TRADE IN TECHNOLOGY
10.3 TRADE IN SERVICES
Trade in services refers to the sale and delivery of a product, called a service, between a producer and consumer. This section covers the total payments, receipts and trade balance for the royalties, contract and professional charges and construction and engineering fees for the years 2001 to 2008.
10.3.1 Payments and Receipts
This section reports on the total payments, receipts and balance for royalties, contract and professional charges, and construction and engineering fees made by Malaysia for the trade in services.
Figure 10.10: Total Royalty Payment, Receipt and Balance (RM Million), Malaysia 2001-2008
Source: Bank Negara Malaysia
Figure 10.10 shows the patterns of technology trade in terms of royalty receipts, payments and balance for the period 2001-2008. Receipts in the royalty account have not shown much improvement throughout the reporting period. Royalty payments for the trade in services abroad by Malaysian based companies in the period 2003 to 2005 but fell in 2006. In general, Malaysia is a royalty payer, selling less of its patented technology abroad. This is reflected in figure 10.10, where throughout 2001 to 2008, the balance of payments in the royalty accounts showed large deficits.
Malaysian Science & Technology Indicators 2008 Report Malaysian Science & Technology Indicators 2008 Report Figure 10.11: Total Contract and Professional Payment, Receipt and Balance (RM Million),
Malaysia 2001 – 2008
Source: Bank Negara Malaysia
Figure 10.11 shows that there were large deficits in the balance of payments for the contract and professional services. Even though the total ‘contract and professional’ receipts have shown steady improvements from 2002 to 2008, the gaps were still broad as the total payments grew even higher than the total earnings. The highest year of payments was recorded in 2008 with RM10,786 million. Year 2007 also marked a significant improvement in the balance of payment, in which a total trade deficit of RM1,947 million was recorded during the year, reducing trade deficit by 25.4% as compared to the previous year.
Figure 10.12: Total Construction and Engineering Payment, Receipt and Balance (RM Million), Malaysia 2001 – 2008
Source: Bank Negara Malaysia
Total ‘construction and engineering’ fee payments fluctuated over the period 2002 to 2008. Receipts collected increased gradually from 2001 to 2007. Year 2007 marked a significant improvement where receipts collected during the year reached 6,773 million, an increase of 28.8% from the previous year.
Despite showing the positive growth in receipts, the overall balance of payments continued to show
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wide deficits in the account. The balance of payments showed fluctuations in the total fees when it fell sharply in 2005 with a drop of 111.7% from the previous year. Nevertheless, the accounts showed improvements in 2006 when it slightly increased to RM-1,705 million (Figure 10.12).
Figure 10.13: Total Payments, Receipts and Balance in Trade in Services (RM Million), Malaysia 2001 – 2008
Source: Bank Negara Malaysia
The payments made by Malaysia grew much faster than the receipts collected during 2001 to 2008, causing service trade deficits to grow bigger. The largest deficit in account was recorded in 2005, where total payment exceeded total receipts by RM11,407 million. The total payments increased steadily from the year 2002 with only a slight dropped in 2006 before it grew back in the following years. The highest payment made was in 2008, with a total amount of RM23,270 million, representing an increase of 1.6%
from RM22, 898 million recorded in 2007. On the other hand, the total receipts grew steadily over the period 2001-2008 and reached its peak in 2008 with total receipts of RM15,585 million.
Malaysian Science & Technology Indicators 2008 Report Malaysian Science & Technology Indicators 2008 Report Figure 10.14: Composition of Payments in Services Trade, Malaysia 2001 – 2008
Source: Bank Negara Malaysia
Figure 10.14 shows the composition of payments in services trade over the years 2001 to 2008. Payments for contract and professional fees constituted the biggest portion, with above 40.0% shared percentage throughout 2001 to 2008 years period. Only 2005 marked a slight reduction in the portion, which constituted 35.1% of total payments. Meanwhile, ‘construction and engineering’ was ranked second place, contributing a share of above 30.0% throughout the period except for 2004, where it contributed 27.0% of total payments. Payments for royalties accounted for less than 25% throughout the period under review except for 2005 where royalty payments accounted for 28.4% of total payments.
Figure 10.15: Composition of Receipts in Services Trade, Malaysia 2001 – 2008
Source: Bank Negara Malaysia
Figure 10.15 shows the composition of receipts in services trade from 2001 to 2008. The biggest share of receipts composition was in the ‘contract and professional’ fee with above 50% share throughout 2001-2008, except for 2005 and 2006 where it accounted for 49.9% and 49.8% of total receipts in service trade. The highest share recorded by this receipt segment was in 2001 with 67.6% of total receipts.
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Receipts from ‘construction and engineering’ fees contributed the second largest share in the service trade account. The collections from this service trade component increased steadily throughout the years but dropped slightly in 2008. The receipt from ‘construction and engineering’ segment showed a marked improvement in 2006 of receipts collected during that year.
Receipts from royalties remained to be the smallest contributor to the trade in services accounts, contributing less than 5% of the total receipts.
10.3.2 Main Contributors to Payments and Receipts
This section presents payments, receipts and balances by major contributors for royalty, contract and professional charges, and construction and engineering fees.
10.3.2.1 Royalties
Figure 10.16: Royalty Payments, Malaysia (RM Million) 1999 – 2008
Source: Bank Negara Malaysia
The United States remained to be the largest country that received royalty payments from Malaysia throughout the period 1999-2008. Royalty payments to this country reached above RM900 million levels since 2000, with the highest royalty payment recorded in 2008 at RM1,718 million. Nevertheless, it was observed that royalty payment to Switzerland in 2005 was higher (RM1,997 million) than the United States. As a note, Switzerland was categorized under “others” as historical data prior to 2005 from this country was not available. Other countries which became Malaysia’s major recipients of royalty were Japan, the United Kingdom and Singapore.
