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Advancement in Telecommunication and Economic Growth - Case of Malaysia

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Graduation Project Submitted to the Department of Business Studies, HELP University, in Partial Fulfilment of the Requirements for the Degree of Bachelor of Economics Hons

APRIL 2015


I hereby declare that the graduation project is based on my original work except for Quotations and citations which have been duly acknowledged. I also declare that it has not been previously or concurrently submitted for any other course/degree at HELP University or

Other institutions. The word count is 9158 words.




Table of Contents


1.1 Introduction1

1.2 Industrial Formation History 1

1.3 Structural Change In Telecommunication Industry 1

1.4 Trends In Telecommunication Penetration1

1.5 Aims of Research2

1.6 Research Objective2

1.7 Scope & Limitation1

1.8 Structure of Research1

Chapter 2 Literature Review 1


3.1 Introduction1

3.2 Theoretical Framework1

3.3 Data Collection1

3.4 Research Design 1

3.5 Research Strategy 1

Chapter 4 ANALYSIS1

4.1 Hypothesis Development & Analysis1

      4.1.1 Pearson’s Correlation Test 1

      4.1.2 Multiple Regression Analysis 1


5.1 Conclusion 1

5.2 Recommendation4



First of all, I would like to express my big thank you to my supervisor, Ms. Sridevi Narayanan for her guidance, advice, and input throughout the whole process of completing this graduation project. One simply cannot wish for a better supervisor, who would always be helpful every time I seek for advice. I am extremely and most sincerely grateful to very helpful classmate and friend Mr.Sushant Vaidik, Mr.Amree Ariff and Mr.Lim Kai Jian for their utmost support ranging from their acquaintance to guidance and sometimes even personal favors. I was once frightened about getting this research project done. I sincerely thank my friends and seniors who have enlightened me. This project would not have been successful alone. A special thanks also to my Econometrics lecturer Ms. Sharina for teaching me how to use the Eviews Software and assisting me with developing the models required for this research. I am deeply thankful to the lecturers, friends, tutors and everyone who has helped me, directly or indirectly, to complete it. I would also like to thank my parents for they have always been supporting me and encouraging me with their best wishes. Thank You.




APRIL 2015

Supervisor: Ms. Sridevi Narayanan

Malaysia has one of the most amount of telecommunications subscribers following Singapore and Vietnam in an ASEAN context. Malaysian telecommunication investment has been improving over the years and notably from the telecommunication reforms. Previous researches on other countries showed that it is only applicable in developing country, but there are also researches proving that it works also in developed countries. This research paper therefore examines the correlation relationship between Telecommunication Investment and GDP growth in Malaysia using Pearson’s correlation test. The results showed that there is strong correlation between telecommunication Investment and Economy Growth. Although the direct significant relationship was not seen, when looked at other sub hypotheses it is okay to conclude that the growth in the distribution i.e. subscription of the services especially mobile telephones and broadband have contributed to the economic growth of the country for more than past decade. Finally the objective of this paper was also to provide recommendation on the areas which can possibly be improved by the government through policies and implied by telecommunication industry.

Chapter 1 Introduction

In this Chapter, the background of the telecommunication sector development and the essence of the paper will be highlighted. The phases of telecommunication investment, the apparent changes in national income and the shift to the new investment variables will be viewed through. And, by the end of the chapter the aim, objectives and structure of this paper will be presented.

1.1 Introduction

Malaysian economy has seen tremendous and rapid changes on its contributing sectors after its independence and most particularly in last couple of decades. From the mere establishment of telegraph lines between two British house, which eventually was gotten rid of, formation and extension of land-line telephones to the introduction of LTE/4G wireless internet technology last year, Malaysia has reached noticeable stage in telecommunication development. This development is bound to make not only scholars but all fellow citizens wonder on how the structures of economy has been affected and how the sector has directly contributed to the soaring economic growth of nation.

1.2 Industrial Formation History

Before Malayan Independence, in the telecommunication sector, establishment of Postal and Telegraph department had introduced telegraph while the first telegraph line was connected between then house of British Resident and Deputy British Resident in 1874. However, majority of telegraph lines were destroyed during Japanese occupation. Until 1946 the same department was responsible throughout Malaysia for extension of all telecommunications services. The Telecommunication Department of its own was formed in 1946 segregating it from the Postal department in Peninsular Malaysia. After the unification of State of Malaya in Malaysia, the merged department including Telecommunication Department in Sabah and Sarawak was established to be known as Jabatan Telekomunikasi Malaysia (JTM) translated as Department of Telecommunications Malaysia under then Ministry of Energy, Posts & Telecommunications.



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