Miti Blog

Ministry of International Trade and Industry Malaysia Official Blog

Services sector is new engine of growth

Posted by admin2 on June 23, 2015 at 12:25 pm
Services sector is new engine of growth
by: Dato’ Sri Mustapa Mohamed
THE services sector is overtaking manufacturing as the main contributor to economic growth. This will have vast implications on where people are going to find work and what skills they will need to get employed. 

The government’s growth target is very clear: To become a developed nation by 2020. Using a World Bank definition, that means having a per capita income of RM49,500 (US$15,000) by the end of the decade. The per capita income level in 2010 was RM23,100 (US$7,000).This is an ambitious target and requires gross domestic product (GDP) growth of at least 7 per cent per year. 
Historically, the country’s growth had been led by manufacturing. But when the government reviewed its economic policy last year, it realised that this may not be the case for much longer. 
For two reasons. In developed economies, the services sector is usually the biggest contributor to economic output. 

Last year, services contributed to 77 per cent of the US’s GDP; 71 per cent of Germany’s; 74 per cent of Japan’s; 63 per cent of Singapore’s and 92 per cent of Hong Kong’s. In Malaysia, the figure was 58 per cent. This means there is plenty of room for the services sector to grow as the nation’s economy becomes more developed.

The second reason is more prosaic. Increasingly, many of Malaysia’s traditional competitive advantages in manufacturing - such as our low cost and the availability of skilled workers - are being matched by many emerging economies. The solution for us is to migrate to higher value-added and more technology and capital-intensive industries. That is happening, but will take time. 

Meanwhile, new sources of growth will have to be found and the government has targeted the services sector to drive future growth. It is projecting that the sector’s share (inclusive of government services) of GDP will grow to 67.3 per cent by 2020. The government envisages that this growth will take place across the board, especially in oil and gas, construction, business and professional services, education and training, ICT, healthcare and tourism sectors.

Particular attention will be given to the development of so-called “backbone services”. These are the ones that contribute important inputs for the production and export of other services. Think software tools that we use to manage our airports; or the digital networks that enable us to use our handsets.To accelerate growth of the services industry, the government has opened up a number of important services sub-sectors to foreign participation. Allowing foreigners to own businesses here or in partnership with locals can help to upgrade the skills of Malaysians and also assist them to establish business links overseas. 

Some of the liberalisation measures undertaken also meet obligations the country has signed up to under various trade agreements. Upon joining the World Trade Organisation in 1995, for example, we committed ourselves to liberalising a wide range of sectors in the services industry. Currently, we are in the Doha Round and once the round is concluded we would have liberalised 11 out of 12 major sectors.Our Asean commitments have also required us to progressively open up our domestic services market to participation from other Asean countries. 
The targets and timelines we follow are according to the blueprint mapped out to establish the Asean Economic Community by 2015. To date, we have made liberalisation commitments in 96 services sub-sectors. 

The government has also acted unilaterally to accelerate the pace of services liberalisation. In April 2009, 27 services sub-sectors were opened up. More substantive moves were announced in Parliament recently in the Prime Minister’s budget speech. An additional 17 sub-sectors will be opened up to foreign ownership in 2012. These changes allow foreigners to own up to 100 per cent of their local business. (See table) 

The government has conducted extensive consultations with public and private stakeholders. Additionally, Ministry of International Trade and Industry is preparing a roadmap on the implementation of the liberalisation of the services sector.And for the first time, higher foreign equity participation in service areas, such as architecture, engineering, taxation and accounting services will be allowed. How is all this going to work out? An overseeing body, known as the Malaysia Services Development Council (MSDC), has been set up to monitor and coordinate the work of ministries implementing the liberalisation programme. 

The MSDC will review rules and regulations that impede the growth of the industry and assist local players, mostly SMEs, to develop and export their services. The export potential of our services sector should not be underestimated. Last year, our services exports totalled a massive RM105 billion. Tourism is a significant contributor to this total. In 2010, 24.6 million tourists visited Malaysia, bringing in receipts amounting to RM56.5 billion. If we can attract more tourists from China, Europe and the Middle East, tourism’s contribution to GDP will grow. 

Last year, our construction sector contributed exports valued at RM3.44 billion. The Middle East has been a favoured destination for Malaysian construction companies, and over the past few years, seven leading Malaysian companies have undertaken projects in Saudi Arabia, Sudan, Qatar, the UAE, Bahrain, Syria and also Oman, Yemen, Morocco and Yemen. We also expect that medical tourism will become an expanding industry in the years to come will have spillover effects on other sectors of the economy.

