Intermediate Services and Economic Development: The Malaysian Example

Abstract

The paper explores the role of intermediate sendees, defined as services which are used as intermediate inputs in the production of other goods and services, in economic development using the Malaysian example. Intermediate services are now critical to the functioning of the world economy and their importance is likely to increase as information and knowledge intensity of international economic activity increases. Intermediate services as inputs in the production of other goods and services critically affect the competitiveness of the economy. Accordingly, it is important from the viewpoint of economic policy formulation to look at the inter-relationships between services and other sectors as well as the impact of services on employment and foreign exchange earnings. The paper reveals that intermediate services are important in terms of their essentialness as inputs to goods and services producers as well as in terms of the direct contribution made to domestic output, employment and foreign trade. The paper establishes the proposition that intermediate services contribute significantly to competitiveness and that higher value-addition and productivity are rooted in the technology embedded in the deliver)' of such services.