3. Logistics and industrial infrastructure

This section covers the following topics: ports and waterways, railways, roads, airports, telecommunications and connectivity, industrial and logistics parks.

Summary

• 3.1. Ports and waterways
• 3.2. Railways
• 3.3. Roads
• 3.4. Airports
• 3.5. Telecommunications and connectivity
• 3.6. Industrial and logistics parks

The objective of the 12th Malaysia Plan (2021-2025) is to restore the growth momentum of key economic sectors and propel strategic and high-impact industries, as well as micro, small and medium-sized enterprises (MSMEs) to realign growth on a sustainable trajectory, as well as strengthen Malaysia's position in the global value chain. Malaysia will shift towards high value-added and high-skilled economic activities and aim to become a high-income nation driven by advanced technology.

The logistics and industrial infrastructure sector must be developed to support and accelerate this process, with emphasis on improving first and last mile connectivity, increasing the competitiveness of the sector and strengthening governance .

However, challenges in meeting the demand for seamless connectivity and reliable transport and logistics infrastructure continue to hinder efforts to meet the growing demand. According to the 12th Plan, industry fragmentation, poor technology adoption, uncoordinated planning and implementation, and weak governance have been negatively impacting , resulting in poor quality of services and relatively higher costs.

Transforming the logistics ecosystem for greater efficiency has been identified as a game changer: initiatives will be taken to centralize logistics hub planning and development, accelerate digitalization, encourage mergers and acquisitions among logistics operators, establish a single Border Agency, and create a national regulatory framework for warehousing and the maritime economy.

Providing efficient and inclusive transport and logistics infrastructure will continue to be a focus, by improving accessibility to public transport, enhancing trade facilitation and strengthening the institutional and regulatory framework.

Green growth in the infrastructure sector will play a key role, and in addition to the 12th Malaysia Plan, two other specific policy documents will guide this:

• National Transport Policy 2019-2030 (NTP) 1. Developed through close collaboration between the government and the private sector, it consists of five policy thrusts and 23 strategies that take into consideration future trends that will impact the transport sector. The five policy thrusts aim to (1) strengthen governance to create an enabling environment for the transport sector, (2) optimize, build and maintain the use of transport infrastructure, services and networks to maximize efficiency, (3) improve safety, integration, connectivity and accessibility for seamless travel, (4) advance towards a green transport ecosystem, (5) promote the internationalization of transport services; The strategies aim to address 8 key trends: (I) growing and ageing population, (II) increasing urbanization, (III) advances in real-time information and digitalization, (IV) expanding e-commerce market, (V) shift towards environmentally sustainable transportation, (VI) shift to larger vessels, consolidation and containerization, (VII) increasing passenger travel and impact of low-cost carriers cost , (VIII) Proliferation of new technologies.

• The Low Carbon Mobility Blueprint 2021-2030 (LCMB) 2. The policy aims to reduce emissions from the transport sector, which is currently the second largest emitter of CO2 in the country, after the energy sector, contributing 25% to 30% of GHG emissions with vehicles predominantly powered by internal combustion engines (ICEs). The Blueprint implements a policy framework to integrate the shift to electrification in the transport sector as a key strategy to reduce emissions and contribute to the achievement of the national GHG target under the Paris Agreement, in line with the commitments of neighboring Thailand and Singapore, as well as global best practices. The Blueprint also aims to build 10,000 EV charging points by 2025.

3.1. Ports and waterways

According to the UNCTAD (United Nations Conference on Trade and Development) Liner Connectivity Index 3, in the fourth quarter of 2023, Malaysia confirmed its position as the 4th best connected country in the world by ship, preceded by China, South Korea and Singapore.

Table : Liner Connectivity Index ranking, Q4 2023, UNCTAD

From 2009 to 2018, Malaysian ports recorded an average growth of 3% in cargo volume handled 4. After a decline in 2017, cargo volume recovered in 2018 to 568 million tonnes and reached a record high of 595 million tonnes in 2019. The arrival of the COVID-19 pandemic had a negative impact in 2020, with a contraction of 4.9%, lower than 2018 levels, followed by 2021 that almost reached 2019 levels and 2022 that fell again to 567 million tonnes. Provisional data for 2023 from the Ministry of Transport 5indicates a 0.6% year-on-year growth in the third quarter. Container traffic is the one that has seen the greatest fluctuations, with growth of 8.8% in weight and 6% in TEU in 2021, while in 2020 it saw a decline of 10.6% in weight and 3.4% in TEU ; partial data for 2023 indicates growth of 8.1% in weight, year-on-year in the third quarter.

