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Monday, October 25, 2021
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HomePERSPECTIVEUnlocking Malaysia's Potential for Productivity to Propel Economic Growth

Unlocking Malaysia’s Potential for Productivity to Propel Economic Growth

Malaysia’s economy has been steadily growing over the past 50 years. As a result of this development, Malaysia evolved from a low-income economy in the 1970s to a middle-income economy in the 1990s, and is now on its path to being an advanced economy and inclusive nation in 2020. The government has established the 11MP to attain this aim, which serve as a road map for the country’s in achieving last Vision of 2020. In order for Malaysia to reach its 2020 economic development targets, productivity was identified as a game changer in this plan. The Eleventh Malaysia Plan (11MP) aims to boost multi-factor productivity (MFP)1’s contribution to GDP growth to 40% by 2020, as well as increase labour productivity growth to 3.7 percent per year during the Plan’s duration. To do so, efforts must be focused on growing productivity over the next several years, despite a challenging global background defined by declining productivity, more competitive markets, and worsening global macroeconomic trends. Yet, the attack of pandemic Covid-19 has somehow impacted the continuation in maintaining the current level of economic condition.

In response to the COVID-19 pandemic, the Malaysian government reviewed the implemented measures, i.e. Movement Control Order (MCO), based on the country’s pandemic situation from time to time. Most states in Malaysia are in Phase One of the movement control under the National Recovery Plan (NRP). Kelantan, Pahang, Perlis, Perak, and Terengganu have met the required thresholds and transited into Phase 2 of the NRP. A large part of Selangor and several localities in Kuala Lumpur are under the Enhanced Movement Control Order (EMCO) from 3rd July to 16th July 2021. Only essential economic and service sectors can operate during EMCO or Phase One of NRP, with strict adherence to SOP. Interstate travel remains banned nationwide. As of 24th August 2021, Malaysia recorded 1,593,602 total COVID-19 cases, with 1,446 active clusters. The country border remains closed and only travellers with approval from relevant agencies are allowed to enter.

Productivity is commonly defined as the ratio of inputs (labour and capital) to outputs (goods and services), which reflects how efficiently inputs are used to produce output. The two forms of productivity measures are an MFP measure (which connects a measure of output to a bundle of inputs) and a single factor productivity measure (relating a measure of output to a single measure of input). MFP is a measure of the combined productivity of various inputs that accounts for the GDP growth that isn’t accounted for by capital or labour force growth. MFP measurement needs a significant quantity of data. Furthermore, because it is a composite indicator, it is less capable of informing particular productivity-boosting strategies. A single factor productivity metric, such as labour productivity, on the other hand, is easier to assess and convey at the national, sector, and company levels since it can clearly direct critical activities to generate value for the whole economy. As a result, throughout this Blueprint, a single factor productivity metric, labour productivity, will be employed. Labour productivity is generally measured at the national level as the ratio of value added to total employment. Figure 1 shows the global MFP contribution highlighting, United States, Israel, United Kingdom and Germany in compare to Malaysia. {explain on rates}

Malaysia MFP

Multi-Factor Productivity (MFP) MFP is a measure of efficiency in the utilisation of inputs. Better quality inputs directly result in the generation of greater output especially when inputs are utilised effectively and efficiently. Higher contribution of MFP in relation to economic growth will lead to a higher standard of living. From 2010 to 2018, Malaysia’s economy was supported by labour growth where labour contributed 50.7% to GDP growth while MFP was 26.5%. Nevertheless, in the last 5 years from 2014 to 2018, the performance was relatively productivity-driven as MFP’s share to GDP has increased. During this period, MFP demonstrated a growth of 1.5% that contributed 29.7% to GDP which is behind the target of 39.6% as stated in the 11MP MTR. On the other hand, capital and labour shared the same amount of growth with 1.8% respectively. With this performance, improving MFP to further drive productivity in Malaysia will need an increase in the utilisation of technology for productivity gains, better organisational management, training and engaging human capital and business friendly regulations. MPB is another avenue to boost the MFP in a holistic approach through greater collaboration and integration to implement productivity enhancement initiatives at national, sectoral and enterprise levels.

Malaysia Labour Productivity

Malaysia Labour Productivity improved by 13.61 % YoY in Jun 2021, compared with a drop of 0.44 % in the previous quarter. Malaysia Labour Productivity Growth data is updated quarterly, available from Mar 2001 to Jun 2021, averaging at 2.43 %. The data reached an all-time high of 13.61 % in Jun 2021 and a record low of -16.14 % in Jun 2020. CEIC calculates Labour Productivity Growth from quarterly Real GDP and quarterly Employment. The Department of Statistics provides Real GDP in local currency at 2015 prices, and Employment. Labour Productivity Growth prior to Q1 2016 is calculated from Real GDP based on SNA 2008 with 2010 prices, prior to Q1 2011 is calculated from Real GDP at 2005 prices and prior to Q1 2006 from Real GDP at 2000 prices.

In the latest reports, Malaysia Population reached 32.58 million people in Dec 2020. Its Unemployment Rate increased to 5.40 % in May 2020. Monthly Earnings of Malaysia stood at 803.81 USD in Jun 2021. The country’s Labour Force Participation Rate remained the same rate at 68.50 % in Feb 2021.

To ensure productivity cultures is continue during this pandemic, several initiatives were developed and executed through various platforms and methods. One of the good examples is by practicing Behavioral Insight approach to determine the right action and measurement that can be taken by organization to improve their productivity and efficiency. Behavioral Insight has been practised in many sectors such as healthcare, transportation, farming, water system and education has guiding policymakers to decide the best policy that can resolve certain issues and problems that occurred especially during this pandemic.

 

 

Dr Suhaimee Saahar @ Saabar

(Productivity Champion 2020-2022)

Director of Centre of Information and Mediawarfare Studies (CMIWS)

Faculty of Communication and Media Studies

UiTM, SHAH ALAM

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