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Malaysian Science & Technology Indicators 2008 Report Malaysian Science & Technology Indicators 2008 Report Figure 10.17: Royalty Receipts, Malaysia, (RM Million) 1999 – 2008
Source: Bank Negara Malaysia
Figure 10.17 above shows receipts in royalty by major technology trade partners for the period 1999-2008. The United States remained as Malaysia’s major contributor in terms of royalty receipts, contributing RM27 million or 4.1% of total royalty receipts. The amount represents a decrease of 29% from the previous year. The second largest contributor was Singapore with RM18 million, an increase of 38.5% over the previous year. The third largest contributor, the United Kingdom, recorded a 44% decrease in royalty receipts from RM9 million in 2007 to RM5million in 2006, while Japan recorded a one-fold increase from RM1 million in 2007 to RM2 million in 2008.
Figure 10.18: Royalty Balance, Malaysia (RM Million) 1999 – 2008
Source: Bank Negara Malaysia
Overall, Malaysia recorded very substantial deficits in royalty payments throughout 1999 to 2008 indicating that Malaysian companies remained dependent on foreign technologies especially from the United States, Japan, the United Kingdom and Singapore.
Most technology trade partners recorded deficits in 2008. The largest were observed in the United States (RM -1,691 million), followed by Japan (RM-670 million), Singapore (RM-376 million) and the United Kingdom (RM-245 million).
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10.3.2.2 Contract and Professional Charges
This section presents the payments, receipts and balance of payments for contract and professional charges by selected countries from 1999 to 2008.
Figure 10.19: Payments for Contract and Professional Charges by Country (RM Million), Malaysia 1999 – 2008
Source: Bank Negara Malaysia
Overall, there has been an increase in the deficit in the ‘contract and professional’ charges account during the period of 2008. The United States remained to be the largest recipient of the ‘contract and professional’ fees made by Malaysia. In 2008, total payments to the country increased by 24.3%
from RM1,680 million recorded in the previous year.
Singapore was the second largest recipient with RM2,077 million, a double digit increase of 37.6%
from RM1,510 million in 2007. Other major recipients were the United Kingdom (RM1,124 million or -4.8%), Hong Kong (RM623 million or +15.0%) and Japan (RM307 million or +10.0%).
Figure 10.20: Receipts for Contract and Professional Charges by Country (RM Million), Malaysia 1999 – 2008
Source: Bank Negara Malaysia
Malaysian Science & Technology Indicators 2008 Report Malaysian Science & Technology Indicators 2008 Report The total receipts for ‘contract and professional’ charges showed an increasing trend from 1999 to
2008 except for 2002 when it dropped 6.5% from 2001. The United States accounted for the largest share in 2008, with 22.5% of total receipts. This was followed by Singapore (RM1,382 million or 16.6%), the United Kingdom (RM670 million or 8.0%), Hong Kong (RM635 million or 7.6%) and Japan (RM272 million or 3.3%).
Figure 10.21: Balance of Payments for Contract and Professional Charges by Country (RM Million), Malaysia 1999 – 2008
Source: Bank Negara Malaysia
The payments for the ‘contract and professional’ charges grew faster than the receipts collected, resulting in high deficits in the balance of payments. In 2008, the balance of payments for contract and professional charges declined by 120.5% to RM-1,065 million, from RM-483 million recorded in 2007.
With the exception of Hong Kong which registered trade surplus of RM12 million, all other major trading partners registered trade deficits in contract and professional charges for 2008. The largest were observed in Singapore (RM-695 million), followed by the United Kingdom (RM-454 million), the United States (RM-212 million) and Japan (RM-35 million)
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10.3.2.3 Construction and Engineering Fees by Country
This section reports about construction and engineering payments, receipts and balance of payments to the selected countries.
Figure 10.22 Construction & Engineering Payments (RM Million), Malaysia 1999 – 2008
Source: Bank Negara Malaysia
Figure 10.22 shows the major recipient countries of ‘construction and engineering’ payment from Malaysia from 1999 to 2008. The largest recipient country in 2008 was Singapore with RM1,971 million, up 76.0% from 2007, followed by the United States at RM891 million (-7.4%), Japan at RM757 million (-56.7%), Germany at RM512 million (-37.9%) and the United Kingdom at RM381million (+2.7%).
Figure 10.23: Construction and Engineering Receipts (RM Million), Malaysia 1999 – 2008
Source: Bank Negara Malaysia
Figure 10.23 above shows receipts from ‘construction and engineering’ charges by major country for the period 1999-2008. Singapore overtook the United States in 2008 to become Malaysia’s major contributor at RM769 million, 20.2% higher than the previous year. The second major contributor
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was the United States at RM567 million (-53.5%), followed by Germany at RM246 million (+6.5%), Japan at RM197 million (16.2%), and the United Kingdom at RM154 million (+48.1%).
Figure 10.24: Construction and Engineering Balance of Payment, (RM Million), Malaysia 1999 – 2008
Source: Bank Negara Malaysia
The payments made by Malaysia for ‘construction and engineering’ grew significantly faster than the receipts collected over the period of 1999 to 2008, resulting in huge deficits in the account. In 2008, Malaysia recorded deficits with most of its major trading countries. The largest were observed in Singapore (RM-1,202 million), followed by Japan (RM-560 million), the United States (RM-324 million), Germany (RM-266 million) and the United Kingdom (RM-227 million).