Industry Overview

5. INDUSTRY OVERVIEW (Conf’dj 5. INDUSTRY OVERVIEW (Conf’dj
1 INTRODUCTION Objective of the Study This Executive Summary of the independent market research (“IMR”) report has been prepared in conjunction with the listing of Perak Transit Berhad on the ACE Market of Bursa Malaysia Securities Berhad. The objective of this IMR report is to provide an independent view of the industry and market(s) in which Perak Transit Berhad operates in and to offer a clear understanding of industry and market dynamics. Rationale and Scope of Work Perak Transit Berhad is principally involved in the operations of Terminal AmanJaya integrated public transportation terminal and the provision of public bus services in Ipoh, Perak. Perak Transit Berhad is also involved in petrol station operations and the management of automotive diesel oil incentive programme. The scope for this Executive Summary of the IMR report will thus address the following areas: • market development and growth prospects of the public bus terminal services market in Ipoh, Perak, in relation to the Terminal AmanJaya integrated transportation terminal operations of Perak Transit Berhad;
• market development and prospects of the advertising market in Malaysia in relation to the rental of advertising and promotion space at Terminal AmanJaya;
• market development and growth prospects of the public bus transportation services market in Malaysia as well as the Northern and East Coast regions of Malaysia in relation to the public bus services operations of Perak Transit Berhad; and
• market development and growth prospects of the retail market in Malaysia in relation to the rental of shops and kiosks at Terminal AmanJaya.

The growth of petrol station operations and the management of automotive diesel oil incentive programme are not addressed in this Executive Summary of the IMR report as the margin contribution from this business segment is relatively small in comparison to the other business segments of Perak Transit Berhad. [The rest of this page is intentionally left blank] 5. INDUSTRY OVERVIEW (Conf’dj

2 DEFINITIONS AND SEGMENTATION Public transportation is a key pillar of a nation’s economy. From cities to small towns, and everywhere in between, public transportation provides transit for daily mobility and links between people and their jobs, education and entertainment. Therefore, the availability and convenience of public transportation defines the quality and promotes positive perception of public transport services. Public transport services are a form of travel provided by high occupancy vehicles such as buses and trains, along predetermined travel paths and at scheduled intervals during a day. Public transportation services can be operated by governments or private organisations, and provide access to transport for the entire community as opposed to private transport that is limited to selected individuals. Key factors that will promote pUblic transportation as the travel mode of choice include service coverage, travel time, reliability, park and ride facilities, comfort and safety. Cities and metropolitan areas are centers of diverse economic activities that require efficient and convenient transportation of persons and goods. The high density of activities in urban cities makes it possible and necessary for high capacity modes, such as bus, light rail systems and mass rapid systems, to be used as these modes of transportation are more economical and energy efficient than private cars. Moreover, public modes of transportation provide transport service for all persons, while private cars can only be used by those who own and drive them. Thus, cities need and benefit from public transportation services, which offer greater mobility for the entire population than people in rural areas can enjoy. Land public transportation modes in Malaysia include road and rail transport: • Road public transportation Road public transportation include buses, coaches and taxis. Buses and coaches are a significant and large element in Malaysia’s public transportation landscape. A stage bus is a bus plying along a route approved by the Land Public Transport Commission (Suruhanjaya Pengangkutan Awam Darat, “SPAD”) for the carriage of passengers on a service which contains fare stages, with a separate fare, timetable and schedule of fares for each fare stage. Stage bus services are available to the general public on demand and generally make multiple stops along a particular route, with cash payments collected on­board or at selected stops. Longer distance express bus services are also available to the general public, but unlike stage bus services, express buses do not typically make multiple stops along its intended particular route. An express bus is a bus plying along the route approved by SPAD, with a timetable and fare table, for the carriage of passengers at separate fares on a service which contains no fare stages of less than 32 kilometres. Taxis are vehicles that are available for hire on demand. • Rail public transportation In Malaysia, light rail systems are automated transportation modes predominantly used for public transportation in Klang Valley. The average trip length between stations for light rail systems are generally short. Mass rapid systems are designed for high capacity transportation needs, and distances between stations tend to be farther than that of light rail systems, with longer average trip lengths. Malaysia is currently in the midst of constructing its mass rapid system in Klang Valley which is anticipated to be operational by 2017. The selection of pUblic transportation mode of choice is typically influenced by passenger characteristics including household structure and income as well as vehicle ownership; characteristics of travel including purpose of travel, time and distance of travel; and characteristics of the transport facility including travel duration, cost, quality of service and parking space availability. 3 5. INDUSTRY OVERVIEW (Conf’dj
Public transportation infrastructure is a key component of operation and function of an efficient, convenient and safe public transportation system. Appropriate infrastructure forms an integral part of customer experience and promotes public transportation as a competitive and viable alternative to private vehicle travel. For road public transportation, pertinent infrastructure include stations, stops, depots, park and ride facilities and transport corridors. • Terminals/stations A terminal or station is a public transportation facility that acts as a central departure and/or destination point to accommodate high passenger volumes. Terminals provide passengers with the key point of connection to a public transport service and a desired destination (or transfer point enroute to a destination). Terminals are often located in high frequency corridors and can be located from outer­suburban areas to inner-city areas. Terminals generally serve key catchment areas such as commercial and business districts, and may contain various supporting infrastructure such as ticketing and public transport information, park and ride facilities as well as other public amenities and ancillary services. Multi modal terminals provide transfers between different modes of transportation such as bus to train. These terminals function to serve key catchment areas and where two (2) or more public transport corridors come together with different modes. Intra modal terminals act as departure or destination points for high traffic stations in key catchment areas, and are key points of transfer between the same modes of transportation. The appropriate design of terminal infrastructure is largely influenced by the operational capacity demands of its immediate location and services from the wider public transportation network. Thus, the consideration of potential short-term and long-term capacity constraints that may be placed on station infrastructure should be addressed early in the planning stage of station. These may include, but are not limited to, future patronage and service growth; future transport network and corridor connections; demographics applicable to surrounding land use nodes; and future potential surrounding land use development. • Stops Stops such as bus stops act as collection and drop-off points for passengers along a predefined public transportation route. The design and location of bus stops is critical for passengers, bus operators, traffic management, fare zone boundaries and overall performance of the public transportation service provider. • Transport corridors Public transport corridors such as roads, busways and rail lines are pathways that are dedicated solely or predominantly for public transportation services. 5. INDUSTRY OVERVIEW (Conf’dj
Land public transportation -modes of transportation and associated infrastructure Land pubhc transportation
i ,,—–=——:-:-c——–, _ Transport corridors (i.e_”busway or rail line) 1_ -,1 Tr_a_in_s _
11 Denotes the market segment in which Perak Transit Berhad is principally involved_ The significance of cities as highly productive centres of economy in Malaysia is increasingly becoming more distinct. To this end, public transportation networks must be able to support the nation’s economic growth, growing population and their diverse needs and expectations. A comprehensive and well­performing transport system is an important enabler of sustained economic prosperity_ [The rest of this page is intentionally left blank] 5. INDUSTRY OVERVIEW (Conf’dj

