Trade and Transport Facilitation: The Malaysian Experience and Milestones

Services Development Division Ministry of International Trade and Industry (MITI) MALAYSIA

Outline

Overview of Malaysias Services Industry Overview of Malaysias Transport Industry Overview of Malaysias Logistics Industry Status of Malaysias Logistics Industry Malaysias Economic Corridors Opportunities for Logistics Services Liberalization of Logistics in Malaysia Approach to Logistics Liberalization Issues Challenges

Overview of Malaysias Services Industry

The Services Sector, including logistics has been targeted as the engine of growth under Malaysias Third Industrial Master Plan (IMP3); Total share of services in Malaysias GDP has expanded from 48.8 percent in 1987 to 53.4 percent in 2007; IMP3 targets an increase in the GDP contribution from 50.5 percent in 2005 to 59.7 percent by 2020 to be achieved through:

an annual average investment of USD15.3 billion; and an annual average growth of 7.5 percent during the period.

Overview of Malaysias Services Industry (contd)

This sector has been increasingly highlighted in the countrys various development plans (eg. 9th Malaysia Plan, economic development corridors); Liberalization in the services sector is currently being undertaken in:

ASEAN: through AFAS (full liberalization to be undertaken by 2015 and logistics 2013); the WTO: through progressive liberalization; bilateral and regional FTAs: through binding of GATS commitments.

Overview of Malaysias Services Industry (contd)

IMP3 targets (2006-2020):

to attain overall growth of 7.5% during the Plan period; increase contribution of the sector to GDP to 59.7% in 2020; achieve total investment of USD229.6 billion during the Plan period, with annual investment of USD15.3 billion.

Overview of Malaysias Services Industry (contd)

Services Indicator Share of Real GDP (%) Growth (%) Investment Approved (USD billion) Productivity Growth (%) Share of Total Employment (%) 2007 53.6 9.7 21.8 5.0 51.4 Manufacturing 2007 30.1 3.1 19.9 8.0 29.3

Overview of Malaysias Services Industry (contd)

Indicator Share of real GDP(%) Government Non-Government 2007 2006

53.4 6.9 46.5

51.8 7.1 44.7

Growth (%)
Investment Approved (USD billion) Share of Total Employment (%)

9.7
21.8 51.5

7.2
18.5 41.8

Overview of Malaysias Transport Industry

Transport sector covers maritime, aviation and land modes; In 2007: 56 projects were approved; investments amounting to USD5.6 billion, of which: USD4.1 billion are domestic investments; and USD1.5 billion are foreign investment. Sea and air transport services are the two main exportable components of the transport sector in Malaysia; In 2007, Malaysias transport sector registered: a deficit of USD4.5 billion; a contraction of 31.1 percent from 2006 (USD6.53 billion) Transport sector remains in deficit due to reliance on foreign freight, particularly in the transport of goods.

Overview of Malaysias Transport Industry (contd)

Sea Transport: Exports of sea transport services registered a 19.1 percent growth, valued at USD2.8 billion (2007), compared with USD2.4 billion (2006); Imports of sea transport services increased by 5.4 percent to USD10.9 billion (2007), compared with 10.3 billion (2006). Air Transport: Exports of air services registered a strong growth of 86.9 percent to USD5.3 billion (2007), compared with USD2.8 billion (2006); Increased in export of air services was due to: introduction of low cost carriers; expansion into short routes and destinations; and large volume of air travelers due to cheaper air travel.

Overview of Malaysias Transport Industry (contd)

2007 2006 Change USD bil. USD bil. (%) Sub-Sector Total Trade Total Export of Non-Government Services Transport Total Import of Non-Government Services Transport Trade Balance
*n.a not applicable

64.1 32.3 8.1 31.8 12.6 0.5

55.3 26.5 5.2 28.7 11.7 (2.2)

15.9 21.5 56.1 10.8 7.3 n.a*

Overview of Malaysias Logistics Industry

Logistics has assumed a very prominent role as it provides the backbone to facilitate international trade; Logistics value chain involves integration of various service providers transport, distribution, freight and ancillary services to deliver a total supply chain solution; To give more focus on this sub-sector, the Government has set up the Malaysia Logistics Council (MLC) in February 2007 to be the focal point for the overall coordination on strategies, policies, regulations and rules for the logistics sector.

Status of Malaysias Logistics Industry

Status of Malaysias Logistics Industry (contd)

Status of Malaysias Logistics Industry (contd)

Status of Malaysias Logistics Industry (contd)

Malaysias Economic Corridors Opportunities For Logistics Services

Malaysias Economic Corridors Opportunities For Logistics Services (contd)

Malaysias Economic Corridors Opportunities For Logistics Services (contd)

Malaysias Economic Corridors Opportunities For Logistics Services (contd)

Peninsula Malaysia

The Northern Corridor Economic Region (NCER) development program is a Government initiative to accelerate economic growth and elevate income levels in the north of Peninsular Malaysia encompassing the states of Perlis, Kedah, Pulau Pinang and the north of Perak. The NCER initiative will span from 2007 to 2025.

