7 - Infrastructure in Malaysia: Investment, Growth and Policy Challenges

Summary

Introduction

Since independence, the Malaysian economy has posted impressive rates of growth, in the process undergoing important structural changes (see Table 7.1). Neither the growth of the economy nor its structural transformation, from a predominantly agricultural economy to a manufacturing and service based one, would have been possible without the sustained expansion and modernization of the country's infrastructure.

This chapter describes the development of infrastructure in Malaysia. Infrastructure comprises a wide spectrum of physical facilities and services, ranging from the various types of transport facilities to utilities such as telecommunications, electricity, sewage and water supply. Most types of infrastructure have the common characteristics of being both capital-intensive and long-lasting. There are also important differences between them in terms of industry structure.

Some, for example, are near natural monopolies whilst in others competitive markets are possible. Also infrastructure such as roads and telecommunications are network industries, whereas ports and airports are location specific. Because the sector is very broad and complex, the discussion, of necessity, is broad and addresses crosscutting and sector-wide issues without going into the specifics of each subsector. Yet another complication with regard to infrastructure in Malaysia arises from the fact that the country comprises three separate physical and political entities. The component parts of the country — Peninsular Malaysia, Sabah and Sarawak — are very different in terms of land area, level of development and population size. The regional disparities render discussion of the country's infrastructure problems and policies somewhat problematic.

In this chapter only some of the important issues pertaining to infrastructure development in Malaysia are addressed. Among the issues discussed are:

1. • Investment in infrastructure development and the consequent growth of the country's infrastructure stock;

2. • The sector objectives and strategies of the government; and

3. • The current and emerging infrastructure challenges.

Investment in Infrastructure

At independence in 1957, Malaya inherited a fairly good set of infrastructure facilities for its immediate needs, albeit highly concentrated along the west coast and also dependent on Singapore for port and airport facilities. Development of infrastructure, especially in Peninsular Malaysia, from 1957 up to 1965 mostly kept abreast of growth in demand: this is borne out by the fact that there were few instances of severe infrastructure shortages or breakdowns even if, as earlier, the spread and coverage of infrastructure was uneven between different regions of the country.