Malaysia's manufacturing sales in 2002 eased 0.4 percent from the year before, official figures showed Tuesday.

Sales in manufacturing, the key driver of the economy, dipped to RM307.8 billion, down from RM308.9 billion in 2001, the Statistics Department said.

But total salaries and wages paid last year rose marginally to RM18.08 billion, up from RM17.98 billion in 2001, it said in a statement.

In December, manufacturing sales rose 11.7 percent from a year earlier to RM25.8 billion but dropped 1.9 percent from November. The sector employed 971,558 people as at end-December.

Economists said the annual decline was expected amid global economic uncertainties due to a looming war in Iraq, which put the brakes o­n global demand and led to foreign investments falling worldwide.

New package

"It is a tough year ahead. Malaysia is also facing competition from China, which is emerging as a giant manufacturing base," said Nizam Idris, regional economist with Singapore-based IDEAglobal.

He hailed Malaysia's transition towards a knowledge-based economy, focusing o­n high-technology and value-added industries, but said it takes time to retrain skilled labour and revamp domestic structures.

A new policy package to boost the economy, to be unveiled by Prime Minister Dr Mahathir Mohamad at the end of March, is widely expected to bring some cheer to the sector.

Mustafa Mohamed, executive director of the National Economic Action Council in charge of preparing the package, told reporters today it would "place Malaysia o­n a much stronger footing to face future challenges."

Focus o­n restructuring

The package focuses o­n 10 key areas including boosting competitiveness, wooing foreign and local investment, encouraging new sources of growth and improving government delivery system, he said.

"We are not talking about expenditure, about money. The focus is going to be more o­n system procedures, bureaucracy, making Malaysia more investor-friendly," Mustafa said.

"We cannot compete with lower cost producers. We have to move up the value chain, emphasise more o­n productivity. We have to restructure our manufacturing."

The manufacturing sector contributes o­ne-third to Malaysia's gross domestic product, which was officially forecast to have grown between four and five percent last year.

Mahathir, also finance minister, has said GDP growth this year was expected to be similar to the 2002 estimate, compared with an official forecast of 6.0-6.5 percent. AFP