Despite the fluctuations, with 27.3 million TEU 6handled in 2022, Malaysian ports handle container traffic comparable to that of Rotterdam and Antwerp combined (which was 27.9 million TEU in 2022).

As one of the largest exporters of liquefied natural gas (LNG), Malaysia is home to the world's first floating LNG port facility and is also home to the world's largest palm oil terminal.

Strategic location and good connectivity make Malaysia one of the preferred countries to enter the Southeast Asian market: Malaysia is located right in the heart of the region where intercontinental and intra-Asian maritime trade routes meet. Singapore remains the region's main port, but has little room for expansion and fewer land connections. With an abundance of affordable land, well-maintained infrastructure and a thriving economy, Malaysia will only strengthen its already strong position as a gateway to the region and benefit from the increase in container traffic in Southeast Asia.

Malaysia's port system is fragmented into several specialized ports scattered around the country, coordinated by government-appointed authorities and operated by private entities. The main container ports are located on the west coast of the Malacca Peninsula, while the main bulk ports are located on the east coast of the peninsula and in Sabah and Sarawak (Borneo).

Today Malaysia has 8 ports whose administration is appointed at the federal level, which are respectively: Port Klang, Tanjung Pelepas , Johor Port, Penang Port, Bintulu Port, Malacca Port, Kuantan Port and Kemaman Port.

In addition, there are ports administered by the state governments in Sabah and Sarawak and several privately owned port facilities and jetties across the country, including Port Dickson and Lumut , mainly for the benefit of the mining and oil and gas industries.

Port Klang, the world's 12th largest container port, handled 13.72 million TEU in 2021 and 13.22 million TEU in 2022 (48.4% of Malaysia's total container traffic), while it handled 30.3 million tonnes of conventional cargo in 2022, up 13% from 26.8 million in 2021 7.

The second largest container port is Tanjung Pelepas , which handled 10.51 TEU (38.5% of Malaysia's total container traffic) in 2022; Port Klang and Tanjung Pelepas operate mainly as HUBs, as 73.8% of their traffic is transshipment.

Penang Port , the third largest container handling port with few transhipment cargoes but a strong economic hinterland and good connections to southern Thailand, acts as a regional import and export hub.

The Port of Johor is a major hub for the oil and gas industry and the deep-sea ports of Kuantan and Kemaman serve, among others, the mining industry in central and northern Malaysia and are a hub for offshore operators. Bintulu is the main port of entry for Sarawak and is among the world's largest LNG trading hubs. Sapangar Port Bay is the new gateway to Sabah and along with the other ports in the state, serves the trade in palm oil and related cargoes. The relatively high cargo volume in Port Dickson can be attributed to the Shell refinery that operates the port. Lumut Jetty is operated by global mining leader Vale and serves as a regional distribution and transhipment hub.

The 12th Malaysia Plan envisages that port infrastructure and service capacity will be increased, while a multimodal approach to cargo movement will be adopted.

The impetus of the 11th and 12th Malaysia Plan has led major Port Authorities to develop their own Green Port Policies and initiatives, through the use of renewable energy sources, electrification of equipment, optimisation of logistics and supply chain management, sustainable procurement practices, reduction of waste and water consumption and energy-efficient lighting 8.

The major development project is the expansion of Port Klang, with the construction of the third HUB on Carey Island, confirmed in April 2023 by the Government 9, with a planned budget of 8.5 billion dollars to allow the port to handle a total of 36 million TEU per year (almost triple what it handled in 2022). Other ports have also presented expansion plans, including the setting up of industrial parks in the hinterland , including the port of Tanjung Perak 10.

Malaysia has 7,200 km of waterways, of which 3,200 km are in the Malay Peninsula and 4,000 km in Borneo 11. River transport is practiced in rural communities, but it is in the state of Sarawak in Borneo that it is of greatest importance: Sarawak has a total of 55 navigable rivers with a total length of 3,300 km, the Rejang River , 567 km long, is the longest river in Malaysia, with between 300 and 500 vessels using it every day, about 50% of traffic is passenger transport, the rest is mainly for the transport of goods, including logs 12.