3 ANALYSIS OF PUBLIC Bus TERMINAL SERVICES IN IpOH, PERAK, MALAYSIA Industry Performance, Outlook and Prospects Major towns and cities across Malaysia house single modal and multi modal terminals. Single modal terminals include standalone pUblic railway stations and bus terminals that are not integrated with other modes of transportation. Multi modal terminals are railway stations and bus terminals that offer connectivity with other forms of pUblic transportation such as taxi services, light rail transit systems, and mass rapid systems. In many smaller towns, a pUblic bus terminal may offer both combined stage bus and express bus services. Nevertheless in larger cities, stage bus services and express bus services may be operated from separate terminal facilities. Terminal AmanJaya is owned and operated by Perak Transit Berhad. Terminal AmanJaya is an integrated transportation terminal and complex located in Perak’s capital city of Ipoh and is gazetted by the Ipoh City Council as a station for pUblic services vehicles (bus and taxi services). In 2014, SPAD released “Pekeliling Suruhanjaya Pengangkutan Awam Darat Bil. 02 Tahun 2014: Operasi Perkhidmatan Bas Ekspress di Bandaraya Ipoh -Mengambil dan Menurunkan Penumpang Di Terminal AmanJaya” (“Circular”). This Circular was released as part of SPAD’s goal of transforming land transportation and further improving the delivery of pUblic transportation services to the pUblic. Under the guidelines of this Circular, SPAD has determined that all express bus services operating in Ipoh are mandated to pick up and drop off passengers in Terminal AmanJaya. By centralising express bus operations in Terminal AmanJaya, it is anticipated that passengers will be able to benefit in terms of comfort, safety, have access to improved travel information and notification as well as enhanced pUblic transportation network. Without express written consent from SPAD, express bus operators are prohibited from picking up and dropping off passengers in other locations in Ipoh. Failure to comply with SPAD’s guidelines under this Circular could lead to a fine of between RM1,000 and RM500,000 or imprisonment of no more than two (2) years or both. Further, the Circular details the provision of shuttle bus services along four (4) travel routes to improve the interconnectivity between Terminal AmanJaya and Ipoh town centre. Terminal AmanJaya commenced operations in September 2012 as the express bus terminal in Ipoh, Perak. Terminal AmanJaya is the only gazetted express bus terminal in Ipoh by the Ipoh City Council, where the gazette came into effect on 31 July 2012. Thus, the growth in bus terminal services in Ipoh is represented by the following measures: • Total number of passengers recorded at Terminal AmanJaya, based on the total number of ticket­purchasing passengers; and
• Perak Transit Berhad’s segmental revenue growth for terminal services operations at Terminal AmanJaya.

The provision of integrated transportation facilities such as Terminal AmanJaya is pertinent to ensuring that the population opts for public transport. Efforts are underway to improve integration between modes to promote seamless mobility. In addressing increased mobility demand, the Government has committed to continuing investments in public transport capacity and service expansion, where focus will be placed on providing services that are well-connected, accessible, affordable, convenient, reliable and safe to encourage the shift from private vehicles to public transport. Strategies to improve overall public transport services will cater to rural, rural-urban, urban and intercity mobility. Facilities for mobility-impaired persons will be improved particularly at stations and terminals. These efforts will contribute positively to the prospects and outlook for public bus terminal services. 6 5. INDUSTRY OVERVIEW (Conf’dj
Competitive Landscape Terminal operations at Terminal AmanJaya began in September 2012, with the recording of passenger data commencing in March 2013. The total number of passengers recorded at Terminal AmanJaya, based on the number of ticket-purchasing passengers, was 573,022 from March to December 2013. During the same period of March to December 2015, the total number of passengers at Terminal AmanJaya increased to 709,411, at a compound annual growth rate (“CAGR”) of 11.3%. The number of ticket-purchasing passengers increased from 760,740 passengers for the period of January to December 2014 to 822,775 passengers for the period of January to December 2015 at an annual growth rate of 8.2%. Public bus terminal services market in Ipoh, Perak -number of ticket-purchasing passengers at Terminal AmanJaya Year I Period Total Passengers Annual growth R  2013 March-December a 573,022 – 2014 March ­December 637,405 11.2% 11.3%  2015 March ­December 709,411 11.3%  2014 2015 January-January-December December 760,740 822,775 -8.2% 8.2%
a Number of passengers In 2013 are for the period between March and December due to the commencement of data collection In March 2013 Source: Perak Transit Berhad Perak Transit Berhad’s segmental revenue for its integrated terminal complex operations has also demonstrated significant growth, rising from RM13.5 million in the financial year ended (“FYE”) 31 December 2013 to RM29.5 million in the FYE 31 December 2015, at a CAGR of 47.7%. Public bus terminal services market in Ipoh, Perak -Perak Transit Berhad’s segmental revenue growth for terminal services operations at Terminal AmanJaya
Perak Transit Berhad recorded a revenue of RM74.12 million in the FYE 31 December 2015, outperforming other identified providers of public bus terminal services in Malaysia. Perak Transit Berhad’s gross profit margin and profit after tax margin of 44.42% and 25.89% respectively in FYE 31 December 2015 outperformed the respective industry averages of 18.00% and 12.59%. In FYE 31 December 2015, Perak Transit Berhad’s gearing ratio was 0.95 times, which was lower than the industry average of 1.36 times. During the same period, Perak Transit Berhad had a current ratio of 1.04 7 5. INDUSTRY OVERVIEW (Conf’dj

 

