Drivers of Productivity in ASEAN Countries: Malaysia, Thailand and Indonesia
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Universiti Malaysia Sarawak (UNIMAS)
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This study investigates the key drivers of Total Factor Productivity (TFP) in three ASEAN countries which are Malaysia, Thailand, and Indonesia over the period from 1990 to 2024. Productivity growth is crucial for long-term economic development, yet the specific influences of land use, labor participation, and technological access remain underexplored in the region. The study focuses on three main explanatory variables: Agricultural Land (AL), Labour Force Participation Rate (LFPR), and Internet Users (IU), using annual time series data. Econometric methods including Augmented Dickey-Fuller (ADF), Phillips-Perron (PP), and KPSS unit root tests, Johansen cointegration test, Vector Error Correction Model (VECM), and Granger causality analysis were employed to examine both short-run and long-run relationships. The results confirm that all variables are integrated of order one, I(1), and cointegrated in each country. In Malaysia and Indonesia, agricultural land and labor force participation rate exhibit significant long-run positive effects on productivity, while internet user shows weaker or mixed influence. Thailand shows stronger long-run relationships, with bidirectional causality between total factor productivity and agricultural land, and unidirectional causality from labor force participation rate and internet user to agricultural land. Short-run dynamics are limited, with most variables showing no significant immediate impact on productivity. The findings suggest that land management, labor participation policies, and targeted digital infrastructure development play important roles in improving productivity across the region. This study contributes to a better understanding of productivity determinants in developing economies and offers policy recommendations for sustainable growth.