1. MALAYSIA KLEMS: PRODUCTIVITY PERFORMANCE THE 2 ND ASIA KLEMS DATABASE MANAGEMENT WORKSHOP 17 OCTOBER 2014 Mazlina Shafi’i Wan Fazlin Nadia Wan Osman Malaysia Productivity Corporation

2. Malaysia KLEMS Team The project is lead by the Malaysia Productivity Corporation (MPC). Data Development Team: MPC Department of Statistics Malaysia Economic Planning Unit, Prime Minister’s Department Technical committee – data validation: Key expert, MPC, Department of Statistics, Economic Planning Unit and stakeholders.

3. To investigate the sources of economic growth of Malaysia at industry level. To develop a database on productivity by 30 industries with a breakdown into contributions from capital, labour, energy, materials and service inputs as well as total factor productivity. Coverage over the period of 2000-2010 To conduct a number of analytical research projects in areas of: analysis of productivity, industry structures, technology and innovation at the sectoral and industrial level. labour markets and skills. technological progress and innovation. link to productivity research using firm level databases. Industry benchmark among KLEMS practicing countries. Objectives of Malaysia KLEMS Project

4. 1. Output (Value Added) Source of data: National Account Data from the Department of Statistics, Malaysia (www.statistics.gov.my)www.statistics.gov.my Time period: 2001-2010 Data from National Account was grouped into KLEMS-30 industries (sectors 31 and 32 in Asia KLEMS manual is not available).

5. Share of Value Added by Main Economic Sectors Malaysia's Industrial Structure: 2001-2010

6. Share of Value Added by Industry Code Industry 2001-20052006-20102001-2010 % Share 1Agriculture8.587.918.24 2Mining and Quarrying14.1011.1512.63 3Food Products, Beverage & Tobacco2.532.612.57 4Textiles, Leather & Footware0.700.520.61 5Wood & Products of Wood & Cork0.760.680.72 6Paper & Paper Products, Printing & Publishing0.710.760.73 7Coke, Refined Petroleum Products & Nuclear Fuel3.003.133.07 8Chemicals & Chemical Products2.452.802.63 9Rubber & Plastic Products1.601.411.51 10Other Non-Metallic Mineral Products0.770.820.79 11Basic Metals & Fabricated Metal Products1.751.991.87 12Machinery0.800.740.77 13Electrical & Optical Equipment8.647.488.06 14Transport Equipment2.872.632.75 15Other Manufacturing & Recycling0.580.560.57 16Electricity, Gas & Water Supply2.592.552.57 17Construction3.352.943.14 18Sale, Maintenance & Repair of Motor Vehicles2.091.891.99 19Wholesale Trade & Commission Trade5.365.845.60 20Retail Trade, Repair of Household Goods3.895.484.68 21Hotels & Restaurants2.152.322.24 22Transport & Storage3.683.663.67 23Post & Telecommunications2.993.373.18 24Financial Intermediation7.478.487.97 25Real Estate Activities4.223.924.07 26Renting of M&Eq and Other Business Activities2.963.563.26 27Public Admin & Defense; Compulsory Social Security6.457.056.75 28Education (private)0.550.680.62 29Health & Social Works (private)0.600.700.65 30Other Community, Social & Personal Services1.171.111.14

7. Growth of Value Added by Main Economic Sectors 2001-20052006-20102001-2010 Growth Rate (%) Malaysia4.634.384.51 Agriculture3.132.652.89 Mining2.43-1.720.36 Manufacturing4.412.573.49 Construction1.005.743.37 Services5.386.946.16

8. Growth of Value Added by Main Economic Sectors: 2001-2010

9. Approach by Jorgenson, Gollop and Fraumeni was used to estimate changes in labour quality. In this way, aggregation takes into account the changing composition of labour force. This variable indicates the labour services per hour worked. It is measured as the difference in growth of labour service and hours worked. Methodology 2. LABOUR ACCOUNT

