Contribution of processing trade activities to Malaysia’s domestic economy
Transformation of the current international trade pattern has mislead the information on how much Malaysia export are really made in Malaysia. Increased international outsourcings have spurred trade in intermediate goods, which is termed as processing trade. Malaysia is one the countries that...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English |
| Published: |
2016
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/66844/1/FEP%202016%2034%20IR.pdf |
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| Summary: | Transformation of the current international trade pattern has mislead the
information on how much Malaysia export are really made in Malaysia. Increased
international outsourcings have spurred trade in intermediate goods, which is
termed as processing trade. Malaysia is one the countries that actively
participating in the processing trade activities in the Asian region. While empirical
evidences in other countries clearly indicate the unfavorable effects on local
economies, empirical works to quantify the impact of increased processing trade
in Malaysia are clearly lagged behind. The fact is that the conventional national
accounts framework does not separate the processing trade activities in the
calculation of gross domestic products (GDP). In this study, we further improve
the GDP accounting by separating the manufacturing sectors according to
domestic and processing trade sectors, and integrating them consistently in a socalled
‘dualistic’ input-output table. Results clearly show that the processing trade
sectors do not only associated with higher foreign content but also have lower
growth linkages to the domestic economy. From the overall processing exports,
only 39.6% are benefited to the domestic value added while another 60.4% are
attributed to foreign content. Based on the findings, we strongly suggest the
government to review the current Free Industrial Zone policies by putting more
emphasize on the domestic manufacturing sectors and finding new focused
sectors for exports. |
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