Associate Prof. Dr. Zulkifli Mohamad Udin
Dean, School of Technology Management & Logistics
Universiti Utara Malaysia
Dr. Mustakim Melan
Head, Department of Transportation and Logistics and the Centre for Transportation and Logistics Studies UUM.
Students of School of Technology Management & Logistics, UUM
Distinguished Guests, Ladies and Gentlemen,
Assalamualaikum Warahmatullahi wabarakatuh and a very good afternoon.
First of all, let me thank UUM for inviting me here this morning to give this talk. I am particularly pleased that the topic that I was asked to speak on is “The role of the Land Public Transport Commission in Economic Development”. I believe that this is a recognition by UUM that the Land Public Transport Commssion or S.P.A.D. as it is more commonly known has a very important role to play in sustaining Malaysia’s economic development.
For most people, when they do think of public transport, they do not relate it to economic development. Instead they think of public transport as something that is positively down-market, something that only the poor use. For many of our urban middle-class, public transport is something that other people should take so that I in my car can enjoy hassle-free travel. Yet, it was not always like this. For many of us who were teenagers in the 1960s and 1970s, we took public transport to go to school, to go to the cinema, to go to football games. Why is it that within one generation, the image of public transport has deteriorated so much that so many today’s parents would not dream of letting their children take public transport and instead stress themselves out playing chauffeur to their kids? I believe that one reason our understandable instinct to ensure that our children have a better quality of life than us. So the deterioration of public transport is in a way a problem of success, a byproduct of Malaysia’s phenomenal economic success.
Malaysia’s Economic Development – The Big Picture
By any measure, Malaysia is an economic development success story. Malaysia’s Gross Domestic Product (GDP) figure reached billion RM590.4 billion in 2010. In fact real GDP growth averaged 6.3% over the last 20 years far surpassing our population growth which averaged 2.3% in the same period. Since 1950 , there are only 13 economies that have grown at an average rate of 7 percent a year or more for 25 years or longer. We are an open economy with exports of goods and services forming 92% of our GDP. Yet, we have the resilience to weather economic storms. Even now, as economic conditions worsen in the so-called developed world, Malaysia is holding steady and as of 2nd Quarter 2012, our real GDP grew by 5.4%. Our international reserves stand at RM432 billion.
The World Economic Forum report for 2011 saw Malaysia rise one notch in the World Economic Competitiveness list to number 16 in 2011 compared to the year before. Malaysia today is among 21 most competitive countries in the world. Meanwhile, the World Bank, in its “Doing Business 2012” report, acknowledges Malaysia as the 18th easiest country to start or run a business. We have overtaken developed countries like Germany, Japan, Taiwan and France.
All these achievements have translated into real benefits for our people. The poverty rate has reduced from 49.3% in 1970 to 3.8% in the last 20 years. We have one of the lowest unemployment rates in the region at 3.2%. Indeed we host more than 2 million foreign workers from other countries in the region. Our emphasis on inclusive growth has ensured that the Gini coefficient measuring income inequality reduced from 0.51 to 0.44 in the same 20-year period. Malaysia is a solid middle-income country. Yet we must ensure that we do not fall into the middle-income trap and that is why the Government launched the Economic Transformation Plan (ETP). We are already seeing the success of this initiaitive. When the ETP was launched two years ago, the country’s per capita income was RM20,500. Today, it has risen to RM29,000. The 2011 data also shows the highest Gross Domestic Product (GDP) as well as Gross National Income (GNI) achievements since independence. These achievements have enabled the government to collect the highest revenue in history, post-independence, which is RM185.54 billion, allowing the implementation of numerous incentives for the benefit of the people.
Mobility Demand – The Linkage Between Economic Development and Transportation
What are the factors behind this success story? You being academics know the answer better than me. But one thing is undeniable. Our transportation system is a key factor. Take manufacturing for instance. Manufacturing makes up 54.2% of our GDP. Workers need to be able to get to work in factories for manufacturing to take place in the first place. Raw materials need to be brought to the factories and finished products need to be transported for the manufacturing output to be economically useful. The same holds true for the primary sector such as agriculture which makes up 7.3% of our economy. Even the services sector, which makes up 48% of our economy is highly transportation-dependent. Only an efficient transport network will enable people to go to restaurants, banks, retails outlets for the services sector to flourish. I believe that this situation will continue for the foreseeable future despite all the hype about the internet economy. Goods ordered through online shopping cannot be delivered online; they have to be transported physically after all. It is no surprise the Amazon, the largest online retailer in the world, is also one of the biggest users of transport services.
The increase in economic growth and demographic increase has resulted in an increase in mobility demands. A study by the Ministry of Works showed that mobility demands increased from 13 million trips per day in 1991 to 40 million trips per day in 2010. Mobility demand closely tracks economic growth. So as Malaysia’s GDP increases by 6% per annum, travel demand concomitantly will increases by 5%-7% per annum. On current trends, this means that travel demand will increase to 140 million trips per day in 2030. The Government has always been cognisant of the link between efficient transportation system and economic development. We have over the decades, built up an excellent transportation infrastructure network, particularly the road network.
