Regional Input-Output Table: The Case of North Corridor Economic Region (NCER) in Malaysia

Transcription

1 Iteratioal Joural of Busiess ad Social Sciece Volume 8 Number 2 December 207 Regioal Iput-Output Table: The Case of North Corridor Ecoomic Regio (NCER) i Malaysia Mohd Khairul Hisyam Hassa Nur Ashiki Azmi Mohammad Affedy Arip & Veus Khim-Se Liew Faculty of Ecoomics ad Busiess Uiversiti Malaysia Sarawak Kota Samaraha, Sarawak, Malaysia Abstract Limited studies o the regioal iput-output model ecoomic performace have bee carried out i Malaysia eve though the use of iput-output model has become importat as a plaig tool for future ecoomic developmet. This study attempts to fill the gap by costructig the regioal iput-output model for NCER. The table will cover ie sectors, which are the mai sectors that cotributed to the regio s GDP. I the case of NCER, it was carried out through applyig the o-survey based method, amely RAS techique. Through the backward ad forward likages ad multipliers aalysis, this study foud that maufacturig, other services ad fiace sectors were the key sectors i NCER that ca give a big impact o the ecoomy of this regio particularly i acceleratig the future ecoomic growth. Keywords: Regioal Iput-Output; NCER; Malaysia. Itroductio The developmet of the Norther Corridor Ecoomic Regio (NCER) uder the Nith Malaysia Pla has focused o acceleratig ecoomic growth ad elevatig icome levels, particularly i the orth of Peisular Malaysia ivolvig the states of Perlis, Kedah, Pulau Piag, ad Norther Perak (districts of Hulu Perak, Keria, Kuala Kagsar, ad Larut Matag-Selama). I this regard, The Norther Corridor Implemetatio Authority (NCIA) has idetified the key ecoomic sectors with a very big ivestmet potetial such as agriculture, maufacturig, tourism, ad logistics. For example, durig the period from 2007 to 202, the total ivestmet i this regio recorded RM29.70 billio, which is about 7 per cet from the total Master Pla target (RM77 billio) ad major ivestmets came from the maufacturig ad tourism sectors (Ecoomic Plaig Uit, 204). The expasio of ivestmets i NCER also reflected the etire umber of employmet i this area. I the same period of time, this regio recorded 0.42 millio jobs or 27 per cet of the total Master Pla target (.57 millio jobs). For the GDP growth, this regio recorded 5.9 per cet o average for the period from 2007 to 202 ad Pulau Piag with the highest GDP growth at 6. per cet particularly cotributed by the electroics ad electrical sector. It is followed by Kedah (5.9 per cet), Perak (5.7 per cet), ad Perlis (5.3 per cet) (Ecoomic Plaig Uit, 204). With the curret situatio, the ivestmet ad ecoomic growth i this area are aticipated to expad i achievig the visio to become a world-class ecoomic regio by the year Due to that, the developmet ad improvemet i the key ecoomic sectors for this regio eed to be stregtheed i order to give a coducive ivestmet eviromet to the ivestors. NCIA as a policymaker at the regioal level eed to kow the potetial of each mai sector that eed to be give more priority. It is because each sector i ecoomy iteractig to each other ad the iformatio o the iterdepedecy betwee the sectors i the ecoomy is very useful i the plaig process. Thus, because the importace of iformatio o the sectoral level for the ecoomic growth of this area, the policymakers eed to have a iput-output table, which is explaied the flows of the demad ad supply for each sector i the ecoomic system. Therefore, the purpose of this paper is to costruct the regioal iput-output table for NCER i Malaysia ad its applicatio to the plaig process. 65

