Integrated, local-level planning can reduce high costs of congestion and boost growth in Malaysia

Malaysia Economic Monitor: Transforming Urban Transport

Integrated, local-level planning can reduce high costs of congestion 
and transform urban transport in Malaysia, World Bank says       

KUALA LUMPUR, June 16, 2015 --- Malaysia’s economy is projected to expand by 4.7 percent in 2015 and 5.0 percent in 2016. The outlook reflects the overall strength of Malaysia’s domestic economy amid ongoing fiscal consolidation, lower commodity prices and weak global trade, a new World Bank report notes. Risks are significant, however, considering the possibility of new declines in commodity prices and volatile capital flows.

Enhancing resilience to external shocks and maintaining the pace of growth requires continued structural reforms to unlock productivity gains. The Malaysia Economic Monitor, launched today, makes the case that improved urban transportation is essential to reduce the high costs of traffic congestion and to ensure urbanization remains a positive force in Malaysia’s transformation into a high-income, inclusive and sustainable economy.

“Urbanization has given more Malaysians economic opportunities and has helped generate good jobs, raise incomes, and reduce poverty,” says Ulrich Zachau, World Bank Country Director for Malaysia. “Yet, urbanization has also brought urban sprawl and congestion. People lose time and businesses lose money from delays. Malaysia can now invest in smart urban transport solutions, which will make cities more productive and livable across Malaysia.”

To transform the planning and delivery of urban transport, Malaysia may consider prioritizing the following reforms: (a) Establish lead transport agencies at the metropolitan level to spearhead integrated approaches towards the planning and delivery of both public and private urban transport; (b) Identify and implement sustainable financing mechanisms; and (c) align public transport with incentives to discourage the use of private transport in congested areas, as London, Singapore and other major world cities have done successfully. Introducing congestion charges, user fees and gasoline taxes would not only result in environmental gains but could also trim the fiscal deficit by as much as RM19 billion.

“The recent move to scrap fuel subsidies was a win for equity, the environment, and the budget, with the savings helping the Government remain on the path of fiscal consolidation” says Frederico Gil Sander, Senior Country Economist for Malaysia. “Malaysia can now take the next step and explore additional revenue sources such as gasoline taxes that can also promote and finance public transport and a cleaner environment.”

Efforts are underway to improve urban mobility. These include projects, such as the Mass Rapid Transit (MRT) construction, and the establishment of the Land Public Transport Commission (SPAD), which has developed into a capable, multi-disciplinary planning and regulatory agency. Institutional challenges remain, however, further policy steps can ensure that urban transport planning is integrated across modes and administrative boundaries at the metropolitan level.

“The Government recognizes the need to enhance mobility to boost the competitiveness of Malaysian cities,” says Dato’ Sri Abdul Wahid Omar, Minister in the Prime Minister’s Department. “Hence, we have a number of initiatives under the 11th Malaysia Plan to expand the modal share of public transport to 40 percent in the Greater Kuala Lumpur/Klang Valley Region, and 20 percent in other major Malaysian cities. It is hoped that these efforts to improve urban transport will boost productivity and propel Malaysia to become an inclusive, sustainable and developed nation by 2020.”

More women in the labor market, but even more gains possible. Higher levels of education and more jobs in the services sector have helped to boost women’s labor force participation, which increased substantially from 46 percent in 2009 to 53.6 percent in 2014. Government policies to make childcare and pre-primary education more accessible have also helped. Ensuring the quality of these options and paying greater attention to the role of gender norms is necessary to make lasting improvements in women’s labor force participation.

The Malaysia Economic Monitor series provides an analytical perspective on the policy challenges facing Malaysia as it grows into a high-income economy. The series also represents an effort to reach out to a broad audience, including policymakers, private sector leaders, market participants, civil society, and academia.​