National Income of Malaysia

The National Income accounts provide a summary of all transactions in an economy. Seen from the income side, the production process creates incomes for the owners of the inputs used in production including labor and capital.

 

Every day there are many transactions taking place in the Malaysian economy. There is buying and selling of products and services, the collection of taxes and the payment of subsidies, the payment to workers and the return to capital on its investment. The National Income accounts provide a summary of all these transactions in an economy over a period of time, usually a quarter or a year.

 

Malaysia has over a period of time evolved from a low to medium income economy. After independence, the economy was to a large extent dependent on primary commodities, namely rubber and tin. During the period 1957 to 1960, agriculture was the largest sector, employing about 58% of the labor and accounting for 47% of total output. Rubber by itself accounted for over 25% of National Income, nearly 30% of employment and about 60% of exports. At the same period, the mining sector, dominated by tin, employed 3% of the labor force and accounted for 25% of exports. With rubber and tin accounting for 85% of total exports between them, the entirely economy was vulnerable to fluctuations in commodity prices.

 

The Government then released the necessity to diversify the economy and reduce the dependence on rubber and tin. The Government then laid emphasis on developing other suitable agricultural crops and embarked on downstream manufacturing activities. This heralded the phase of industrialization in Malaysia since the early 1970s.The Government provided special assistance and incentives for setting up and for expanding industrial establishments. The Government came up with the First Industrial Master Plan (IMP, 1986-1995), Malaysia’s first industrial blueprint.

 

Due to the impetus given to the manufacturing sector, by 1988 for the first time, the manufacturing sector became the leading growth sector when its share of gross domestic product rose to 21.1% surpassing that of agriculture at 18.6%.This signaled a structural shift from agriculture to a manufacturing based economy.

 

The Second IMP (1996-2005) was introduced to bring about a change from assembly intensive manufacturing to an integrated, industry wide approach consisting of both manufacturing and related services. To further boost manufacturing and modern services the Third IMP(2006-2020) was introduced in 2006.At the end of the period, Malaysia emerged as one of the most dynamic and vibrant economies of the world. Between 1971 and 2008, Malaysia was among the fastest growing countries in the Asean region.