIO UNIT WHAT IT TELLS
Added Value Content Percent This ratio can be used to gauge
the degree of utilisation of
bought-in materials and services
= Added Value x 100 and changes in the price
Total Output
differentials between products
and purchases.
A high ratio indicates efficient
usage of purchase or favourable
price differentials.
A low ratio means:
- High costs of bought-in
materials and services
- Poor products quality
- Low price competition
214 PRODUCTIVITY REPORT 2008

APPENDIX B
DERIVING THE SOURCES OF LONG-TERM
ECONOMIC AND PRODUCTIVITY GROWTH
SOURCES OF LONG-TERM ECONOMIC GROWTH
A production function is used to compute the sources of economic and productivity
growth:
Q = f( K,L ) (1)
where
Q = Output or GDP
K = Capital
L = Number of workers
By including a time variable (due to technical progress), the resulting shifts of the
production can be represented by:
Qt = f( Kt , Lt , t ) (2)
thus implying that the same input quantities yield a different output at different points of
time.
Assuming that technical progress is both neutral and disembodied (Solow, 1957), the
production function (2) can be expressed as:
Qt = A(t ) . f( Kt , Lt ) (3)
where
Qt , Kt and Lt = output and factor inputs during period t
A(t ) = technical progress or TFP as a function of time
Differentiating (3) with respect to time and denoting the derivatives by putting a dot over
the variable, hence
.
dQ/dt = Q we have
. . . .
Q = A . f ( Kt , Lt ) + A . ∂ f . K + A . ∂ f . L (4)
∂ K ∂ L
Dividing throughout by Q leads to an expression for the proportionate rate of change in
output:
. . .
Q = A . f( Kt , Lt )/Q + A . ∂ f . K + A . ∂ f . L (5)
Q ∂ K Q ∂ L Q
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215

APPENDIX B
. . . .
Q = A . f (Kt , Lt )/Q + A . ∂ f . K . K + A . ∂ f . L . L(6)
Q ∂ K Q K ∂ L Q L
Solow (1957) assumed that factors are paid the value of their marginal products under
competitive equilibrium conditions, so that
∂ Q = A . ∂ f = r
∂ K ∂ K p
∂ Q = A . ∂ f = w
∂ L ∂ L p
where
p = prices of output
r = prices of capital inputs
w = prices of labour inputs
. . . .
Q = A + r K . K + wL . L (7)
Q A pQ K pQ L
In Solow’s notation, the shares of capital and labour are denoted by wK= r.K/p.Q and
wL = w.L/p.Q respectively, thus with this assumption the equation (7) becomes:
. . . .
Q/Q = A/A + wk . K/K + wL . L/L (8)
Further, assuming constant returns to scale, where percentage change in inputs leads
to the same percentage change in output, the following holds:
wK + wL = 1
Therefore equation (8) becomes:
. . . .
Q/Q = A/A + wk . K/K + ( 1- wk ) . L/L (9)
where
Q/Q = Proportionate rate of change of output
.
A/A = Proportionate rate of change of technical progress of TFP
.
K/K = Proportionate rate of change of capital
.
L/L = Proportionate rate of change of labour
216 PRODUCTIVITY REPORT 2008

SOURCES OF LONG-TERM PRODUCTIVITY GROWTH
.
Subtracting L/L from both sides of equation (9) to express the equation in terms of
productivity:
. . . . . .
Q/Q - L/L = A/A + w K
. K/K + ( 1 - w K
) . L/L - L/L
. . . . .
Q/Q - L/L = A/A + wK . ( K/K - L/L )
APPENDIX B
Therefore
. . .
q/q = A/A + w K
. k/k (10)
where
q/q = Q/Q - L/L = Proportionate rate of change of productivity
.
A/A = Proportionate rate of change of technical progress or TFP
. . .
k/k = K/K - L/L = Proportionate rate of change of capital to labour ratio
Equation (10) denotes that changes in productivity over time are therefore the result of
neutral technical progress (or TFP) and of increases in capital to labour ratio (capital
intensity).
SOURCES OF LONG-TERM ECONOMIC GROWTH EXPRESSED IN TERMS OF
PRODUCTIVITY GROWTH
Subtracting (10) from (9) to derive the relation between economic growth and
productivity growth
. . . . .
Q/Q - q/q = wK . K/K + ( 1 - wK ) . L/L - wK . k/k
. . . .
= wK . K/K + L/L - wK . L/L - wK . k/k
. . .
= wK . k/k + L/L - wK . k/k
.
= L/L
PRODUCTIVITY REPORT 2008
217