SMITH ZANDER
times in comparison to the industry average of 0.97 times. In FYE 31 December 2015, Perak Transit Berhad’s return on assets and return on equity were 7.18% and 15.10% respectively, which were below the industry averages of 9.14% and 65.96% respectively. [The rest of this page is intentionally left blank] Company No.: 831878-V 5. INDUSTRY OVERVIEW (Conf’d)
Public bus transportation services market in Malaysia -financial performance of public bus terminal services providers in Malaysia 1:[E o U  tA CQ en ‘iii ~ ,g l/I ~ .~ :: .~ col/I~lO:iE ~UlEo -moc: [,;;;,u.!2·ti!:€.~ .!: .;; l= E0::;:; E ‘”‘ 0 <ll U  en w .5 ID ~ ~ .~ en ~ ..c~5 .g[m;: = -cuE ~ 0r::~ 10 ~’EO Uj! ~ .2l <1>­<ll C..l  Q) ~ ::10 ~g >'”&!~ – 0;: _ eg ~~ cn:aE ea: ,,­ ?ft _ ><.!: .B S ~ ~o E:;9 ~ _:1: ‘0 ‘ga: 5. 0:­t/):g .. C}  ~ t: ‘0, m E ~ -: .2l (ij -‘0 .. ~  -(/)E E. 0 ~ ‘­~ ~ <I> C}  _enE E. 0 i … ‘E ~ ::I U  0c;::.’;;;’ ~ l/I ~ 0 r:: .a <I> a:  0 ~ ;:’5 go t: 0 r:: .a <I> a:  Darulaman Solutions Sdn  IGeneral trading  I Operator of I 31 Sungai December  293.21  I  129.33 I  -38.70 I  44.11  I  -13.20 I  N/A b  I  0.46 I  N/A c I  N/A b  Bhd  Petani  2014  express  bus station  Maju  TMAS IOperating and  Operator of  N/A c  Sdn Bhd  managing an  Terminal  integrated bus  Bersepadu  terminal  Selatan  including  renting out  ancillary  facilities within  the terminal  Melaka Sentral ITo provide  Operator of  “3f  I  10,243.32 I  3,340.75 I  306.60 I  32.61  I  2.99 I  7.62 I  0.38 I  0.48 I  4.71  Sdn Bhd  management  Melaka  December  services to  Sentral bus  2014  shopping  terminal  complexes,  bazaar, market  (wet and dry),  bus and taxi  terminal  NPO Development  I Property development  Operator of Klang  260.50  Sdn Bhd  Sentral bus  9  118
Company No.: 831878-V 5. INDUSTRY OVERVIEW (Conf’d)
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Penang  IEngaged in  Operator of I  31  I  851.44 I  -982.69 I  -1,583.02 I -115.42 I -185.92 I  0.00 I  0.09 I  N/A C I  N/A C  Sentral  Sdn  property  Penang  December  Bhd  development,  Sentral  2014  managing and  temporary  maintaining a  bus  temporary  terminal  transport  Perak  terminal Transit IOperations of  Owner and  15.10  Berhad d  Terminal  operator of  AmanJaya  Terminal  integrated  AmanJaya  public  in Ipoh,  transportation  Perak  terminal; the  provision of  public bus  services in  Ipoh, Perak;  petrol station  operations and  the  management  of automotive  diesel oil  (“ADO”)  incentive  programme  10  119
Company No.: 831878-V 5. INDUSTRY OVERVIEW (Conf’d)
>­~ Q.E o () Syarikat Kenderaan Melayu Kelantan Berhad m£1)._ II) UJ C’)U)::I > ~ :E Ul i’a .Q III u..QJot=.S!m uCJ cn Q)’~lii~:2: :E’i!:c: :c ::::sc.c.’O ::::Sgj.g :£!~~Ec: .e–e ram~8o O~QJ ~ ,9-U)”iii U) .-c…. C.>.S!.l:Ul =Eo .§ ~ j ‘E .’!! lii a.~ E~”” m 8 Public transportation services UDA Mall Sdn I Properly Bhd management Operator of I bus terminals in Kelantan, namely in the towns of Machang, Kuala Krai, Tumpat and Kota Bahru I Operator of Pudu Sentral bus terminal Ul ~ j 31 ‘#. _c: )(‘5> III lo..=_ ,S_ ~o eg liig ~ c:g c.~ =~ ..::: g;u ~:a: ~:a: ‘0&:2: Oa: :;::a: 5. ~,~ -e­….. a. Ul ~ c’5 t!:, -_l:: fI) UJ ._ Q,) Q) ~ EE C’3 __ E .S! .S! ~ ‘lli ‘lli : ‘-.:: QJ g> c: == ‘i: ~ mm_ :: ~ <3e a. ‘0’ 0<r: 0′ .l!! ~ ~ ‘5 ~ goc: c: 00c: c: … :;.a …. && 14,672.49 I -5,417.73 I 8,885.51 I -36.92 I 60.56 I 0.37 I 1.37 I 8.89 I 28.58 December 2014 20.90 Industry average I 18.00 1 12.59 1 1.36 I 0.97 9.14 I 65.961 aMay include revenue derived from other business segments and/or other geographies, as segmental revenue information is not available b Not applicable due to negative shareholder’s equity C Not applicable due to loss after tax d Revenue from integrated public transportation terminal operations comprised RM29,547,OOO, while revenue from bus operations as well as petrol station operations and the management ofADO incentive programme comprised the remaining RM44,576,OOO Source: Perak Transit Berhad, Annual reports, Companies Commission of Malaysia 11 120 5. INDUSTRY OVERVIEW (Conf’dj
Key Demand Conditions and Dependencies Growth of the retail market in Malaysia drives demand for commercial rental space at bus terminals The retail and wholesale sector is Malaysia’s third largest industry and is a major contributor to the nation’s gross national income (“GNI”). The Economic Transformation Programme (“ETP”) (2011 -2020) was launched in 2010 with the goal of promoting Malaysia into an inclusive and sustainable high-income country by the year 2020. Malaysia’s gross domestic production (“GDP”) per capita increased by 19.3% from approximately RM28,733 in 2010 to RM34,284 in 2015 while purchasing power parity (“PPP”) per capita income increased by 29.4% from approximately USD20,336 to USD26,315 during the same period. This increase in disposable income has led to a rise in a more affluent population that has greater spending power, creating demand for basic necessities and non-essential products. Malaysia has a reputation as a leading tourism destination globally and tourism is the nation’s fifth largest industry after oil, gas and energy, financial services, wholesale and retail and palm oil. Tourist arrivals increased from 24.6 million arrivals in 2010 to 25.7 million arrivals in 2015 at a CAGR of 0.9%, while tourism receipts have witnessed growth over the same period, increasing from RM56.5 billion to RM69.1 billion, registering a CAGR of 4.1 %. Under the Malaysia Tourism Transformation Plan 2020, the Government targets to grow tourist arrivals and tourism receipts to 36.0 million and RM168.0 billion respectively by 2020. As a major contributor to Malaysia’s GNI, the retail sector is a key driver of domestic consumption and plays a significant role in promoting economic growth. As such, it has been identified as one (1) of the 12 key economic focus areas under the ETP. Despite recent developments in the retail market, retail expenditure in Malaysia (RM3,154 or USD886) is lower compared to that in countries such as South Korea (USD2,995), Taiwan (USD3, 115) and Singapore (USD3,423). While this disparity can be partially attributed to differing income levels, the Government of Malaysia intends to drive retail spending in achieving the targets under ETP. In achieving the GNI targets for the retail sector, the Government intends to improve access to finance, liberalise the retail sector through the opening up of restricted markets, streamlining set-up and expansion requirements, upgrading transportation infrastructure, and growing human capital. SMITH ZANDER views positively initiatives taken by the Government of Malaysia via various economic plans and policies to boost the retail market in Malaysia. Growth of Malaysia’s retail market will be driven by the increasing disposable income of the population that signifies growth potential for retail sales, higher tourist arrivals coupled with tourism receipts that boost retail sales, and greater Government-driven initiatives to propel the retail market in Malaysia and boost retail expenditure, thus creating demand for retail space. Please refer to Chapter 5 -Analysis of the Public Bus Transportation Services Market in Malaysia ­Key Demand Conditions and Dependencies for further information on the growth potential of the public bus transportation services industry in Malaysia and Chapter 6 -Analysis of the Public Bus Transportation Services Market in the Northern Region of Malaysia -Key Demand Conditions and Dependencies for further information on the growth potential of the public bus transportation services industry in the Northern region, as these conditions are also applicable to public bus terminal services in Ipoh, Perak. 5. INDUSTRY OVERVIEW (Conf’dj
Key Supply Conditions and Dependencies Availability of land bank for future expansion of transportation terminals Terminal operators typically acquire greenfield sites or large parcels of land to ensure they have sufficient stock of land for future developments. The construction of infrastructure may require the government to acquire various private properties. Under the Land Acquisition Act 1960, a State Authority may compulsorily acquire public property for any public purpose, for a purpose which the State Authority considers beneficial to the economic development of Malaysia, and for mining, residential, agricultural, commercial, industrial, or recreational purposes, or a combination of such purposes. While the State Authority is legally required to pay adequate compensation to the owner(s) of the private properties, the owners may still be adverse to the compulsory land acquisition. Subsequently, this would result in a delay in the acquisition of the properties; a delay which may span over years. This would then delay the construction of the intended infrastructure. While parts of terminals feature standardised components, terminal station design is site-specific, and no two (2) stations are completely identical in design. This gives planners and designers the opportunity to tailor specific outcomes to meet the functional and operational needs of passengers and services. The nature of terminal and/or stop facility will help inform planning decisions at a regional, district and municipality site level by the public and private sector. The nature of terminal and/or stop facility is dependent on the location, purpose and function of the terminal and/or stop, as well as supporting infrastructure. Terminals can function most effectively when supported by appropriate land use conducive to high levels of passenger activity. While other factors outside of terminal operations also influence the functionality of a terminal, ultimately, location characteristics are a key driver for passengers to use terminals and public transportation. Site-specific characteristics of a terminal location are key considerations in creating an attractive, seamless integration with the surrounding environment. This will then ensure that the terminal becomes a fundamental part of the surrounding community. Availability of labour and manpower for the operation and management of terminals A bus terminal is a facility where buses typically begin or terminate its route, and serves as a hub where passengers board and alight. As a public transportation facility, bus terminal