The services sector is also known as the tertiary sector. Services are defined in conventional economic literature as intangible goods. The tertiary sector of economy involves the provision of services to businesses as well as final consumers.
It has been internationally accepted that an adequate measure of the service sector contribution to the economy is 20% of total exports. In Malaysia the figure for 2007 and 2008, at Ringgit Malaysia (RM) 100.9billion and RM102billion respectively, came up to 17%.
As per World Trade Organization, eight developing countries are in the list of the world’s 30 largest exporters of services and Malaysia was ranked 30th in 2008. At present 7% of the services sector share of GDP consists of services provided by the Government. The remainder is the tradable services sector which has commercial and growth prospects.
Tourism has been valued at RM50billions and is one of the main services export earner. It grew by 5% in 2008.Other sectors with potential are information and communications technology, construction, Islamic financial services, education and training, management services, medical tourism, logistics and oil and gas services.
The investments made in services totaled RM 66.4billion in 2007 and RM 50.1 billion in 2008, exceeding the annual target of RM 5.8 billion set by the Third Industrial Master Plan.
Domestic investments make up more than 85% of investments in the services, whereas Foreign Direct Investment (FDI) is only 15%.The government is taking initiatives to increase the FDI in the service sector.
To begin with the government has liberalized equity conditions imposed on foreign investors and has eased the restrictions against the employment of foreign specialists and professionals in the services sector. The other initiatives include the liberalization of the 27 sub sectors of services in April 2009, followed by the liberalization of selected financial services and the de regulation of Foreign Investment Committee guidelines.
The government is of the view that liberalization would bring in new capital, expertise and technology, create employment and new opportunities for joint ventures between foreign and domestic services.