APPENDIX B
Therefore
. . .
Q/Q = q/q + L/L (11)
where .
Q/Q = Proportionate rate of change of output
.
q/q = Proportionate rate of change of productivity
.
L/L = Proportionate rate of change of labour
Alternatively, equation (11) can be written as:
. . . .
Q/Q = A/A + wK . k/k + L/L (12)
Equation (11) expresses economic growth in terms of productivity growth and an
increase in labour input (employment expansion), while that of equation (12) expresses
it in terms of TFP growth and an increase in labour and capital inputs.
218 PRODUCTIVITY REPORT 2008

MPC BOARD OF DIRECTORS
CHAIRMAN
Y. Bhg. Tan Sri Dato’ Azman Hashim
Ambank Group
DEPUTY CHAIRMAN
Y. Bhg. Dato’ Kamaruddin Ismail
MEMBERS
Y. Bhg. Tan Sri Dato’ (Dr.) Ir. Wan Abdul Rahman
Hj. Wan Yaacob
Y. Bhg. Prof. Tan Sri Dato’ Dzulkifli Abdul Razak
Y. Bhg. Tan Sri Dato’ Hj. Mohd. Ramli Kushairi
Y. Bhg. Emeritus Prof. Datuk Dr. Mohamed Ariff
Abdul Kareem
Y. Bhg. Datuk Mustafa Mansur
Y. Bhg. Dato’ Azman Shah Dato’ Seri Harun
Y. Bhg. Dato’ Mohd Mokhtar Ismail
Y. Bhg. Dato’ Nik Zainiah Nik Abd. Rahman
Y. Bhg. Dato’ Thomas George
Y. Bhg. Datin Yasmin Merican
Mr. Rajasekaran Govindasamy
Mr. Zamzuri b. Abdul Aziz
Mr. Muhamad Abd. Rahaman
Ministry of International Trade
and Industry
Minconsult Sdn. Bhd.
Universiti Sains Malaysia
South Malaysian Industries Bhd.
Malaysia Institute of Economic
Research
Federation of Malaysian
Manufacturers
Antara Holiday Villas Sdn. Bhd.
Ministry of Agriculture and
Agro-based Industry
Malaysia Productivity Corporation
Ministry of Human Resources
Trax Associates Sdn. Bhd.
Malaysian Trade Union Congress
Ministry of Finance
Economic Planning Unit
PRODUCTIVITY REPORT 2008
219

MPC CONSULTATIVE PANELS
CONSULTATIVE PANEL FOR AGRICULTURE
DEPUTY CHAIRMAN
Mr. Abu Hanipah Abd. Wahid
MEMBERS
Y. Bhg. Dato’ Foong Lai Choong
Y. Bhg. Dato’ Rashidi Omar
Y. Bhg. Dato’ Hj. Safie bin Baharom
Prof. Dr. Mad Nasir Shamsudin
Dr. Izham Ahmad
Mr. Chua Piak Chwee
Mr. Kasmuri Hj. Sukardi
Ms. Normah Omar
Ms. Yeoh Gim Bee
IOI Plantation
TH Plantation Sdn. Bhd.
Department of Agriculture
Universiti Putra Malaysia
International Tropical Fruit Network
International Tropical Fruit Network
Poliplant Group
MARDI
Ministry of Agriculture & Agro-based industry
CONSULTATIVE PANEL FOR CONSTRUCTION
CHAIRMAN
Y. Bhg. Tan Sri Dato’ (Dr.) Ir. Wan Abdul
Rahman bin Hj. Wan Yaacob
Minconsult Sdn. Bhd.
MEMBERS
Y. Bhg. Datuk Ir. Hamzah b. Hasan
Y. Bhg. Dato’ Goh Chye Koon
Y. Bhg. Dato’ Hj. Mokhtar bin Samad
Dr. Ahmad Ruslan b. Mohd Ridzuan
Ar. Lim Pay Chye
Ir. Hj. Mohd Mazlan b. Mohd Ismail Merican
Mr. Dzulfakar b. Ahmad
Mr. Lawrence Chan Kek Tong
Mr. Ng Kee Leen
Construction Industry Development Board
IJM Corporation Berhad
Malay Contractors Association Malaysia
Universiti Teknologi MARA
Malaysian Institute of Architects
Institute of Engineers Malaysia
Department of Statistics
Real Estate Housing Developers’ Association
Malaysia
Master Builders Association Malaysia
220 PRODUCTIVITY REPORT 2008

