Malaysian Economy Services Sector PDF

MALAYSIAN ECONOMY SERVICE SECTOR IN MALAYSIA CHAPTER 5 1 Learning Outcome Explain the importance and contribution of services sector Explain the role of services sector to Malaysian economy Explain growth of services sector...

MALAYSIAN ECONOMY SERVICE SECTOR IN MALAYSIA CHAPTER 5 1 Learning Outcome Explain the importance and contribution of services sector Explain the role of services sector to Malaysian economy Explain growth of services sector Government policy that involve in the service sector 2 Overview Introduction The role of service sector in Malaysia Types of service sector in Malaysia Service sector development in Malaysia Growth of service sector Government policy 3 Introduction The service sector makes an important contribution to GDP in most countries, providing jobs, inputs and public services for the economy. The service sector is an important component of any country's economy. It makes a direct and significant contribution to GDP and job creation, and provides crucial inputs for the rest of the economy, thus having a significant effect on the overall investment climate, which is an essential determinant of growth and development. 4  The Role of Service Sector in Malaysia The services sector assumes an increasing share of GDP as the economy matures, as is evident in the case of developed countries. As Malaysia moves towards becoming a developed nation, greater emphasis is placed on the development of the services sector to serve as the main engine of growth to propel and sustain the economy. It makes a direct and significant contribution to GDP and job creation, and provides crucial inputs for the rest of the economy, thus having a significant effect on the overall investment climate, which is an essential determinant of growth and development. 5 The Role of Service Sector in Malaysia Figure 5.1 Employment by Economic Activity (DOSM) 6  SERVICES SECTOR DEVELOPMENT IN MALAYSIA Nowadays, services sector is an important engine of the global economy development and it continues to grow vigorously. The progress of globalization, government liberalization, and the rapid advancement of information and communication technology (ICT) contributes to the continual acceleration of this sector. 1 The services sector has successfully played its role as one of the main economic builders to many economies throughout the world. For instance, it is the leading sector in GDP contribution for countries like US, Japan, Brazil, India, and Singapore. 7 SERVICES SECTOR DEVELOPMENT IN MALAYSIA Figure 5.2 Contribution of Service Sector by Countries, 2018 8 Source : The World Factbook  SERVICES SECTOR DEVELOPMENT IN MALAYSIA SERVICES SECTOR SHARE TO GDP AND SHARE OF EMPLOYMENT IN ASIA USD160 billion of value added – the 5th in South East Asia Employment in services sector accounted for more than 60% of workforce 9 SERVICES SECTOR DEVELOPMENT IN MALAYSIA In Malaysia, services sector is ranked evidently as the main contributor to the GDP. In 2020, it has recorded a remarkable performance where 57.7% of the 5.3% economic growth rate is represented by services trade (9th Malaysia Plan, 2006). Some of the main services sectors that generated vigorously the revenues for the economy are travel, transport, telecommunications, computer & information and other business services. On the exports side, these four components accounted for 85.8 per cent (2015: 86.1%), while for imports the share was 78.6 per cent (2015: 79.4%) In terms of world services exports, Malaysia is among the top 30 contributors (with a total of USD19.0 billion in 2005.) It is also among the top three leaders in ASEAN after Singapore and Thailand. 10 SERVICES SECTOR DEVELOPMENT IN MALAYSIA Malaysian economy witnessed GDP growth of 4.5% in quarter four of year 2016. On a quarter-on-quarter seasonally adjusted basis, the GDP has grown 1.4%. It becomes important to mention that Malaysia follows the calendar year as the financial cycle. On the production side, Services sector remained as the main impetus for economy growth in quarter 4, 2016. For the year 2016, Malaysia’s economy has grown 4.2% with a value of RM 1,107.9 billion at constant and RM 1,229.4 billion at current prices. Services sector has contributed 54.6% to the GDP growth. The sector has recorded the growth rate of 5.5% in Q4 2016. Agricultural sector has recorded decline of 2.4% due to negative growth in Oil Palm and Aquaculture. 