Total factor productivity growth in foreign and domestic firms in Malaysian manufacturing

Abstract

In this article, we estimate total factor productivity growth (TFPG) in foreign and domestic firms in 53 Malaysian 5-digit ISIC manufacturing industries for the period 1988 to 1992. We find that most of the growth in real manufacturing output over this period is due to input growth, rather than productivity growth. This is true for both domestic and foreign firms. Where there is non-negligible amounts of TFPG growth, it is concentrated in final goods industries such as household consumer and electrical goods. These are industries that manufacture, and not just assemble. Future productivity growth, if there is to be any, is likely to come from the expansion of these industries, and not from continued growth in assembly activities in the semiconductors and electronic parts industries. The evidence on TFPG presented here suggests that, as of 1992 at least, this shift from assembling to manufacturing had not occurred to any significant extent.