2 ISSN (Prit), (Olie) Ceter for Promotig Ideas, USA By usig the o-survey based method RAS techique, the regioal iput-output table for NCER will develop ad provide the calculatio o likages ad multipliers aalysis. The results obtaied give some policy relevace to the developmet of the regio. This paper is outlied as follows. The followig two sectios preset literature review, followed by the basic structure iput-output table NCER. The fourth sectio describes the methodology ad data, while the fifth sectio explais empirical results ad discussios. The last part icludes coclusios ad implicatios. 2. Literature Review Various surveys have bee doe i costructig the regioal iput-output table with various modificatios of the basic procedures as well as their use of data i differet type of ecoomies such as Sawyer ad Miller (983), Steve et al. (983), Pigozzi ad Hiojosa (985), Ralsto et al. (986), Flegg et al. (995), Flegg ad Webber (997), Juius ad Oosterhave (2003), ad Tohmo (2004). I a differet o-survey method aalysis, Sila ad Juvacic (2005) used the modified Geeratio of Regioal Iput-Output Table (GRIT) methodology to estimate the regioal iput-output table ad the provided the ecoomic performace of the Easter Sloveia regio by examiig relatioships betwee the sectors i the regioal ecoomy. This study also examied iput ad output multipliers derived from the model to idetify the key ecoomic sectors i the regio. By cotrast, Riddigto et al. (2006) foud uclear sigificace betwee the regioal iput-output tables produced by the survey-based method, utilizig the atioal data ad locatio quotiet tables. The result also raised the observatio that utilizig the atioal data ad locatio quotiets produced misleadig results. But the gravity model-based approach was foud to produce similar result to the survey-based approach. So oe of LQ methods seemed to be clearly better tha the others. Yu, et al. (2007) geerated two regioal iput-output (IO) tables by usig locatio quotiet techique ad cross idustry locatio quotiet, ad the develops a exteded IO model of water cosumptio for South East of Eglad ad North East of Eglad. Aother approach based o mixed survey ad o-survey based method have become popular istead of usig survey-based method i particular. Applyig the recet method of costructig the regioal iput-output table, Flegg ad Tohmo (200) have coducted the study i regioal iput-output tables ad the FLQ formula: a case study of Filad. They are usig data for 20 Fiish regios, ragig i size from very small to very large for 995, which idetify 37 separate sectors. I additio, this study is focused o the LQbased method (icludig FLQ, SLQ, CILQ ad AFLQ). The fidig states that the differeces betwee regioal ad atioal ratios of itermediate to primary iputs beig of much fewer cocers. Moreover, the AFLQ was foud to be very similar ideed to those for the FLQ, i terms of both accuracy ad the patter of errors. The fidig very helpful to ay regioal aalyst who is cotemplatig makig use of the FLQ formula to geerate iitial sets regioal iput-output coefficiets. Future more, these coefficiets could be used either as part of the RAS procedure or as the o-survey foudatios of a hybrid model. 3. Basic Structure Iput-Output Table NCER The 20 itermediate demad sectors of the Malaysia iput-output table (2005) were first aggregated ito 9 sectors with the available data ad with the hope this aggregatio would reflect the ecoomy of the NCER regio for that particular year. This aggregatio was also o the importace of the sectors to the NCER ecoomy as well as based o the cotributio to the gross domestic product. Basically, the structures of the regioal iput-output tables for NCER is similar to that of the atioal table. The first quadrat or itermediate demad quadrat is represeted by the matrix of 9 idustry rows ad colums. The secod quadrat (fial demad) is represeted by 9 idustry rows ad five colums of fial demad sector (private cosumptio, govermet cosumptio, chage i ivetory, gross fixed capital formatio ad exports). Quadrat three is the primary quadrat which icludes taxes, import ad value added. The fourth quadrat comprises six rows of primary iput sector ad five colums of fial demad sector. 66