However we now find that we have become the victim of our own success. Our success in providing relatively good-paying jobs to the broad mass of citizens, combined with the investments made to provide a first-class road infrastructure network has led to a predictable result – very high levels of private vehicle ownership. Ministry of Transport statistics show that private vehicle ownership is increasing by 7% annually. Although, there is no authoritative national statistics, data for the Greater Kuala Lumpur/Klang Valley region shows that the modal share of private vehicles in the GKL region increased from 66% in the 1980s to about 90% now even as the absolute volume of trips is also increasing. It is highly likely that the same trend in occurring in the other major cities in the country.
Satisfying Mobility Demand – The Economic Case for Public Transport.
One does not have to be an academic researcher to see the consequence of the increasing use of private vehicles to satisfy mobility demands. It is there for all to see. Traffic gridlock in Malaysia’s major urban centres is already a fact of life. Peak periods are lengthening in major urban centres. Traffic congestion has an economic cost. In Australia which has a similar population to Malaysia, research estimated that traffic congestion in its major cities cost the economy 12.9 billion Australian dollars in lost productivity in 2010. So we have to increase the use of public transport to ensure that economic losses due to traffic congestion are reduced.
Then there is the impact of increasing use of motor vehicles on air pollution. The Compendium of Environmental Statistics published by the Department of Statistics show that motor vehicles are responsible for 87% of air pollution in Malaysia. This has major implications for quality of life in Malaysian cities. We recognize that the quality of life has significant economic implications. This is why within the ETP, the National Key Economic Area for the GKL/KV region has specified the objective for Kuala Lumpur to be among the top 20 most liveable cities in the world. So it is imperative to ensure that air quality does not worsen in the Kuala Lumpur region, indeed in the whole country. The only way to do this is to significantly ramp up the share of public transport.
The increasing reliance on private vehicles to satisfy mobility demands has another direct economic cost. As you know, in Malaysia, the Government subsidizes fuel. In fact there are two separate components, one is the direct fuel subsidy given by the Government on fuel consumed by consumers and the other is the tax exemption enjoyed by oil companies resulting in foregone revenue by the Government.
The estimated cost to the Government for providing fuel subsidy alone in 2012 is RM25.2 billion. In fact the absolute amount has been increasing every year both in line with world fuel prices and rising use of motor vehicles in the country. In 2007 for instance, the fuel subsidy cost was only RM7.41 billion. Currently fuel subsidies account for 14% of the national budget. Use of private transport to satisfy mobility needs therefore has a very strong direct economic impact on the country. This is especially so considering that every 100 passenger-kilometres travelled by private vehicles uses 300% more fuel than performing the same journey by public transport. Increasing the modal share of public transport will therefore reduce the amount of fuel subsidy that needs to be borne by the Government and the savings can be used for other purposes for the benefit of our people.
So far all the factors mentioned above relate mainly to movement of people. There is a similar economic case for increasing the efficiency of freight transport. Let me give you a simple illustration which,h while not it may not academically rigorous, nevertheless is intuitively persuasive to businessmen. In 2011, the total value of our exports was RM694.5 billion i.e. RM1.9 billion per day . So, if each day, our exporters can save just one hour in freight travelling time, then the saving will be RM79 million per day and the improvement to Malaysia’s economic competiveness will be RM28 billion a year.
The Role of the SPAD
Now, if the case for increasing public transport is so self evident economically, why do we need the S.P.A.D? After all classical economic theory teaches us that if there is a demand, then the market will automatically fulfil it using the invisible hand. Unfortunately, reality teaches us differently. Just look at the wonderful experiment of market-based public transport versus planned public transport conducted by the Thatcher Government in Britain. As many of the older generation among us may remember, in 1986, the UK Government deregulated bus services in all of England except London. So we had a nice controlled experiment, London being the case of the planned bus transport model and other English countries being the standard bearers for the free market model.
A decade later i.e. in 1996, UK Dept of Transport statistics showed that bus patronage in English metropolitan counties fell by 37.5% while in London, it increased by 4.6%. Looking at a longer time frame, i.e. 1986-2008, bus patronage decreased by 45.8% under the free-market model while it increased by 81.4% under the planned model. Similar decreased in bus patronage occurred under the free market model in New Zealand and other countries where they were tried. By contrast in countries which stuck to planned models such as Switzerland, patronage kept rising.
In a way, this should not be surprising. After all, if you think about it, public transport is the movement of people from different origins to different destinations but in the same vehicle. So, how someone could think that you could do this successfully without planning is beyond me. So planning is the first role of the S.P.A.D. We have to plan at two different levels. One is at the strategic level. We have just prepared the draft National Public Transport Master Plan which is now available for public comment on our website. In the national plan we set overall objectives relating to our target modal share for public transport which is 40% in urban areas. We also set equity targets such as increasing the provision of public transport services in rural areas and increasing connectivity and service levels between rural areas and urban areas.
