Assignment 2

BME 2044 Malaysian Economy

Prepared for: Madam Sherly George

Group members

Mohamad Fairuz Bin Yahaya 1041105413

Salman

Table of content

Introduction

Service industry

The service industry can be determined as an Industry that provides

services rather than goods. Economists divide the products of all

economic activity into two broad categories, goods and services.

Industries that produce goods (tangible objects) include agriculture,

mining, manufacturing, and construction. Service industries include

everything else: banking, communications, wholesale and retail trade,

tourism, telecommunication, all professional services such as engineering

and medicine, education all consumer services, and all government

services. The proportion of the world economy devoted to services rose

rapidly in the 20th century. In the U.S. alone, the service sector accounted

for more than half the gross domestic product in 1929, two-thirds in 1978,

and more than three-quarters in 1993. Worldwide, the service sector

accounted for more than three-fifths of global gross domestic product by

the early 21st century. As of in Malaysia, we can see that service sector

continuing to drive the Gross Domestic Product (GDP) each year.

(On-line source from "www.worldbank.org/depweb/beyond/beyondco/beg_09.pdf”)

Everything that grows also changes its structure. Just as a growing tree constantly

changes the shape, size, and configuration of its branches, a growing economy changes

the proportions and interrelations among its basic sectors agriculture, industry, and

services. We can see in a middle and high income country, whereby agriculture is not the

main contributor to a country GDP which is different for service industry the main driver

of the economy. Malaysia aim to become a high income country is no doubt heading into

the direction of high income country. There for we can fore cast the demand for more

expert and labor in the service industry will continue to rise in the near future. For the

purpose of this research, we decide to focus on the tourism industry and look at it from

economy point of view.

In this report we will also discuss further about:

The importance of tourism industry

How tourism sector have contribute to the GDP of a nation and more specifically

the Malaysian economy..

Factor that effect tourism industry

Challenges and issue for tourism industry.

Suggestion on how to improve the industry.

The Growing Importance of Service Industry.

We are now a "service economy" more than half of the employed population is not

involved in the production of food, clothing, houses, automobiles, and other tangible

goods. History has told us that the shift of employment to the service industries has been

particularly dramatic. To fully understand the importance of service industry, we need to

first understand why there is a shift in the level of employment towards service sector.

Year after year we can see that the employment level is more focus on service rather than

other sector such as manufacturing and agriculture.

In the United States, a research has been done to investigate the reason behind the shift in

employability. In table 2 (below) we can see the change in employability of labor.

Average annual rates of change of employment (1929 - 63) by industry have been

calculated at the sixty-one industry level of detail provided by the National Income

Division of the Office of Business Economics. Thirty-eight of the industries are in the

goods sector twenty-three in the service sector. The fraction of the industries in each

sector experiencing different annual rates of growth is also shown. We see that a large

percentage of the service industries had rapid rates of growth of employment and only a

very few had decline or slow rates. For the goods industries, it is the opposite. Almost one

third of the goods industries showed an absolute decline in employment between 1929

and 1963, while less than one-sixth of them had rates of growth in excess of 2.5 per cent

per annum. Only two of the service industries showed declines in employment and almost

half of them grew at rates exceeding 2.5 per cent. It appears that the generalization about

the shift of employment to services has considerable validity at the detailed industry

level.

(Source: 1929, NoJional Income, 1954 E4ilion, Table 28, pp. 202—3; 1963, Survey of Current Business, July. 1964, Table 55, p. 30.)

According to economy expert, Allan G. B. Fisher in his book, The Clash of Progress and

Security, published in 1935, "We may well now turn to examine what much careful

generalization of available fact shows to be the most important concomitant of economic

progress, namely, the movement of working population from agriculture to manufacture,

and from manufacture to commerce and services."

The shift of employment to services has many important implications. The trends

discussed here may be offset by other changes that are also taking place in the economy,

but they serve to indicate the likely effects of the relative growth of services, other things

remaining the same. With the growth of the service industries, there also increase some

opportunity. These opportunities include:

Growing employment opportunities for women and older workers.