3 Primary iputs Import Itermediate demad Total itermediate demad Private cosumptio Govermet cosumptio Chage i ivetory Gross fixed capital formatio Foreig Iter-regioal Total fial demad Total output Iteratioal Joural of Busiess ad Social Sciece Volume 8 Number 2 December 207 Table : Structure of Sigle-Regio Iput-Output Table for NCER Itermediate demad Fial demad Export.. j i.. 9 Total itermediate demad Quadrat Itermediate demad Quadrat 2 Fial demad Purchases from abroad Domestic Services T axes of commodity (import) T axes of commodity (domestic) Foreig Iter-regioal Value added Total primary iputs Total iputs Quadrat 3 Primary iputs Quadrat 4 Primary iputs to fial demad Notes: =Agriculture, 2=Miig ad quarryig, 3=Maufacturig, 4=Costructio, 5=Utilities, 6=Wholesale ad retail trade, 7=Fiace, 8=Other services, 9=Govermet services Source: Miller ad Blair (2009) 4. Methodology ad Data I this study, the costructio of regioal iput-output table for NCER used the o-survey method. The mai sources of data were take from the Departmets of Statistics, Malaysia, for the developmet of the regioal iput-output tables with the atioal iput-output table used as a referece. Actually, oe of the o-survey based methods such as RPC, GRIT, SLQ, CILQ, ad FLQ produces results similar to a survey-based method. So, i costructig the regioal iput-output models with the most accurate figures, some sectors eeded the full rage of superior data, especially for the key sectors (Lahr, 993). 4. RAS Techique RAS techique is the best adjustmet to the basic matrix to stabilize ad improve over the rows ad colums. I the cotext of iput-output matrix is frequetly the basis of direct ad residual coefficiet matrix is a vector of demad ad itermediate iputs. I this study, we applied the model used by Saari ad Rashid (2009). This method ca be explaied usig the followig equatio: RAS = C* () where R ad S is a diagoal matrix, ad A ad C* are respectively direct coefficiet matrix of atioal ad state levels. The matrix C* of state direct coefficiet matrix i equatio (l) is formed as a result of pre-ad post-multiplicatio of a matrix by a diagoal matrix. This implies that each elemet a* ij matrix C* obtaied from ay elemet a ij matrix A as the followig equatio: a* ij = r i a ij s j (2) Sice equatio (2) shows all the elemets of the matrix A ad C* are the same, the the dimesios of the two matrices are also similar. Each elemet of R must be equal to the umber of lies A ad C*, while the umber of colum A ad C* determiig the umber of elemets of S. 67

4 ISSN (Prit), (Olie) Ceter for Promotig Ideas, USA I each row of the RAS techique elemets R ad a* ij are formed by multiplyig each elemet of the row, I matrix A with the same R factor. Whe all operatig lies for matrix A is fiished, it will create a matrix D: D = R A (3) or equivalet: d ij = r i a ij (4) The fial process to form the matrix C* is multiplyig every elemet j colum of the matrix D with each elemet of colum j factor S. This will create a matrix DS Where, DS = R A S = C* (5) a* ij = c ij s j = r i a ij s j (6) 4.2 Likages Aalysis I the iput-output aalysis, the likages aalysis is used to measure the iteractio or relatioship betwee oe sector ad other sectors i a ecoomy. Basically, there are two commoly utilized forms of likages, which is the forward ad backward likage. The forward likage is to explai the relatioship betwee the idustry colum ad to iform which colum idustries row idustry i sells its output ad the value of each sale, whereas the backward likage idustries is used to explai the relatioship betwee row ad to tell us from which row idustries colum idustry j purchases iputs ad the value of each purchase. The effect of likage aalysis is that it utilizes the iverse Leotief matrix techology that reveals the structure of iterdepedece betwee sectors of ecoomic productio. Idex of backward likage ad forward likage effects, ca be achieved by the followig equatio. 4.3 Backward Likages Backward likage effects are related to derived demad, which is the provisio of iput for a give activity. The effects o supportig sectors reflect the backward likages i the ecoomy as firms will be buyig from ad sellig to oe aother. Where: : the umber of idustry b ij : the colum sum of the Leotief iverse matrix for the particular sector i j b ij: deotig the sum of the Leotief iverse matrix for the total idustry. 4.4 Forward Likages Forward likage effects are related to output utilizatio, the outputs from a give activity will iduce attempts to use this output as iputs i some ew activities. bij j U i ij b (8) 2 ij Where, b ij : the row sum of the Leotief iverse matrix for the particular sector. i U 4.5 Output Multiplier The simple output or type I multiplier for a particular sector is defied as the total amout of productio i all sectors of the whole ecoomy that is ecessary i order to satisfy a dollar s worth of fial demad for sector j s output. The measuremet of value for simple output multiplier of a sector is give by the formula; ij i ij b b 2 ij i j i j (7) 68

