Let’s do our part to help build Malaysia

Staying Resilient in Challenging Times

The world is not short of problems. Geopolitical uncertainty, racial and religious tension, market and financial volatility continue to grab headlines and dictate water-cooler conversations. Behind closed-doors, governments struggle to find balance, dealing with what feels like a world economic system conspiring against them.
Malaysia is not shielded from the impact of external headwinds. With merchandise trade alone at 138% of GDP and as the 14th largest trading nation in the world, we are exposed to the vagaries of the world economy.
The tapering of Quantitative Easing has strengthened the dollar relative to other world currencies. China, in deliberately shifting from investment-led to consumption-led growth, demands fewer commodity imports. Greece and by extension the Eurozone are urgently trying to contain a full blown crisis of mounting debt woes and capital outflows, potentially threatening Greece’s exit from the Euro.
The heavy consequences of ill-preparedness – as we experienced during the Asian Financial Crisis of 1998 – are not something we care to repeat. Despite counter-measures, its effects created a heavy drag on our economy for many years.
True, the 2009 Global Financial Crisis was barely felt here in Malaysia. However, managing its effects required digging deep into Government coffers to create an expansionary economic environment.
You can do quite a bit with a combination of fiscal and monetary policy. However, as the global economy continues its course of rapid change, we too have to change. Sometimes we have no recourse but to bite bullets and take tough albeit unpopular measures to secure growth while creating resilience
Recently I had the opportunity to present the Malaysian approach to an audience of Finance Ministers at Harvard University.
I proposed that Governments should gradually reduce debt and deficit to get into a financial ‘Safe Zone’ (see chart 1) where public debt as a percentage of GDP is below 75% and deficit is at 4% or below.
Simultaneously, to create a platform for economic resilience, governments must focus on enabling sectors which constitute the lion’s share of economic activity. The private sector – not the government – must sit in the driver’s seat, fuelling investment and growth.
The talk was well-received; I am convinced governments should avoid the high-leverage high-growth model and take instead, the balanced debt-to-equity model to grow the economy and cut deficit.
The Economic Transformation Programme (ETP) was introduced in 2010 to do just that – to have growth by focusing on the 12 sectors where we have natural competitive advantage.
To put this into better perspective, two key decisions were made that put us in the correct trajectory to deal with challenging times:

1. Progressively create manoeuvring room by reducing our debt and deficit levels
Historically, some countries which thought they were heading towards high-income ignored debt management as they pursued growth.
We are doing it another way – going for high-income while reducing structural deficits and continuing to spend prudently in prioritised areas such as projects under the National Key Economic Areas (NKEA).
Imbalances in the system such as blanket subsidies had to be restructured to benefit the deserving. When we moved to managed float for automotive fuels in October last year, it was estimated we would save about RM10.7 billion in 2015.
Under the 11th Malaysia Plan, we have committed to reduce national debt from 53.3% currently to 43.5% by 2020. Fiscal deficits will drop from 3.2% of GDP in 2015 to 0.6% by 2020.
With the private sector leading the charge to draw in revenue and investments, the government can ease into its role as facilitator and problem-solver, and focus on its fundamental duty – to safeguard citizen welfare.

2. Diversify and restructure the economy while reducing dependence on commodities
Commodity prices are volatile and beyond our control. It’s insensible to volunteer ourselves as hostages to such volatility in this challenging economic environment.
We must extend our development strategy anchored on economic diversity, which is why the ETP focuses on developing 12 top sectors in the economy. How do we do this? By bringing government and private sector together to work together at a closer level, and removing barriers and red-tape.
Implementation of GST, which is aimed at broadening the tax base for the country, will put us in better stead to create stronger safety nets and improve quality of life for all Malaysians.
In 2009, oil and gas revenue was 40.3% of the Federal budget, but we managed to reduce this to 29.7% in 2014 by increasing revenue from other sectors. Unfortunately, there is a misperception that Malaysia is totally dependent on oil and gas when in actual fact we are far more balanced and diversified and no longer overly reliant.Facts are facts! The fact is Government revenue from oil and gas is now only 29.7% in 2014, a big reduction over the last five years. We are headed in the right direction in terms of economic diversification.