11 12 SERVICES SECTOR DEVELOPMENT IN MALAYSIA DIGITAL ECONOMY IS AN EMERGING CONTRIBUTOR TO THE MALAYSIA ECONOMY One of new components in the services sector due to growing digitalization and use of technology in economic activity (IR 4.0) Related to e-commerce activity in the ICT sector Positive performance trend between 2015-2017 Value-added – 9% 13 Employment – 5.4% SERVICES SECTOR DEVELOPMENT IN MALAYSIA The transformation of the economy will be characterized by economic sectors moving to higher value-added economic activities, where knowledge, innovation and productivity are central to value creation. For Malaysia, given the existing strong manufacturing and services base, movement towards higher value-added activity will be driven by the existing and new industries migrating up the value chain, such as in the areas of advanced electronics as well as green and resource-based industries. This will be strongly complemented by the development of knowledge-intensive services, including computing, information and communication technology (ICT), research and development (R&D), health and education, as well as manufacturing-related support services such as logistics, marketing and branding. Of significance, while multinational and large domestic corporations will remain important, small and medium enterprises (SMEs) will be central to the economy. A broad base of highly dynamic, innovative and competitive SMEs will be a critical and prominent feature of a high value-added, high-income Malaysian economy 14 SERVICES SECTOR DEVELOPMENT IN MALAYSIA Source: Financial Sector Blueprint 2011-2020, 15 BNM SERVICES SECTOR DEVELOPMENT IN MALAYSIA 16 POLICY & PLANNING IN MALAYSIA SERVICES SECTOR In the Eleventh Malaysia Plan, 2016-2020, the services sector will continue to be the primary driver of the economic growth. The strategies are formulated to enhance the competitiveness and resilience of the services sector and promote the migration into high value and knowledge-intensive services activities. The main growth contributors will be the wholesale and retail trade, financial services and communications subsectors, supported by strong household spending and stable labour market condition. Greater focus will be given to the modern and knowledge-intensive industries, including halal, ecotourism and information, communications and technology (ICT). 17 POLICY & PLANNING IN MALAYSIA SERVICES SECTOR The development of the services sector is guided by the Services Sector Blueprint, launched in 2015. The Blueprint aims to unlock the potential of the sector and transform it to become more knowledge-intensive and innovation-led. The services sector is expected to grow at 6.8% per annum and contribute 56.5% to the GDP in 2020, and provide 9.3 million jobs. 18 POLICY & PLANNING IN MALAYSIA SERVICES SECTOR Malaysia Statistics of International Trade In Services 2020 recorded the highest deficit ever at RM47.4 billion. In 2020, Malaysia’s exports of services recorded RM92.6 billion as compared to RM170.2 billion in the preceding year resulting from a disruption in the key services components, namely Travel and Source: DOSM Transport. 19 POLICY & PLANNING IN MALAYSIA SERVICES SECTOR Imports of services decreased to RM140.1 billion as against RM181.1 billion in 2019, relatively a slower decline than exports of services. Travel, the mainstay of Malaysia’s services trade all this while has faced a challenging situation which led to the highest deficit in services in 2020. Telecommunications, computer and information services have seen a windfall opportunity throughout the year 2020 in the forms of teleworking, video streaming, cloud computing and other digital services. 20 POLICY & PLANNING IN MALAYSIA SERVICES SECTOR Figure 5.3 Malaysia’s Total Trade in Services, 1885-2020 (DOSM) 21  Figure 5.3 Selected Regulatory, Governance and Innovation-related Indicators, 2016-2020 2016 2020 Score (0-100) Rank (Out of 143) Score (0-100) Rank (Out of 143) Ease of starting a business 95.3 14 83.3 97 Logistics performance 72.6 24 54.0 40 Regulatory quality 60.9 78 59.8 40 Knowledge-intensive 25.2 51 27.2 54 employment, % of workforce (2014) Tertiary enrolment, % gross 38.53 68 45.1 65 (2013) ICT use, 2015 47.6 54 65.2 52 ICT access, 2015 66.1 55 74.8 44 Source: Global Innovation Index 22 11th Malaysia Plan 23  11th Malaysia Plan Chapter 8 Re-engineering economic growth for greater prosperity 24 POLICY & PLANNING IN MALAYSIA SERVICES SECTOR Services Sector Blueprint by EPU Financial Sector Blueprint by BNM 25 SERVICES SECTOR BLUEPRINT 26 Services Sector Blueprint by EPU  Services Sector Blueprint Key Challenge : ○ Contribution of services sector to GDP is relatively low compared with developed countries ○ Mix of services sub-sectors skewed towards lower productivity and lower knowledge-intensive subsectors ○ Growth of total investments in the services sector remains lower than the Manufacturing Sector ○ Services share of exports remain low 27 FINANCIAL SECTOR BLUEPRINT 2011-2020 28 Source: Financial Sector Blueprint 2011-2020, BNM  Conclusion The services sector will continue to be the key driver of growth. Growth in the sector is expected to increase significantly by 6.9% per annum, increasing its share to the GDP from 53.8% in 2015 to 56.5% in 2020. The sector is expected to record broad-based growth across all subsectors. The wholesale and retail sub sector will continue to be the main contributor, expanding by 5.8% per annum, supported by strategies to modernise the subsector as well as enhance the efficiency and effectiveness of the supply chain. The real estate and business services subsector is expected to expand by 7.9%, followed by the finance and insurance sub sector by 6.1%. 29