3.2. Railways

Rail transport is mainly present in the Malay Peninsula, while in Borneo it is present only in Sabah .

The railway line in Sabah is 134 km long, with a 1-metre gauge, and connects Tanjung Aru to Kota Kinabalu and Tenom . It is operated by Sabah State Railway and has 15 stations 13.

The main railway network in Peninsula Malay connects the major cities of Peninsula Malay, is operated by the state company KTM, and consists of two main lines, the West Coast Railway Line, which extends for 1151 km from Padang Besar , on the border with Thailand, to Woodlands Train Checkpoint on the border with Singapore, and the East Coast Railway Line, which extends for about 620 km from Tumpat , almost at the border with Thailand, to Gemas , where it joins the West Coast Railway Line; both lines have a gauge of one metre and carry both passengers and freight.

KTM Intercity is the brand name of KTM's diesel-hauled intercity rail service 14, the East Coast Railway Line is operated exclusively by diesel, while the West Coast Railway Line is operated by diesel only on the southern leg between Gemas and Singapore. The DMU - Diesel Multiple Unit train was launched on 11 April 2021 by Malaysia's Minister of Transport, Datuk Seri Ir . Dr. Wee Ka Siong at Pasir Mas station , Kelantan . This train was introduced to replace the conventional KTM Intercity train, for the northern leg of the East Coast Railway Line between Tumpat and Kuala Lipis , and is equipped with modern, comfortable and user-friendly facilities. Before the Covid-19 Pandemic, the Intercity service carried approximately 3.7 million passengers per year, or approximately 183 million passenger kilometers, the numbers decreased in 2020 and plummeted in 2021, due to the total lockdown that started in June, reaching 304,000 passengers and 47 million passenger kilometers. In 2022 15, the numbers increased to 2.7 million passengers and 219 million passenger kilometers. During the period 2012-2019, the number of passenger kilometers of the KTM Intercity service decreased as the number of passenger kilometers of the KTM ETS service increased.

KTM ETS is the brand name of KTM’s intercity electric train service (ETS – Electric Train Service) 16. It is the fastest metre gauge train service in Malaysia, operating along the northern stretch of the West Coast. Railway Line between Padang Besar , on the border with Thailand, and Gemas , which, in addition to being electrified, is double track. The trains travel up to 140 km/h and, for this reason, it is classified as a high-speed train. Before the Covid-19 pandemic, the ETS service moved around 3.9 million passengers per year, for around 1.1 billion passenger-kilometers, the numbers decreased in 2020 and collapsed in 2021, due to the total lockdown started in June, reaching 630,000 passengers and 177 million passenger-kilometers. Towards October 2021, the situation began a phase of normalization, with the government's decision not to apply restrictions on the travel of vaccinated people. In 2022, the numbers grew to 3.3 million passengers and 946 million passenger-kilometers.

KTM Kargo is KTM's freight service, in 2021 it moved 17approximately 4.8 million tons of goods (+5.3% compared to 2020), 1 billion tonne-kilometres (+22.5% compared to 2020) and 224,444 TEUs (+12.9% compared to 2020). In 2022, the service almost restored 2019 levels, moving 6 million tons (+0.7% compared to 2019) for 1 billion tonne-kilometres (-7.6% compared to 2019). The “ Landbridge ” 18service connects Singapore to Thailand and represents KTM’s commitment to the creation of the Trans-Asia Rail Link, the proposed link to strengthen and improve trade between ASEAN and China, for which KTM has established a potential handling capacity of 80 TEUs per 40 wagons per trip, with an average of 4,500 TEUs per month.

In addition to the main rail network, there are other local services, concentrated in the Klang Valley area.

