Structural Changes in the Growth of Malaysian Manufacturing Sector

Structural change in manufacturing sector was beginning in 1970 to 2000.

Two approaches were employed in this study,

- The econometric approach: to determine the long-run relationships between the value-added of manufacturing, per capita income, population and export.

- The structural decomposition analysis (SDA) approach: to analyze the sources of growth and key sectors in the manufacturing industry.

Introduction of the export-oriented strategy in the 1970s and 1980s to replace the import substitution strategy gave fresh impetus to industrial growth.

This was evidenced in the long-run movement in export and the value-added of the manufacturing sectors.

Example: most of the industries were non-resource based such as textiles, electrical and electronic products, which was in line with the world's increasing demand for these products.

The results of the analysis indicate that in the period between 1978 and 1991, domestic demand expansion in the agriculture, light industries, heavy industries, and mining and services sectors was the dominant source of growth in the economy.

However, in the comparison between domestic expansion and export expansion, domestic demand expansion was still dominating in all these sectors.

From 1991 to 2000, the growth in the mining and heavy industries sectors was due mainly to export expansion.

Surprisingly, the light industries sector experienced a negative growth during this period, while the agriculture and services sectors showed declining growth trends.

For the entire period between 1978 and 2000, export expansion appeared to be the dominant source of growth for the heavy industries and mining sectors, slightly higher in percentage than the domestic