Our Islamic financial sector, too, is well developed and should continue to attract investors. Overall, we now have in place various initiatives to accelerate the pace of development of the services sector. Mida is working hard to bring in foreign investment in this sector while Matrade is helping our companies to export their services in selected industries. Locally, our own companies must take better advantage of the opportunities that are emerging in key services sectors of our economy as we roll out our Economic Transformation Programme.
If we can keep this pace up and stay focussed, I am confident we can meet the growth targets we have set for ourselves. 

Datuk Seri Mustapa Mohamed is the Minister of International Trade and Industry.

No commnents yet

Type Your Search Here


4PU ACEAN AEC AFAS AFTA AKI APEC ARBC ASEAN ASEAN Business Advisory Council (ABAC) ASEAN Regional Business Council ASEAN- India FTA ASEAN-India FTA AirAsia Alternative medicine Andrew Robb Anti- Dumping Anugerah Kecemerlangan Industri Apollo Hospitals Apparels Apps Store Asean Economic Community Asean Framework Agreement on Services Asian Development Bank Australian Minister for Trade and Investment Automotive Industry Axiata BDO BNM Babar Ali Khan Bangladesh Bank of China Bogor Goal Brazil Budgets Bumiputera CEO CEPT CHINA CIDB CIMB COO Caexpo Cement and Concrete Association (C&CA) Channel News Asia Chemical Company of Malaysian Berhad (CCM) Chile China China-ASEAN China-ASEAN FTA Confederation of Indian Industry Conference Construction Industry Development Board Consumers DIGI DOHA Dato' Seri Mustapha Mohamed Datuk Dr Rebecca Sta Maria Datuk Hamim Samuri Datuk Ir Hamim Samuri Datuk Jacob Datuk Mustapa Mohamed Datuk Naimun Ashakali Mohammad Datuk Seri Mustapa Mohamed Datuk Seri Mustapha Mohamed Datuk Seri Najib tun Razak Doha Development Agenda ELV Policy EPU ETP Economic Planning Unit Economic Policy Leaders programme Economic Transformation Program Economic Transformation Programme Economy Eelco Eksport Eksports Eports European Commission (EC) Events Export Exports FDI FOKEM FTA Federal Governmen Federation of Malaya Fiscal policy Committee (FPC) Food Forbes Foreign direct investments Foreign investments Forum Ekonomi Dunia GDP GE GST GTP Global Market Globecycle Goods and Services Tax Government Transformation Programme Groom Big HACCP-certified HDC HP Halal Halal Development Industry Halal Development Industry Corporation Halal Industry Development Corp Halal Ingredients Asia 2015 Hoekstra ICT IJM Corp Berhad IMD INSKEN INVESTMENT MISSION IPI IT Import Imports India Indian Commerce and Industry minister Nirmala Sitharaman Industries Industry Information and Communication Technology (ICT) Infrastructure Development Finance Company Institute for Management Development International Trade and Industry InvestKL Investents Investment Investments Jabatan Kemajuan Islam Malaysia Jakim Jeli Jepun Jom Masuk IPT (KPTN 2015) KELANTAN KSU Karnival Karnival Pendidikan Tinggi Negara Khazanah Nasional Khazanah Nasional Bhd Kulim Hi-Tech Park LIMA LIMA'15 LNG Laporan World Competitiveness Yearbook (WYC) Lawatan Lembaga Pembangunan Industri Malaysia Lexus MAI MATRADE MAlaysian Economy MGCC MIDA MITC MITI MITI Deputy Secretary-General MITI Report MITI Weekly Bulletin MITI Weekly Bulletin trade MITI report MITI weekly Bulletin MITI] MNC MOF MPC MTFTA Malaysia Malaysia Airports Holdings Berhad Malaysia Automotive Institute Malaysia Economy Malaysia Entrepreneurship Forum 2015 (MEF) Malaysia External Trade Development Corp Malaysia External Trade Development Corporation Malaysia International Halal Showcase Malaysia-China Trade Malaysia-India Comprehensive Economic Cooperation Agreement Malaysian Airlines Bhd Malaysian Economy Malaysian Industrial Development Finance Bhd Malaysian Palm Oil Board Malaysian Report Malaysian Standards Malaysian economy Malaysian pavilion Manufacturing Manufacturing Industry Maybank Media Release Menteri Perdagangan Antarabangsa dan Industri Microsoft Mid Tier Companies Development Programme