Growing opportunities for part-time employment and urban self-employment.

Growing need for workers with more formal education.

Possible decreasing importance of unions and growing importance of professional

organizations.

Possible trend toward greater personalization of work.

Growing importance of small firms.

Growing importance of nonprofit organizations (public and private).

Declining relative importance of physical capital.

Growing stability in employment and, to a lesser extent, in output.

Possible increase in cyclical variability in output per man-hour.

(Source National Bureau of Economic Research)

Tourism and Malaysian Economy

Malaysia is a great tourism destination due to its outstanding combination of both modern

and cultural ways. White sandy beaches, 19 national parks, jungle, hill resort and

Southeast Asia’s highest mountain, Mount Kinabalu also help in attracting large number

of tourists. Travel and tourism is the country’s second largest income spinner after

manufacturing. This explains how important tourism is to the Malaysian economy. The

Tourism department was set up in 1957 but they hardly have any data so it’s very difficult

to say how tourism effected the economy back then. Back then tourism was not very high

in Malaysia anyways. The department was quiet ineffective. The department was

upgraded to the Tourism Development Corporation in 1972. In the 80’s increased

finances meant that more people were had their own cars and better road transportation

services were provided which in turn increased tourism as tourists could now travel easy

from place to place without having to worry about the method of travelling. The

government has steadily increased the allocated budget for this sector over the last few

years. It has been increased from RM605.5 million in the 7th Malaysian plan to

RM1009.0 million in the 8th Malaysian plan period, experiences 60% increase in its

allocation (EPU, 2001). In the 9th Malaysian plan period, the allocation reached to

RM1367.0 million (EPU, 2006).

Malaysian economy’s current account balance remains relatively resilient with

manufacturing and tourism taking the lead. Tourism industry is currently the third largest

foreign exchange earner, after manufacturing. Tourism receipts increase significantly over

the last three decades. Increase in tourism receipts in 1982-2007 periods was about 42

times on an average of 12.42 per cent annually with an average annual growth of 17.58

per cent. Tourism receipts increase with the increase of tourist arrivals. For instance,

tourists’ arrivals have increased from 2.7 million in 1982 to 13.3 million in 2002, and to

20.97 million in 2007 with an average annual growth rate of 10.17 per cent(figure 1).

Figure 2 Ministry of Tourism Malaysia

Figure 3 Ministry of tourism Malaysia

The Malaysian Ministry of Tourism highlighted five policies: -

To emphasize on the development of the tourism industry and attain maximum

economic benefit from the industry.

To minimize negative socio-cultural and environmental impact of tourism in the

process of development.

Third, to tailor-plan the tourism development in line with the state’s unique

characteristics of beautiful nature.

Fourth, to encourage tourists to spread development to rural region and reduce

concentration in the town area to provide direct benefit to the rural people.

Fifth, attain greater participation from the private sector in developing the

tourism industry with the public sector as the coordinator, supporter and

facilitator.

With the rise of tourism came the gargantuan rise in hotel and hotel related services (989

hotels in 1990 to an almost 80 per cent increment at 1,776 hotels in 2001). This created a

flow of jobs in the tourism industry and further improved the experience of tourists who

came to visit Malaysia.

Figure 4

The Malaysian economy has made an enormous leap since 1957.  The

transformation of the country's economy from one based on primary commodities like

tin, rubber and palm oil to a dynamic and vibrant industrializing nation is attributed to a

variety of pull factors.  Malaysia's political and economic stability, prudent and pragmatic

investor friendly business policies, cost productive workforce, developed infrastructure

comparable to that of any western country and a host of other amenities make this

country an enticing place for investors.  

Malaysia has achieved 14 continuous years of trade surplus.  Their total trade in

2011 reached RM 1.269 trillion, an increase of 8.7% compared to 2010, the highest total

trade ever recorded.  Exports showed a positive growth with an increase of 8.7% to RM

694.55 billion for the year 2011 and imports rose by 8.6% to RM 574.23 billion. 

