Estimating Demand For Infrastructure In Northern States Of Malaysia
This study examines the demand for infrastructure in Northern States of Malaysia. Four states of Northern Malaysia, namely Perlis, Kedah, Penang, Perak and panel data over the period of 2007–2015 were used. The panel VAR approach was employed to analyze the demand for infrastructure. The infrastructure development index was developed using the Principal Component Analysis (PCA), this index was then used as a response variable. The explanatory variables are the share of the three sectors to Gross Domestic Product (GDP) which are agriculture, manufacturing and services. The empirical results indicate that these agriculture, manufacturing and servicessectors are positively and negatively related to a certain infrastructure indicators, for instance manufacturing sector is positively related to per capita electricity, but negatively linked to per capita both under broadband and cellular for telephone use and sanitation. Therefore, the public sector has to play a leading role through direct investment in various infrastructure services. The Government of Malaysia also needs to encourage more participation of private sectors to invest through policies that tend to enhance incentives for private investors. The public sector also should take initiatives in the form of Public-Private Partnerships (PPP) for the projects that have potentials, but the private sector is hesitating to invest due to higher risk. These PPP can open opportunities for new investment projects and attract new investors.
Keywords - Infrastructure, VAR Model, Panel data, Infrastructure Development Index.