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Measuring the Economic Impacts of Industrial Collaboration Program (ICP)

30 Sep 2020

Part I

Industrial Collaboration Program (ICP) is a value-added program leveraging on national procurement to support the local industry and technology development needs in contributing to the national economic growth. It is a program that designed to speed-up and maximise economic growth from an infrastructure investment.

Infrastructure investment is a critical factor in the growth and wealth of a country, enabling industries to produce goods and services more efficiently. Infrastructure investment can be grouped into three types:

  1. Structures: Water systems, highways, bridges, building etc.
  2. Equipment: Computers, machineries, military hardware etc.
  3. Intellectual property: Software, pattern, research, development etc.

In relation to the overall economic output, increased infrastructure spending by the government is generally expected to result in higher economic output in short-term by stimulating demand and in the long-term by increasing overall productivity. Increased in economic output imply an additional circulation in the economy thus expected to have subsequent effects on employment and income to households, profit to firms and revenues to the government.

Economic impacts of infrastructure investment can be measured in short-term and long-term. The difference between short-term and long-term impacts can be illustrated in Figure 1 below.

Figure 1: Difference in the impacts of short-term and long-term investment

To relate the benefits of ICP to national economic growth, the assessment on the impacts of ICP on Gross Domestic Product (GDP) was carried out. TDA in collaboration with researchers from Institute of Agricultural and Food Policy Studies (IKDPM), Universiti Putra Malaysia had initiated a joint research to measure the economic impacts of ICP programs.

This assessment measures the economic impacts of three major ICP procurements namely MRT Sungai Buloh-Kajang (SBK) Line by Malaysia Rail Transit Corporation (MRT Corp), Manjung Five Power Plant by TNB and Sistem Bisnes Utama (SBU ICT) by Kementerian Dalam Negeri. In total, the analysis covers eight (8) programmes and 48 projects that have been completed until 2018. Figure 2 presents the list of programmes and number of projects for each procurement.

Figure 2: List of programmes and number of projects by procurement

To be continue in Part II

Further elaboration on Measuring Economic Impacts of Industrial Collaboration Program (ICP) will be published in Part 2 in our next edition of TDA Insider

This article was prepared by Industry Intelligence Unit of TDA

Author:Ahmad Raziz Rashid 
Ahmad Raziz Rashid
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