Malaysia Economic Monitor, June 2015 - Transforming Urban Transport

Malaysia’s rapid urbanization has led to increased levels of road congestion. Improving urban transportation is essential to reducing the high costs of traffic, boosting economic growth, and improving people’s lives.

Photo: Nafise Motlaq / World Bank

Key Findings

Malaysia’s growth is projected to maintain a healthy pace.

  • Malaysia’s economic growth projection: 4.7% (2015) and 5% (2016).
  • Malaysia’s exports, including the long-embattled E&E (electronics/electrical) sector, showed signs of recovery in 2014 (up 5.2%), but slowed in early 2015.
  • Private consumption is expected to moderate to a still-robust 5.9% (2015) before rebounding to 6.4% (2016) as consumers adjust to the Goods and Services Tax (GST).
  • The introduction of GST and elimination of fuel subsidies has helped Malaysia weather the oil price shock, but further reforms are required to ensure medium-term fiscal targets are met.

Congestion threatens to dampen the benefits of urbanization

  • Rapid urbanization boosted productivity and access to economic opportunity, helping raise incomes and reduce poverty.
  • But urban sprawl, high motorization rates and inadequate public transport led to congestion and low usage of public transport.
  • Only 17% of commuters in Kuala Lumpur use public transport compared to 62% in Singapore and 89% in Hong Kong.
  • Residents of Greater Kuala Lumpur spend more than 250 million hours a year stuck in traffic.
  • The total cost of traffic in Greater Kuala Lumpur is estimated at 1.1 - 2.2% of GDP in 2014.

The lack of unified planning is a key obstacle to the delivery of efficient urban transport

  • Current planning and delivery practices for urban transport are still not sufficiently robust to handle the underlying complexity of Malaysia’s cities as they are scattered across a number of different entities.

Malaysia’s urban transport system can address these challenges more robustly by establishing metropolitan-level lead agencies

  • Lead urban transport agencies at the metropolitan level would oversee integrated planning, maintenance and service delivery of all modes of urban transport.
  • The introduction of new financial instruments such as taxes, user charges and fees can help finance a lead transport agency with the right mandate sustainably.
  • Policies to promote the use of public transport should be aligned with policies that discourage car use in congested areas.