 Although initially after independence Malaysia was an agriculture based nation,

now it has changed completely. Agriculture now contributes very little to the overall

employment rate and GDP of the nation. Manufacturing has become the country’s main

source of income and employment followed by tourism.

It’s been observed that the GDP of the nation is directly related to the income

from tourism.

Figure 5 the economic growth rate

Source: Investment Lobby

Figure 6: Growth rate

Source : National Statistics

Tourism industry has once again seen an increase this year. Tourist arrivals rose to

24,714,324 compared to 24,577,196 in 2010 while receipts climbed to RM58.3 billion

compared to RM56.5 billion the previous year.

The top ten tourist generating markets from January to December 2011 were Singapore

(13,372,647), Indonesia (2,134,381), Thailand (1,442,048), China (1,250,536), Brunei

(1,239,404), India (693,056), Australia (558,411), United Kingdom (403,940), Japan

(386,974) and Philippines (362,101).

The tourism sector contributed a total of RM37.4bil to the Gross National Income (GNI)

of the country.

Overall it is easy to understand why the Malaysian government is so persistent with the

tourism industry. Its contribution to the national income and employment is enormous. In

2011 alone, a total of 55,565 jobs were created in the tourism sector. The international

shopping attractions have also earned a place in the hearts of the international tourist

community, as evidenced by the growth in shopping spend for the year 2011. Malaysia

has premised itself as a diverse tourist attraction that offers world class attractions such as

culture & heritage, ecotourism, Meetings, Incentives, Conventions and Exhibitions

(MICE), shopping, international events and health tourism, which affords visitors from

all over the world a plethora of choices to enjoy.

In a survey that have been done by us, we have conclude that there are

several factor that drive the tourism from other country to travel to other

country. They are:

Transportation

Culture

Shopping

healthcare

political stability

Transportation and tourism

Transportation links the various destinations and ferries

people, goods, and services. Tourism is all about travel; and the

role of transportation in its operation is vital. It is largely due to the

improvement of transportation that tourism has expanded. The advent

of flight has shrunk the world, and the motor vehicle has made travel to

anywhere possible. This reality coupled with changing work patterns and innovative

marketing has driven international mass tourism through the years. Culpan (1987, p 546)

identified transportation modes and management as the “important ingredients of the

international tourism system,” acknowledging that linkage by air, sea and land modes is

essential for the operations as well as the availability of support services such as fuel

stations, auto repair, motels and rest facilities for land travel.

Advances in transportation have widely eased travel. It is attributed to the ease and

accessibility of modern transport that has spurred the widespread growth of nature

tourism within the United States and overseas. Transportation in tourism is most often

seen as just part of the tourism system which is in charge of bringing the tourists to the

destinations, a means of getting around the place and

leaving it once the duration of the trip is over. Page and Lumsdon (2004) contend that the

transportation system of a tourist destination has an impact on the tourism experience

which explains how people travel and why they choose different forms of holiday,

destination, and transport. The improvement in transportation modes plus low fares has

increased the accessibility of areas once considered off-the-beaten-path. Access to

tourism sites vary according to the nature of the site, the state of infrastructure, and the

efficiency of the public transport system.

Malaysia as a Shopping Destination

It is almost a given that most tourist activity is inextricably linked to some form of

shopping, through food and drink, souvenir purchases or through activity choices. Of

course there is a degree of supposition to aligning shopping and tourism because it is

difficult to plot retail spending patterns against tourists and non-tourists because of the

differing nature of tourist activity.

The following categories attempt to define the types of shopping activity that are tourism-

related, deduced from a range of previous research into the area

Shopping as an ancillary function of the visitor attraction (eg gift shops) or

destination (eg ‘bucket and spade’ shops at the seaside)

Shopping for travel and tourism products within retail sectors which are, as a result,

influenced by seasonality. Examples of this include swimming costumes, tents

and travel accessories.

Shopping for essentials whilst on holiday, carried out mainly by those taking self-

catering holidays who need to stock up on food and household items.

Shopping as a distinct tourism activity, where the experience is designed as a

‘shopping destination’ and for the most part therefore, requires participants to

travel as a pre-requisite to shopping.

