Description

Malaysia has adopted the so-called “Export-led growth” strategy since its independent
from Britain in 1957. This paper chooses Sabah as the case study to test the hypothesis
and examine the relationship between Sabah’s exports and economic growth. The case
of Sabah is interesting because the State has promoted exports as the “engine” for its
economic growth. On the other hand, exports have been playing a crucial role in the
Sabah’s economy, there is still lack of systematic empirical analysis of the impact of
exports on the state’s economic performance. There are two main empirical findings
from this study. Firstly, the Johansen cointegration tests indicate that there is no
existence of equilibrium relationship between exports and economic growth in Sabah
state. Secondly, the “Granger” causality tests indicate that there is also no causality
between exports and economic growth in Sabah. Therefore, the results of the empirical
analysis do not support the “export-led growth” hypothesis. Some recommendations for
policy makers could be drawn from this empirical research. Despite of exports’ important
role in the Sabah’s economy, exports don’t seem to “Granger” cause economic growth.
In other word, some other economic activities, such as consumption, investment, or
government expenditure, could be alternative sources of its economic growth. The
future research may incorporate these variables into the econometric model in order to
identify a real “engine” of the Sabah economy.