CONSULTATIVE PANEL FOR DEVELOPMENT FINANCIAL INSTITUTIONS
CHAIRMAN
Mr. Mohd. Najib Hj. Abdullah
MEMBERS
Malaysian Industrial Development
Finance Berhad
CONSULTATIVE
PANELS
Mr. Adib Daud
Mr. Baharuddin Muslim
Ms. Hidayah Mohd. Rashid
Mr. Leong Kin Choong
Mr. Mohamad Che Taib
Mr. Nik Abdullah Shukri Nik Mustapha
Mr. Syed Jamaludin bin Syed Jaafar
Bank Kerjasama Rakyat Malaysia Berhad
Exim Bank of Malaysia
SME Bank
Malaysian Industrial Development
Finance Berhad
AGRO Bank
Bank Pembangunan Malaysia Berhad
Bank Simpanan Nasional
CONSULTATIVE PANEL FOR ENERGY AND UTILITY
CHAIRMAN
Mr. Ahmad Jauhari Yahya
Malakoff Berhad
MEMBERS
Y. Bhg. Dato’ Abdul Razak Abdul Majid
Y. Bhg. Dato’ Pian bin Sukro
Dr. Mohd. Zamzam Jaafar
Dr. Philip Tan
Mr. Ahmad Zairin Ismail
Tenaga Nasional Berhad
Suruhanjaya Tenaga
Tenaga Nasional Berhad
Institution of Engineers
Pusat Tenaga Malaysia
PRODUCTIVITY REPORT 2008
221

CONSULTATIVE
PANELS
CONSULTATIVE PANEL FOR HEALTHCARE
CHAIRMAN
Y. Bhg. Tan Sri Dato’ Dr. Abu Bakar
Suleiman
International Medical University
MEMBERS
Y. Bhg. Datuk Dr. Noor Hissam Abdullah
Y. Bhg. Puan Sri Prof. Datuk Suraiya Hani
Hussein
Y. Bhg. Prof. Dato’ Dr. Syed Mohamed
Al-Junid
Y. Bhg. Dato’ Dr. Jacob Thomas
Y. Bhg. Datin Paduka Siti Sa’diah
Sheikh Bakir
Dr. Chong Su-Lin
Mdm. Susila Devi
Ministry of Health
Malaysian Society For Quality In Health
UNU International Institute for Global Health
Sime Darby Medical Centre Subang
Jaya Sdn. Bhd.
KPJ Healthcare Bhd.
Association of Private Hospitals of Malaysia
Malaysia External Trade Development
Corporation
CONSULTATIVE PANEL FOR TOURISM
CHAIRMAN
Y. Bhg. Dato’ Azman Shah Harun
Antara Holiday Villas
MEMBERS
Y. Bhg. Dato’ Anthony Yeo
Prof. Madya Dr. Za’faran bt Hassan
Dr. Junaidah Lee Abdullah
Y.M. Engku Morris Engku Hussin
Ms. Azizah Ariffin
Mr. Christopher Raj
Mr. Hisham Tan Abdullah
Mr. Jean-Jacques Kiefer
Mr. Mohd. Nadzri Jelas
Mr. Shaharuddin M Saaid
Ms. Zahriah Abdul Kadir
Mr. Zaini Ramlee
Mr. Zulkifli Mat Said
Mr. Zamani Ridzwan
Resorts World Bhd.
Universiti Teknologi MARA
Ministry of Tourism
Holiday Villa Hotels & Resorts
Ministry of Human Resource
Shangri-La Hotel Putrajaya
The Malaysian Food and Beverage Executive
Associations
Sunway Resort Hotel & Spa
Eastpine Sdn. Bhd.
Malaysian Association of Hotel Owners (MAHO)
Rangkaian Hotel Seri Malaysia Sdn. Bhd.
Malaysia Association of Tour and Travel Agents
(MATTA)
Tourism Malaysia
Malaysia Association of Hotels (MAH)
222 PRODUCTIVITY REPORT 2008