IMF managing director Christine Lagarde on her visit to Malaysia was impressed with the transformation of our economy from being export-led towards more balanced growth. She agreed it was important to combine short-term objectives with a longer-term vision. Lagarde also iterated her satisfaction to see that Malaysia has identified sectors to propel the economy, and bring together various ‘actors within the real economy’ in public and private sector.

Getting the nation on the right track is neither a walk in the park nor are the measures popular with all of Malaysians. Changing for the better is always hardest in the beginning.

As ratings agencies hawkishly eye developments in Malaysia and competing nations nip at our heels, it is crucial we have the stamina to stay on the right course.

Malaysia is moving the right way, closer to the Safe Zone (2013)

 

Getting on the bus

In trying to get people out of their cars and give public transportation a shot, daily commuters can be persuaded to consider the train. Getting on the bus is a different matter altogether.

Many see it as a harrowing experience of an interminable wait whether it is for the bus to arrive or the stress of sitting in traffic. But all that may soon change.

Last month, the Prime Minister launched the Bus Rapid Transit Sunway (BRT Sunway) service, a public transportation partnership that sets the model of how Government can successfully collaborate with the private sector. Prasarana bore 85% of the RM661 million total cost for the elevated BRT Sunway while Sunway Bhd funded the rest.

The BRT Sunway complex is equipped with a Park and Ride facility for 1153 cars

The BRT Sunway complex is equipped with a Park and Ride facility for 1153 cars

What makes the BRT unique is that the buses travel in dedicated lanes – they do not have to jostle with the hundreds of vehicles crowding out highways. Passengers go to a station, pay their fares and board through doors as you would a train. Because there is no traffic to contend with, buses arrive on-the-dot enabling passengers to get to their destination efficiently and on time.

Plying a 5.4km elevated route with seven stations covering a 500,000 population radius, high-tech electric buses connect Sunway residents to the LRT and KTM Komuter terminals without fuss. With a Park and Ride facility for 1153 cars in the main BRT terminal, including special bays for women and the disabled, the stations are equipped with escalators, lifts, kiosks and a Passenger Information System.

An electric bus arrives at the Sun-U Monash station in Sunway

An electric bus arrives at the Sun-U Monash station in Sunway

The BRT is widely deployed in tight urban sprawls around the world. Cities such as Bogota in Columbia, Guangzhou in China and even Jakarta, Indonesia use it for mass transit. As proof of its popularity, more than 163 cities in the world run BRT systems, with 82 planning or building infrastructure towards this end.

The BRT makes as much sense in city planning as trains. In densely overpopulated locations, constructing tracks and stations above ground and underground involve untold complications, and are a public bane.

To top it up, rails are expensive, especially when you compare their costs to the BRT because of the infrastructure and technicalities involved.

That said, factors such as demand, distance topography, engineering considerations and cost come into play when deciding the best mode. In the case of Klang Valley, BRT is deemed effective to deliver passengers to larger capacity transport systems like LRT, MRT and metro rails.

The BRT Sunway connects the missing link between two rail lines – KTM Komuter and Kelana Jaya Line LRT extension and serves as part of a master plan for the creation of an integrated network of public transportation in Greater KL.

What I mean by ‘integrated’ is where the MRT, BRT and the high speed rail link-up with existing systems such as the KTM Komuter, LRT and buses to expand reach and connectivity. To make public transportation enticing, emphasis must be given to improving first and last mile connections, park and ride facilities and a single card payment system.

In a populous area like Sunway, the BRT fits snugly to address congestion. Because of overcrowding and the lay of buildings and infrastructure, it was very difficult to get an LRT alignment into Sunway. The BRT emerged as a strong option to bypass the congestion.

Passengers getting on the bus on the BRT Sunway system

Passengers getting on the bus on the BRT Sunway system

The Government also plans to construct a 34km Kuala Lumpur-Klang BRT along the Federal Highway by 2016. We are studying the viability of introducing BRTs in 10 other densely populated areas within Klang Valley. I understand that Iskandar Malaysia in Johor is in the midst of planning its own BRT too.