5 Iteratioal Joural of Busiess ad Social Sciece Volume 8 Number 2 December 207 OM j b ij i where OM j is a simple output multiplier for sector i ad b ij is a elemet i the Leotief iverse matrix (regioal). 4.6 Employmet Multiplier The simple employmet multiplier explais the amout of employmet geerated i the regio for each additioal riggit of fial demad for the sector s output. This is useful for policymakers or ecoomists to see the employmet impacts of a particular sector expasio i their regio. The measuremet for the employmet multiplier is show as follows: EM j i E b (9), i ij (0) where EM j is a simple employmet multiplier sector j, E +, i is a employmet coefficiet sector i ad b ij is a elemet i the Leotief iverse matrix (regioal). 4.7 Icome Multiplier This is expressed as the ratio of the direct plus idirect icome chage to the direct icome chage resultig from a uit icrease i fial demad for ay give idustry. So, the measuremet for the icome multiplier is show as follows: IM j i E b, i ij () where IM j is a simple icome multiplier sector j, E +, i is a icome coefficiet sector i ad b ij is a elemet i the Leotief iverse matrix (regioal). 4.8 Data I this study, two sets of data were employed. Firstly, Malaysia s iput-output table for 2005 published by the Departmet of Statistics, Malaysia ad perhaps gives the most accurate iformatio about the iteridustry relatios ad structure of the ecoomy with a 20 x 20 sectors. The sector was aggregated ito 9 x 9 sectors by emphasizig o the mai sectors i NCER. This table was compiled by usig the ew idustrial classificatio of the Malaysia Stadard Idustrial Classificatio (MSIC) o the basis of the 993 System of Natioal Accouts (SNA). This is the latest iteratioal stadard for compilig I-O as proposed by the Uited Natio. Secodly, the fial demad ad primary iputs compoets. Basically, the fial demad compoet icludes private cosumptio (household expediture), govermet cosumptio, gross fixed capital formatio, chages i ivetory ad export (foreig ad iter-regioal). For the costructio of the fial demad quadrat, the Departmets of Statistics, Malaysia (DOSM) provided complete data for the atioal accout, exteral trade statistics ad yearbook for each regio. The compoets for primary iput icluded commodity taxes (domestic), commodity taxes (import), imports (foreig ad iter-regioal) ad value added. O the costructio of primary iput for commodity taxes (domestic), the Departmets of Statistics, Malaysia (DOSM) provided figures at the aggregate level as cotrol values. 5. Empirical Results The total cotributio of the mai sectors i the geeratio of output is aalyzed based o the 2005 regioal iputoutput table for NCER that have bee developed for the purposes of this study (Table 2). NCER recorded a total output of RM208,508 millio i year 2005 ad maufacturig appeared to be the most importat activity i terms of output geeratio with value of RM0,35 millio (48.6 per cet). Wholesale ad retail trade; ad fiace were raked the secod ad third most importat sectors i NCER with values of RM28,0 millio (3.48 per cet) ad RM26,05 millio (2.48 per cet) respectively. Govermet services, costructio, agriculture ad utilities ad merged as the least importat output geeratig sectors. 69