10. Data Variables No. of Employees total man hours work salaries and wages Sample 30 industries according to Asia KLEMS categories Period 2000-2012 by gender, education and age Data used in the study are taken from the preliminary version of the Malaysia-KLEMS database, which is constructed in close cooperation with the Department of Statistical Malaysia (DOSM) and Economic Planning Unit (EPU). The main sources of data are from various official publications such as National Accounts Statistics (NAS), Input-Output tables, Annual Industries Survey (AIS), Household Income Survey (HIS), Labour Force Survey (LFS), and Salary and Wages Survey (SWS) and supplemented by many unpublished sources documents provided by the DOSM for the Malaysia-KLEMS project. Data Source

11. Labour Quantity Growth by Main Economic Sector, 2001-2012 (%) 2001-20052006-20102011-2012 Malaysia1.0871.1761.197 Agriculture1.0631.1371.149 Mining0.9531.1261.182 Manufacturing0.9951.0090.988 Construction1.0261.1151.133 Services0.9660.8940.868 Labour Share by Main Economic Sector, 2001-2012 (%) Labour Quality Index by Main Economic Sector, 2001-2012

12. IndustryCategory2001-2005 2006-20102011-2012 Manufacturing NEC; Recycling unskilled14.5414.0514.04 skilled85.4685.9585.96 Electricity, Gas & Water Supply unskilled13.8313.5412.19 skilled86.1786.4687.81 Construction unskilled20.5219.4016.87 skilled79.4880.6083.13 Sale, Maintenance & Repair of Motor Vehicles & Motorcycles unskilled9.949.7310.06 skilled90.0690.2789.94 Wholesale Trade & Commission Trade, Except of Motor Vehicles & Motorcycles unskilled6.876.984.86 skilled93.1393.0295.14 Retail Trade, Except of Motor Vehicles & Motorcycles; Repair of Household Goods unskilled13.9612.599.00 skilled86.0487.4191.00 Hotels & Restaurants unskilled18.4617.9717.72 skilled81.5482.0382.28 Transport & Storage unskilled14.4213.6311.58 skilled85.5886.3788.42 Post & Telecommunications unskilled2.392.210.53 skilled97.6197.7999.47 Financial Intermediation unskilled0.540.390.32 skilled99.4699.6199.68 Real Estate Activities unskilled4.323.884.17 skilled95.6896.1295.83 Renting of M&Eq & Other Business Activities unskilled6.065.946.56 skilled93.9494.0693.44 Public Admin & Defense; Compulsory Social Security unskilled3.723.262.75 skilled96.2896.7497.25 Education unskilled1.070.950.56 skilled98.9399.0599.44 Health & Social Works unskilled2.582.291.83 skilled97.4297.7198.17 Other Community, Social & Personal Services unskilled10.659.568.23 skilled89.3590.4491.77 IndustryCategory2001-2005 2006-20102011-2012 Malaysia unskilled12.34 12.8412.72 skilled87.6687.1687.28 Agriculture, Hunting, Forestry & Fishing unskilled50.9048.7645.75 skilled49.1051.2454.25 Mining & Quarrying unskilled7.876.623.08 skilled92.1393.3896.92 Food Products, Beverages & Tobacco unskilled16.4615.4315.26 skilled83.5484.5784.74 Textiles, Textiles Products, Leather & Footwear unskilled19.3816.8212.72 skilled80.6283.1887.28 Wood & Products of Wood & Cork unskilled28.4529.0436.60 skilled71.5570.9663.40 Pulp, Paper, Paper Products, Printing & Publishing unskilled5.655.545.99 skilled94.3594.4694.01 Coke, Refined Petroleum Products & Nuclear Fuel unskilled1.991.590.68 skilled98.0198.4199.32 Chemicals & Chemical Products unskilled4.294.026.68 skilled95.7195.9893.32 Rubber & Plastics Products unskilled11.2511.6622.19 skilled88.7588.3477.81 Other Non-Metallic Mineral Products unskilled13.8813.5416.48 skilled86.1286.4683.52 Basic Metals & Fabricated Metal Products unskilled10.5811.3312.63 skilled89.4288.6787.37 Machinery, NEC unskilled5.515.277.38 skilled94.4994.7392.62 E&E unskilled3.523.326.56 skilled96.4896.6893.44 Transport Equipment unskilled6.486.635.58 skilled93.5293.3794.42 Share of Labour: Skilled and Unskilled by Industries, 2001-2012 (%)