services cater to both bus operators and passengers. The scope of operations in a bus terminal is wide and varied, ranging from fare collection to maintenance and repair services. Personnel involved in the operations of a bus terminal include operators of terminal vehicles, office personnel and maintenance staff; each with a role to ensure services offered are efficiently rendered to all parties. Terminal management personnel range from personnel involved in day-to-day tasks involved in the operations of a terminal such as maintenance and cleaning staff to executives with specialised skillsets who oversee the administrative and financial management of a terminal. Terminal management personnel are central to terminal operations as they are responsible for implementing efficient systems and carrying out routine tasks to ensure the seamless operations of a bus terminal. Bus terminal management includes, but is not limited to, training and development of terminal employees, managing the terminal operations budget, establishing work schedules and assignments for all terminal employees, as well as planning and assigning buses to their respective bays within the bus terminal to ensure the seamless operation of bus services with minimal delays and interruptions to the bus schedule. Bus terminals often contain commercial space which is available for rent, with the aim of providing retail services to bus terminal customers and serves as an additional source of revenue for terminal operators. As such, terminal management personnel 13 5. INDUSTRY OVERVIEW (Conf’dj
are also responsible for managing existing tenants and finding new tenants to rent available commercial space. The operations and management of a terminal is labour intensive and requires manpower with specific skillsets that vary with job function within the terminal environment. The efficiency of terminal operations hinges on terminal operations personnel employed and requires an adequate number of sufficiently competent and skilled personnel to ensure functions such as maintenance services, bus service scheduling, terminal traffic management, and passenger management are carried out efficiently. As such, terminals can function most effectively when supported by an adequate number of suitably skilled and trained personnel. Product/Service Substitution There are no comparable substitutes to Terminal AmanJaya in Ipoh given that Terminal AmanJaya has been gazetted by the Ipoh City Council as a station for public services vehicles (bus and taxi services). Further, under Circular guidelines from SPAD, SPAD has determined that all express bus services operating in Ipoh are mandated to pick up and drop off passengers in Terminal AmanJaya. Collectively, this effectively makes Terminal AmanJaya the sole provider of terminal services for express bus services in Ipoh with no close product substitutes within Ipoh. Please refer to Chapter 3 -Analysis of the Public Bus Terminal Services in Ipoh, Perak, Malaysia -Relevant Laws and Regulations for details of the Ipoh City Council gazette and SPAD circular. Reliance and Vulnerability to Imports The provision of public bus terminal services in Malaysia is not dependent on imports as public bus terminal services are provided by owners and/or operators of public bus terminal facilities, where the provision of these services are localised at each public bus terminal facility. Relevant Laws and Regulations The relevant laws and regulations that govern bus terminal service providers in Malaysia include, but are not limited to the following: Road Transport Act 1987 [Act 333] No 1667. Public Vehicles Stations (Ipoh City Council) Order 2012 In exercise of the powers conferred by subsection 72(1) of the Road Transport Act 1987 [Act 333], the Ipoh City Council gazetted Terminal AmanJaya as the station for public services vehicles (bus and taxi services) with effect from 31 July 2012. Pekeliling Suruhanjaya Pengangkutan Awam Darat Bil. 02 Tahun 2014: Operasi Perkhidmatan Bas Ekspress di Bandaraya Ipoh -Mengambil dan Menurunkan Penumpang Di Terminal AmanJaya Terminal AmanJaya is an integrated bus terminal and complex located in Perak’s capital city of Ipoh and caters to the operations of express buses. Terminal AmanJaya is owned and operated by Perak Transit 14 5. INDUSTRY OVERVIEW (Conf’dj
Berhad. In 2014, SPAD released “Peke/iling Suruhanjaya Pengangkutan Awam Darat Bil. 02 Tahun 2014: Operasi Perkhidmatan Bas Ekspress di Bandaraya /poh -Mengambi/ dan Menurunkan Penumpang Di Termina/ AmanJaya” (“Circular”). This Circular was released as part of SPAD’s goal of transforming land transportation and further improving the delivery of public transportation services to the public. Under the guidelines of this Circular, SPAD has determined that all express bus services operating in Ipoh are mandated to pick up and drop off passengers in Terminal AmanJaya except in selected circumstances with written consent from SPAD. By centralising express bus operations in Terminal AmanJaya, it is anticipated that passengers will be able to benefit in terms of comfort, safety, have access to improved travel information and notification as well as enhanced public transportation network. Without express written consent from SPAD, express bus operators are prohibited from picking up and dropping off passengers in other locations in Ipoh. Failure to comply with SPAD’s guidelines under this Circular could lead to a fine of between RM1,000 and RM500,000 or imprisonment of no more than two (2) years or both. Further, the Circular details the provision of shuttle bus services along four (4) travel routes to improve the interconnectivity between Terminal AmanJaya and Ipoh town centre. Suruhanjaya Pengangkutan Awam Darat Act 2010 SPAD was officially established on 3 June 2010 following the passing of the Suruhanjaya Pengangkutan Awam Darat Act 2010 by Parliament in May 2010. The Suruhanjaya Pengangkutan Awam Darat Act 2010 provides for the establishment of SPAD towards achieving a safe, reliable, responsive, accessible, efficient, planned, integrated and sustainable land public transport, while ensuring the provision of affordable services for the carriage of passengers and competitive services for the carriage of goods and for related matters. Land Public Transport Act 2010 [Act 715] Under the Land Public Transport Act 2010 [Act 715], SPAD will be the regulator and licensing authority for all public service vehicles including freight via road and rail. These functions are currently being carried out by the Commercial Vehicles Licensing Board, Department of Railways and the Commissioner of Tourism of the Ministry of Tourism. SPAD gained its full powers on 31 January 2011 with the gazetting of the Land Public Transport Act 2010 [Act 715]. SPAD, which comes directly under the purview of the Prime Minister, is tasked with drawing up policies, planning and regulating all aspects of train, bus and taxi services as well as road and rail-based freight transport. SPAD also has enforcement powers which it will carry out with close cooperation with other enforcement agencies such as the Royal Malaysian Police and the Road Transport Department. SPAD will playa central role in improving road and rail-based public and freight transport in the country. The Land Public Transport Act 2010 [Act 715] states that SPAD shall propose policies and plans in relation to or affecting land public transport, and develop strategies in line with the approved policies and plans with a view to achieving a safe, reliable, efficient, responsive, accessible, planned, integrated and sustainable land public transport, while ensuring the provision of affordable services for the carriage of passengers and competitive services for the carriage of goods. With the Land Public Transport Act 2010 [Act 715] coming into force, SPAD takes over the functions of Commercial Vehicles Licensing Board, Department of Railways and the tourism vehicles licensing function of the Ministry of Tourism in Peninsular Malaysia. At present, the Commercial Vehicles Licensing Board, Department of Railways and the Ministry of Tourism continue to exercise their respective powers in Sabah and Sarawak. 15 5. INDUSTRY OVERVIEW (Conf’dj
4 ANALYSIS OF THE ADVERTISING MARKET IN MALAYSIA Introduction This chapter provides an analysis of the advertising and promotion market in Malaysia, as Perak Transit Berhad leases out advertising and promotion space at Terminal AmanJaya to advertisers. The outlook and prospects of the advertising market will serve as an indicator to the rental prospects of advertising and promotion space within Terminal AmanJaya. Definitions and Segmentation Advertising allows the dissemination of information and messages to a mass audience publicly through different types of communication media such as print, radio, and television. Advertising is one (1) of the most important mass communication tools that content owners use to carry messages in advertisements or programmes which can reach and influence audience. Content owners may be manufacturers intending to advertise and sell their products, government health authorities broadcasting a health campaign, and movie producers who want to generate entertainment revenues from an audience. Examples of advertisements include product and brand promotions, as well as marketing and promotional events that increase awareness of different products among the public. Content is displayed through many forms of media such as the television, radio, out-of-home media, prints and others. Television includes free-to-air television and pay television. Examples of free-to-air television in Malaysia are RTM1, RTM2 TV3, NTV7, 8TV and TV9 while examples of pay television services include ASTRa and HyppTV. Radio is one (1) of the oldest modern forms of mass communication in the media industry, transmitted for in audio form to the public. The print media consists of magazines, newspapers, brochures, newsletters and posters. Out-of-home media transmits content to viewers outside of their homes, both at indoor and outdoor public areas. [The rest of this page is intentionally left blank] 5. INDUSTRY OVERVIEW (Conf’dj
Advertising market in Malaysia -market segmentation Outdoor public places
• Street
• Highway
• Pedestrian bridge

