Total factor productivity as a source of economic growth

Abstract

The Malaysian economy has enjoyed strong growth for nine consecutive years where labour-intensive industries have been replaced by capital intensive industries as the main source of growth. The economy has now reached a stage where capital investment alone will not be sufficient to provide the driving force for further growth. The greater concern would be the long-term sustainable growth in productivity which will determine the future standards of living and also improvements in national competitiveness. Generally, higher long-term productivity growth is associated with growth in capital intensity (CI) and growth in Total Factor Productivity (TFP).