13. Labour Quantity Growth: Skilled and Unskilled by Industries, 2001-2012 (%) Industry 2001-20052006-20102011-2012 UnskilledSkilledUnskilledSkilledUnskilledSkilled Malaysia-0.04-0.16-0.024.112.353.50 Agriculture, Hunting, Forestry & Fishing -0.70-1.212.212.571.053.06 Mining & Quarrying -0.050.970.128.118.295.17 Food Products, Beverages & Tobacco 0.48-0.300.566.930.892.47 Textiles, Textiles Products, Leather & Footwear -1.08-0.890.390.23-1.282.89 Wood & Products of Wood & Cork -0.75-1.390.380.23-2.991.55 Pulp, Paper, Paper Products, Printing & Publishing 0.02-0.380.172.490.763.55 Coke, Refined Petroleum Products & Nuclear Fuel 0.19-0.180.0317.332.184.72 Chemicals & Chemical Products -0.550.120.222.521.134.58 Rubber & Plastics Products 0.38-0.490.565.70-3.092.98 Other Non-Metallic Mineral Products -0.15-0.530.563.59-2.493.93 Basic Metals & Fabricated Metal Products -0.21-0.440.520.821.652.97 Machinery, NEC0.060.10-0.090.493.074.27 E&E-0.34-0.220.16-3.66-0.933.12 Transport Equipment 0.050.260.195.042.923.11 Manufacturing NEC; Recycling -0.51-0.330.380.050.372.36 Industry 2001-20052006-20102011-2012 UnskilledSkilledUnskilledSkilledUnskilledSkilled Electricity, Gas & Water Supply 0.08-0.950.294.431.693.69 Construction0.580.030.535.482.573.02 Sale, Maintenance & Repair of Motor Vehicles & Motorcycles 2.34-0.04-0.5720.281.90-4.05 Wholesale Trade & Com. Trade, Except of Motor Vehicles & Motorcycles -0.23-0.040.04-1.952.91-0.32 Retail T., Except of Motor Vehicles & Motorcycles; Repair of Household Goods -0.45-0.34-0.751.602.0318.28 Hotels & Restaurants 0.100.54-1.474.984.99-7.31 Transport & Storage0.35-0.01-0.196.982.29-1.50 Post & Telecom.-0.160.080.030.662.885.20 Financial Intermediation -0.04-0.030.003.352.304.42 Real Estate Activities -0.680.270.14-3.148.883.32 Renting of Machinery & Equipment & Other Business Activities 1.260.40-0.1214.224.06-0.16 Public Admin & Def.; Compulsory Social Security -0.07-0.290.065.312.264.81 Education0.03-0.060.015.623.641.70 Health & Social Works 0.14-0.09-0.079.095.62-0.33 Other Community, Social & Personal Services -0.81-0.14-0.430.815.21-6.37

