In the previous newsletter (Part 1), we have highlighted about ICP Programme and its relation to national economic output and GDP.
This issue we will focus on the data sources, methodology, and results obtained from the study. At the end of the article, the limitation and way forward will also be highlighted.
|1.0 Data Sources and Processing|
This study utilises data from two (2) main sources: Input-Output Table 2015 (Department of Statistics Malaysia, 2018) The latest input-output table for 2015 consists of 124 industries. Each of the industries in the input-output table is formed by a group of economic activities that share the same nature of business. These economic activities are classified based on MSIC 2008.
ICP project investment and expenditure under 3 main procurements (Technology Depository Agency Berhad, 2018) Investment and expenditure for ICP projects from three main procurements namely MRT-SBK Line by Malaysia Rail Transit Corporation (MRT), Manjung Five Power Plant by TNB and Sistem Bisnes Utama (SBU ICT) by Kementerian Dalam Negeri (KDN).
These expenditures involved 48 projects and had been audited by TDA for their validity. However, the impact assessment process is not a straight-forward process as the ICP investment and expenditures need to go through four major data processing stages as illustrated in Figure 1.
Input-output analysis is consistent with the system of national accounts for accounting and measuring GDP. Thus, the results of the analysis are comparable to the national account statistics.
2.0 ICP Economic Impacts & Multiplier
Based on the data provided and methodology used, the findings for impact of ICP investment and expenditure by type of procurement are as follows:
Figure 2: Nominal ICP Value and Economics Impacts of Total Procurements
Based on the amount of ICP expenditure of RM1.14 billion, the analysis concluded that:
- It has generated RM2.14 billion as output or yield of RM1.88 for every Ringgit spent.
- Contributed RM780.89 million to GDP or yield of RM0.68 per every Ringgit spent.
- From the amount of GDP, it contributes RM464.10 million to operating surplusi and RM316.79 million to compensation of employeeii.
Forecasted 10,146 jobs created or 889 jobs for every RM100 million spent
2.2. Program-based Impacts (MRT Procurement)
Based on the amount of ICP expenditure of RM1.08 billion, the analysis concluded that:
- It has generated RM2.03 billion as output or yield of RM1.88 of output for every Ringgit spent.
- Contributed RM732.23 million to GDP or yield of RM0.68 per every Ringgit spent.
- From the amount of GDP, it contributes RM436.62 million to operating surplus and RM295.62 million to compensation of employee.
- Forecasted 9,644 jobs created or 893 jobs for every RM100 million spent.
Operating surplus measures the surplus or deficit accruing from processes of production before deducting any explicit or implicit interest charges, rent or other property income payable on the financial assets, land or other natural resources required to carry on the production. It is essentially profit to an enterprise.
ii Compensation of employees (COE) is the total remuneration for employees, which includes salaries and wages, training, meals, uniform and other payments in kind, paid by an enterprise to an employee in return for work done by the latter during the accounting period.
Analysis provided in this study have several unique features that can be highlighted as below.
- The impacts of ICP investment expenditures on the macroeconomic indicators can be assessed both at total impacts and at per Ringgit of investment.
- For each procurement, program and project, the results can be detailed at 124 sectors and thus providing valuable information for policy makers in assessing the gainers from the investment.
- Analysis are able to assess the economic impacts for individual procurement, programme and project. In this study, findings reveal that MRT procurement bring the largest impacts to the economy because it dominates the largest share of total ICP investment and expenditure.
- Multiplier derived from this study is highly useful in assessing impact per Ringgit of investment. In this study, although the impacts of MRT procurement is the largest, the contribution per Ringgit of investment is relatively lower compared to TNB Manjung Five and SBU ICT procurements.
Although this study has provided useful results for policy assessment of ICP procurements, some limitations should be noted because the economic impacts may not be measured perfectly due database and model constraints.
3.3 Way Forward
Based on this study, TDA has gained benefits by using methodology and economic assessment tool provided. However, there are two (2) recommendations for future improvement in measuring economic impacts of ICP procurements.