Globalisation and Labour Productivity in the Malaysian Manufacturing Sector

Globalisation process has forced the Malaysian manufacturing sector to strengthen its ability to compete in the international market. Globalisation, coupled with advancement in information, communication and technology has increased the demand for quality labour, having knowledge and competing to maximise production. The objective of this paper is to analyse the depth of globalisation impact on labour productivity in the Malaysian manufacturing sector. The analysis has used data from the Manufacturing Industrial Survey, Department of Statistics Malaysia comprising 24 years, from 1985 to 2008 and selected six sub-industries. A multiple regression model using panel data is estimated to analyse the relationship between labour productivity using capital-labour ratio, number of labour, foreign direct investment (FDI), foreign labour, economic openness and technology. Findings of the study show that globalisation indicators like FDI and economic openness have negative and significant effect on labour productivity in the manufacturing sector. The dummy period after the year 1995 is positive and significant reflecting that the impact of globalisation on labour productivity in the Malaysian manufacturing sector is higher after the year 1995 as compared to the years prior to 1995.