14. Labour Quality Index by Industries, 2001-2012 Industry 200120022003200420052006200720082009201020112012 Malaysia1.0281.0651.0921.1171.1341.1461.1571.1721.2121.1931.2031.192 Agriculture, Hunting, Forestry & Fishing 1.0201.0401.0611.0911.1041.1131.1261.1431.1591.1461.1501.149 Mining & Quarrying0.8840.8450.8361.1021.100 1.0881.0811.2111.1511.1861.177 Food Products, Beverages & Tobacco 1.0311.0561.0771.0281.0821.1351.1511.1791.2451.2111.2291.208 Textiles, Textiles Products, Leather & Footwear 1.0501.0991.1211.1701.1801.2011.1991.2091.2211.2241.2191.204 Wood & Products of Wood & Cork 1.059 1.0611.1031.0871.1221.1931.1621.2731.2441.2461.251 Pulp, Paper, Paper Products, Printing & Publishing 1.0401.1111.0691.1491.1151.1701.2311.2401.2721.2561.2621.259 Coke, Refined Petroleum Products & Nuclear Fuel 1.1541.0771.2501.4741.3181.431 1.3331.4461.3541.4041.384 Chemicals & Chemical Products 1.0791.0691.0161.0251.1041.1141.1831.2281.3041.2681.2871.283 Rubber & Plastics Products 1.0161.0371.1071.0831.1451.1491.1881.1941.3311.2891.3021.301 Other Non-Metallic Mineral Products 1.1011.0131.1731.1300.9931.0801.1551.1681.1761.1781.1741.178 Basic Metals & Fabricated Metal Products 1.0421.1371.1171.0851.1541.2011.2361.2371.2681.2551.2591.258 Machinery, NEC1.0101.0471.0271.0781.0251.1941.1881.0851.2681.1521.2111.201 E&E1.1601.1581.2181.2401.3501.3771.4101.4421.5321.4801.5031.496 Transport Equipment 1.0191.1191.0881.1781.1281.1391.2031.2101.2871.2411.2611.255 Manufacturing NEC; Recycling 1.0981.1181.1101.1501.2171.2731.2901.3711.3351.3521.3391.342

15. Labour Quality Index by Industries, 2001-2012 Industry 200120022003200420052006200720082009201020112012 Electricity, Gas & Water Supply 1.0611.1071.1391.1331.1701.2131.2041.2551.2011.2401.2251.238 Construction0.9851.0291.0061.056 1.0951.0921.1251.1361.1291.1321.135 Sale, Maintenance & Repair of Motor Vehicles 0.9130.9220.9680.9580.9930.9811.0081.0071.0101.0051.0081.007 Wholesale Trade & Commission Trade 1.0471.0881.0971.0551.1191.1351.1241.1251.1361.1331.1311.136 Retail Trade, Repair of Household Goods 1.0201.0591.0851.0991.1031.0931.115 1.1251.1241.1191.152 Hotels & Restaurants 0.9941.0311.0301.0561.0731.0741.1051.0901.1131.1081.1051.103 Transport & Storage1.0581.0681.0971.1051.1131.1351.1371.1391.1681.1531.158 Post & Telecommunications 1.4121.3061.5451.5361.4851.3921.5251.5071.4781.4861.4921.498 Financial Intermediation 1.1691.1361.2401.2461.2891.3421.3641.3281.4001.3681.3821.379 Real Estate Activities 1.2531.1751.2281.2571.3191.2781.2761.1171.1841.1491.1601.154 Renting of M&Eq & Other Business Activities 0.9420.9950.9921.0111.0271.0080.9910.9881.0531.0241.0301.023 Public Admin & Defense; Compulsory Social Security 1.0391.0861.0991.1311.1371.1531.1611.1701.1811.1741.1791.180 Education0.9901.0031.0301.0681.0541.0661.0731.0781.1031.0931.096 Health & Social Works 0.9781.0111.0501.1141.1731.2381.2731.2751.3341.3101.3121.295 Other Community, Social & Personal Services 1.0501.0571.0681.0851.0951.1081.0911.1681.1741.1811.152

16. Capital stock measurement is using the Perpetual Inventory Method, capital stock (A) is defined as a weighted sum of past investments is defined as a weighted sum of past investments with weights given by the relative efficiencies of capital goods at different ages according to (industry subscripts are suppressed for convenience) Methodology with A k,t, the capital stock for a particular asset type k at time t, θ k,τ, the efficiency of a capital good of age t relative to the efficiency of a new capital good and I k t−τ, the investment in period t-τ. Hence with a given constant rate of depreciation δ, different for each asset type, θ t = (1−δ ) t and it follows that the capital stock of a particular asset k at time t, A k, t is given by: 3. CAPITAL ACCOUNT

