Manufacturing Performance and Services Inputs: Evidence from Malaysia

Abstract

The Malaysian economy has been deindustrializing since the late 1990s. The relative decline of the country’s export-oriented manufacturing sector has led to a decline in the trade ratio. This could reflect a decline in the country’s participation in manufacturing global value chains. The services sector makes important contributions to the performance of the manufacturing sector in terms of productivity and exporting. Therefore, any policy attempt to enhance manufacturing performance is likely to require improvements in the performance of the services sector. This is particularly important as there is evidence that the country’s manufacturing sector is increasingly dependent on services generated domestically.