CONSULTATIVE PANEL FOR HUMAN RESOURCE
CHAIRMAN
Mr. Md Jafar bin Abdul Carrim
Ex-Malaysia Employers Federation
CONSULTATIVE
PANELS
MEMBERS
Y.Bhg. Datuk Dr. Syed Muhamad Syed
Abdul Kadir
Adjunct Prof (Dr.) Alias Masod
Dr. Mohd Ghazali Bin Abas
Dr. Ramli Bin Hasan
Ir. Rohaizi Mohd Jusoh
Mr. Abdul Wahab Abu Bakar
Mr. Aminul Rashid Zamzam
Mr. Chiam Tow Hui
Mr. Davies Danavaindran
Mr. Khor Chai Tian
Mr. Nik Mustapha Nik Mohamed
Ms. Norfariza Hanim Kasim
Mr. Nor Suhaimi Sulong
Mr. Pang Chau Leong
Mr. Shamsuddin Bardan
Mr. V.T. Chandra Segaran
Mr. V.T. Nathan
Dagang Net Technology Sdn. Bhd.
Universiti Teknologi MARA
Economic Planning Unit
Ministry of Higher Education
Construction Industry Department Board (CIDB)
Malaysia
Nestle Products Sdn. Bhd.
Petroliam Nasional Berhad (PETRONAS)
SMI Association of Malaysia
Federation of Malaysian Manufacturers
Master Advisory Services Sdn. Bhd.
Malaysian International Chamber of Commerce
Department of Statistics
Maxis Communications Berhad
Ministry of Human Resource
Malaysian Employers Federation
The Malayan Agricultural Producers Association
Ex-MEF & Retired Lawyer
CONSULTATIVE PANEL FOR INFORMATION TECHNOLOGY
CHAIRMAN
Y. Bhg. Dato’ Wira Mohamed Said
Mohamed Ali
MEMBERS
Prof. Dr. Abdul Razak Hamdan
Prof. Dr. Abdullah Mohd Zin
Prof. Dr. Mohammed Yusoff
Dr. Nordin Othman
Mr. Cheah Kok Hoong
Ms. Fatmah Mahmood
Mr. Jesse Chooi
Mr. Lee Cheng Suan
Mr. Lee Hwee Hsiung
Mr. Lim Chen Yam
Mr. Zamani Zakariah
Universiti Kebangsaan Malaysia
Universiti Kebangsaan Malaysia
Universiti Terbuka Malaysia
Zetta Consultants Sdn. Bhd.
Association of Computer and Multimedia
Industry
Ministry of Science, Technology and Innovation
Multimedia Development Corporation Sdn. Bhd.
Federation of Malaysian Manufacturers
SMI Association of Malaysia
Malaysian National Computer Confederation
Malaysian Communication and Multimedia
Commission
PRODUCTIVITY REPORT 2008
223

