The services sector is set to be the engine of growth for the Malaysian economy going forward, with a target contribution of 70% to the gross domestic product (GDP) by 2015, according to the Ministry of International Trade and Industry (Miti).
Towards this end, said Miti Deputy Minister Datuk Mukhriz Mahathir, the Government has been undertaking regulatory reform initiatives through various programmes, including the progressive liberalisation of the services sub-sectors, the Economic Transformation Programme, amendments of statutes and the streamlining of regulations.
“The targeted 70% is on par with other developed countries such as the United States and Japan, but we cannot push any higher because we still have to focus on other sectors,” he told reporters at the “Programmes and Incentives for the Services Sector” briefing yesterday.
Under the 10th Malaysia Plan, running from 2011 through 2015, it is anticipated that the average real annual growth rate of the sector would accelerate to 7.2%.
In April 2009, the Government had liberalised 27 services sub-sectors up to 100% foreign ownership, with the liberalisation of an additional 18 services sub-sectors being announced in 2012. This was to attract more foreign investments, provide opportunities for joint ventures with foreign firms, improve competitiveness and encourage the transfer of specialised expertise and technology.
“Liberalisation is one of the pillars in the development and growth of the sector. The sector is now a facilitator of domestic growth and employment as well as an anchor and support to other sectors of the economy such as the manufacturing and agricultural sectors,” Mukhriz elaborated.
For the third quarter of 2012, the services sector contributed 54.7% of GDP, while the total investment for the sector in the first half of 2012 was RM59bil, out of which 88% or RM51.9bil was from domestic investment.
The full results are slated to be announced between end-March and early-April. In 2011, the sector contributed 54.2% to GDP with a capital investment of RM70.4bil, out of which 74.6% or RM52.5bil was from domestic investment with the rest coming from foreign investment.
“Many domestic players are concerned about being swamped by foreigners from the services liberalisation initiative, but the risk of not liberalising should be considered, especially when others around us are opening up and benefiting from the process. “We do not want to be left out,” Mukhriz explained.
At the moment, the deputy minister said the major contributors to the services sub-sectors include oil and gas, education, construction, information and communications technology, tourism and the financial sector.