KTM Komuter is KTM's brand of commuter rail services serving Kuala Lumpur and surrounding suburban areas in the Klang Valley. The service was introduced in 1995 and is 1 metre gauge, unlike all other rail transport systems in the Klang Valley, and shares the same tracks with the KTM ETS, providing interchanges with the intercity rail service. The service was later introduced in the northern peninsular Malaysian states of Perak, Pulau Pinang , Kedah and Perlis in September 2015 after the completion of the Ipoh-Padang Besar electrification and double track project . The trains used are air-conditioned electric multiple units. Before the Covid-19 pandemic, the KTM Komuter service carried around 30.4 million passengers per year, for around 905 million passenger kilometres, the numbers decreased in 2020 and plummeted in 2021, due to the total lockdown that started in June, reaching 5.9 million passengers and 188 million passenger kilometres. In 2022, the levels returned to growth, reaching around half of 2019, with 14.5 million passengers and 488 million passenger kilometres.

The Klang Valley is also served by other standard gauge rail transport systems:

• LRT – Light Rapid Transit . This is a medium capacity railway system of Prasarana Malaysia, it is a railway system consisting of four lines: Kelana Jaya Line, Ampang Line, Sri Petaling Line and the upcoming Shah Alam Line. The lines are operated by Rapid Rail and owned by Prasarana Malaysia. In 2019, the LRT service carried 159 million passengers, in 2022 the passengers were 99 million.

• MRT – Mass Rapid Transit . The Klang Valley Mass Rapid Project Transit (KVMRT) was drafted in early 2010 with three lines to be built, which include the MRT Kajang Line, the MRT Putrajaya Line and the upcoming MRT Circle Line. All three lines are operated by Rapid Rail and owned by MRT Corp. The MRT stations are also supported by additional parking areas and feeder buses for last-mile connectivity. The Kajang Line is the first MRT line built in Malaysia and is a fully automated driverless rail system with 29 stations spanning 47 km. In 2022, it carried 86 million passengers.

• KLIA Ekspress provides a non-stop service between KL Sentral and Kuala Lumpur International Airport (KLIA), operated by ERL – Express Rail Link, without stopping at any of the intermediate stations. The journey takes only 28 minutes with a maximum speed of 160 km/h (99 mph ). Trains run at 15-minute intervals during peak hours and 20-minute intervals during off-peak hours. In 2019, KLIA Ekspress handled 2.1 million passengers, and in 2022, it handled 563,000 passengers.

• KLIA Transit shares the same platforms as KLIA Ekspres . Operated by ERL, KLIA Transit stops at all stations between KL Sentral and KLIA, providing a commuter rail service as well as a rail link from the city centre to the airport. ERL lines are currently the only rail link between Kuala Lumpur and Putrajaya . In 2019, KLIA Transit handled 6.8 million passengers, in 2022 it handled 3.4 million.

In addition to the standard gauge systems, Kuala Lumpur is also served by KL Monorel , the monorail service operated by Prasarana Malaysia, which connects the KL Sentral transport hub with the Golden Triangle area of Kuala Lumpur. The system extends over 8.6 km (5.3 mi), with 11 elevated stations and has 50,000 passengers per day. In 2019, KL Monorel handled 12.5 million passengers, in 2022 it handled 10.7 million.

The development of rail transport in its various forms is considered strategic for the future of Malaysia and for this reason, the National Rail Centre of Excellence (NRCOE) was also established in 2019, whose functions are to (1) implement Human Capital Development (HCD), Rail Industry Development Programme (RIDP), Testing and Certification and Technology Research and Development, (2) become the facilitator for the development of the rail industry in Malaysia, (3) become the hub and interface for international and local industry players to interact and provide professional advice on the rail industry.

Major projects in the pipeline or planned include the development of additional lines in the Klang Valley, the doubling of tracks in the single-track sections and the construction of the East Coast Rail Link (ECRL), a standard gauge double-track railway link infrastructure project connecting Port Klang on the Straits of Malacca to Kota Bharu in northeastern Peninsular Malaysia, linking the East Coast Economic Region states of Pahang , Terengganu and Kelantan to each other and to the central west coast region of the peninsula, implemented in partnership with ucted China Communications Construction Company.

The East Coast Furthermore, Railway Line is particularly exposed to hydrogeological risk and requires maintenance and restoration due to landslides and mudslides.

3.3. Roads

Malaysia's road network is the largest in Southeast Asia, with over 290,000 kilometers, of which 247,000 are state-owned, 23,000 are federally owned, and 20,000 are concessional. 25.7% of the roads are unpaved and are entirely part of the state-owned network 19.

