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Question A: With references to Malaysian context, evaluate the growth of service sector and its underlying factors.

The service sector contributed about 57.6 per cent to Malaysia gross domestic product (GDP) in 2009, representing a 10 per cent increase since 2000 (Appendix 1). The service sector has expended gradually over the years from 1980, with the exception of a marginal slide in the early 1980’s, when it fell from about 43.1 per cent in 1980 largely due to the slow growth in government services. The services sector share also fell in 1990, but this was largely attributed to the large-scale privatisation of public services. The government services share GDP has declined from 6.7 per cents in 2002 to 2.0 per cents in 2009. The downward trend is part of the national strategy to withdraw from direct participation in economic activities and to assume a more regulatory role and to shift the engine of growth to the private sector. None the less, the government services have expended in absolute terms with the increase in population and standard of living and modernisation of the services provided (Vijayakumari, 2003).

In terms of employment, services accounted for about 53.5 per cent of total employment in 2009 (Appendix 2). Services employment share has been on the rise since 1980, when it accounted for about 50 per cent of total employment. Employment in all sub sectors has been on the rise, with the exception of government services, whose employment share has declined from 13.3 per cent in 1980 to 10.4 per cent in 2002.

In terms of trade in services, Malaysia has traditionally been a net importer of services. Its role in services trade has been rather weak, leaving perennial deficit in the services account balance of payments. In 2005 the deficit was 1.9 per cents of Gross National Income (GNI) and 1.3 per cents of GNI. From 2007 to 2009 the services account of the balance of payment having a surplus whereby 0.4 per cents if GNI in 2007 0.7 per cents of GNI...