CONSULTATIVE
PANELS
CONSULTATIVE PANEL FOR LOGISTICS AND TRANSPORT
CHAIRMAN
Mr. Mirzan Mahathir
Crescent Capital Sdn. Bhd.
MEMBERS
Y. Bhg. Datuk Baseer Hassan Abdul Kader
Prof. Madya Hamzah Abd. Jamal
Prof. Madya Sabariah Mohamad
Prof. Dr. Nor Ghani Md. Nor
Mr. Mohamad Radwan Alami
Federation of Malaysian Port Operating
Companies
Universiti Teknologi Malaysia
Institut Pengangkutan Malaysia (MITRANS),
Universiti Teknologi MARA
Universiti Kebangsaan Malaysia
Federation of Malaysian Manufacturers
CONSULTATIVE PANEL FOR MANUFACTURING SECTOR
CHAIRMAN
Y. Bhg. Dato’ Dr. Ir. Andy Seo Kian Haw
Federation of Malaysian Manufacturers
MEMBERS
Y. Bhg. Dato’ Dr. Ong Eng Long
Mr. A. H. Yong
Mr. Abdul Ghafar Musa
Mr. Chin Hon Meng
Mr. Choy Ming Bil
Mr. Mohd Shafie BP Mammal
Mr. Woo Mun Meng
Kossan Rubber Industries Berhad.
The Electrical & Electronics Association of
Malaysia
Ministry of International Trade and Industry
Sun Rubber Industry Sdn. Bhd.
Expertise Resource Association
National Union of Telecommunication
Employee
Enviri Industries Sdn. Bhd.
224 PRODUCTIVITY REPORT 2008

CONSULTATIVE PANEL FOR PRODUCTIVITY MEASUREMENT
CHAIRMAN
Profesor Dr. Rahmah Ismail
Universiti Kebangsaan Malaysia
CONSULTATIVE
PANELS
MEMBERS
Prof. Madya Dr. Hj. Mohd Anuar
Hj. Md Amin
Prof. Madya Dr. Saadiah Mohamad
Prof. Madya Dr. Tan Hui Boon
Prof. Dr. Nor Khomar Binti Ishak
Ms. Chin Lye Ha
Mr. K. Yogeesvaran
Mr. Kevin Tan
Mr. Mohd Fairuz Abdullah
Mr. Roseley Bin Dato’ Hj. Khalid
Ms. Tay Suan See
Mr. Zainal Abidin Ahmad
Universiti Kebangsaan Malaysia
WIEF-UiTM International Center
Nottingham University Business School
Malaysia
Universiti Tun Abdul Razak
Federation of Malaysian Manufacturers
Economic Planning Unit
Omni View Consultancy (M) Sdn. Bhd.
Kart Food Industries Sdn. Bhd.
Department of Agriculture
Department of Statistics
Perodua Auto Corporation Sdn. Bhd.
PRODUCTIVITY REPORT 2008
225

MPC MANAGEMENT TEAM
DIRECTOR GENERAL
DEPUTY DIRECTOR GENERAL I
DEPUTY DIRECTOR GENERAL II
SENIOR DIRECTOR
DIRECTORS
REGIONAL DIRECTORS
Y. Bhg. Dato’ Nik Zainiah Nik Abd Rahman
Mr. Mohd Razali Hussain
Mr. Ahmad Fadzil Mahmud
Ms. Shahuren Ismail
Mr. Ab. Rahim Yusoff
Mr. Ab. Razak Omar
Mr. Burhanuddin Saidin
Ms. Chan Kum Siew
Ms. Lee Saw Hoon
Mr. Megat Akhbarruddin Megat Ismail
Mr. Mustapha Sufa’at
Dr. Rahmat Md. Smail
Mr. Abdul Latif Abu Seman
Mr. Kamaruddin Mohamad
Mr. Mohd Zaki Ibrahim
Mr. Nik Mustafa Raja Salleh
226 PRODUCTIVITY REPORT 2008