17. For the aggregation of capital services over the different asset types it is assumed that aggregate services are a translog function of the services of individual assets. It is further assumed that the flow of capital services for each asset type is proportional to its stock, independent of time. Hence the corresponding index of capital input K is a translog quantity index of individual assets in a particular industry given by: Where the weights are given by the average share of each component in the value of capital compensation and with the price of capital. Methodology (continue)

18. Data Variables Net Capital Stock by asset types (Constant and Current) Rate of return Depreciation rate Deflator Data Source Department of Statistics, Malaysia Bank Negara Malaysia (Adjusted by MPC) Asia KLEMS Manual Department od Statistics Malaysia Sample 30 industries according to Asia KLEMS categories Period 2000-2011

19. Capital Services Growth by Main Economic Sector, 2001-2010 (%) Capital Share by Main Economic Sector, 2001-2010 (%)

20. Sector Contribution to Aggregate Capital Services 2001-20102001-20052006-2010 ITNon-ITTotalITNon-ITTotalITNon-ITTotal Agriculture2.013.643.622.93.93.81.073.423.38 Mining1.3413.0312.892.110.1 0.5715.9315.71 Construction1.231.31 0.91.4 1.571.24 Manufacturing15.3220.1120.0519.921.2 10.7719.0618.94 Services80.1061.9162.1474.1763.4663.5686.0260.3660.72 Growth of Capital Services 2001-20102001-20052006-2010 ITNon-ITTotalITNon-ITTotalITNon-ITTotal Malaysia13.007.517.5615.707.747.8010.307.297.32 Agriculture7.565.375.3821.716.076.15-6.604.674.61 Mining14.5514.69 37.8812.5612.58-8.7816.8116.80 Construction25.095.045.2023.003.443.5227.176.656.89 Manufacturing7.765.715.7213.128.938.962.402.492.48 Services13.876.766.8415.816.796.8811.946.736.80

21. Growth in IT Capital Services, 2001-2010 Note: All values are average annual growth rate IT Capital Services Share, 2001-2010 Note: All values are average annual share

22. Industry Contribution to Aggregate Capital Services, 2001-2010 SectorsITNon-ITTotal Agriculture 2.013.643.62 Mining and Quarrying 1.3413.0312.89 Food products, beverages and tobacco 0.721.491.48 Textiles, textile products, leather and footwear 0.380.88 Wood and products of wood and cork 0.381.04 Pulp, paper, paper products, printing and publishing 0.761.01 Coke, refined petroleum products and nuclear fuel 0.571.971.95 Chemicals and chemical product 0.551.551.54 Rubber and plastics products 1.230.97 Other non-metallic mineral products 0.150.780.77 Basic metals and fabricated metal products 1.091.611.60 Machinery, nec 0.740.64 Electrical and optical equipment 7.066.72 Transport equipment 1.531.171.18 Manufacturing nec; recycling 0.180.26 Electricity, Gas and Water 4.038.718.65 Construction 1.231.31 Sale, Maintenance & Repair of Motor Vehicles 0.500.57 Wholesale Trade & Commission Trade 1.541.55 Retail Trade & Repair of Household Good 1.311.29 Hotels & Restaurants 0.65 0.66 Transport & Storage 16.569.549.63 Post & Telecommunications 14.409.219.28 Financial Intermediation 15.792.342.49 Real Estate Activities 8.061.181.25 Renting of M&Eq & Other Business Activities 6.510.951.02 Public Admin & Defense; Compulsory Social Security 5.7524.9824.76 Education 1.260.230.24 Health & Social Works 1.390.260.27 Other Community, Social & Personal Services 2.340.450.47

