Determinants of Manufacturing Sector Growth in Malaysia

Abstract

The purpose of this study is to analyze the determinants of manufacturing sector’s growth in Malaysia. It aims to evaluate the effects of the selected independent variables on the value-added of manufacturing in Malaysia. A time series data for the period of 1970 to 2019 is used and the multi regression analysis is employed. Results obtained indicate that the exports of goods and services, net inflows of foreign direct investment are statistically significant in determining the manufacturing growth. Therefore, the government should provide more incentives for export activities, such as the reduction in tariffs, tax, and increase in subsidiaries. This initiative will attract more sellers to export their goods with the incentives given by the government. At the same time, the government should take some initiatives such as reducing costs and increasing profits for those investors who are interested in investing in Malaysian businesses. This could help to attract more investors to invest and this would help the manufacturing sector increase production capacity, resulting in an increase in manufacturing value added.