MPC OFFICES
MPC HEAD OFFICES
Malaysia Productivity Corporation
Lorong Produktiviti Off Jalan Sultan
Peti Surat 64, 46904 Petaling Jaya
Selangor Darul Ehsan, Malaysia
Tel : 603-79557266 / 79557050 /
79557085
Fax : 603-79578068 / 79551824 /
79581697
Webite : http://www.mpc.gov.my
E-mail : marketing@mpc.gov.my
MPC REGIONAL OFFICES
Malaysia Productivity Corporation
(KUALA LUMPUR OFFICE)
7 th Floor, West Wing
Menara Matrade, Jalan Khidmat Usaha,
Off Jalan Duta,
50480 Kuala Lumpur
Tel : 603-62037885 / 62037085
Fax : 603-62037886
E-mail : marketing@mpc.gov.my
Malaysia Productivity Corporation
(NORTHERN REGION OFFICE)
Beg Berkunci 206, Jalan Bertam
13200 Kepala Batas, Pulau Pinang
Tel : 604-5754709
Fax : 604-5754410
E-mail : nro@mpc.gov.my
Malaysia Productivity Corporation
(SARAWAK REGION OFFICE)
Lot 894, Lorong Demak Laut 3A
Taman Perindustrian Demak Laut,
Jalan Bako,
93050 Kuching, Sarawak
Tel : 6082-439959 / 439960
Fax : 6082-439969
E-mail : sko@mpc.gov.my
Malaysia Productivity Corporation
(EAST COST REGION OFFICE)
Aras 7, Wisma TNB
Lot 14 Seksyen 19, Jalan Gambut
25000 Kuantan, Pahang
Tel : 609-5131788 / 5131789
Fax : 609-5138903
E-mail : npcwpt@mpc.gov.my
PRODUCTIVITY REPORT 2008
227

OFFICES
Malaysia Productivity Corporation
(KELANTAN OFFICE)
Lot 197C, Tingkat Bawah, Bangunan MAIK
Jalan Sultan Yahya Petra
15150 Kota Bharu, Kelantan
Tel : 609-7416261/ 7416262
Fax : 609-7416263
E-mail : mpckel@streamyx.my
Malaysia Productivity Corporation
(SOUTHERN REGION OFFICE)
No. 8, Jalan Padi Mahsuri,
Bandar Baru Uda, 82100 Johor Bahru
Tel : 607-2377422 / 2377644
Fax : 607-2380798
E-mail : sro@mpc.gov.my
Malaysia Productivity Corporation
(SABAH REGION OFFICE)
Level 2, Menara MAA
No. 6, Lorong Api-api 1
88000 Kota Kinabalu, Sabah
Tel : 6088-456498 / 233245
Fax : 6088-242815
E-mail : npcwsb@mpc.gov.my
Malaysia Productivity Corporation
(TERENGGANU OFFICE)
No 23-03 KT Business Centre
Jalan Sultan Mohammad, Padang Hiliran
21100 Kuala Terengganu, Terengganu
Tel : 609-6228215
Fax : 609-6316010
E-mail : noni@mpc.gov.my
228 PRODUCTIVITY REPORT 2008

INDEX

INDEX
A
Absenteeism 12, 38, 178, 198
Administrative efficiency performance 154
Agriculture sector 4, 10, 19, 30, 34, 98,
105, 113
Agrochemical products 47
Agronomic management 98
Agropreneurs 106, 110
Aquaculture 19
Aquaculture Industrial Zones (AIZ) 103
Asian Association of Management
Organisations (AAMO) 31
Asian Productivity Organisation (APO) 202
Audio visual 48
Automation 36, 60
Automotive Development Fund 61
B
Balanced Scorecard 186, 201
Benchmarking On-line Networking
Database (BOND) 184, 203
Benchmarking 134, 179, 184, 194, 199,
200, 203
Best practices 135, 178, 184, 199, 200,
202, 203
Biofuels 98
Biotechnology 10, 19, 34, 36, 98, 152
Brand Promotion Grant 179
Branding 35
Business approaches 17
efficiency 15
measurement 57
Business Enabling Skills Training (BEST)
201, 205
C
Capacity development 89
utilisation 24, 27, 35, 47
Capital intensity 24, 121, 172, 198
investments 29, 194
productivity 173
structure 26, 27, 29, 55
Capital-intensive production 32
Capital-intensive systems 29
Chemicals and chemical products 7, 42,
52, 169
Civil engineering 118, 120, 123
Clones 10, 34
Collective Agreements (CAs) 11
Commercialisation of the R&D Fund
(CRDF) 151
Commodity prices 4, 98, 102, 112
Community of Practices (CoPs) 73, 185,
199, 203
Competitiveness 11, 14, 26, 28, 35, 88,
104, 174, 184, 199
Construction Industry Development Board
(CIDB) 126
Construction Industry Portal 126
Construction Research Institute of Malaysia
(CREAM) 125, 129
Construction sector 4, 7, 10, 19, 118
Copyrights 87
Corporate governance 32
Customer-centric services 78
D
Demand intensity 26, 27, 28, 35, 55
Department of Agriculture (DOA) 108
Distance learning 85
Distributive trade industry 78
Domestic appliances 48
consumption 70
demand 4, 10, 13, 18, 92
service provider 89
Domestic-oriented industries 4, 7, 42
E
E-application system 135
E-benchmark system 184, 203
E-commerce 85, 109, 169
E-governance 85
E-learning 85, 205
E-payment 163
E-systems 10, 76
East Coast Economic Region (ECER) 85,
119
Economic development 8, 19, 36, 105
PRODUCTIVITY REPORT 2008
231