BRT Sunway rides are free between 1 June and 31 July, after which a fare would be imposed. In deciding on the fare, the Government is studying the best mechanism not only to ensure fairness to passengers but that the pricing mechanism is sustainable.

I believe dynamic pricing with a ceiling fee would be a good way forward. Under this format, fares are adjusted based on customer demand for each trip; taking into account weekday and weekend demand, public holidays and seasonality patterns. Pretty much how an airline would price its flight tickets.

Based on current simulation, it is estimated that Prasarana can potentially reduce Government subsidy for public transportation from RM18 million to RM15 million a year if dynamic pricing is implemented.

As population rises to 10 million in Greater KL by 2020, we will increasingly face paralysing issues of congestion and pollution affecting mobility, productivity and quality of life.

Public transportation is the best way forward but we must create a system that is dependable, accessible and efficient, otherwise commuters will ditch the trains and buses for their cars and the city will grind to a halt.

The wheels are in motion for improved commuting experiences in our capital with various projects such as the MRT Line 1 (63% completed), MRT Line 2 (tendering by October 2015), LRT Ampang Line (target completion by March 2016) and LRT extension from Bandar Utama to Klang (construction to start in 2016).

The launch of the BRT, I am confident, heralds only good things to alleviate our infamous KL jams and will provide a vastly improved transit experience for passengers. Please go and try it.

Setting the Record Straight

Impact of ETP & GTP

There are occasions where one needs humour, not just patience to deal with critics. The publication of the Economic Transformation Programme (ETP) 2014 Annual Report has unearthed its own set of denigrators. Emerging out of the woodwork and safe behind their keyboards, they fire away on social media, hell bent on condemning every traction the […]

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The measure of poverty

The recent release of the Economic Transformation Programme (ETP) Annual Report 2014 received its share of brickbats. A few were aimed at me, in light of the commentary made that the rate of poverty in Malaysia for 2014 has been reduced to one percent. As a nation, we can be proud to have come far […]

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Staying the course

Every day we receive messages from Malaysians of all walks-of-life. Many are hopeful for the work that goes in to the National Transformation Programme (NTP). Others criticise and question our progress. One thing is clear. These feedback – good, bad and ugly – demonstrate without doubt Malaysians care about Malaysia and want things to improve. […]

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Upping the ante on public service delivery

I also took the opportunity to shop at the Kedai Rakyat 1Malaysia (KR1M) there

As a young student at Universiti Sains Malaysia, on a few occasions, I had to take the bus from Pudu Raya terminal in Kuala Lumpur to Penang. At the terminal, travel-worn commuters had to stomach choking exhaust fumes, brave filthy corridors and carefully navigate poorly lit, steep stairways to get to their respective platforms where […]

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Private Sector To Take Lion Share

Chart 1: Private sector dominates investment ratio

Just last month, the 333-metre long “MT Mesdar” weighing in at 315,802 metric tonnes arrived from the Middle East to discharge crude oil at Malaysia’s first deep water storage terminal in Pengerang, Johor, marking the first time a Very Large Crude Carrier berthed there. The first phase of the terminal developed by Pengerang Independent Terminals […]

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Be generous to your employees

Household income outpacing inflation

During my 23 years with Shell, I was once posted in 2003 as CEO to Shell Middle Distillates Synthesis (Malaysia) Sdn Bhd (SMDS) in Bintulu, a company that had been in the red for about 10 years. Radical changes were necessary to turnaround and we had to get everyone – from managers to security guards […]

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We Can All Help Teach for Malaysia

Three years ago, I was invited by Teach For Malaysia (TFM) to teach English for a day at a Form Four class in Kapar, Selangor. I was excited to return to the classroom and do my part. Back when I was in secondary school, our days were led by fiery teachers who demanded our best. […]

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It’s Not All Doom And Gloom

Import and Export of Crude Petroleum, Petroleum Products and LNG From Jan to Nov 2014 (Data source: Department of Statistics, Malaysia)

I was recently invited to speak at a CEO’s Luncheon hosted by The Economist on the current state of our economy. My message to the room of senior analysts and fund managers was clear. We are on the road to transforming Malaysia to become a high income economy, in a way that is inclusive and […]

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