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Productivity Performance of Malaysian Government Linked Companies (GLCs) in Plantation Sectorby Rosmi Abdullahe-mail :

AbstractThe increase in productivity performance and economies of scale are very important to the industry. Productivity performance explains how effective and efficient the company is, in managing the inputs such as labour and capital to produce the output. The increasing performance reflects the success of the business of the company in competing with others. The first part of these studies measure productivity performance of the Government Linked Companies in plantations sector. The productivity measurement indicators have been used because they explain theefficiency and effectiveness of the company

in managing resources. To stay competitiveand efficient in the industries, productivity

ratio for the employee and capital should be higher compared with other companies. The two most important productivity measurements are labour productivity and capital productivity. Labour productivity measures the effectiveness and efficiencies of the labour in producing the product. A higher labour productivity indicates that the labours are efficient and a lower ratio is due to the inefficiency in managing the labour productivity. Capital productivity measures the efficiencies of the capital

utilisation- A higher ratio reflects theeffectiveness of the utilisation of the capital. The findings of this study explained the productivity performance of the selected companies. The trend of the productivity

performances for these 3 companies is very different and the productivity measurement ratios vary from each other. The labour productivity for GLCsl is higher compared withGLCs2 and GLCs3. This implies that GLCsl is most efficient in managing its labour

input. The ratio for capital productivity for the GLCs 1 is higher than GLCs2 and GLCs3.

This indicates that the capital for GLCs2 and GLCs3 are under-utilised compared to theGLCsl. Comparison between these 3 companies shows that company GLCsl is the most efficient in labour and capita! productivity. Companies GLCs2 and GLCs3 have to benchmark the best practices of company GLCsl and implement them to improve the efficiency in labour and capital productivities. The second part of the analysis finding

explains the economic theory of return to scale. The production function approach modelexplained that 3 selected companies are operating at constant and decreasing return to scale. The GLCsl is operating at constant return to scale. The GLCs2 and GLCs3 are operating at decreasing return to scale. The findings proved that productivity measurement is very important in measuring the performance and economies of scale for companies because it explains how effective and efficient the labour and capital are. Eventhough from the financial report the company may record profit but the production function mode! approach may show that the company does not operate at an increasing economies of scale. The company should operate at an increasing economies of scale to maintain and succeed in the business. Productivity improvement refers to the change sought, noted and implemented in an operation to produce a positive change in the performance of the company. The company has to implement continuous productivity improvement programme for the labour and capital to improve, sustain and be competitive in the industries and the market. Keywords: Competitiveness, Efficiency, Productivity, Performance

Introduction Competitiveness of Malaysian IndustriesCompetitiveness and efficiencies are very important factors for industries to compete and sustain in this era of globalisation. The efficiency and effectiveness in management, production and marketing will contribute to the competitiveness and increase in profit. This research identifies the need to understand productivity performance and economies of scale for the plantation sector. The study will focus on

the same type of industries sector under the Malaysian Government Linked Companies. The productivity performance of the industries is very crucial to understand, identify and analyse the factors affecting and to understand the companies' internal problem, trend and competitiveness, and to sustain in the market.The role of productivity in a firm's performance is fundamentally important to the economy. Many companies have been using productivity performance measurement to evaluate their performance and competitiveness. Productivity indicators of the

industries will be compared at the national productivity level. Benchmarking within the industries of the same sector is also conducted to ascertain the level of competitiveness, in terms of labour productivity and capital productivity. Productivity measurement is an indicator of how well companies are in managing their production, material, human capital and quality of their products. Peter Drucker (1974) had put it in a more general way, "Without productivity objectives, a business does not have direction. Without productivity measurement, it does not have control"- This statement proves that measurement of productivity indicator is very important to strategise how the companies should manage their production, human resources, raw material, capital and end products. Productivity indicator would be able to measure the trend, effectiveness and efficiencies in the utilisation of inputs in producing outputs. The overall performance of Malaysian productivity has been measured and compared with other countries. Productivity level can be used as an indicator to measure the competitiveness performance of Malaysian industries. The study by the National Productivity Corporation (NPC) produced in Productivity Annual Report 2005, shows that the productivity level of Malaysia was lower than USA, Japan, Ireland, Hong Kong, France, Finland, Singapore, UK, Germany, Canada, Australia, Taiwan and Korea. Conversely, the Malaysian productivity level is higher when compared to Thailand, Philippines, China, Indonesia and India. The comparison was based on therelative productivity for year 2005. Among the Asian countries, Hong Kong, Singapore

and Taiwan's productivity were between 3.2 to 5-4 times that of Malaysia. Malaysia's productivity was higher than Thailand, Philippines, China, Indonesia and India. From the report by NPC, Malaysian industries were far behind our neighbouring country Singapore, which had productivity level of 4.7 compared to 1.0 for Malaysia. There are still a lot of rooms for improvement for the Malaysian industries through the implementation of productivity improvement programme, such as Total ManagementQuality System.



Relative Productivity and Growth

Selected Countries

twity(constant i'ei;\n USS) Productivity6.9 6.8 5.6 5.3 5.1 4.94.7 4.6Growth (%);:


^"^^^^^ 77.346 77,061 62,936 60,299 57,677 55,698 52,426 51,882

1.8 1.9 1.0 5.01.4 0.1 1.9

Japan IrelandHong Kong France Finland Singapore



Germany CanadaAustralia Taiwan Korea Malaysia Thailand Philippines China

50,789 49,308 45,545 35,856 27,90911,300 4,305 2.807

4.5 4.4 4.0 3.2 2-5 1.0 0.4 0.2 0.2 0.2 0.1

0.9 1.6 -1.0 2.7 2.6 3.0 3.0 -0.87.1 4.4 6.6

2,2721,952 1,242


Computed from: Economic Report, Ministry of Finance, Malaysia, various Issues: OECD Economic Outlook, December 2005, Vol. 78 National Accounts of OECD Countries, Detailed Tables 1992-2003 Country Data, Source: National Productivity Corporation

Malaysian industries must be more competitive to sustain and compete in globalisation. There are many factors involved in managing quality and performance of a company. The two most important factors are the performance measures of labour


and capital in producing outputs. The result indicates that Malaysian industries should improve more on their productivity level to compete with the other countries. Additionally, to improve the macro productivity level, Malaysian Government should emphasise at the micro productivity level. This could be done by increasing the productivity in each company in Malaysia. This study measures the performance of productivity indicator in Malaysian Government Linked Companies (GLCs) to analyse and evaluate how competitive this sector is. in Industries Economies by Scherer (1996); Tirole (1988), it is found that frequently mentioned performance criteria include efficiency, product variety, innovativeness and macro-economic stability. Related dimensions of competitive conduct include pricing behaviour, R&D, advertising and product design. Market structure, finally, encompasses elements such as concentration, product differentiation, market entry barriers, and vertical integration. Structure, conduct and performance are all characteristics of markets. They include product and process technology, employees' skills, unionisation and location of raw resources. Basic conditions on the demand side influenced effective demand. They include consumers' buying methods, availability of substitutes, price elasticity, and cyclical and seasonal patterns in buying. This input can be divided into two main production factors, labour and capital, which are to produce output. These two factors measure efficiencies and effectiveness of the company by using productivity measurement. This can be analysed by productivity performance each year, comparing between the years to see how the factors are influencing the inputs and outputs of the companies. In terms of the structure, it is important to see whether the selected companies are influenced by the rules or regulations. The study will also determine whether the

conclusion by Scherer & Boss (1990), that public policies, finally, can both influence