INDEX
environment 5, 35
growth 18, 24, 35, 92, 105, 152
performance 15, 26
regional corridors 19
restructuring 26, 27, 30
services 140
Eco-tourism 90, 144
Education 36, 67, 89, 90, 137, 149
Efficiency Enhancement Clinics (EEC) 37,
199, 202, 204
Electronic government 158
integrated circuit 42
Employment 25, 30, 32, 110, 120, 143, 170
Entrepreneurship Development
Programmes (EDP) 205
Entrepreneurship 169, 176
Export-oriented crops 108
Export-oriented industries 8, 42
External demand 18, 28
F
Fabricated metal products 43, 169
Farmers’ Organisation Authority (FOA) 108
Federal Agricultural Marketing Authority
(FAMA) 108
Finance 4, 7, 10, 34, 70
Financial guarantee 61
management 32
Food and beverages 7, 43, 52, 56, 169
Foreign Direct Investment (FDI) 60, 105
Foreign Investment Committee (FIC) 89,
155
Franchise Financial Scheme 176
G
General Public Administration 154
Global Competitiveness Report 153
crisis 37, 88, 127, 204
demand 27
economy 28
trade 92
warming 98
Globalisation 17, 101
Good Agricultural Practices (GAP) 34, 101
Government efficiency 160
Government-linked companies (GLCs)
151, 168
Gross Domestic Product (GDP) 4, 176
H
Halal food 43
Health food 43
services 145
Healthcare 36, 73, 148
High Speed Broadband Project (HSBPP)
86
Hotel 80
Household 11, 19
Human capital 24, 26, 27, 28, 35, 76, 82,
90, 105, 129, 151, 176, 200
Human resource 18, 45, 55, 149
Human Resource Development Fund
(HRDF) 61
I
Import duty 10
Income 10
Industrialised Building System (IBS) 10,
125, 129
Industry Restructuring guarantee Fund
Scheme 36, 61
Inflation 92
Information and Communication Technology
(ICT) 34, 75, 82, 200, 202
Infrastructure 4, 15, 19, 76, 83, 90, 100,
137, 144,152, 153
Innovation 18, 24, 30, 37, 57, 68, 86,151,
199, 200
Innovation practices index 67
Innovative and Creative Circles (ICC) 37,
59, 134, 179, 202, 204
Institute for Management Development
(IMD) 202
Institute of Public Administration (IPA) 202
Insurance 4, 10
Intermediate and Capital Goods 42
Internet 85, 169, 184
Inventory and logistics management 45
Investments 24, 152
Iron and steel products 8, 43
Iskandar Development Region (IDR) 85,
119
Islamic finance 36
J
Japan International Cooperation Agency
(JICA) 202
232 PRODUCTIVITY REPORT 2008