Malaysias Economic Corridors Opportunities For Logistics Services (contd)

Peninsula Malaysia
The East Coast Economic Region (ECER) covers the states of Kelantan, Terengganu and Pahang, as well as the district of Mersing in Johor.

The ECER s distinctive natural resources, culture & heritage will form the basis for transforming the economy into one that is dynamic and competitive in light of greater regional and global competition and economic liberalisation.

Malaysias Economic Corridors Opportunities For Logistics Services (contd)

Peninsula Malaysia
Located in Johor, the southern gateway to Peninsula Malaysia, is within reach of a global market of some 800 million people. Iskandar Malaysia aims to be a sustainable region of international standard. As the beacon of new growth, Iskandar Malaysia will spur economic developments that actuate Malaysia's global potential. Recognizing the need for sustainable development, social and environmental issues features heavily on its agenda.

Malaysias Economic Corridors Opportunities For Logistics Services (contd)

Sabah
The Sabah Development Corridor programme is a Government initiative to accelerate economic growth and elevate income levels in the state of Sabah. The initiative will span from 2007 to 2025. The program is part of the Governments commitment to helping the Region maximizes its economic potential and closing the development and income gap between the different regions in Malaysia and to move towards higher value-add and knowledge based economic activities to drive further increases in per capita income.

Malaysias Economic Corridors Opportunities For Logistics Services (contd)

Sarawak
The Sarawak Corridor of Renewable Energy or simply known as SCORE, is one of the five regional development corridors being developed throughout the country. SCORE is a major initiative undertaken to develop the Central Region and transform Sarawak into a developed State by the year 2020. It aims to achieve the goals of accelerating the State's economic growth and development, as well as improving the quality of life for the people of Sarawak.

Liberalization of the Services Sector

Preparations required: strengthen domestic regulations;

for non-regulated sectors, self-regulation is advised or if required, to advise the Government on regulatory requirements; regulating provides protection to local services providers; foreign suppliers could be required to obtain accreditation or recognition for gratification to supply the services;

look at regulations that impedes services exports;

identify issues that currently impedes the growth and development of particular services sub-sectors;

Liberalization of the Services Sector (contd)

address policy/regulation issues in the MLC for long-term competitiveness or Trade Facilitation issues to PEMUDAH; identify incentives that could assist the industry to become more competitive. This can be addressed in Malaysias Annual Budget; undertake mergers and acquisitions to strengthen the industry; use incentives currently available through MATRADE, MIDA and SMIDEC; pursue MRAs with trading countries, in particular within ASEAN and FTA partner countries; build local capacity, niche where we have the strength; look for opportunities abroad through partnership.

Approach to Logistics Liberalization

ASEAN

Target of minimum number of new subsectors to be scheduled in each round:

2008 at least 10 new sub-sectors 2010 15 new sub-sectors 2012 20 new sub-sectors 2014 20 new sub-sectors 2015 7 new sub-sectors

Approach to Logistics Liberalization

WTO

On Services, Malaysia will continue to review and undertake progressive liberalisation of its services sectors taking into account domestic capability as well as to enhance competitiveness at the global and regional levels. While we acknowledge that the developed countries want a relatively ambitious level in services liberalisation, Malaysia is of the view that adequate flexibility and policy space is needed in liberalisation of the services sectors.

Issues

Liberalization:

most services sectors are still not fully aware of the impact of services liberalization, especially Malaysias commitments in AFAS, WTO and FTAs.
many of the Acts and Regulations governing business and professional services require review to face competition due to liberalization in the services sector. steps to be undertaken in enabling the sectors to selfregulate to face competition due to liberalization. services under purview of many Ministries and Agencies; need for greater coordination in the development of this sector, especially in enhancing capacity to export and take advantage of opportunities overseas.

Domestic Regulations:

Unregulated Sectors:

Coordination of Development in Services Sector:

Challenges

Industry practices such as just-in-time and point-topoint deliveries that demand accurate and timely deliveries; Integration of the various transport modes and service providers so as to provide a seamless connection; Using of latest technologies to achieve quick turnaround by automated tracking of consignments and deliveries; Incorporating standards and best practices into the industry; Enhancing providers; professionalism and image of logistics

Developing e-logistics and infostructure; and Leveraging on on-going liberalization initiatives in bilateral, regional and multilateral for a to build up Malaysias national and global logistics network.

THANK YOU
For more information, please contact:
Mr. Mohd Hafizzuddin Md Damiri Senior Assistant Director (Logistics) Services Development Division Ministry of International Trade and Industry
email: hafizz@miti.gov.my tel: (603) 6203 3344