The Impacts of ICT on Labor Productivity in Selected Services Sector in Malaysia

The services sector has been identified as an important economic growth driver in the period of the Tenth Malaysia Plan. The sector is expected to grow at 7.2 percent annually, raising its contribution to GDP to 61 percent by the end of the Tenth MalaysiaPlan period. With the limited resources and increasing competition in the global market, anenhancement in the labor productivity is important and critical. The objective of this article is to analyze the impacts of investments in ICT-capital and usage of ICT on labor productivity by using panel data from 2002 until 2007 in five services sub-sectors, namely education and health services in the private sector, accommodation, transportation and ICT services. Results show that there are significant positive relationship between the labor productivity and the investments in ICT-capital and usage of ICT. Therefore, following initiatives are suggested in order to increase the benefits from the investments in ICT-capital and usage of ICT: 1) organizational change to incorporate more ICT components in daily operation, 2) providing training and up-to-date ICT knowledge to workers, 3) government supports in term of fund, incentive or subsidy to promote the innovation development and to formulate ICT strategic plan.