The Malaysian Development Plan plans to improve road links in rural areas, to connect unserved villages and improve existing roads, the target of the 12th five-year plan includes paving 2,800 kilometers of rural roads by 2025 and building about a hundred bridges (Strategy C1)

Particular attention is paid to improving the network in Borneo, since the one in the Malay Peninsula is already widely developed.

The toll highway system connects major cities, extends for 2016 kilometers 20, is built and operated under concession (Public Private Partnership) and controlled by Malaysian Highway Authority, established under the Malaysian Ministry of Works.

The standard requires that toll motorways have at least two lanes in each direction, most have toll booths at the entrance and exit with tolls adjusted according to the type of vehicle and the distance travelled, some have toll booths at specific crossings.

In Malaysia, they drive on the left.

3.4. Airports

MAVCOM, the Malaysian Aviation Commission 21, lists 42 airports, to which is added an unspecified number of aerodromes for STOL aircraft.

There are seven airports classified as international

• Kuala Lumpur International Airport (KUL), Selangor

• Sultan Abdul Aziz Shah Airport (SZB), Selangor

• Penang International Airport (PEN), Penang

• Kuching International Airport (KCH), Sarawak

• Kota Kinabalu International Airport (BKI), Sabah

• Langkawi International Airport (LGK), Kedah

• Senai International Airport (JHB), Johor

The largest of which is Kuala Lumpur International Airport, which in 2023 handled over 47.2 million passengers, including 32.5 million international passengers 22.

Senai International Airport (JHB ) is operated by a group company MMC Corporation Berhad , under a 50-year concession that began in 2003, while the other international airports are operated by Malaysia Airports. Holdings Berhad (MAHB).

MAVCOM notes that out of the 42 airports surveyed, 39 are operated by MAHB, which is a listed company with golden share of the Federal Government of Malaysia (as a final result of the privatization process of the sector in 1999), constituting a quasi-monopoly regime, with 93% of the passengers handled and 98% of the sector's turnover. Despite the quasi-monopoly regime, MAHB is not able to unilaterally raise the prices of services, due to the regulation of airport charges managed by MAVCOM, however it enjoys the advantage of the framework agreement with the Government, which retains the responsibility of providing the capital expenditure (CAPEX) for the construction, expansion and maintenance of the airports, while MMC is entirely responsible for the CAPEX in Senai International Airport .

In 2019, it issued a Position Paper 23, which, taking into account an increasing difficulty in developing the airport industry and maintaining the quality of the services offered, proposes a policy that aims to create more regulatory clarity, fully assign CAPEX responsibility to airport operators and progressively introduce more competition and new operators in the sector, with a medium-long term strategy (2025-2030).

A National Strategic Plan for Airports is expected to be published by the end of the 12th Five-Year Plan (2025).

3.5. Telecommunications and connectivity

On 29 August 2020, the Prime Minister of Malaysia, Tan Sri Muhyiddin Yassin, announced the JENDELA Action Plan 24as part of the 12th Five-Year Plan (2021-2025). The RM21 billion (EUR4.1 billion) JENDELA Plan has been formulated to guide Malaysia towards achieving better digital connectivity by increasing the efficiency of the country’s infrastructure. Of the RM21 billion allocated for JENDELA, 40% is coming from the Malaysian Communications and Multimedia Commission ’s (MCMC) Universal Service Provision (USP) fund , while the remaining 60% is to be funded by industry players.

This plan is designed to pave the way for comprehensive and quality broadband coverage and prepare the transition to 5G technology. The JENDELA Plan also provides for the closure of 3G networks and the improvement of the 4G network.

To develop the 5G infrastructure, in 2021 the Ministry of Finance established a special purpose company, Digital Nasional Berhad (DNB) 25, regulated by MCMC; in October 2022, 65% of DNB was acquired by the four largest mobile operators in Malaysia, while 35% remained as a golden share with the Ministry of Finance. The four largest operators were Telekom Malaysia (TM), YTL Communications(YTL), Digi and Celecom ; the latter two merged in late 2022, creating CelecomDigi , the largest mobile operator in Malaysia with over 20 million subscribers.

