Country Economic Work for Malaysia - Islamic Development Bank

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the Department of Statistics, Malaysia (May 2012), domestic demand contributed the largest share, accounting for 10.7 percentage points of total GDP growth in 2010 while the growth was contracted by 3.5 percentage points due to decline in external demand. Among domestic demand factors, private consumption contributed 3.5% and private investment 1.8% and will likely be the key growth drivers in 2011 and 2012, with rural areas benefitting from elevated commodity prices and urban areas from continued growth in the manufacturing and services sectors (Table 1.1). Leading indicators such as rubber prices, stock market index, consumer sentiment index, and number of retrenched workers suggest that consumer spending will remain buoyant in the coming years. Solid employment and modest wage increase in line with improving external demand as well as buoyant commodity prices are also expected to support household income and consumption. Similarly, private investment is likely to rise with the implementation of projects under the Government’s Economic Transformation Program (ETP), which is being largely driven by the private sector. 7. In terms of sectoral performance, services sector remained the main source of economic growth. During 2000s, annual average growth in the services sector was 6.2%, attributed mainly due to strong performance in the finance, insurance, real estate and business services, wholesale and retail trade, hotel industry, and transport and communication (Figure 1.2). The share of services sector in GDP also increased from 49.3% in 2000 to 57.7% in 2010 (Figures 1.3 and 1.4). Currently, 87% of the 15 10 5 0 -5 -10 Figure 1.2. Malaysia: Sectoral Growth Rates, 2001-2010 (% per annum) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Agriculture Manufacturing Services Source: Economic Planning Unit, The Malaysian Economy in Figures (various Issues) Figure 1.3 Sectoral Shares in Gross Domestic Product of Malaysia, 2000 (% of total GDP) Figure 1.4. Sectoral Shares in Gross Domestic Product of Malaysia, 2010 (% of total GDP) Agriculture 8.6% Mining 10.6% Agriculture 7.3% Mining 7% Services 49.3% Manufactrin g 27.6% Construction 3.9% Manufactrin g 30.9% Services 57.7% Construction 3.3% Source: Economic Planning Unit, The Malaysian Economy in Figures (2011) 7
SMEs are concentrated in the services sector. During the last five years, SME growth outperformed the overall economic growth. However, there are some important areas of concern for SMEs such as the issue of low productivity, slow innovation and lack of financing, which need to be addressed effectively. 8. The manufacturing sector was hit hard by the global recession but recovered remarkably in 2010. The manufacturing sector grew by 3.5% per annum during 2001-2010. Since the manufacturing sector is largely dependent on global demand, it was adversely affected by the global recession with a negative growth of 9.3% in 2009. This was largely due to the sharp deterioration in the demand for export-oriented products. Subsequently, the manufacturing sector’s share of GDP declined from 30.9% in 2000 to 27.6% in 2010 (Figures 1.3 and 1.4). Nonetheless, in 2010, the manufacturing sector strongly recovered with a positive growth of 11.4%. 9. Compared to other key sectors, growth in the agriculture sector remained relatively slow. During 2000s, the agriculture sector grew by 3.2% per annum. The slower growth was mainly attributed to a decline in the output of rubber and sawlogs, which is due to a reduction in rubber hectrage and controlled logging for sustainable forest management. However, increases in the production of oil palm, livestock and fisheries supported the growth of the agriculture sector. The share of agriculture in the GDP declined marginally from 8.6% in 2000 to 7.3% in 2010. 10. Malaysian economy remains at almost full employment level. The unemployment rate declined from the maximum level of 7.4% in 1986 to 3.1% in 2011. Due to global financial and economic crisis, the unemployment rate increased slightly to 3.7% in 2009. However, the employment situation recovered from the crisis and returned to the pre-crisis/ normal level of 3.1% in 2011(Figure 1.5). Recovery in employment appears in all the major sectors including manufacturing, construction, agriculture, and services. Real wages in the manufacturing sector have risen to fairly high compared to the pre-crisis level, owing to 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Figure 1.5. Malaysia: Unemployment Rate, 1986-2011 (% p.a.) 1986 1987 1988 1989 1990 1992 1993 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Economic Planning Unit, Government of Malaysia (www.epu.gov.my) persistently high number of available vacancies. The economy is expected to remain at full employment level with an estimated unemployment rate of 3.1% in 2015. 11. Remarkable achievement in reducing poverty. Based on the national poverty line (defined as MYR750 per capita per month), poverty declined from 49.3% in 1970 to only 3.8% in 2009, due to the implementation of targeted poverty eradication programs in both rural and urban areas. Hardcore poverty has reduced to almost zero in 2010. Despite this great success, some deep pockets of poverty remain among some groups and in remote parts of the country. In particular, 8
Page 4: Acknowledgements Appreciation for s
Page 7 and 8: ISRA : International Shari’ah Res
Page 9 and 10: (v) Foreign Direct Investment……
Page 11 and 12: (2005)), key insights emerged in tw
Page 13 and 14: drain. Further, the Government need
Page 15: macroeconomic indicators are given
Page 19 and 20: easy technology adoption, pro-busin
Page 21 and 22: Kelantan with the lowest per capita
Page 23 and 24: Figure 1.12. General Growth Diagnos
Page 25 and 26: that the Government’s Economic Tr
Page 27 and 28: (ii) Low Returns to Investments app
Page 29 and 30: Figure 1.22. Malaysia's Exports by
Page 31 and 32: 43. Malaysia’s private firms are
Page 33 and 34: over the medium-term. Several initi
Page 35 and 36: growth software compared to its maj
Page 37 and 38: esearchers and technicians in R&D p
Page 39 and 40: 59. Malaysia can further enhance it
Page 41 and 42: Annex Table 1.2. Malaysia: MDGs Ach
Page 43 and 44: 64. The Malaysian experience has al
Page 45 and 46: economic growth. The ETP is expecte
Page 47 and 48: 77. According to the Global Competi
Page 49 and 50: development of infrastructure throu
Page 51 and 52: a. Northern Corridor Economic Regio
Page 53 and 54: The challenge is for financial inst
Page 55 and 56: Original Equipment Manufacturing (O
Page 57 and 58: Intensify formalisation to promote
Page 59 and 60: Sukuk market has experienced unprec
Page 61 and 62: For innovation to become an importa
Page 63 and 64: y the United States (MYR2.3 billion
Page 65 and 66: (vi) (vii) Sharing Eexperience and
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institutions as well as Islamic pro
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Liberal Foreign Exchange Administra
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Issues/Challenges Facing the Islami
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Funding from Government of Malaysia
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programmes in the country. Initiati
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labeling and branding of Halal prod
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to over 200 industrial estates or p
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member countries can be provided te
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Figure 6.5: MATRADE Business Strate
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offered by the 35 MTCP training ins
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case of the economies in transition
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Key Challenges Facing the MTCP
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iii. Conclusion 185. Above diagnost
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Country Economic Work for Malaysia - Islamic Development Bank

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