Job opportunities 89, 112
Job stability 12
K
Kaizen 47, 48
Key performance indicators 134, 186
Knowledge enhancement 28
Knowledge-based economy (KBE) 85
L
Labour cost competitiveness 49, 79, 83,
118, 121, 174
Labour cost per employee 83, 121, 174
Labour-intensive operation 29
Leadership 32, 201, 205
Liquidity 10
Livestock breeding programmes 19
Loans 10, 35
Logistics 67
M
Machinery and equipment 7
Malaysia Benchmarking Index (MBI) 185,
186, 203, 205
Malaysian Industrial Development Authority
(MIDA) 89
Malaysian Institute of Management (MIM)
31
Malaysian Management Capability Index
(MCI) 31
Management of Technology (MOT) 86
Management practices 17
systems 18
Manufacturing cycle time 57
sector 19, 30, 42, 55, 168
Market Development Grant (MDG) 28,
179
Marketing 34, 35, 108, 168, 176
Mining sector 4, 11
Mobile broadband 85
Motor vehicles 8, 43, 144
Multinational Corporations (MNCs) 168
Ninth Malaysia Plan 4, 10, 19, 35, 119,
148, 151, 168
Non-metallic mineral products 7, 43
Northern Corridor Economic Region
(NCER) 85, 119
O
Operating systems 34, 92
Operational outcomes index 67
Organisation and culture 57
Organisation for Economic Cooperation and
Development (OECD) 12
Output growth 4, 32, 34, 42
Outsourcing 34, 83, 144, 168
P
Patents 87
Patient Safety 73
Performance measures 157
Plant and equipment 57
Plastic products 8, 59, 169
Population 15
Poverty 148
Private consumption 4
Private Finance Initiative (PFI) 89
Private hospitals 73
Pro-business policies 4
Process Improvement for Excellence
(PRIME) 157, 185
Productivity and Quality (P&Q) 62, 169,
199, 202
Productivity comparison 12
growth 5, 7, 12, 18, 24, 45, 54, 118,
154
level 5, 8
performance 4, 7, 171
Productivity-Linked Wage System (PLWS)
11, 37, 49, 93, 200, 202
Public administration efficiency 160
Public investment 4
safety 152
service 139, 154, 162
INDEX
N
National Energy Policy 153
National E-Tendering Initiatives (NeTI)
126
Natural resources 13, 104
Q
Quality Assessment System in Construction
(QLASSIC) 126
Quality assurance 57
enhancement 18
PRODUCTIVITY REPORT 2008
233

INDEX
Quality Environment (QE) 177, 179, 201,
204
Quality management systems 45, 179,
204
R
Research & Development (R&D) 151, 168
Retrenchment 12
Round Table Discussion (RTD) 125
Rubber products 8
Rural Economy Funding Scheme 176
S
Science and Technology (S&T) 152
Second Economic Stimulus Package 37
Security Services 152
Service Sector Capacity Development Fund
(SSCDF) 89
Services sector 4, 10, 19, 30, 66, 75
Six Sigma 201
Skilled labour 32, 35
workforce 29, 128
Skills Development Programmes 169
Skills-based performance 11
Small and Medium Enterprises (SMEs)
38, 68 , 91
Small and Medium Industries (SMIs)
168, 200
Social services 144
Staff turnover 12, 38
Stakeholders 184
Stimulus packages 62
Syariah-based financing 91
Trade 4, 7, 28, 32, 34, 42, 70, 75, 112,
137, 144
Trademarks 87
Trading partners 5, 16, 42
Training 24, 38, 59, 76, 89, 129, 137, 151,
198
Transport equipment 7, 8, 42, 52, 191
Transport 4, 7, 10, 34, 70, 76, 92
U
Unit labour cost 83, 118, 121, 174
Urban transport and rail 153
Utilities 11, 32, 70
V
Value added 24, 26, 30, 36, 86, 176
Value chain 101, 140, 168, 169, 176, 199
Visual management 177
W
Wage system 11
WiMAX 85
Wood and wood products 59, 171
Workforce 26, 30, 35, 170
Working Capital Guarantee Scheme 60
World Economic Forum (WEF) 202
World Trade Organisation 88
T
Technical progress 26, 27, 30
Technological advancement 13, 128
capabilities 113, 152
categorisation 86, 88
environment 86, 88
Technology Acquisition Fund (TAF) 152
Telecommunication 83, 85, 90, 128
Textiles and apparel 47
Third Industrial Master Plan 35, 144, 168
Total Factor Productivity (TFP) 24, 26, 27,
32, 35, 55, 200
Total quality management 134
Tourism 4, 10, 19, 36, 67, 70, 80, 89, 90
234 PRODUCTIVITY REPORT 2008