Productivtiy and Economic Growth in Malaysia: Industry 4.0

Teoh, Khai Shiun (2020) Productivtiy and Economic Growth in Malaysia: Industry 4.0. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

Technological innovation integrated with strategic policies is vital for sustainable growth. This study aims to highlight the importance of productivity on Malaysia’s sustainable growth from 1985 to 2018. The dynamic relationships among gross domestic product, capital, labour, total factor productivity, governance institutional quality, and foreign direct investment are examined. The augmented production function, F-bound, ARDL, and Granger causality tests are utilized. The results confirm the dynamic relationship among the variables. However, in the short run, there is bidirectional causality between foreign direct investment and labour productivity. The labour productivity, foreign direct investment and total factor productivity has a significant positive impact on Malaysia’s economy in the long run. Granger causality test shows that there is causality from capital productivity to total factor productivity, then to foreign direct investment and thus to labour productivity. These four variables are vital growth inputs especially to capital productivity and should be accompanied by technological innovation. Well-planned and relevant policies can boost technological progress in Malaysia, slowly yet surely.