Shopping to experience local culture through an engagement with local products,

local craftspeople and a desire to purchase something which truly ‘belongs’ to and

is ‘from’ the destination.

Why shop?

There are numerous issues at play in trying to decipher what is happening with tourists

when they engage in shopping activity. Coles (2004: 379) identifies

'the spatial, temporal and purchasing behaviour of tourists as shoppers, the type and

nature of goods acquired as part of shopping episodes and tourists’ shopping

performances'

In highlighting these tourist performances Shields (cf. Coles, 2004:379) identifies a social

emphasis on consumption which places shopping at the heart of many people's

recreational activities.

It is crucial to recognize that shopping in this context is discussed as a leisure activity, as

part of the tourist experience and as a result is embedded within the experience that

tourists have come to expect. There is, therefore, a powerful argument that destinations

must seek to:

define the ‘local’ product

define the brand for that local product

seek to support traditional and local crafts and producers

define the destination shopping profile (‘quaint’ market towns, ‘modern’ shopping

center)

position shopping and retail within marketing material.

What motivates tourists to become shoppers?

Littrell et al. (1994:16) describes four types of tourist and demonstrates the link between

their tourist activity and their shopping patterns. This is summarised in the table below

and clearly shows a link between the different styles of shopping behaviour and different

travel groups

Tourist interest Shopping preference

Culture Local arts and crafts

Natural and built heritage Local arts and crafts and printed materials

Urban entertainment Souvenirs to display at home which often carry the logo of the visited

destination

Active outdoor pursuits Souvenirs associated with these outdoor activities

It is the purpose of the original trip, linked to the type of person who would engage in a

given activity that influences shopping choices. However, when shopping becomes an

activity for the sake of shopping it is somewhat different, and “Dhokalia identified three

main motives for shopping: utilitarian, family or social interaction and shopping as a

pleasure activity in its own right with social and relaxation dimensions” (Moscardo

2004: 305).

Malaysia is a great shopping destination in Southeast Asia. Malaysians love shopping,

which explains the huge number of luxury malls, street-side stalls and stores in the

capital, Kuala Lumpur. If you are a shopaholic, the best time of the year to visit is during

The Malaysia Mega Sale Carnival, around August – September when the entire country

offers large discounts.

From the exotic and antique to modern electronic and audio-visual equipment, the

constantly changing product range available in Malaysia includes an extensive collection

of designer labels from the fashion capitals of the world. The exemption of duty on a

number of items has resulted in more competitive pricing and makes shopping in

Malaysia an even more attractive option. Malaysian duty-free zones are on the islands of

Labuan and Langkawi. There are also some duty-free shops in Kuala Lumpur and

Penang, international airports and city centres. Duty-free items like cameras, watches,

pens, cosmetics, perfumes, mobile phones, computers, cigarettes and liquor are among

the most inexpensive in the world. Cash is accepted at night markets while major credit

cards are accepted in most shops in the malls and shopping complexes.

Local regulations ensure items are price-tagged and prominently displayed, particularly at

department stores in shopping complexes where prices are fixed. High-class shopping

malls where everything is designed for shopper convenience, contain banks, foreign

currency exchange counters, supermarkets, restaurants and hundreds of shops offering a

tremendous range of goods.

For light, casual shopping, there are bazaars, roadside stalls and night markets in towns

throughout the country. A major attraction is the colorful, bustling night market or 'pasar

malam' - found in most neighborhoods on certain days of the week - which stocks a

bewildering variety of goods, local foods and fruits. Shopping at one is a fun experience.

Despite the low prices, bargaining at nights markets is workable. It can be quite a

humorous exercise as the traders are generally friendly and enthusiastic.

Culture as a tourist attractions

Tourism has assumed a vital role in the development of destinations around the world. In

most cases, culture is a major asset for tourism development as well as one of the major

beneficiaries of this development. Culture is a major factor in the attractiveness of most

destinations, Cultural resources were seen as part of the cultural heritage of destinations,

largely related to the education of the local population and the underpinning of local or

national cultural identities. Tourism, on the other hand, was largely viewed as a leisure-

related activity separate from everyday life and the culture of the local population. This

gradually changed towards the end of the century, as the role of cultural assets in

attracting tourists and distinguishing detestations from one another become more obvious.

