KUALA LUMPUR, Oct 11 -- Malaysia's Total Factor Productivity (TFP) has not grown as much as that of developed countries, as the country relied substantially on multinational companies (MNC) and foreign direct investment (FDIs) for export upgrading and technology transfer.

According to the Economic Outlook 2020 report released by the Ministry of Finance today, moving away from labour-intensive manufacturing to sustain an increase in productivity and per capita income requires innovation rather than imitation.

“Furthermore, Malaysian firms were unable to create technology, which is a prerequisite in innovating and increasing productivity,” the report said.

Apart from that, Research and Development (R&D) and Commercialisation and Innovation (C&I) activities in the manufacturing industries, particularly among SMEs, are often constrained by inadequate resources.

Industry players would instead use existing technology without further enhancement, resulting in lagging technologies as compared to other Newly Industrialised Economies, the report said. 

In 2020, the manufacturing sector is estimated to grow 4.1% driven by steady improvement in the export-oriented industries coupled with sustained expansion in the domestic-oriented industries.  

The manufacturing sector is highly import-intensive in particular, the electrical and electronics, chemicals products, partly due to the intense complexity of the global supply chain. 

“Due to low technological capabilities of local firms, most of the industry players, especially MNCs would rarely use local supplies to support their operations,” said the report.

It also stated that only 30 per cent of the Malaysian workforce is in the skilled category, mainly due to the readily available pool of low-skilled low-cost foreign workers which discourages industrial improvement and upskilling of the workforce.

“Furthermore, Malaysia faces acute brain drain as reflected by the World Bank report (2011), which estimates that one in every ten skilled Malaysians opts to work abroad,” the report stated. 

-- BERNAMA