INTRODUCTION

SECTORAL ANALYSIS OF THE ECONOMY

At the end of this topic, students should be able to understand:

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1. Sectorial analysis concepts2. The primary sectors3. The primary sectors activities4. The secondary sector5. The secondary sectors activities6. The tertiary sectors7. The tertiary sectors activities

Sectorial analysis is also known statistical analysis of the size, demographic, pricing, employment, competitive, and other economic dimensions of a sector of the economy.

A review and assessment of the current condition and future prospects of a given sector in an economy.

It gives the government and investors the idea of how well a given sector is expected to perform.

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Sectorial analysis

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Sumber: Seventh Malaysian Plan

SECTOR 2007 2008 Changes in %

Agriculture, forestry, fishing

38954 40073 2.80

Mining 42663 42337 -0.76Manufacturing

152262 154195

1.27

Construction

15279 15604 2.13

Services 270762 290588

7.32

Total 519920 542797

4.40

TABLE: MALAYSIAN ECONOMY STRUCTURE (2007 AND 2008)

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TABLE: MALAYSIAN ECONOMY STRUCTURE (Contribution to GDP)

SECTOR 1975 1995 2011

Agriculture, forestry, fishing

27.7 12.9 7.7

Mining 4.6 6.2 8.8Manufacturing 16.4 26.5 26.3Construction 3.8 4.8 3.0

Services 47.5 49.6 54.2Total 100 100 100

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TABLE: MALAYSIAN ECONOMY STRUCTURE (Contribution to GDP)

Primary sectors

The primary sector of the economy is the sector of an economy making direct use of natural resources. This includes agriculture, forestry and fishing, mining, and extraction of oil and gas.

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Primary sector Before independence (1800-1957)

- Agricultural sector played a dominant role because Malaysia was blessed with abundant of natural resources.

- British companies ventured into plantation agriculture especially rubber.

- Rubber was the significant contributor to the country’s export and GDP at that time.

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Primary sector After independence (1957-1970)

- Due to the fall in price of rubber and tin, Malaysia’s government intervened to change the agricultural policy to reduce the high dependency on rubber.

- The change was in terms of crop diversification where there are crops such as oil palm, timber, cocoa, and pepper.

- The government allocated 47.5% of its total public spending for agriculture under the First Malaya Plan

(1956-1960)

- FELDA, FELCRA, MADA, FAMA were established to develop the agriculture sector.

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Primary sector NEP period (1971-1990)

- The main objective was to eradicate poverty especially among Malays who are mostly

depending on agricultural sector for a living.

-Many farmers remain poor causing huge disparity between different races in Malaysia (Chinese, Indian, Malays).

-Many policies to develop agricultural sector were implemented to overcome the issue. Rural poverty reduced from 58.7& in 1970 to only 24.7% in 1984.

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Primary sector

Secondary sector

The secondary sector producing manufactured and other processed goods from raw materials.

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13Secondary sector

Before independence(1950s)

- Manufacturing was not the main sector in Malaysia during colonial period.

-Very little manufacturing activities as Malaysia was mainly focused on agricultural sector.

-Only contributed about 8% to the Malaysian GDP.

14Secondary sector

After independence(1957-1970)

- Manufacturing played a significant role during this period as an import substitute.

- Import substitution was introduced to replace the imported goods with the goods that are produced domestically.

- Primarily on the production of consumer goods such as food, beverages, tobacco, and plastics.

15Secondary sector

Post 1970s

-The sector was shifted from import substitution to export orientation to promote domestic goods to other countries.

- Emphasized on foreign direct investment (FDI) to attract investors into manufacturing sector.

-Free Trade Zone (FTZ) introduced in 1971 to enable manufacturers to obtain raw materials and

intermediate goods duty-free. (mostly produced electrical, electronic products, textiles and food)

-Industrial Coordination Act introduced in 1975 to encourage joint venture by Malaysian in manufacturing.

16Secondary sector

Post 1980s

-Establishment of the heavy industries to develop industrial sector.

- Government was actively involved in the industrial development with the

introduction of PROTON and Perwaja Steel Sdn. Bhd.

- Industrial Master Plans (IMP) were formulated for future development

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Metal working and smelting,Metal working and smelting,

SECONDARY SECTOR

ACTIVITIES

Automobile

productionAutomobile

productionTextile

productionTextile

production

Chemical and engineering industries

Chemical and engineering industries

Aerospace manufacturing

Aerospace manufacturing

Energy utilitiesEnergy utilities

ShipbuildingShipbuildingConstruction and

EngineeringConstruction and

Engineering

SECONDARY SECTOR ACTIVITIES

Tertiary sector

The services sector is also known as the tertiary sector. Services are defined in conventional economic literature as intangible goods.

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19Tertiary sector

Tertiary sector includes government services, utilities, information and communications technology, construction, Islamic financial services, education and training, management services, tourism, logistics and oil and gas services.

The government has liberalized equity conditions imposed on foreign investors and has eased the restrictions against the employment of foreign specialists and professionals in the services sector.

High contributor to GDP since colonial period until the current years.

20Tertiary sector

21Tertiary sector