Transport sector faces challenges from changes in political plane

Of note, in 2016, the former government had launched the DFTZ project to push Malaysia’s presence in the regional and global e-commerce market.

KUCHING: Malaysia’s transport sector faces various headwinds ahead, driven by increased regulatory risk on the back of the change in Malaysia’s political landscape, potential dial-back on certain initiatives, and rising fuel costs.

While there are plenty of opportunities in store for players, the research wing og AmInvestment Bank Bhd (AmInvestment Bank) was mindful of various headwinds such as the increased regulatory risk on the back of the change in the political landscape following the 14th General Election (GE14), potential dial-back of certain major initiatives by the preceding administration and rising fuel costs.

It highlighted that while the rapidly expanding e-commerce sector, particularly, online shopping, has created huge opportunities for parcel delivery service providers such as Pos Malaysia Bhd (Pos Malaysia), the development of the e-commerce, Alibaba-backed Digital Free Trade Zone (DFTZ) project in the KLIA Aeropolis could be subjected to the new government’s (Pakatan Harapan) review.

“All China-Malaysia deals signed in recent years will now come under scrutiny.

“This follows the revelation of unconventional contractual terms the preceding administration entered into with Chinese lenders and contractors with regards to the East Coast Rail Link (ECRL) and two multi-product petroleum pipeline projects, where the payment schedules are based on timeline milestones, compared with the industry’s norm of percentage of completion.

“This has resulted in the payments being way ahead of the actual work done, which is nonsensical,” the research team pointed out.

Of note, in 2016, the former government had launched the DFTZ project to push Malaysia’s presence in the regional and global e-commerce market.

“DFTZ will serve as a regional e-fulfilment centre (virtual zone) as well as an e-commerce logistics hub (physical zone).

“Apart from Malaysia Airports (the landowner and developer of the KL Aeropolis), we believe local logistics players (including warehouse operators) are poised to garner a slice of action in the physical zone of the DTFZ,” AmInvestment noted.

It further pointed out that regulated businesses might also face a higher regulatory risk, as the new administration strives for better deals for the rakyat, as promised in its election manifesto.

“Under these circumstances, it is unlikely, for instance, for airport operator Malaysia Airports to secure an upward revision in passenger service charges (PSC).

“In fact, in the run-up to potentially new rates in 2019, the Ministry of Transport now says that PSC should be determined in accordance with the quality of facilities in the airport, which means certain smaller and older airports may even see a reduction in PSC,” it added.

Aside from that, for the shipping industry, the research team said, the transshipment seaport operator Westports Holdings Bhd could still feel the negative impact from the recent reorganisation of the global shipping alliance, resulting in the diversion of transshipment cargo volumes to Singapore.

“On a brighter note, we expect gateway cargo volumes to continue to grow in coming years, thanks to Malaysia’s robust exports and imports,” it said.

As for Bintulu Port Holdings Bhd, it believed that it could be weighed down by start-up costs at its newly completed Samalaju Industrial Port.

Meanwhile, AmInvestment noted that Tourism Malaysia has projected Malaysia’s tourist arrivals to surge by a whopping 28 per cent to 33.1 million in 2018 from 25.9 million in 2017, and would hit 36 million in 2020 in conjunction with the Visit Malaysia Year 2020 campaign.

“We find the projection a tad optimistic given that the numbers had stagnated at about 26 million over the last three years.

“Nonetheless, we do agree that the trend for tourist arrivals in coming years is upwards, as Malaysia is slated to host a series of highprofile international events including the Commonwealth Heads of Government Meeting, the APEC Summit and World Congress of Information Technology.

“Low-cost carrier AirAsia and airport operator Malaysia Airports are the main beneficiaries of the growing tourist arrivals,” it opined.

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