The second level of planning is at the tactical level, where we translate national objectives into actual public transport networks, selecting appropriate modes and technologies and coordinating timetables. This will have to be done at the state-level or in a special case like the GKL/KV region at the regional level. The draft GKL/KV Master Plan is also available on our website. We have identified rail as the backbone of the public transport system in this region and identified corridors with rail gaps. We have planned several projects to fill this rail gaps such as MRT lines 1,2, and 3, extensions of the existing LRT lines and service enhancement of KTMB commuter services. We have identified bus transformation needs in the region including implementation of bus rapid transit lines at one end and improving feeder services to rail and bus terminals at the other end. We will be preparing similar plans in all other states in Peninsular Malaysia and for this purpose are setting up the Public Transport Coordinating Committee in all states.
The next broad function of the S.P.A.D is regulation. The purpose of regulation is to ensure that services are delivered as planned in terms of quantity and quality. Over the last decade, we have seen the decline of public transport. In certain cities, regular intra-city or intra-town public transport services have dwindled to virtual disappearance. This to me is a regulatory failure because the relevant authorities could not ensure that approved services were in fact delivered. As an interim measure, we have instituted the Interim Stage Bus Support Fund to revive such services. However, as the name implies, this is only an interim solution and we will be looking at the permanent sustainable solution for public transport services. We are preparing clear guidelines, and performing a thorough review of existing regulations, licenses, laws and practices to ensure regulatory coherence are observed. This streamlining of reforms is continuously made to eliminate archaic practices that do not pass a cost-benefit analysis for the public transport industry.
The third broad area of S.P.A.D functions is enforcement. S.P.A.D been consistent and firm on the enforcement actions against errant market players in all the public transport sectors especially the taxi, bus and freight sectors. These enforcement actions are meted out to ensure the players observed the rules and take into consideration the economic implications in the event mishaps or accidents. For your information, road accidents cost the country RM9 billion annually in medical costs, insurance and car repairs with an average of 6,800 lives lost every year, with 65 per cent of the accidents caused by speeding. As such, S.P.A.D takes the view of not only the economic considerations in enforcing the rules against the industry players but the lives of rakyat.
All these activities are being taken to ensure that we revive public transport, not as something for other people to use, but as something for all of us to use. To me this is both a social imperative as well as an economic imperative. Why social imperative? Because what are we saying when we provide a first-class road infrastructure but there is no public transport plying those roads? Is this not tantamount to saying that the road is only for those who can afford to own private vehicles? Is this the sort of development that we want to reinforce? I believe no. Our infrastructure development needs to be coupled with development of the services that use the infrastructure. This is balanced development. This is economically efficient development. So in the case of transport infrastructure, road and rail infrastructure development needs to be coupled with transport service development. Only then can we say that the infrastructure development is being used in an economically optimum manner. This is the economic imperative.
Hence to me, S.P.A.D has both a social and an economic function. In fact the setting up of S.P.A.D by the Government is a recognition that the development of transport services was in many ways the missing link in our national development scenario. Previously, there was a regulatory body to carry out the licensing function. But this body was not tasked or equipped to do the planning function. Previously, there were separate agencies handling road-based and rail-based public transport, when as far as the public is concerned both are one and the same. Hence the creation of S.P.A.D to bring together the planning function with the regulatory function for all public transport modes and services.
I recognize that for us in S.P.A.D to carry out our functions effectively, we need to also emphasize research. We should aim to have data-driven analysis, data-driven plans, and data-driven reporting to the public. We need to strategize how best to use our limited resources in an optimum way, in an economic manner. Here I believe that academicians such at those at UUM and other institutions of higher learning have an important role to play. You at the Centre of Transportation and Logistics have a wealth of knowledge and experience that I am sure will be able to help us do our planning, regulation and enforcement in a more efficient manner. I encourage all of you to identify the areas of expertise you have that can benefit S.P.A.D and submit your ideas and research proposals to us.
Ladies and gentleman,
So, as you can see, S.P.A.D has a very important role to play in the economic development of Malaysia. We have a very important role to play in the social development of the country. We do both of these through our efforts to increase the modal share of public transport and increasing the efficiency of freight transport movement. As pointed out earlier in my talk, by increasing the public modal of public transport, we will be directly increasing the productivity of our workforce, increasing the quality of life of our cities thus making them more attractive for investors, increasing the efficiency of our supply chains and thus the competitiveness of our exports and reducing the Government’s fuel subsidy outlays.
We are not naïve about the challenge ahead of us. Increasing modal share of public transport from 10% to 40% is a mammoth task and there is no room for complacency or business as usual. Yet we must remain optimistic that we will live up to the task at hand to improve the public transport system. This has been neglected for too long. It is my ambition for us to once again create a situation where parents again let their children take public transport, indeed where parents themselves take public transport wherever possible. I say this not out of a sense of nostalgia for my youth, but because this is the only way for us to improve the quality of life in our cities, towns and kampungs. This is the only way for us to ensure that our children have a better quality of life than us. I hope that all of you here are equally willing to meet this challenge and help us with your expertise. Working together, I am confident that we will be able fulfill the aspirations of the rakyat and truly make public transport the rakyat’s choice.