23. Average Growth of Capital Services by Industries, 2001-2010 SectorsITNon-ITTotal Agriculture7.565.375.38 Mining and Quarrying14.5514.69 Food products, beverages and tobacco1.129.349.32 Textiles, textile products, leather and footwear-1.10-1.62 Wood and products of wood and cork-6.431.211.19 Pulp, paper, paper products, printing and publishing2.125.825.79 Coke, refined petroleum products and nuclear fuel9.759.71 Chemicals and chemical product17.087.847.90 Rubber and plastics products9.615.755.79 Other non-metallic mineral products13.951.421.48 Basic metals and fabricated metal products16.664.764.85 Machinery, nec9.875.595.62 Electrical and optical equipment7.194.854.87 Transport equipment4.1411.1111.02 Manufacturing nec; recycling10.087.677.69 Electricity, Gas and Water-12.206.906.86 Construction25.095.045.20 Sale, Maintenance & Repair of Motor Vehicles22.10-0.73-0.59 Wholesale Trade & Commission Trade26.483.773.90 Retail Trade & Repair of Household Good28.575.795.93 Hotels & Restaurants27.524.804.94 Transport & Storage18.303.213.42 Post & Telecommunications20.324.784.97 Financial Intermediation10.234.805.12 Real Estate Activities7.411.902.23 Renting of M&Eq & Other Business Activities12.006.616.93 Public Admin & Defense; Compulsory Social Security12.4810.09 Education24.2610.5311.12 Health & Social Works25.0011.0911.67 Other Community, Social & Personal Services18.384.505.08

24. 4. Total Factor Productivity (TFP) The sources of VA growth can be expressed as: VA growth = ConK + ConL + TFP and the inputs can be further detail as: VA growth = ConK IT + ConK NONIT + ConL SK + ConL UNSK + TFP Compute for 1.The whole economy 2.Main Economic Sectors i) Agriculture ii) Mining iii) Construction iv) Selected Manufacturing & Services industries Methodology Data Sources Value Added Data refer to real GDP obtained from National Account Data from the Department of Statistics, Malaysia (www.statistics.gov.my) for the period 2000 - 2012www.statistics.gov.my

25. Source of Malaysia’s Value Added Growth (%)

26. Agriculture Mining Construction Manufacturing - E&E Source of Value Added Growth by Main Economic Sectors and Selected Industries (%)

27. Manufacturing - Chemical Manufacturing - Food Manufacturing – Transport Equipment Services - Retail Source of Value Added Growth by Main Economic Sectors and Selected Industries (%)

28. Services - Transport & Storage Services - Financial Intermediation Source of Value Added Growth by Main Economic Sectors and Selected Industries (%)

29. Source of Value Added Growth by Main Economic Sectors and Selected Industries, 2001-2010 (%) Value AddedCapitalLabourTFP Malaysia4.512.711.460.34 Agriculture2.891.110.810.97 Mining0.368.740.49-8.87 Construction3.370.833.65-1.12 Manufacturing - E&E0.542.600.06-2.12 - Chemicals6.773.851.091.84 - Food6.033.812.38-0.15 - Transport Eq5.725.452.23-1.95 Services - Retail8.770.721.656.40 - Transport & Storage4.060.011.282.78 - Financial intermediation7.330.973.013.35

30. ISSUES & CHALLENGES Capital Inputs Agriculture and mining are important sectors to Malaysia thus assets incorporate biological assets and mineral exploration. However, assets not including Land which is important to Agriculture & Real Estate. Labour Inputs For labour, even though services sector recorded the largest share in labour, the quality index of the sector was smaller than the other main sectors. Furthermore, services sector has more than 85% of skilled labour in the sector. MPC contribution Development of - Capital services & Assets for land. - Labour quality

31. Future Task 1.IO Calculation: 2000-2011 2.Add land estimates 3.Use actual rate of return 4.New national account with R&D, IO 2010 5.1990-2012 with new IO 2010 structure 6.More assets class Telecommunication equipment (ICT) R&D (intangible)

32. THANK YOU