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  • 20 YEARS OF MALAYSIAN ECONOMY: A STRUCTURAL ANALYSIS USING INPUT-OUTPUT

    APPROACH

    LAI KAH LEE SHI XIAN

    PUA HONG YUAN RAYMOND NG YAO HUI

    TIM CHIA CHENG

    BACHELOR OF ECONOMICS (HONS)

    FINANCIAL ECONOMICS

    UNIVERSITI TUNKU ABDUL RAHMAN

    FACULTY OF BUSINESS AND FINANCE

    DEPARTMENT OF ECONOMICS

    APRIL 2015

  • GROUP 3

    20 YEARS OF MALAYSIAN ECONOMY: A

    STRUCTURAL ANALYSIS USING INPUT-OUTPUT

    APPROACH

    BY

    LAI KAH

    LEE SHI XIAN

    PUA HONG YUAN

    RAYMOND NG YAO HUI

    TIM CHIA CHENG

    A research project submitted in partial fulfillment of the

    requirement for the degree of

    BACHELOR OF ECONOMICS (HONS)

    FINANCIAL ECONOMICS

    UNIVERSITI TUNKU ABDUL RAHMAN

    FACULTY OF BUSINESS AND FINANCE

    DEPARTMENT OF ECONOMICS

    APRIL 2015

  • ii

    Copyright @ 2015

    ALL RIGHTS RESERVED. No part of this paper may be reproduced, stored in a

    retrieval system, or transmitted in any form or by any means, graphic, electronic,

    mechanical, photocopying, recording, scanning, or otherwise, without the prior

    consent of the authors.

  • iii

    DECLARATION

    We hereby declare that:

    (1) This undergraduate research project is the end result of our own work and that

    due acknowledgement has been given in the references to ALL sources of

    information be they printed, electronic, or personal.

    (2) No portion of this research project has been submitted in support of any

    application for any other degree or qualification of this or any other university, or

    other institutes of learning.

    (3) Equal contribution has been made by each group member in completing the

    research project.

    (4) The word count of this research report is 18559 words .

    Name of Student: Student ID: Signature:

    1. Lai Kah 12ABB06033

    2. Lee Shi Xian 12ABB01702

    3. Pua Hong Yuan 12ABB03716

    4. Raymond Ng Yao Hui 12ABB02100

    5. Tim Chia Cheng 12ABB01915

    Date: 17th

    April 2015

  • iv

    ACKNOWLEDGEMENT

    First and foremost we would like to thank University Tunku Abdul Rahman

    (UTAR), for allowing us to carry out this research and providing us with the

    Datastream a database system for us to search for our relevant data.

    We would also like to express our gratitude to our project supervisor, Dr. Eng

    Yoke Kee, who has been guiding and helping us with any problems that we faced

    throughout our Final Year Project. We would also like to thank her for her kind

    words during our Viva presentation. Besides that, we would also like to extend

    our gratitude to our FYP coordinator Miss Lim Shiau Mooi for providing us with

    the guidelines for our project and Viva presentation.

    Last but not least, we would like to thank all the lecturers in UTAR who is

    teaching and who has taught us in the past. They have provided us with the

    knowledge that is necessary to make this project a success. Furthermore, we

    would also like to thank our friends and our respective families who have been

    providing us with great moral support throughout our project. Finally we would

    like to thank the Department of Statistics Malaysia who provided us the data

    needed for this project and all the past researchers who did research on topics that

    are relevant to our topic for providing a guideline for our methodology.

  • v

    TABLE OF CONTENTS

    Page

    Copyright Page......................................................................................................... ii

    Declaration .............................................................................................................. iii

    Acknowledgement .................................................................................................. iv

    Table of Content ..................................................................................................... v

    List of Tables ........................................................................................................ viii

    List of Figures ......................................................................................................... ix

    List of Abbreviations ............................................................................................... x

    Preface..................................................................................................................... xi

    Abstract .................................................................................................................. xii

    CHAPTER 1 RESEARCH OVERVIEW ................................................................ 1

    1.0 Introduction ................................................................................ 1

    1.1 Structural Analysis ..................................................................... 1

    1.2 The Transformation of Malaysian Economy ............................. 2

    1.2.1 Background of the Study ............................................ 2

    1.2.2 Overview of Malaysias Major Industrial Policies ..... 3

    1.2.3 The Trend of Industrial Production in Malaysia ......... 5

    1.3 Problem Statements ................................................................... 8

    1.4 Research Objectives ................................................................. 10

    1.4.1 General Objectives .................................................... 10

    1.4.2 Specific Objectives ................................................... 10

    1.5 Significance of the Study ......................................................... 11

    1.6 Chapter Layout......................................................................... 12

  • vi

    CHAPTER 2 LITERATURE REVIEW ............................................................... 13

    2.0 Introduction .............................................................................. 13

    2.1 A Review for the Evolution of Input-Output Analysis ........... 13

    2.2 A Review for Past Studies on the Structure of Production ..... 22

    2.3 Conclusion .............................................................................. 24

    CHAPTER 3 RESEARCH METHODOLOGY .................................................... 25

    3.0 Introduction .............................................................................. 25

    3.1 Input-Output Methodology ..................................................... 25

    3.1.1 Input and Output Coefficients .................................. 26

    3.1.2 Input and Output Leontief Inverses ......................... 27

    3.1.3 The Backward and the Forward Linkages ............... 30

    3.1.4 Coefficients of Variation .......................................... 32

    3.2 Data Sources ............................................................................ 33

    3.3 Conclusion .............................................................................. 35

    CHAPTER 4 RESEARCH RESULTS AND INTERPRETATION ..................... 36

    4.0 Introduction .............................................................................. 36

    4.1 Measures of Forward and Backward Linkages ........................ 37

    4.2 Structure of Production of the Malaysian Economy ................ 41

    4.2.1 Primary Sector .......................................................... 41

    4.2.2 Secondary Sector ...................................................... 44

    4.2.3 Tertiary Sector .......................................................... 49

    4.3 Identification of the Key Industries ....................................... 52

    4.4 Conclusion ............................................................................... 69

    CHAPTER 5 CONCLUSION, IMPLICATIONS AND RECOMMENDATIONS

    ........................................................................................................ 70

    5.0 Introduction .............................................................................. 70

  • vii

    5.1 Concluding the Major Findings .............................................. 70

    5.2 Policy Implications ................................................................. 72

    5.3 Limitations and Recommendations for Further Research ...... 74

    REFERENCES ...................................................................................................... 75

  • viii

    LIST OF TABLES

    Page

    Table 3.1: Typical Input-Output Table............................................................... 25

    Table 3.2: Reclassification of Industry .............................................................. 34

    Table 4.1: Sensitivity of Dispersion Index Forward Linkage ......................... 37

    Table 4.2: Power of Dispersion Index Backward Linkage ............................. 39

    Table 4.3: The Ranking of Power of Dispersion Index of Backward Linkage .. 53

    Table 4.4: The Ranking of Sensitivity of Dispersion Index of Forward Linkage

    ............................................................................................................................ 54

    Table 4.5: The Ranking of Coefficient of Variation of Backward Linkage Vj .. 55

    Table 4.6: The Ranking of Coefficient of Variation of Forward Linkage Vi.....