• BlIilding

 

Indoor pubnic places • Point-of-sale
• Ambient
• Bus terminal
• Airport
• Train station
• Office building

Transitvehicle • Bus
• Train
• Taxi

Promotiona.l activities • Retail mall
• Bus terminal
• Airport
• Train station

Out-of-home media transmits content to viewers outside their homes and reaches out to audiences at indoor and outdoor public spaces. Out-of-home media can take both print and digital forms and is defined as any content that is displayed in a public space, for example a billboard, light box, floor or pillar or wall or stair graphics, vertical or horizontal panel, and banners, These also include digital signages that are displayed in public areas, including liquid crystal display screens, plasma screens and liquid crystal display or light emitting diode billboards. Print or digital signages may also be located on streets and transit vehicles such as buses and taxis, as well as in buildings such as retails stores, transportation stations such as bus terminals, and in office buildings. These signages are typically placed in highly visible public locations that are easily spotted by an audience. These locations include streets, highways, pedestrian bridges and in transit vehicles (i.e., buses, trains and taxis), Industry Performance, Outlook and Prospects Advertising expenditure in Malaysia is made up of expenditure in advertising through several media channels that are a combination of print and digital channels. Categories of media that carry advertisements include newspapers, free-to-air television, pay television, radio, magazines, outdoor, in-store media and cinema. Between 2010 and 2015, total advertising expenditure in Malaysia grew from RM9.4 billion to RM13.6 billion at a CAGR of 7,7% on the back of positive market sentiment. This growth has been underpinned by an expansion of advertising solutions moving beyond traditional channels as it penetrates the digital space. The growth and development of content delivered through pay television and the internet has also created room for growth in advertising expenditure as businesses seek more innovative means of engaging the public, Global sporting events such as the London Olympic Games in 2012 and the FIFA World Cup in Brazil in 2014 have also created platforms for advertisers to capitalise on the public attention garnered by these events during this period. 17 5. INDUSTRY OVERVIEW (Conf’dj
Advertising market in Malaysia -total advertising expenditure 10.0
Based on latest available information, out-of-home advertising expenditure grew from RM245.8 million in 2013 to RM267.1 million in 2014 at a CAGR of 8.7%. This growth led to an increase in the percentage share of out-of-home advertising in relation to total advertising, where out-of-home advertising accounted for 1.8% of total advertising expenditure in 2013 which increased to 1.9% of total advertising expenditure in 2014. Advertising market in Malaysia -out-of-home advertising expenditure in 2013 and 2014 a 2013  2014  Total advertising expenditure (RM billion)  13.7  14.1  Out-of-home advertising expenditure (RM million)  245.8  267.1  Percentage share of out-of-home advertising  1.8%  1.9%  Growth rate of out-of-home advertising  8.7%
a Latest available statistics as at 30 August 2016 The longer term growth prospects are positive as advertising expenditure is anticipated to grow and register a CAGR of 4.0% between 2014 and 2019. While traditional non-digital media such as newspaper and television will continue to dominate overall advertising expenditure during this period, growth will be largely concentrated in the digital media platform where internet advertising is expected to witness strong growth between 2015 and 2019. Digital media is increasingly becoming a popular advertising platform due to its affordability, accessibility and change in consumer habits. This increase in popularity is expected to result in growth in advertising expenditure for digital media platforms, especially as the Government continues to further improve internet penetration rates in Malaysia. 18 5. INDUSTRY OVERVIEW (Conf’dj
Key Demand Drivers Transportation infrastructure development will create room for growth in the out-of-home advertising channel Through the ETP and Eleventh Malaysia Plan (“11 MP”), the Government is focused on ensuring that the development of transportation infrastructure will result in greater utilisation of existing facilities with an emphasis on better delivery, quality of services and capacity improvement. With several projects that are focused on infrastructure and public transportation in both urban and rural areas of Malaysia under these plans, an increase in the potential audience for advertisers is anticipated. With the construction of the mass rapid transit network, the expansion of the light rail transit network, and the implementation of the bus rapid transit in Klang Valley, the completion of the electric train service railway track from Padang Besar in Perlis to Kuala Lumpur, and the Stage Bus Services Transformation (“SBST”) Programme scheduled to be rolled out in five (5) cities across Malaysia including Ipoh, the Government is looking to increase public transportation modal share across the country. This provides room for further development and growth of out-of-home advertising through innovative channels, such as on transit media e.g. buses and trains, that enable viewers to watch programmes and advertisements on digital as well as non-digital screens while travelling from one place to another, allowing advertisers to effectively cast a wider net to reach consumers both at home, as well as on public transportation systems. The announcement of new highway projects such as the West Coast Expressway in Peninsular Malaysia and the Pan Borneo Highway in East Malaysia also create growth opportunities for more traditional forms of out-of-home advertising such as billboards and banners as advertisers look to attract the attention of new passenger traffic along these highways. Further, the strategic location of public transportation terminals along major highways and federal roads allow advertisers to target a broad range of public transporation users, as well as passenger traffic along these highways. Advertisers are further able to organise promotional activities and events in these transportation terminals to capture a wider customer base. The development of transportation infrastructure across the country provides room for growth in the out-of­home advertising space and creates growth potential for the advertising opportunities moving forward. Rise in the number of commercial developments in Malaysia will result in growth in out-of-home advertising Shopping centres and commercial centres are strategic locations for out-of-home advertising as it allows advertisers access to a large target market of consumers that are seeking convenience in purchasing fast moving consumer goods and print media. Commercial development in Malaysia, comprising shops, shopping complexes, purpose-built offices and hotels, registered positive growth between 2010 and 2015. In 2015, there were 932 shopping centres in Malaysia, up from 759 in 2010. The number of purpose-built private and government office buildings in Malaysia also registered growth from 2,235 buildings in 2010 to 2,434 buildings in 2015. 5. INDUSTRY OVERVIEW (Conf’dj
Advertising market in Malaysia -development of selected commercial properties 3,000 III Purpose-buill offices ill Shopping centres
Source: National Property Information Centre (NAPIC) In particular, commercial development in the Central region (comprising Kuala Lumpur, Selangor and Negeri SembiIan) is expected to be driven by national plans to transform Malaysia into a high-income nation by 2020 such as the Greater Kuala Lumpur/Klang Valley module of the ETP. Some of the upcoming commercial development projects in the Central region include the development of three (3) KLCC towers for additional office, hotel and retail space, Bukit Bintang Commercial Centre, and KL118 Tower. Property development in the Southern region (comprising Malacca and Johor) is also expected to grow in line with the implementation of the second phase of the Iskandar Malaysia Masterplan. Development activities in Iskandar Malaysia will continue to be focused within the city centre, Danga Bay and the Nusajaya locality within Flagship A and Flagship B development zones. In 2013, several integrated developments incorporating purpose-built office building space were announced including Medini Empire, Zikay@Medini, D’Pristine@Medini, Southkey, Vantage Bay, 18@Medini, Meridin@Senibong, Sunway Medini, Medini Lakeside and The Suasana. Several of these announced integrated developments in 2013 are also expected to carry retail components. In addition, upcoming commercial property development projects in the Northern region (comprising Penang, Kedah and Perak) are driven by the Government’s promotion of Kedah and Perak as tourist destinations. Commercial developments in Perak are expected to see a rise in light of the launching of Perak’s transformation plan, Perak Amanjaya, in 2016, with five (5) key economic zones identified, i.e. Hulu Perak, Beriah Valley, Manjung, Ulu Bernam and Lembah Kinta. Perak has already experienced major growth in its commercial developments, where some of the major commercial centres include Taipan@lpoh CyberCentre and Taipan Festival Mall in Bandar Meru Raya; the upcoming Taipan@Slim River shopping centre in Tanjung Malim; Jelapang Square in Western Ipoh; Movie Animation Park Studios in Meru Raya which is an animation theme park; University Square@Kampar in Kampar which comprises The Pavilion shop offices and The Disney concept retail shop lots, as well as the anticipated upcoming three-star hotel, a college, an office tower, 24-hour food and beverage outlets and Disneyland Castle. Kedah also sees 20 5. INDUSTRY OVERVIEW (Conf’dj