6 ISSN (Prit), (Olie) Ceter for Promotig Ideas, USA Table 2: Cotributio of Each Sector to the Gross Outputs i NCER, 2005 Sector RM millio Percetage (%) Agriculture 7, Miig ad quarryig, Maufacturig 0, Costructio 7, Utilities 3,95.90 Wholesale ad retail trade 28, Fiace 26, Other services 3, Govermet services 9, Total 208, Source: Authors calculatios Table 3 shows the values of backward ad forward likages for the ie major sectors i NCER for year The likages aalysis will describe which sectors have greater impact o the developmet i NCER. Maufacturig (.2268), other services (.589), utilities (.50), ad costructio (.054) sectors have greater backward likages which are more tha compared to the other sectors. This is shows, these sectors have a strog iterdepedece betwee the sectors i NCER ecoomy particularly i purchasig iput from other sectors. The expasio i fial demad i these sectors will result the additioal output i its ow sectors ad other sectors i ecoomy as well. With respect to forward likages, wholesale ad retail trade (.893), maufacturig (.7033), fiace (.3346), ad other services (.0685) sectors showed strog values of forward likages (more tha ). The higher values of forward likages explai that output of these sectors will be used as a iput i the others sectors i ecoomy. Table 3: Backward ad Forward Likages i NCER, 2005 Sector Backward Likages Rak Forward Likages Rak Agriculture Miig ad quarryig Maufacturig Costructio Utilities Wholesale ad retail trade Fiace Other services Govermet services Source: Authors calculatios O the other had, maufacturig ad other services sectors were the strategic sectors i acceleratig ecoomic developmet i NCER. This is because these sectors have a strog backward ad forward likages which are more tha (backward ad forward likages) ad cotributig more i purchasig ad supplyig the output i the ecoomy. A uit chage i their fial demad will cause the expasio i output for overall sectors i ecoomy. 70

7 Iteratioal Joural of Busiess ad Social Sciece Volume 8 Number 2 December 207 Table 4: Output Multiplier, Employmet Multiplier ad Icome Multiplier i NCER, 2005 Sector Output Employmet Icome Agriculture Miig ad quarryig Maufacturig Costructio Utilities Wholesale ad retail trade Fiace Other services Govermet services Source: Authors calculatios Table 4 shows the values of sectoral output, employmet ad icome multipliers based o the NCER iput-output table. By usig the sigle-regio iput-output model, NCER recorded the maufacturig sector as havig the highest output multiplier. This meas that icreasig a uit of the fial demad would icrease the output multipliers of the maufacturig sector by This value of output geerated i the NCER ecoomy icluded direct effects ad idirect effects. The other services; ad utilities; sectors were the secod ad third sectors i NCER with the highest output multipliers of.9035 ad.8907 respectively. The maufacturig; other services; ad utilities; sectors recorded the highest output multiplier values i the NCER regio because these sectors had strog iput relatios with the other sectors i the ecoomy as show by values of their backward likages. So, these sectors should be give more priority by policymakers for future growth ad developmet i this regio. Employmet multiplier is aother importat measuremet i additio to output ad primary multipliers. A employmet multiplier shows the amout of employmet geerated i the regio for each additioal riggit of fial demad for the sector s output. The maufacturig sector had the highest employmet multiplier with value of i NCER. So, icreasig a uit of fial demad i this sector would icrease uit of employmet i this regio. I NCER, several importat sectors cotributed to the employmet. The agriculture sector was raked secod with value of , followed by the utilities (0.022), other services (0.022), wholesale ad retail trade (0.095), costructio (0.045) ad fiace (0.036) sectors. The govermet services, ad miig ad quarryig sectors emerged as the smallest cotributors to the employmet multipliers with values of ad respectively. For the icome multiplier, the fiace sector recorded the highest icome multiplier i NCER with value of This shows that ay icrease i the fial demad of this sector would lead to a big geeratio of icome i the NCER regio. The miig ad quarryig sector raked secod with value of , followed by the maufacturig sector i the third rak with value of These three sectors had the highest values of multipliers (icome) because of their capability i geeratig high values for icome. 