Achieving a System of Competitive Cities in Malaysia

Key Findings

As Malaysia looks toward the future, urbanization will play an increasingly important role as a driver of economic growth. 

• Malaysia is the 5^th most urbanized economy in East Asia after Singapore, Japan, the Republic of Korea, and Taiwan.
• The urban population of Malaysia’s three largest cities - Kuala Lumpur, Georgetown and Johor Bahru - account for 70% of the national total population.
• Malaysia’s development strategy has recognized the role of cities as the nexus for economic growth and this vision has been operationalized in the New Economic Model (NEM). 

Malaysia faces four main constraints to the economic competitiveness of its cities.

• Low economic density, for example the employment density of Seoul, Singapore and Hong Kong is 2.5, 5 and 10 times that if Kuala Lumpur. 
• Malaysia’s urban sprawl has led to higher transport costs than other East Asian cities as well as negative environmental impacts. For example, the share of transport costs for households are 50% higher in Kuala Lumpur than Hong Kong and Tokyo.
• Insufficiently integrated institutions and policies have affected urban planning and implementation. 
• Moreover, Malaysia’s cities are undermined by high levels of centralization, problems with urban and spatial planning, and financial and technical constraints. At risk-youth in urban areas are especially vulnerable to social exclusion economically, politically, socio-culturally and spatially.

As Malaysia sets its sights further on high-income status, it will be essential to improve the competitiveness of its major cities. The study highlights the following policy recommendations:  

• Foster economic growth by strengthening institutions for managing land markets and developing land policies, as well as targeting interventions that improves the efficiency system of cities. 
• Ensure environmental sustainability by encouraging use of public transport and incorporating climate change resilient infrastructure planning.  
• Strengthen the institutions for city competitiveness by localizing the delivery of selected urban services and increasing the capacity of local authorities.
• Foster social inclusion by strengthening programs for at-risk urban youth, keeping children in schools, scale-up programs for vulnerable youth, invest in safe neighborhood programs, and improve coordination, design and implementation of programs.  
• Promote innovation through information, such as deepening open data policies.
• Achieving a system of competitive cities in Malaysia will require sustained effort from the government to put in place the necessary conditions, and through the implementation of key reforms.