growth in commercial development with new shopping centres currently under construction, adding to Aman Central in Alor Setar, an eight (8)-storey development that opened in 2015. Commercial developments in Penang are expected to continue, and the Second Penang Bridge which was opened in 2014 is promoting property development in both landing sites of the bridge, Le. Batu Kawan and Batu Maung. Some of the proposed developments in these areas include a theme park; IKEA store, IKANO Shopping mall and mixed development of offices and residences; and Penang Premium Outlet These development plans create opportunities for growth in advertising expenditure with a particular focus on out-of-home advertising installations in and around these commercial developments as more advertising space becomes available in areas with high volume of vehicle and foot traffic. The expansion of digital content and services lead to growth in digital advertising Increasing internet penetration as well as the proliferation of mobile services and high speed broadband, especially in the urban areas of Malaysia, have seen a growth in the consumption of online content and services by the public. Social media platforms such as Facebook, lnstagram and YouTube that rely on user-generated content have become increasingly popular across population demographics in Malaysia in recent years. In order to adapt to the shift in consumption patterns of media and entertainment in the country, advertisers will have to broaden their approach and extend their reach to digital content to engage their customer base. Technological innovation and the advancement of online advertising has provided a range of new tools for advertisers to attract a larger customer base in a more targeted manner, thereby optimising the advertiser’s resources and maximising the impact of the message being delivered. Tools such as search engine optimisation and sponsored links enable advertisers to focus their outreach efforts to potential customers specifically in search for services they are able to render. The increased level of competition online underlines the need for advertisers to remain active in the channel and to maintain a presence and engage with their customer base. The growing importance of digital advertising in light of the growing popularity of online services provides growth potential for the advertising industry moving forward as advertisers become more innovative in a bid to navigate the digital landscape and interact with their customer base in a way that was not possible using traditional media channels. [The rest of this page is intentionally left blank] 5. INDUSTRY OVERVIEW (Conf’dj
5 ANALYSIS OF THE PUBLIC Bus TRANSPORTATION SERVICES MARKET IN MALAYSIA Industry Performance, Outlook and Prospects Public transportation systems provide the most efficient means of transporting large numbers of people, especially in dense urban or city areas. Bus services, as a form of public transportation, provide flexibility in meeting the demands for public transportation. In many developing nations, buses are the only choice of public transportation among the middle-income and lower-income population. City buses or stage buses connect residential, commercial and industrial areas within cities and towns on a fixed schedule, and have frequent stops along a given route at controlled fares. Malaysia’s inter-city travel market has been growing in line with the growth in disposable income, and therefore the amount of disposable income available for leisure and optional travel has also increased. Express bus services are provided nationwide as an important means of transportation service. Most cities and towns in Peninsular Malaysia have a daily link with other parts of the peninsular through the national network of express bus services. Express bus services operate on a fixed schedule over given routes at controlled fares, but unlike stage buses, express buses have less frequent stops and generally cater for longer journeys. Total registered buses and passenger ridership serve as indicators of the extent of the development of the public bus transportation market in Malaysia, and also serve as indicators to support the growth in public bus terminal operations services in the country. Total registered buses include stage buses, express buses, mini buses, school buses, feeder buses, employee buses and chartered buses. The total registered buses in Malaysia witnessed a slight drop from 69,149 buses in 2010 to 65,044 buses in 2014. Nonetheless, a positive year-on-year growth was witnessed between 2013 and 2014 as total registered buses increased from 62,784 buses to 65,044 buses at a CAGR of 3.6%. This growth in total registered buses is attributed to the growth in annual passenger ridership following efforts from the Government of Malaysia to improve the delivery, quality of services and accessibility of public transportation in Malaysia. During the period between 2013 and 2014, the highest number of registrations was witnessed in the Central region which grew from 26,032 buses to 27,064 buses at a CAGR of 4.0%. SMITH ZANDER notes that the Northern region also witnessed a higher than average industry growth rate of total registered buses during this period despite registering a lower asset base compared to the Central region. Between 2013 and 2014, the Northern region registered a CAGR of 3.9% as total registrered buses increased from 12,243 buses to 12,722 buses. [The rest of this page is intentionally left blank] 5. INDUSTRY OVERVIEW (Conf’dj
Public bus transportation services market in Malaysia -regional growth in total registered buses a, b, C
20,000  10,000  °  2010  2011  2012  2013  2014  Central  -South  -East Malaysia  _East Coast  -Total
a Total registered buses include stage buses, express buses, mini buses, school buses, feeder buses, employee buses and chartered buses b Central region comprises the states ofSelangor, Federal Territory ofKuala Lumpur and Negeri Sembilan; Northern region comprises the states of Perlis, Kedah, Penang and Perak; Southern region comprises the states of Malacca and Johor; East Coast region comprises the states of Pahang, Terengganu and Kelantan; and East Malaysia comprises the states of Sabah and Sarawak C Latest available statistics as at30 August2016 Source: SPAD In 2014, the highest new registration for buses was witnessed in the express bus and stage bus categories with 433 new registrations and 404 new registrations respectively. Key drivers that have influenced the growth in new registrations for express bus and stage bus services are the growth in passenger movement arising from increased economic and travel/leisure activities, greater urbanisation in small towns as well as Government initiatives to develop and regulate the public bus transportation system in Malaysia. [The rest of this page is intentionally left blank] 5. INDUSTRY OVERVIEW (Conf’dj
Public bus transportation services market in Malaysia -total new registrations for express buses, stage buses, mini buses and feeder buses a 2,000
-28 341″‘1,500
35tJ) (I) E 3 _54 “OtJ);
·19 1,000 ‘0, 18 ~ “” i iii ;2 500
o 2010 2011 2012 2013 2014 Express bus Stage bus mFeeder bus IIlI Chartered bus aMini bus
a Latest available statistics as at 30 August 2016 Source: SPAD Major towns and cities across Malaysia house single modal and multi modal terminals. Single modal terminals include public railway stations and bus terminals that are not integrated with other modes of transportation. Multi modal terminals are railway stations and bus terminals that offer connectivity with other forms of public transportation. In many smaller rural towns, public bus terminals offer both stage bus and express bus services. Nevertheless in larger capital cities, stage bus terminals and express bus services may also be operated from separate dedicated facilities. The annual ridership of stage buses in selected capital cities increased from 208.8 million passengers in 2012 to 224.7 million passengers in 2014 at a CAGR of 3.7%. Stage bus services in Georgetown, Malacca, Kuantan and Kota Sharu witnessed strong annual passenger ridership growth rates over the period of 2012 and 2014. [The rest of this page is intentionally left blank] 5. INDUSTRY OVERVIEW (Conf’dj
Public bus transportation services market in Malaysia -stage bus annual ridership in selected capital cities a City  ~~~ .  Annual passenger ridership (‘000) -.2012 2014  ~-~~~J I  CAGR (%)  Kangar  372  238  -20.0  Alor Setar  2,490  1,865  -13.5  Georgetown  10,704  17,856  29.2  Ipoh  7,632  6,509  -7.6  Shah Alam  18,171  13,634  -13.4  Seremban  5,231  4,936  -2.9  Malacca  3,212  5,624  32.3  Johor Bahru  29,417  24,440  -8.9  Kuantan  411  4,134  217.1  Kuala Terengganu  509  435  -7.6  Kola Bahru  1,869  3,308  33.0  Greater Klang Valley  128,780  141,673  4.9  Total  208,798  224,652  3.7
.. a Latest available statIstIcs as at 30 August 2016 Source: SPAO, Economic Planning Unit Based on estimated annual economic growth of 5.0% to 6.0%, mobility demand in Malaysia is expected to rise to 72.0 million trips per day by 2020 from 40.0 million in 2010 where the majority of these trips will be in urban areas, in tandem with the expected increase in urban population from 67.0% of the total population in 2010 to 75.0% of the total population by 2020. In addressing increased mobility demand, the Government will continue to invest in public transport capacity and service expansion. Despite various efforts for improvement, there are still challenges in providing sufficient capacity and optimal service standards of urban transport as well as accessible public transport coverage in rural areas. Public transportation services in rural areas are largely limited, primarily due to low demand and high operating cost. The low demand for public transportation in these areas cause service operators to bundle their services which then leads to unreliable services. The lack of public transport services has encouraged the use of private vehicles such as private cars and motorcycles. The focus of transport infrastructure development during the 11 MP will be on greater utilisation of existing facilities with an emphasis on better delivery, quality of services and capacity improvement. Public transportation network expansion will focus on connecting underserved areas, and integrated transport planning will be geared towards providing mobility and connectivity for goods and people. Malaysia targets to raise the pUblic transportation modal share1 for capital cities outside the Greater Klang Valley, including Ipoh in the state of Perak, to 20.0% by 2020 from its current rate of between 3.0% and 8.0%. Towards realising this target, studies will be carried out to identify the passenger per hour per direction (“pphpd”) for each corridor in major cities with focus on integrated transport planning. During the 11 MP period, stage bus services will be revamped under the SBST Programme through migration of the current fare-box collection model to gross-cost service contract model. The SBST Programme will be extended to selected cities and rural areas nationwide. Malaysia also targets to rationalise bus services in 1 Public transportation modal share is the percentage of the population that opts to use public transportation as their chosen method of transportation. Raising public transportation modal share would entail increasing the proportion of the population utilising public transportation as their chosen choice for transportation. 25 5. INDUSTRY OVERVIEW (Conf’dj
