Manufacturing, services key to 6pc annual growth

 

MALAYSIA probably needs a combination of factories that make high technology products and a vibrant services industry to get its targeted 6 per cent annual economic growth, a World Bank Institute economist said.

The economy must grow at least 6 per cent a year from now on if Malaysia is to achieve its goal of becoming a high-income nation by 2020, the government has recently estimated.

According to Dr Shahid Yusuf, an economic adviser at the World Bank Institute, such growth rate is only possible when the economy is driven by both manufacturing and services.

Economies that depend on services generally grow around 2-3 per cent a year, while those with a focus on both manufacturing and services could expand at higher rates of between 5 per cent and 7 per cent, he said.

He noted that middle- and high-income countries with a strong manufacturing sector have so far done better than those relying more on services.

Countries that opted the high-tech road like the Scandinavian nations and the US had generated steadier growth and more high-paying jobs, he pointed out.

"Many countries including certain states in China and Singapore see business-related services like finance as a source of prosperity. But the financial sector only creates a lot of low paying jobs and it doesn't generate a high rate of growth. The government's revenue will also be highly depended on the fortune of a few very highly-paid people," Shahid said in a talk organised by the National Economic Advisory Council in Putrajaya yesterday.

The finance industry is also prone to bubble formation and the rate of investment is low.

"I can see many countries going into services-led economy, but they don't know what they are getting themselves into," he said.

Malaysia should aggressively sharpen its current advantage in factory goods and promote its existing mix of exports, Shahid said. It must also diversify into high-tech products and services with better prospects for export.

Some rising high-tech sectors that the country can consider include robotics, computer graphics, artificial intelligence, data storage system and green manufacturing, Shahid said.