Business

Tuesday September 22, 2009

Knowledge content in key economic sectors

Policy Perspective by Datuk Noriyah Ahmad


MALAYSIA’S transformation towards a knowledge-based economy since the mid-1990s has seen encouraging achievements but more needs to be done.

The Malaysian economy registered a gross domestic product (GDP) growth of 4.6% in 2008. Total factor productivity (TFP), encompasses enhancing efficiency of all factors of production including the development of human capital through knowledge-based activities, inculcating a creative and innovative mindset as well as adopting new technologies and innovation to accelerate productivity growth, is a relevant measure.

TFP grew by 2% for the period 1999-2008 where all economic sectors registered TFP growth ranging from 1% (agriculture) to 2.3% (manufacturing).

The economy is targeted to achieve a TFP growth of 2.2% during the Ninth Malaysia Plan (2006-2010) and 2.8% in the 2011-2020 period.

The study on knowledge content in key economic sectors done by Economic Planning Unit, Prime Minister’s Department, in 2007 measured the level of knowledge content and readiness of the Malaysian industries.

The study encompasses a stratified random survey of 2,433 firms from 21 industries, comprising agriculture, manufacturing, services, and wholesale and retail trade sectors.

The study defines knowledge content as the sum of human capabilities, leadership assets and experience, technology and information capital, collaborative relationships, intellectual property, information stocks and capabilities for shared learning and utilisation that can be used to create wealth and foster economic competitiveness.

The knowledge content measurement framework identifies four knowledge enablers and four knowledge actions with innovation and economic performance as outcomes.

Knowledge content was highest in the telecommunications, IT and chemicals industries whereas the agriculture, wood and construction industries reported the lagging industries.

The gaps between the large firms and SMEs, that of foreign and domestic firms, have narrowed as compared with a similar study done in 2003, highlighting opportunities to promote knowledge exchange and learning between leading and lagging industries.

Human capabilities, technology and infostructure

Overall, all industries did well in technology and infostructure, particularly finance, IT and education services. However, the performance in human capabilities was on the average low, implying that soft aspects in supporting a knowledge-based economy must be given greater focus with training programmes refined and integrated to enable sharing of knowledge.

ICT is the enabling tool in a knowledge-based economy whereby regular use of ICT as part of an employee’s job is associated with higher productivity in industries.

Knowledge leadership and environment

Government assistance in the form of information, advice and technical assistance has significant impact on the level of knowledge content across industries.

However, of concern is the declining rate of collaboration between firms and the ministries, agencies, state and local governments, universities and public research institutes, suggesting a greater need for industries to collaborate with public organisations.

Knowledge generation, acquisition, sharing and utilisation

Research and development engagement, patent and copyright application was low among industries despite continuous provision of funds and infrastructure support.

The capacity to absorb and utilise knowledge is critical to enable the development of new knowledge and innovation, thus enhancing competitive advantage.

It is observed that knowledge intensity in biotechnology firms is higher than others.

The business services, machinery, IT services and agriculture industries were found to serve as hubs for the creation and diffusion of knowledge to other industries.

Knowledge-driven outcomes

Knowledge acquisition and development activities, knowledge exchange with foreign firms and regular use of ICT were significantly associated with higher productivity.

These firms received higher returns from knowledge activities which translated into improved products, processes and organisation through innovation and enhanced economic performance.

Conclusion

Industries identified lack of funds and English-speaking workers as well as inadequate skills as constraints in improving knowledge content, worker skill and ICT utilisation.

Industries have significantly increased their extent of preparedness to become knowledge intensive with variations in the knowledge content dimensions.

Findings of the study will form a valuable input for the upcoming 10th Malaysia Plan.

The Government will play its facilitator role by creating a more conducive environment to support innovation, human capital development and the pervasive use of technology while the private sector is expected to lead as the engine of growth.

The private sector must be willing to invest in the development of its human resource, which is key to innovation, and increase its collaboration with other players within and outside of the industry that may be a part of its supply or marketing value chain.

We must become more focused on areas of opportunity for Malaysia, not by driving down wages, but through creativity and innovation in developing products and services that meet global standards.

In today’s era of convergence, we will see a move into cross-sectoral fields of economic activities, which include healthcare, agro and industrial biotechnology. ICT will continue to play a dual developmental role which is as an industry and as an enabler in driving the growth of our economy.

·The writer is director-general of the Economic Planning Unit.

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