an effort to make it efficient, affordable and safe for intercity travel, where strategies will also be taken to restructure express bus networks for more regular and frequent services without neglecting low demand areas. Under the fare-box collection model, passengers of bus transportation services deposit fares for their travel in a fare-box, whereby these fares will collectively form the revenue of the particular bus operator. The gross cost service contract model is typically applied to less profitable and/or loss-making routes, where passengers of bus transportation services deposit fares for their travel in a fare-box. Fares collected in the fare-box are then handed over to the relevant governing authority, and the operator of the public bus transportation service is paid an amount for services rendered by the governing authority through a pre­defined compensation mechanism, namely the cost per vehicle-km run. The cost per vehicle-km run indicates the cost of transit service per unit of its offered or utilised service. Public bus transportation services market in Malaysia -comparison of fare-box collection model and gross cost service contract model Fare-box collection model Gross cost service contract model Operated by bus operators Fares collected from passengers are deposited in the fare-box Fare box collections form the revenue for bus operators Operated by bus operators  •  Fares collected from passengers are deposited in  the fare-box  •  Fare box collections are handed over to the relevant  governing authority  Government  authority  makes  payment  to  bus  operators in accordance to cost per vehicle-km run
Key Demand Conditions and Dependencies Economic growth drives demand for a holistic public transportation system, including public bus transportation systems There is a distinct correlation between GOP and mobility growth, whereby increased population, employment and economic activity translate into higher mobility requirements. In this context, a holistic land public transport system, including public bus transportation systems, is especially important given Malaysia’s goal to achieve 6.0% annual economic growth and 3.3 million new jobs by 2020. With urbanisation expected to reach 70% by 2020, there is a need to enable an efficient and smooth flow of people, which in turn also enables the growth of new urban areas through increased connectivity. Beyond satisfying a growing demand, land pUblic transportation systems playa catalytic role in accelerating and shaping economic growth. Provision of effective pUblic transport services have the potential of opening up new growth clusters, enhancing the attractiveness of existing clusters, and driving urban revitalisation. The positive spill-over effects of increased economic activity built upon an advanced land public transport network yields employment opportunities and business opportunities in local economies by having synergies with other industries including advertisement, retail and property development. Malaysia has seen a surge in ownership of cars and motorcycles across the country, which is an indication of the nation’s increased prosperity. Although private vehicles contribute to the mobility solution, a sustainable and inclusive social and economic development cannot be overly dependent on private vehicles. As a general rule, public transportation is more affordable and mitigates traffic congestion as well as pollution problems caused by private vehicles on the road. Thus, a holistic land pUblic transport system, 26 5. INDUSTRY OVERVIEW (Conf’dj
including public bus transportation systems, is crucial in meeting the mobility and connectivity requirements that is closely linked to the social and economic development agenda of a nation. Growth prospects of the manufacturing and service industries drive demand for supporting public transportation systems and infrastructure Malaysia’s economy registered a 5.0% growth in 2015 supported by resilient domestic demand and augmented by a recovery in exports. This positive performance was underpinned by strong macroeconomic fundamentals and a diversified economic structure as well as a sound financial system. Private final consumption expenditure expanded by 6.0% and contributed 52.4% to the economy. Private investments stood at RM65.4 billion in 2015, with its share to total investment accounting for 65.4%. In tandem with Government transformation initiatives, investment growth is expected to remain strong in 2016. The services sector remains the driver of growth, and contributed 53.8% to GOP in 2015. Given its importance, the Government has formulated the Services Sector Blueprint 2014 to further develop the sector and strengthen its competitiveness. In this respect, the Services Sector Blueprint focuses on four (4) areas, namely internationalisation which includes Iiberalisation and services exports; providing efficient tax and non-tax incentives; developing human capital; and implementing regulatory reform in the services sector. With the implementation of the Services Sector Blueprint, the services sector is targeted to achieve approximately 60.0% share of GOP by 2020, on par with developed economies. A positive growth is also expected for the outlook for the manufacturing sector led by the export-oriented industries which are expected to record higher growth in line with the improvement in external demand. The continued implementation of various construction projects in Malaysia will support growth in the construction-related cluster. The construction sector is expected to witness recovery, albeit at a more moderate pace in 2016, as the completion of several large civil engineering projects will more than offset the progress in existing projects in the transport, utility, and oil and gas sectors. The positive growth recorded in Malaysia’s economy and the manufacturing sector would lead to an increase in the demand for public transportation services such as public bus transportation systems, and subsequently, the demand for related infrastructure, where transportation will be vital for the mobility of labour in the manufacturing sector. The ETP (2011 -2020) was launched in 2010 with a goal to promote Malaysia into an inclusive and sustainable high-income country by the year 2020. To achieve this, rapid urbanisation is required, and subsequently, the demand for supporting public transportation infrastructure is expected to increase in tandem to support economic growth targets. Public  bus  transportation  services  market  in  Malaysia  – economic  growth  of  end-user  markets/industries  Sector  I  2015e % of GDP a  i I  2015e 2016f Annual change (%)  –
Services Manufacturing Mining and quarrying Agriculture Construction Real GDP 53.8 22.9 8.9 8.8 4.4 100.0 5.7 4.5 1.3 3.5 8.8 4.5-5.5
5.4 4.3 1.3 4.0 8.4 4.0-5.0
a Figures may not necessan!y add up due to roundmg and exclUSIOn ofImport duties component e estimated (forecast Source: Department ofStatistics Malaysia 27 5. INDUSTRY OVERVIEW (Conf’dj
Economic growth corridors drive demand for comprehensive public transportation system and infrastructure development The scale and pattern of public transportation infrastructure development strategies formulated by the Government is driven by the recognition that infrastructure is vital for the nation’s economic development. To this end, the Government’s objective is to meet the nation’s infrastructure needs arising from the growth and transformation of its economy. The Government views seriously its role of minimising infrastructure shortages in the country. Further to meeting the needs of modernised sectors of the economy, including the external sector, the Government is also driven to develop infrastructure to serve socio-economic ends. In this regard, the Government strives to provide infrastructure to promote the development of less developed regions in the country. Improving the accessibility of these regions is intended to result in a more balanced development of the country and reduce economic disparity. In the Ninth Malaysia Plan, five (5) economic corridors were launched in an effort to promote balanced economic development throughout the country. These corridors, located in both Peninsular Malaysia and East Malaysia, have attracted significant investments of approximately RM307.1 billion between 2011 and 2014, of which an estimated 56.8% of these investments have been realised during the period. Approximately RM27.8 billion of these committed investments remain unrealised and could potentially be implemented over the next few years. The percentage of realised investments is the proportion of actual investments made over the total investments that have been pledged or committed. Public bus transportation services market in Malaysia -cumulative investments in five (5) economic growth corridors between 2011 and 2014 a . Committed Realised .. . COrridor (RM billion) (RM billion) Major projects recently completed and In progress 55.4 22.9East Coast Economic • Kuantan Port expansion Region (“ECER”)
• Kuantan Port City development
• Malaysia -China Kuantan Industrial Park
• Kuala Terengganu City Centre
• Kerteh BioPolymer Park

