Determinants of Productivity Growth in the Malaysian Manufacturing Sector

The objective of this study is to examine the influence of trade policies and industry charac teristics on productivity growth of the Malaysian manufacturing sector between 1986-91. The results show that productivity growth in the Malaysian manufacturing sector was influ enced positively and significantly by the rate of growth in output, exports as well as by for eign investment. In contrast, increasing capital intensity is seen to have a negative impact on productivity growth. Examining the labour situation in Malaysia reveals severe labour con straints that may have hindered the absorption of the productivity gains from the increases in capital Hence trade policies need to be complemented by appropriate industrial policies in the nation's pursuit of higher productivity growth.