Phase one of the JENDELA Plan was completed at the end of 2022 with the result of having connected 7.74 million buildings to fiber optics, having 4G coverage of 96.92% of populated areas with an average mobile connectivity of 116.03 Mbps 26. The 5G network reached coverage of 54.7% of populated areas at the end of 2022 and 80% at the end of 2023.

The goal for phase two (by 2025) is to reach 9 million buildings connected to optical fiber, 100% 4G coverage of populated areas with an average connectivity of at least 100 Mbps.

3.6. Industrial parks

The Malaysia Industrial Park Directory 27lists 140 industrial parks, including 128 in Peninsula Malaysia and 12 in Borneo, but the Malaysian Investment Development Authority (MIDA) says there are over 500 industrial parks across the country 28.

The main industrial parks are clusters of companies with shared infrastructures, their development has been determined by a long-term strategy implemented since 2006, which aimed at the creation of five "Economic Corridors" which together cover 70% of the national territory 29:

• Northern Corridor Economic Region (NCER) in the northern Malay Peninsula, with Georgetown as its centre, focuses on modern agriculture, manufacturing and design, tourism, logistics, education and health.

• Iskandar Malaysia (IM) in the south with Johor Bahru as a hub, focuses on creative industries, education, healthcare, financial services, tourism, logistics industry, electrical and electronic services.

• East Coast Economic Region (ECER) on the eastern coast of the peninsula, with Kuantan designated as its centre, focuses on tourism, oil and gas , manufacturing, agriculture, education.

• Sarawak Corridor of Renewable Energy (SCORE) in Borneo with Kuching as its urban center, focuses on energy, raw material processing and tourism.

• Sabah Development Corridor (SDC) in Borneo, with Kota Kinabalu as its centre, focuses on agro-industry, tourism, logistics and manufacturing.

Within the free zones, Free Zones have been established, which are of two types:

• Free Industrial Zones (FIZ): A designated area for manufacturers to import all their raw materials and produce goods for export. Companies wishing to operate in FIZs must import all their raw materials and export at least 80% of their production, with imported raw materials being duty-free. To operate in FIZs, companies must obtain special permits from the Ministry of International Trade and Industry (MITI) and can sell the remaining 20% of their production in Malaysia's domestic market, but as imported goods, subject to Malaysia's standard import duties and taxes. There are 21 FIZs in Malaysia 30.

• Free Commercial Zones (FCZ): Established to promote business activities in Malaysia, including inter-zone trade, along with the promotion of the service sector. Due to the nature of the activities, which may include breaking of cargo, repackaging of imported products or products from companies in other Free Zones, FCZs are usually located near ports in the country. For all imports that will be subsequently re-exported together with other products or as a component of another repackaged product , companies operating in the FCZ are exempted from paying duties, excise duties, sales tax and service tax. Companies in FCZs are not allowed to carry out retail trade activities in Malaysia. There are currently 21 FCZs in Malaysia.

The new Industrial Master Plan 2030 was released on 1 September 2023 31, which aims to give new competitive impetus to Malaysian industry by setting three primary objectives to be achieved by 2030:

• increase the Added Value of the manufacturing sector by 61%,

• increase sector employment by 20%,

• increase the average salary by 128%.

To achieve these objectives, the Master Plan identifies 4 primary missions:

1. improve economic complexity

2. increase digitalization

3. push for carbon neutrality

4. safeguard economic security and inclusiveness .

The industrial real estate market recorded moderate growth in 2023 32, increasing by 0.9% in volume to 8,157 transactions and by 13.1% in value to RM23.94 billion (approximately EUR4.7 billion); Selangor continued to dominate the market, with 31.8% of the total transaction volume, followed by Johor , Sarawak and Pulau Pinang with 19.3%, 7.9% and 7.8% market share respectively.

Construction of new units recorded strong growth. Completions and starts increased by 7.1% to 631 units and 49.5% to 803 units respectively, while planning of new units almost doubled to 1,372 units. Johor contributed the most completions, accounting for 56.4% of the national total, followed by Selangor (21.2%). At the end of 2023, there were just over 121,000 existing industrial units.

The establishment of new factories is subject to environmental constraints and regulations and the authorization is tied to the Environmental Impact Assessment, according to a specific provision of 2015 33.