Minister of Commerce of China Gao yan Minister of International Trade and Industry Ministry of Finance Ministry of International Trade and Industry Miti Miti Report Miti Weekly Bulletin MyASEAN Internship Programme NAP NAP review National Automotive Policy Nestle Networking OIC OIC-Asia Trade and Economic Forum 2015 Organisation of Islamic Cooperation P Ravindran PEMANDU PEMUDAH PKS PLKN PPD Pameran Maritime dan Aeroangkasa Antarabangsa Langkawi 2015 Parts and Components Pembangunan Industri Halal Sdn Bhd Pengurusan Prestasi dan Pelaksanaan (PEMANDU) Perbadanan Perbadanan Pembangunan Industri Halal Sdn Bhd Perbadanan Pembangunan Perdagangan Luar Malaysia Performance Management and Delivery Unit Perjanjian Perdagangan Bebas Perusahaan Kecil dan Sederhana Petronas Play Store Policy Perspective Preferential Tariff Rate Program Pembiayaan Usahawan Wanita Program Transformasi Ekonomi Pusat Dagangan Antarabangsa Melaka Pusat Transformaasi Luar Bandar (RTC) Quality R&D RCEP ROO Ranhill Regional Comprehensive Economic Partnership Road Sectors Royal Vopak Russia SCE SDSI SIRIM SIRIM QAS International Sdn Bhd SME Bank SME CORP SME Corp SME corp Malaysia SMECorp SMEs SPS STA Sadguru Polymers Pvt Ltd & Triace Solution SapuraCreest Satu Daerah Satu Industri Securities Commision Service Industry Service Sector Service Sectors Service sector Service sectors Services Sector Services sector Shell Shell Malaysia Shell Malaysia Ltd(SML) Shell Refining Company Showcase Groom Big Sime Darby Singapore Corp Enterprise Small and Medium Scale Industries Sri Mustapa Mohamed Strategic Trade Bill Success Story Sunway Sunway Group THE 12th China-Asean Expo TM TOK BALI TPP TPP trade TPPA TTPA TV Show Tariff Elimination Temasek Foundation Tenaga Nasional Bhd's The 21th ASEAN Economic Ministers (AEM) The Economic Planning Unit (EPU) The Malaysian Investment Development Authority The New Global Context The World Trade Organisation (WTO Toyota Camry Trade Trade Figure Trade Performance Trade Review Trans Pacific Partnership Trans Pacific Partnerships Trans-Pacific Partnership Agreement UMW Corporation UMW Holdings Berhad UMW Toyota UNCTAD US Universiti Malaysia Kelantan (UMK) Untag Usahawan Bumiputera Vehicle End-of-Life Policy Voluntary Partnership Agreement (VPA) WCC WCY WEF WEP WHS WORLD ECONOMIC FORUM(WEF) EAST ASIA 2014 AND TRADE & INVEST WTO World Competitive Centre World Competitiveness Center (WCC) World Competitiveness Yearbook (WCY) World Economic Forum World Halal Conference 2015 World Halal Summit YB Dato' Sri Mustapa Mohamed ZICOlaw application auto automotive bangladesh bank negara malaysia bilateral relation biojisim biomass business business facilitataion business facilitation cars 15 years cement industry competitiiveness competitive competitiveness competitveness currency e&e economy education electrical electronics emerging market environment eport World Competitiveness Yearbook 2014 export exports felda food manufacturing fore foreign direct investments foreign trade forex free trade agreement green technology gross domestic product healthcare highway hong kong import imports india industries industry interest rates international standards investmen investment investments irAsia iron and steel japan jepun kdnk kelantan liberalisation logistic low carbon malaysia malaysian business manila manufacturing mecc metal sub-sector middle east mihas miti motor vehicles national green technology national timber policy non-Islamic nations non-tariff north africa packaging policy review portland cement proton public service delivery renminbi research and development retails road transport sales showcase small and medium enterprises small and medium enterprises (SMEs) sme sme corp sme corp malaysia sme master plan smi smidec syarikat berstatus multinasional tariff tax incentive textiles the Asociation of Southeast Asian Nations the electrical and electronics the government's 11th Malaysian Plan tnb tourism trade tradisional medicine tube programme usahaw value added visit wood wood-based products world economic forums