In particular, from the 1980s onwards “cultural tourism” became viewed as a major

source of economic development for many destinations in most of the world.

(Source: Estimates from UNWTO figures)

In the U.S., surveys of “historic/cultural travellers” indicate that 30% of domestic tourists

are influenced in their choice of destination by a specific art, cultural or heritage event or

activity. The volume of historic/cultural travel grew 13% between 1996 and 2002, from

192.4 million person-trips to 216.8 million person-trips, slightly faster than domestic

travel as a whole. The important role of art and heritage is also confirmed by market

research from Canada, which indicates that almost 100 million trips taken by U.S.

residents in 2003 were culture-related, almost 50% of the total (Table 2.3).

(Source: Tourism Canada)

These figures show the importance of culture in influencing tourism flows. Culture is also

seen as an important aspect of the tourism product by NTAs, National Tourism

Organizations (NTOs) or regional marketing organizations because it is seen as a very

large market which attracts high spending visitors (Figure 2.2), which is growing rapidly

and is seen as a “good” form of tourism to promote (Richards, 2001). Cultural tourism is

particularly attractive because of the raft of benefits it can deliver to local communities.

According to the National Trust for Historic Preservation in the U.S., these benefits

include:

Creating jobs and businesses.

Increasing tax revenues.

Diversifying the local economy.

Creating opportunities for partnerships.

Attracting visitors interested in history and preservation.

Increasing historic attraction revenues.

Preserving local traditions and culture.

Generating local investment in historic resources.

Building community pride in heritage.

Increasing awareness of the site or area's significant

In many urban areas, cultural institutions have been used to spearhead the regeneration of

run-down areas, rejuvenating local economies and increasing property values. In rural

areas, tourism is used to support traditional livelihoods and crafts and sustain

communities threatened with out-migration. For example, a visit to Perak Darul Ridzuan

would not be complete without purchasing a “labu sayong”. The demand for this

handicraft from tourist help keeps this traditional tradition alive so that it can be learned

and brought forward to the future. Not only this it also help motivate the young people to

learn this traditional method and culture to younger generation, but it also help create a

employment opportunity in the market place. By commercialize this product

internationally, we can boost Malaysia attraction and also helps introduced Malaysia to

the international market. Some other handicraft that exist in Malaysia that we need to

keep alive are

The art of making “keris”

The art of making “batik”

Wau Bulan

And many more. It is truly that Malaysia Truly Asia.

The closer links between tourism and culture are also reflected in governance structures

at national and regional levels. A growing number of countries (about 25 in the world, of

which 4 in the OECD area) are combining administrative structures for culture and

tourism, for example, in a single ministry. In the case of the Malaysia, the link between

tourism and culture was originally made on the basis of the importance of “national

heritage” for tourism and vice versa. Now, countries are beginning to link creativity and

tourism directly. For example, with the help of the government, Malaysia now have 4

world heritage site. They are Melaka and George Town along the Straits of Melaka,

Gunung Mulu National Park in Sarawak and Kinabalu Park in Sabah. The listing of

AHLV by Unesco is also 953rd on the World Heritage List in the current session of the

World Heritage Committee here, and it also "testifies another dimension of the global

recognition of Malaysia as a nation endowed with and committed to the conservation and

protection of its world renowned heritage".

 

Health Standards and Tourism

World wide tourism is always heavily affected by health standards and medical issues of

any nation. Tourists travel to other country to relax and to let go off stress and tension but

if going to another country means living in fear of an epidemic that could affect you any

time or any moment is not what tourists want.

SAARC, H1N1 or Foot and mouth disease have all damaged world tourism enormously

and its not only the infected country that is hampered but also the neighboring countries

since there is always a fear of the infection spreading. A more constant reminder is the

low number of tourists in countries suffering from AIDS. Countries that rely heavily on

tourism may be hit very hard due to these circumstances. The fear of an epidemic can

tarnish a countries reputation regarding health standards quiet heavily and this fear

usually stays for a very long time even if the outbreak is brought under complete control.