6. Coclusio I this paper, regioal iput-output model was applied to costruct the regioal iput-output table for North Corridor Ecoomics Regio (NCER) i Malaysia. Hece, oe of the most importat cotributios of this study is the creatio of regioal iput-output for NCER which provides policymakers a good tool i examiig the relatioships betwee ecoomic sectors particularly i likages ad multiplier aalysis. I 2005, the maufacturig sector emerged as the mai cotributor to NCER s output, geeratig a output amoutig to RM0,35 millio. The ext largest sector was wholesale ad retail trade sector with output of RM28,0 millio, followed by the fiace sector with output of RM26,05 millio. Through the likages ad multipliers aalysis, the results demostrate that maufacturig, other services ad fiace sectors were the mai or key sectors that play a importat role i the developmet strategy of NCER ecoomy. Therefore, policymakers will be able to desig a better regioal plaig i future by usig the most potetial sectors i the regio to accelerate the ecoomic growth by stimulatig the ivestmet flows. Ackowledgemet The authors wish to thak Uiversiti Malaysia Sarawak (UNIMAS) for supportig the dissemiatio of this research. This research was supported by the Miistry of Higher Educatio (MOHE), Malaysia through Research Acculturatio Grat Scheme, (RAGS/SS/07()/907/202(08). 7

8 ISSN (Prit), (Olie) Ceter for Promotig Ideas, USA Refereces Ecoomic Plaig Uit. (204). Regioal Corridor Developmet i Malaysia. Retrieved July 5, 204, from Materials%20/009_34_209_Regioal-Corridor-Developmet-i-Malaysia.pdf Flegg, A. T., Webber, C. D., ad Elliott, M. V. (995). O the Appropriate Use of Locatio Quotiets i Geeratig Regioal Iput-Output Tables, Regioal Studies, Vol. 29 (6), pp Flegg, A. T., ad Webber, C. D. (997). O the Appropriate Use of Locatio Quotiets i Geeratig Regioal Iput-Output Tables: Reply, Regioal Studies, Vol.3 (8), pp Flegg, A. T., ad Tohmo, T. (200). Regioal Iput-Output Tables ad the FLQ Formula: A Case Study of Filad. Bristol, pp Juius, T., ad Oosterhave, J. (2003), The Solutio of Updatig or Regioalizig a Matrix with both Positive ad Negative Etries, Ecoomic Systems Research, Vol. 5 (), pp Lahr, M. L. (993). A Review of the Literature Supportig the Hybrid Approach to Costructig Regioal Iput- Output Models. Ecoomic Systems Research, 5(3): Malaysia, Departmet of Statistics (2005). Iput-Output Tables. Percetaka Nasioal Malaysia Berhad: Kuala Lumpur. Miller, R. E. (983). Experimets i Regioalizatio of Natioal Iput-Output Tables, Eviromet ad Plaig A, 5, pp Miller, R.E., ad Blair, P. D. (2009). Iput-Output Aalysis: Foudatios ad Extesios, 2d Editio, New York: Cambridge Uiversity Press. Pigozzi, B. WM., ad Hiojosa, R. C. (985). Regioal Iput-Output Iverse Coefficiets Adjusted from Natioal Tables, Growth ad Chage, Vol. 6 (), pp Ralsto, S. N., Hastigs, S. E., ad Brucker, S. M. (986). Improvig Regioal I-O Models: Evidece Agaist Uiform Regioal Purchase Coefficiets Across Rows, Aals of Regioal Sciece, Vol. 20, pp Riddigto, G., Gibso, H., ad Aderso, J. (2006). Compariso of Gravity Model, Survey ad Locatio Quotiets-based Local Area Tables ad Multipliers. Regioal Studies, 40(9): Saari, M. Y., ad Rashid, Z. A. (2009). Pembagua Jadual Iput-Output Wilayah da Aalisis ke atas Struktur Idustri Selagor. Iteratioal Joural of Maagemet Studies, 6: -30. Sawyer, C. H., ad Miller, R. E. (983). Experimets i Regioalizatio of Natioal Iput-Output Tables. Eviromet ad Plaig A, 5: Sila, U., ad Juvacic, L. (2005). Regioal Iput-Output Table-the Case of Easter Sloveia. Jahrbuch der Osterreichische Gesellschaft fur Agrarokoomie, 3: Steves, B. H., Treyz, G. I., Ehrlich, D. J., ad Bower, J. R. (983). A New Techique for the Costructio of No-Survey Regioal Iput-Output Models, Iteratioal Regioal Sciece Review, Vol. 8 (3), pp Tohmo, T. (2004). New Developmets i the Use of Locatio Quotiets to Estimate Regioal Iput-Output Coefficiet ad Multipliers, Regioal Studies, Vol. 38 (), pp Yu, Y., Hubacek, K., Gua, D., ad Feg, K. (2007). Costructio ad Applicatio of Regioal Iput-Output Models: Assessig Water Cosumptio i South East ad North East of Eglad. Paper preseted at the 6 th Iteratioal Coferece o Iput-Output Techiques, Istabul, Turkey, July