Productivity and Capital Intensity

I’m almost all the way back – I spent very nearly the whole weekend redoing my whole computer setup, and its very nearly done. It’ll still be a while before I’m posting regularly though, and there’s a lot to catch up on.

In the meantime, here’s a graph to chew on – capital intensity in Malaysia (RM millions per worker):

One of the concerns continually raised over the years has been the level of productivity and value added in Malaysian industry. The above graph is derived from the new capital stock estimates released by the Department of Statistics and labour force data.

It suggests that such concerns might be a little overblown – capital intensity per worker has in fact been rising fairly respectably (log difference):

For the past ten years, the average annual increase works out to above 4% per annum.

A word of caution though – much of this is actually investment in land and building, which explains the spike in 1995. By the same token the lower level of increase in the last decade shouldn’t be too worrisome as what we’re probably seeing is the impact of the chronic oversupply of office space in Malaysia. The numbers are also in current prices, and if adjusted for inflation is barely creeping up – though still positive at a little over 1% per annum.

It would be interesting to compare these numbers with the historical data on industrial countries as well as current data on other emerging markets in the region. I’m not too hopeful though, as reading the background notes from DOS on how they came up with the numbers suggests that this was no trivial exercise, and I wonder how many other emerging markets would actually take the trouble.

Technical Notes:

Malaysian Capital Stock Statistics from the Department of Statistics