SERVICE SECTOR

ECONOMIC ISSUES, POLICIES AND PERFORMANCES

 LEARNING OUTCOMES

• TO LEARN THE COMPOSITION AND CHARACTERISTICS OF THE

SERVICE INDUSTRY
• TO ANALYSE:
• THE GROWTH TREND AND CONTRIBUTIOJ BY THE SERVICE
SECTOR TO THE NATIONAL ECONOMY
• GOVERNMENT POLICIES AND INCENTIVES
• FUTURE GROWTH AND CHALLENGES
 OVERVIEW
• THE SERVICES SECTOR IS ALSO KNOWN AS THE TERTIARY SECTOR.
• SERVICES ARE DEFINED IN CONVENTIONAL ECONOMIC LITERATURE AS INTANGIBLE
GOODS.
• THE TERTIARY SECTOR OF ECONOMY INVOLVES THE PROVISION OF SERVICES TO
BUSINESSES AS WELL AS FINAL CONSUMERS.
• THE SUB-SECTORS IN THE SERVICE SECTOR INCLUDE DISTRIBUTIVE TRADE (RETAIL,
TRANSPROTATION, STORAGE) FINANCIAL SERVICES, GOVERNMENT SERVICES
(EDUCATION, HEALTH), COMMUNICATION, UTILITIES, TOURISM, RESTAURANTS,
ACCOMMODATION AND OTHERS
• THE THREE LARGEST SUBSECTORS OF MALAYSIA ARE DISTRIBUTIVE TRADE, FINANCIAL
SERVICES AND GOVERNMENT SERVICES
• THE SINGLE MOST IMPORTANT IN TERMS OF GDP CONTRIBUTION IS DISTRIBUTIVE
TRADE (11.6% OF GDP IN 2006)
 OVERVIEW (CONT)

• IT WAS NOT UNTIL THE THIRD INDUSTRIAL MASTER PLAN (2006-2020)

(IMP3) THAT FORMAL POLICY RECOGNITION WAS ACCORDED TO
SERVICES AS THE LARGEST ECONOMIC SECTOR IN THE ECONOMY
• IN THE LAST FIVE YEARS, THE SERVICE SECTOR CONTRIBUTES ABOUT
57% TO THE GDP.
• UP TO THE EARLY 2000S, THIS SECTOR GREW AT AN AVERAGE OF 8.3% PR
ANNUM OVER THE PREVIOUS 30 YEARS PERIOD.
• DURING THE 10TH MALAYSIA PLAN , THIS SECTOR WAS ESTIMATED TO
GROW BY 6.3% PER ANNUM
 SERVICE SECTOR CHALLENGES
• ECONOMIC FUNDAMENTALS: THE SERVICES SECTOR FACED
SETBACKS IN TERMS OF TALENT PROCUREMENT DUE TO SKILL
SHORTAGES AND SKILLS MISMATCH BETWEEN THE OUTPUT OF
HIGHER EDUCATION PROVIDERS AND INDUSTRY NEEDS. IN ADDITION,
THERE IS ALSO LACK OF ACCESS TO SOFT TECHNOLOGY FOR SMES.
• POLICY ECOSYSTEM: THE SECTOR CONTINUES TO BE HIGHLY
REGULATED, WHICH WEIGHS DOWN PRODUCTIVITY AND ADDS TO
COST OF DOING BUSINESS.
• ACTIVE PROMOTION POLICIES: MAJORITY OF SERVICE PROVIDERS
ARE DOMESTICALLY ORIENTED. ONLY HANDFUL SERVICES FIRMS
EXPORT THEIR SERVICES. IN ADDITION, THERE IS POOR CROSS
AGENCY VISIBILITY IN INCENTIVES MANAGEMENT.
 NATIONAL POLICY ACTION PLAN ON SERVICES
DEVELOPMENT IN IMP3

• BY 2007, MALAYSIAN SERVICES DEVELOPMENT COUNCIL

(MSDC) AND MALAYSIAN LOGISTICS COUNCIL (MLC) WERE
FORMED UNDER IMP3, PLAYING A SIGNIFICANT ROLE IN
PROVIDING A PLATFORM FOR INTERACTION BETWEEN
SERVICES PROVIDERS AND THE GOVERNMENT
 TRANSFORMING SERVICES UNDER THE 11TH
MALAYSIA PLAN
• FOSTERING A DYNAMIC ENVIRONMENT FOR KNOWLEDGE-INTENSIVE SERVICES
• BY ACCELERATING HUMAN CAPITAL DEVELOPMENT AS WELL AS ENHANCING ACCESS
TO TECHNOLOGY AND R&D
• IMPLEMENTING COMPREHENSIVE AND INTEGRATED GOVERNANCE REFORMS
• BY STRENGTHENING COORDINATION AND COLLABORATION BETWEEN VARIOUS
STAKEHOLDERS AS WELL AS MODERNISING THE CURRENT REGULATORY REGIME
• STEPPING UP INTERNATIONALISATION OF SERVICES FIRMS
• BY ASSISTING FIRMS TO EXPORT SERVICES THROUGH BETTER ACCESS TO FUNDING,
UPSKILLING, AND MARKET INTELLIGENCE
• ENHANCING MANAGEMENT OF INVESTMENT INCENTIVES
• WITH A MORE EFFECTIVE, TRANSPARENT, AND PERFORMANCE-BASED INCENTIVES
PROGRAMME
• EXPANDING MODERN SERVICES