Tourists prefer going to countries with good medical conditions so that in any life

threatening case they can get maximum service. It is very important for countries

attracting tourists to be able to show their advancements in the medical sector in order to

attract more elderly tourists or families with small children.

Political Stability and Tourism

Political stability is absolutely necessary if a country is to depend on tourism regarding

it’s GDP. Any sort of criminal acts or display of political instability can carnage the

goodwill of the nation forcing tourists to opt for other more safer and controlled

countries. Tourists are often regarded as longing for relaxing and unconcerned holiday

making and therefore are sensitive to events of violence in holiday destinations. Faced

with

violent events in a country, potential tourists might fear for their lives or physical

integrity, might simply anticipate becoming involved in stressful situations, or be unable

to visit the places they wanted to visit according to schedule. Tourists might therefore

choose an alternative destination with similar characteristics but in a more stable

condition. If the violence becomes more widespread and prolonged, official authorities in

the countries where tourists originate will start issuing advice against traveling to the

destination. Tourist operators will start eliminating tours to the country due to insufficient

bookings, fear of liability suits, and the like and promote other destinations instead. For

these and similar reasons, one expects political violence to have detrimental impacts on

tourism.

Political violence is the exercise of such force that is politically motivated and can be

exercised by governmental or anti-governmental groups. Depending on its exact

definition, political violence is regarded as an essential ingredient of the somewhat

broader notion of political instability.

Malaysia has always been pretty much politically stable but has always been sensitive to

problems in other countries which is shown by the dip in arrival receipts during the final

years of the Cold war and the Gulf war. It is also important to maintain a good political

alliance with neighboring nations to ensure greater contribution from those countries.

Obviously if Malaysia had a bad relationship with China then Chinese tourists would be

discouraged from visiting Malaysia.

Issue and challenges

Taxi and Tourism

Taxi service in Malaysia has become quiet an industry. One has only to travel a little to

see how busy the taxi drivers are taking passengers from one destination to another. As a

tourist in an unknown country tourists generally tend to travel by taxis. Taxi drivers have

the huge responsibility to give a first good impression. Well-trained taxi drivers can help

shape and improve tourists’ perception about Malaysia. If the tourists feel welcomed and

comfortable it is very likely that they will come back due to the hospitality but on the

other hand if the tourists feel hard done by or duped they might go for a different country

next time. Although most taxi drivers are sincere and sufficiently educated there are

always some cases where the passengers were tricked into paying more or taken to the

wrong place and then just left there.

 For females travelling on their own, and for anyone travelling alone at night, its even

more dangerous. This broad perception of safety concerns range from unwanted attention

from drivers (for female passengers) to robberies and incidents of rape in remote

locations. In 2008, “The Expat” magazine ranked Malaysian taxis last out of 23 countries

surveyed. The Malay Mail conducted a survey. In the survey, over 200 respondents,

which are made of foreigners coming from more than 30 countries worldwide, were

given an opportunity to review and assess the service provided by the local taxis. Among

of the criteria measured are quality of taxi, ease of availability, driver’s courtesy level and

driver’s job knowledge. Each of the criteria was assessed on a 10-point scale. Malaysia

taxi scored a poor average point of 4.58 while the neighboring country average was 8.44.

The most frequent complaints by the respondents were the overcharging practice and the

refusal to take passengers who were not agreeable to a flat fee.

Souce: department of statistics malaysia

In terms of value of gross output and value added, freight transport by road was the top

contributor, accounting for 78.5 per cent and 75.0 per cent respectively. This was

followed by bus services with 11.7 per cent and 13.8 per cent and taxis & rental of cars

with 4.3 per cent and 5.9 per cent respectively.

Recently a number of cases regarding customer harassments have come out. Most of the

victims tend to be tourists or foreigners. It seems that some taxi drivers tend to think of

them as easy prey. This has become quiet a predicament. It is quiet obvious that the taxi

industry has a lot of potential but it required more rigid invigilation. As such the

government must take steps to better train the taxi drivers and provide good vehicles to

reduce accidents and improve customer service and satisfaction.

