Revitalising Affected Sectors

National Economic Recovery Plan
Chapter 7



The transportation sector's share of the Gross Domestic Product (GDP) was 4.3 per cent in 1991 and about 4.5 per cent in 1996. This amounts to about one tenth of the services sectorís contribution to GDP. The transportation sector was promoted to support economic development and become one of the fastest growing intermediate service sectors in Malaysia. The growing importance of the sector is shown by government investment in transportation infrastructure, such as road, rail, ports, airports, etc. The allocation for transportation development rose from RM6.5 billion in the Fifth Malaysia Plan, 1986-1990 to RM15.5 billion in the Seventh Malaysia Plan, 1996-2000.

The adverse effects of the currency depreciation on the transport sector are as follows: rising operational costs, lower cargo volume, income and profits, and excess capacity and staff. The sector faces the lack of financing facilities, inefficiencies, and the lack of transparency on services provided by the relevant government agencies and the private sector. There is also inconsistency in the enforcement of laws and regulations and the lack of coordination and co-operation among government agencies and transport operators.

To resolve the problems in the sector, the following measures are recommended:

  1. Strengthen the regulatory framework and functions in terms of economic, technical and legal capabilities to effectively oversee development and performance of the transport industry so that it could compete globally.

  2. There should be explicit policies with definite time frames for the consolidation and strengthening of Malaysian companies in the transport sector.

  3. Determine the parameters on performance and bench-marking indicators for companies.

  4. Have a critical and careful investment policy for infrastructure development.

  5. Reschedule and defer several major infrastructure projects, including the purchase of lumpy imports (e.g. aircraft, ships etc).

  6. Avoid excess capacity of ports and airports during the period of slow down.

  7. Transport tariffs, including container haulage and other freight rates etc. should not be raised.

  8. The Government should provide allocation for high quality research and development (R&D). There could be cost sharing between public and private sectors for marketing, R & D, product and services promotion and technology enhancement.

  9. Encourage the development of SMIs to provide support services and products to the transport industry.

  10. Develop multi-modal transport operations.

  11. Adopt road-pricing policy that encourages public transport usage.

  12. Enhance road safety to reduce economic loss.

  13. Study the demands from the developed countries to liberalise Malaysia's transport industry.

The following measures are recommended for specific sectors:

  • Shipping
  1. Identify and establish a single, centralised agency responsible for all shipping matters.

  2. The Shipping Financing Fund should be converted to a revolving fund.

  3. Banks should be encouraged to lower interest rates, increase loan quantum, and have longer repayments period.

  4. Duty should be waived on ship spares and equipment ordered from overseas for use on board ships.

  5. Bunkers traded in the country should be quoted in ringgit for Malaysian vessels.

  6. A Malaysian container leasing company should be formed to lease containers in ringgit for domestic operators.

  7. PETRONAS should assist shipowners by increasing the charter hire until the exchange rate stabilises to RM3 to US$1.

  8. The policy to sell on CIF and buy on FOB should be enforced while tax incentives reviewed to ensure that Malaysian lines make shipments.

  9. Malaysian shipping lines should engage in cross trading in other countries to earn foreign exchange.

  10. Review the provisions under Section 54A of Income Tax Act 1967, which provide that the income of a person who carries out the business of transporting passengers or cargo by sea on board Malaysian ships shall be tax-exempted. In addition, the policy of tax derived from chartering should be reviewed and amended to stimulate chartering as well as off-shore supply services activities, thus indirectly discouraging the purchase of vessels.

  11. Encourage greater use of Malaysian ports and ships.
  • Air Transport
  1. Promote Malaysia as a tourist destination. Related industries such as hotel and tour operators should share in any promotional costs.

  2. Suppliers of aviation fuel in Malaysia should be charged in ringgit to share the benefits and costs through price reduction.

  3. The land lease at KLIA and other airports in Malaysia should be resolved.

  4. Adopt a rational domestic competitive policy, especially in the air transportation sector.

  5. There should be greater cooperation and coordination between airlines, airport operators, air traffic control, customs and immigration to improve efficiency.

  6. The following actions undertaken by MAS and other airlines are to be endorsed:

    a. rationalisation of routes by reducing frequency for low yield routes, withdrawal of new services to several destinations, and re-examination of passenger and cargo forecast;

    b. rescheduling delivery of new aircraft and cancellation of option aircraft;

    c. offering on sale and leasing of existing aircraft;

    d. modification to aircraft orders;

    e. upgrading and downgrading of aircraft type and equipment to meet commercial requirement; and

    f. restructuring of MAS, and selling aircraft and leaseback.

  7. All Malaysians and travellers on official visit should be encouraged to use MAS.

  8. No new air operating services licences should be issued.
  • Road Transport

The various authorities such as Road Transport Department, Commercial Vehicles Licensing Board and PUSPAKOM and JKR should look into the following suggestions:

  1. Licensing and inspection procedures need to be simplified to reduce the time required to get permanent permits and operate lorries.

  2. The relevant authority should review smoke test measurements and implement a two-tiers Hartridge Smoke Meter Unit (HSU) System for old and new ëEuro 1í engine lorries.

  3. Alleviate the shortage of lorry services by allowing higher loading limits (upgrading MPLW) on selected lorries, such as double axle semi-trailers.

  4. Tax on imported items such as spare parts and tyres needs to be studied and reduced by the Government.

  5. The approval of haulier permits needs to be scrutinised.

  6. CVLB should consider the approval of multi-trailers and withhold the implementation of ëinterchangeable-trailerí.

  7. Liberalise the transportation of containers so that existing lorry operators can participate, thereby increasing the industry capacity and upgrading the efficiency of the whole transportation system.
  • Container Haulage

The following measures are recommended:

  1. Tax rebates on the import of prime movers should be considered to keep the operating costs down.

  2. Inspection procedure of prime movers and trailers by PUSPAKOM needs to be improved and expedited so that such equipment can be put on road and efficiently utilised.

  3. New trailers should be exempted from annual inspection for a specified period.

  4. Approval from state and local Government for the operation of empty container depots should be more stringent, while parking space for container trailers should be looked into by DBKL.

  5. Co-ordination among various government agencies, such as JKR, police, Road Transport Department and Licensing Board, in relation to the issuance of licences and enforcement should be improved.
  • Keretapi Tanah Melayu Berhad (KTM)

The following measures are being considered for action:

  1. The funding gap of RM247 million for 1998 and RM82 million for 1999 needs to be resolved.

  2. Negotiations on cancellation of 21 EMU sets from South Africa (UCW), which will result in a compensation demand of US$33 million, will be continued.

  3. Excess of 22 EMU units in the Klang Valley could be sold to ERL.

  4. ERL should convert to meter gauge line instead of the present standard gauge.

  5. Reduction of surplus staff of 1,800 out of total 6,000.

  6. The Government should consider approving the increase in freight rates as there has been no revision since 1991.

  7. Critical investments should proceed, but review major rail projects with a view to deferment.

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