LAUSR

Abstract We apply the bootstrap Malmquist-Luenberger productivity index (MLPI) to measure the total factor productivity (TFP) growth for 14 water operators in Malaysia during the years 2000–2017. The analysis confirms that Malaysia's water sector experienced a deterioration in average productivity of 1.21% per year, attributed mainly to technological regression. Before the regulatory reform, the average productivity of water operators improved and was positively influenced by efficiency change. After the reform, the water operators suffered a decline in TFP growth due to decreased efficiency and technical change. The inefficient utilization of capital expenditure and aging water infrastructure are possible reasons for this effect. Regulatory reform is necessary but insufficient to improve the productivity growth of Malaysia's water sector.