This might attract more tourists and in turn contribute more to the countries National

GDP and economic growth. Also if the Government can provide more subsidies to taxi

drivers it would help them get further economically and improve the overall standard of

living of the nation.

Health hazard and Tourism

Malaysia has a good reputation in regards to medical conditions but the fall

in tourism during the SAARC and H1N1 virus shows how much of a blow

these epidemics can have on Malaysia’s economy. Although Malaysia itself

wasn’t that widely effected, the fear that the disease can easily cross the

border, led to a crash in the tourism industry. Malaysia has since done well

to get back and hold on to its tourists but better precautions have to be made

to ensure that infections like these cannot effect Malaysia in the future even

if it means more investment from the government in medical R&D.

Literature Review

In regard to the research made in the US, we can relate to similar changes

in our economy and work force in the service industry. The increasing role

and contribution of the services sector in Malaysia can be measured from its rapid growth

and increasing contributions to total output, total employment and export earnings of the

country. Over the last decade, the services sector has registered strong and healthy

growth, comparable to that of the manufacturing sector. In the period 1980-2005, on

average, the services sector grew by 8.3 per cent per year. And, growth in the services

sector in this period exceeded the gross domestic product (GDP) growth of 6.5 per cent

per year (Table 1).

(Source: Economic divis ion department of s tat is t ic , Malaysia)

As we can see in table 2, the growth of service industries is also quite

rapid when we compare it with the growth of service industries in the

United States. The main contributor of this data is services sub-sectors such as

finance, insurance, real estate and business services by 11.7 per cent per year; electricity,

gas and water by 9.5per cent; transport, storage and communication by 8.7 per cent; and

wholesale and retail trade, hotels and restaurants by 7.3 per cent. Government services

grew at a lower rate of 5.3 per cent per year.

(Source: Economic divis ion department of s tat is t ic , Malaysia)

In a research done by Proffesor Abul Quasem Al-amin (UKM) using the

Leontief’s input-output (I-O) framework (Leontief, Wassily, 1966; Miller and Blair 1985)

to calculate the growing trend of Malaysian economy from 1991 – 2000, he had generate

data that we can see in table 3.

(Source: The Services Sector's Contribution in the Malaysian Economy from 1990 to 2000 by Prof fesor Abul Quasem Al-amin)

The purpose of this research is to find the percentage of how much services indirectly use

in an economy. It has been noticed that the contribution of the services sector in the GDP

of Malaysia is growing progressively. However almost all researchers use direct method

like regression, correlation, coefficient of variation to show the services sector

contributions. These methods only show the direct impact of services sector in an

economy. Therefore, Proffesor Abul’s aims at studying the evolving nature of the services

consumption for production directly as well as indirectly using Leontief Input-output

analysis, that is, the service intensity directly and indirectly of different industries in the

Malaysian economy from the period 1990 to 2000.

With the direct and indirect service incentive data that have been collected, we can now

calculate the average of each type of services and the coefficient of variation (CV)

(Source: The Services Sector's Contribution in the Malaysian Economy from 1990 to 2000 by

Proffesor Abul Quasem Al-amin)

In this paper we analyzed the contribution of services sector for the production of

different industries in the Malaysian economy. This paper provided direct and indirect

service intensities that revealed the contribution of services sector in the Malaysian

economy. The findings indicate that direct and indirect contribution of the services sector

was almost same in the Malaysian economy from 1991 to 2000. The findings indicate

that the contribution of services sector almost steady during the time period and direct

and indirect intensities of other sectors, transport & communication, trade, financial

related service, public service and entertainment are quite significant and in the

Malaysian economy the service consumption both directly and indirectly are remarkably

high of different industries for their production throughout the study period.

