Structural Changes in the Growth of the Malaysian Manufacturing Sector from 1970-2000
The manufacturing industry has been an important sector in the Malaysian economy for the past three decades. The important role of this sector is due not only to the fact that Malaysia today depends substantially on manufacturing for its foreign exchange earnings, but also because Malaysia is the...
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| Format: | Thesis |
| Language: | English |
| Published: |
2006
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/6081/1/FEP_2006_5.pdf http://psasir.upm.edu.my/id/eprint/6081/ |
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| Summary: | The manufacturing industry has been an important sector in the Malaysian economy for
the past three decades. The important role of this sector is due not only to the fact that
Malaysia today depends substantially on manufacturing for its foreign exchange
earnings, but also because Malaysia is the main exporter of electrical and electronic
products. This study examined the sources of structural changes in output growth of
Malaysia's economy over the 1978-2000 period, through analysis of the demand side
using the 1978, 1991 and 2000 input- output tables. This study also analysed changes in
the value-added growth patterns of the manufacturing sector over the period from 1970
to 2000. Two approaches were employed in this study, the econometric approach using
UECM (unrestricted error correction model) and the structural decomposition analysis
(SDA) approach. The econometric approach was used to determine the long-run
relationships between the value-added of manufacturing, per capita income, population
and export. The second method, the structural decomposition analysis, was used to
analyse the sources of growth and key sectors in the manufacturing industry.
Introduction of the export-oriented strategy in the 1970s and 1980s to replace the import
substitution strategy gave fresh impetus to industrial growth. This was evidenced in the
long-run movement in export and the value-added of the manufacturing sectors. As the
results show, most of the industries were non-resource based such as textiles, electrical
and electronic products, which was in line with the world's increasing demand for these
products. Export followed by domestic consumption is increasingly an important factors
of change in the industrial growth patterns for the Malaysian economy.
The second part of the study employed the input-output analysis. The analysis computed
the compositional structural change as a result of decomposition. The study found that
the Malaysian economy had undergone a number of structural changes, caused mainly
by the reorientation of industrialization strategies as well as by variations in the
composition of domestic demand.
The results of the analysis indicate that during the second half of the OPPl (First Outline
Perspective Plan) period between 1978 and 1991, domestic demand expansion in the
agriculture, light industries, heavy industries, mining and services sectors was the
dominant source of growth in the economy. However, in the comparison between
domestic expansion and export expansion, domestic demand expansion was still
dominating in all these sectors. From 1991 to 2000, the growth in the mining and heavy
industries sectors was due mainly to export expansion. Surprisingly, the light industries
sector experienced a negative growth during this period, while the agriculture and
services sectors showed declining growth trends. For the entire period between 1978 and
2000, export expansion appeared to be the dominant source of growth for the heavy
industries and mining sectors, slightly higher in percentage than the domestic demand
expansion.
The third part of the study employed the Rasmussen (1956) degree of dispersion index
using the input-output table. The findings indicate that the key sectors in 1978, 1991 and
2000 were livestock, grain mills, rubber products and basic metal industries. The
combined results of the sources of growth and key sectors in the year 2000 reveal that
domestic demand expansion accounted for most of the growth of the key sectors. |
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