TABLE 1: GROSS DOMESTIC PRODUCT AT CURRENT PRICES - QUARTERLY 2008-2012

(Source: Department Of Stat is t ic , Malaysia)

1st quarter 2011

The Services sector was on a steady growth path by posting 5.9 per cent in

this quarter. The Wholesale & Retail Trade sub-sector which accounts for

23.0 per cent of share in Services sector increased by 6.8 per cent led by

the retail and motor vehicle activities. In addition, the Finance &

Insurance sub-sector showed favorable momentum (6.8 per cent) mainly

attributed by higher loans and insurance premium.

The Real Estate & Business Services sub-sector rose by 8.7 per cent

driven by the trading activity in stock market. The Communication and

Transport & Storage sub-sectors eased to 6.5 per cent and 4.3 per cent

2nd quarter 2011

The Services sector remained stable by posting 6.3 per cent growth in this

quarter. The Wholesale & Retail Trade sub-sector continued to be the main

catalyst by registering a growth of 7.3 per cent. The sub-sector was

supported by the favorable momentum in the Wholesale and stable

performance in Retail segments. The Finance & Insurance sub-sector grew

by 5.6 per cent mainly attributed by higher loans and deposits.

The Real Estate & Business Services sub-sector rose by 7.6 per cent

driven by the trading activity in stock market and computer services. The

Communication and Transport & Storage sub-sectors improved further to

6.5 per cent and 4.7 per cent respectively in this quarter. In addition,

Accommodation & Restaurant sub-sector strengthened to 5.9 per cent led

by Restaurant segment.

3rd quarter 2011

The Services sector remained as the key driver of the Malaysia's economy

by recording 7.0 per cent growth. The favorable performance was led by

the Wholesale & Retail Trade sub-sector which has reached to 9.0 per

cent. The Communication and Transport & Storage sub-sectors

strengthened at 8.7 and 6.1 per cent respectively. The Communication sub-

sector was mainly spurred by the telecommunication activity, while the

water transport, highway and port & airport operation activities supported

the growth in Transport & Storage sub-sector. The Finance & Insurance

and Real Estate & Business Services sub-sectors moderated to 4.6 and 6.7

per cent respectively.

4th quarter 2011

The Services sector, with a share of 59.4 per cent to total GDP, increased

to 6.4 per cent in this quarter. Wholesale & Retail Trade sub-sector was

the main contributor followed by Finance & Insurance and Communication

sub-sectors.

In this quarter, the Finance & Insurance sub-sector improved to 6.4 per

cent underpinned by the robust performance in insurance activity. Growth

momentum of Communication sub-sector advanced to 8.8 per cent backed

by the higher usage of voice, data and multimedia services. Similarly,

Transport & Storage sub-sector continued to grow at 6.2 per cent

propelled by freight and passenger transportation.

In overall, the Services sector for 2011 remained attractive at 6.8 per cent.

1st quarter 2012

The Services sector recorded a growth of 5.0 per cent underpinned by

Wholesale & Retail Trade and Communication. The growth of 6.4 per cent

in Wholesale & Retail Trade was supported by the expansion in Retail

segment particularly in household appliances & equipments,

pharmaceutical products and personal care products. Meanwhile,

Communication expanded to 9.4 per cent propelled by the higher

consumption in mobile phone services and data communication. In this

quarter, the robust construction and oil & gas exploration activities have

stimulated the growth in Business Services.

2nd quarter 2012

The Services sector rose to 6.3 per cent supported by Wholesale & Retail

Trade and Finance & Insurance. The growth of 5.9 per cent in Wholesale

& Retail Trade was led by the Retail segment. In addition, the growth in

Motor Vehicles segment accelerated to 8.4 per cent during the quarter (Q1

2012: 0.2 per cent) propelled by the higher sales of motor vehicles.

Finance & Insurance expanded to 6.6 per cent boosted by the higher fee

income on banking activities and increase in premium income on

insurance activity. Meanwhile, Business Services picked up to 8.8 per cent

underpinned by professional services related to engineering activities.

Conclution

Sources

Online :

http://www.nber.org/books/fuch65-1

http://www.penerangan.gov.my/

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1008725&http://

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Journal:

The services sector’s contribution in the Malaysian economy from 1990 to 2000 by Al-

Amin*1, Mazharul** , & Chamhuri Siwar***