 

• Automotive Industrial Hub, Pekan Iskandar Malaysia
• Pinewood Iskandar Malaysia Studios
• Gleneagles Medini Hospital
• Double Tree Hilton

 

• Pe asus International School Northern Corridor
• Biotechnology Incubation Centre Economic Region
• Aquaculture Development Complex, Selinsing (“NCER”)

47.190.4 51.7 51.7 • Expansion Programme Edu Citi Tel 96.7 44.5Sabah Development • Sabah Oil and Gas Terminal and Sabah -Sarawak Corridor Gas Pipeline • Sipitang Oil and Gas Industrial Park
• Kimanis Power Plant
• International Technology and Commercial Centre
• Aeropod
• Sabah International Convention Centre
• Sabah Agro Industrial Precinct
• Palm Oil Industrial Clusters at Lahad Datu and

Sandakan Sarawak Corridor of 12.9 8.3 • Ferro alloy manufacturing plant Renewable Energy • Polycrystalline silicon manufacturing plant Total 307.1 174.5
a Latest available statistics as at 30 August 2016 Source: Ministry of Finance Malaysia 28 5. INDUSTRY OVERVIEW (Conf’dj
The development of these economic corridors as a result of the committed and realised investments is expected to be a significant impetus for the development of pUblic transportation systems and infrastructure in regions beyond the Klang Valley. Public transportation systems and infrastructure are vital for connectivity and mobility in these economic corridors, where skilled and unskilled labour are dependent on pUblic transportation to commute to work. Increase in investments drive overall economic growth, and subsequently, demand for public transportation systems to increase mobility and accessibility Malaysia continues to witness two (2)-way capital flows, with foreign inflows remaining strong as a result of resilient growth prospects. In 2015, Malaysia attracted RM186.7 billion in approved direct investments in 4,887 projects that are expected to create 180,240 new jobs, many of which are in high-technology and high-value added industries. The country’s investment performance in 2015 exceeded the average annual investment target of RM148 billion set under the Tenth Malaysia Plan (“10MP”). Of the total investments approved in 2015, domestic investments accounted for RM150.6 billion or 80.7%, while foreign direct investments (UFOI”) accounted for the remaining RM36.1 billion or 19.3%. Between 2006 and 2015, FOI inflows into Malaysia increased from RM26.2 billion to RM36.1 billion at a CAGR of 3.6%. The ETP has a defined structure for the manufacturing and services sectors to contribute to Malaysia’s continued growth through high impact projects and business opportunities across the economy. Malaysia’s investment performance in 2015 supports the nation’s goal in fulfilling the objectives of the ETP where it attracted a total of RM186.7 billion worth of investments, with RM113.8 billion under ETP projects (61.0% of total investments in 2015) and the remaining RM72.9 billion under non-ETP related projects. The services sector received investments of RM108.2 billion or 58.0% of total investments in 2015 from 4,150 projects that target to create 112,194 job opportunities, of which domestic investment accounted for RM95.8 billion (88.5%) and foreign investments accounted for RM12.4 billion (11.5%). The real estate segment was the main contributor of approved investments worth RM26.9 billion, followed by the transport (RM15.7 billion), financial services (RM15.4 billion), utilities (RM11.7 billion) and global establishment (RM8.2 billion). The manufacturing sector attracted RM74.7 billion of investments in the same period from 680 projects, of which RM21.9 billion was foreign investments compared to RM52.8 billion worth of domestic investments. In 2015, the primary sector received RM3.8 billion of investments where foreign investments comprised RM1.8 billion and domestic investments comprised the remaining RM2.0 billion. The mining segment, plantation and commodities segment and agriculture segment received RM2.8 billion, RM714.2 million and RM261.2 million respectively in 2015. As the nation strives to position itself as an ideal destination for investments into high value-added, high technology, knowledge-intensive and innovation-based industries, businesses and companies will need to grow in terms of current business practices and infrastructure and in order to expand in scale and reach. This signifies positively for pUblic transportation services as comprehensive public transportation systems will be required for mass passenger mobility and to connect urban areas to rural areas. The pUblic bus transportation system is expected to benefit from increased total investments in Malaysia’s business environment. 5. INDUSTRY OVERVIEW (Conf’dj
Public bus transportation services market in Malaysia -total investments and FDI inflows 250
IITotal inveslmenls !lIFDI Source: Malaysian Investment Development Authority (“MIDA’j Government initiatives to develop a holistic public transportation system in Malaysia The aspiration towards economic competitiveness and wellbeing has led to rapid urbanisation. The demand for constant mobility and accessibility to jobs, health and educational opportunities increase the need for an effective and efficient public transportation system. The issue of public transport is further compounded by the complexities related to land use such as land ownership and zoning laws, as well as the limited holistic approach in development and planning strategies. To this end, the Land Public Transport Act 2010 (Act 715) and Land Public Transport Commission Act 2010 (Act 714) were enacted to provide the mandate and focus in managing all land public transportation matters. SPAD was established to manage all land public transportation matters, including critical activities concerning planning, licensing and enforcement. SPAD has been appointed as the single authority to monitor and enforce standards in providing long-term plans for the public transportation system. With the view of achieving a safe, reliable, efficient, responsible, accessible, planned, integrated and sustainable land public transportation system while ensuring the provision of affordable services for the carriage of passengers and competitive services for the carriage of goods, SPAD has been mandated to develop a 20-year National Land Public Transport Master Plan containing macro policies and plans; and a 20-year Regional Land Public Transport Master Plan based on the National Land Public Transport Master Plan. • The National Land Public Transport Master Plan (2012 -2030) serves as a strategic roadmap outlining macro policies and macro plans guiding the process of transforming the land public transportation landscape in Malaysia to achieve the vision of making public transport the population’s choice of mobility by 2030. In formulating these macro plans, a spatial plan-led system of the National Physical Plan has been adopted, which covers issues from national growth conurbation to district and rural areas. The plan ensures efficient mobility within and between spatial conurbations across Peninsular Malaysia. The 30 5. INDUSTRY OVERVIEW (Conf’dj
National Land Public Transport Master Plan is supported by a series of state level Regional Land Public Transport Master Plans that shall provide direction on the development of intra-regional mobility. Macro level policies define the strategies to address the issue of accessibility, reliability and safety in a responsive, integrated and sustainable manner. Based on the identified macro policies, people-centric measures are formulated whilst the sustainability of industry is also addressed. These measures are guided by four (4) key thrusts, namely collaborative planning and governance, regulatory strengthening, service quality and excellence, and infrastructure and capacity. The National Land Public Transport Master Plan seeks to integrate land public transport in two (2) ways, where firstly land public transport should be well integrated within, i.e. different sectors, and modes of land public transport should be well-connected so that a journey is as seamless as possible; and secondly the land public transport system should be integrated into the land-use of the area that it supports. Bus-stops and terminals should be planned so that they serve the people living, working or engaging in recreational activities nearby. Integrated land public transport interchanges which bring together several modes of transport should become more commonplace, and these should, in turn, be near important developments which would benefit from being an important land public transport node. This will require a comprehensive multi-modal solution that increases access to passengers within conurbations. These solutions will be comprehensive by including enhancements and expansions to existing services, investments in new infrastructure and services, and investments in integration across modes. Together they will increase the capacity of land public transport systems. There are also increased land public transport linkages between different regions across the country. In 2010, the demand for inter-urban rail stood at 4.2 million people and the express bus services experienced over 8,000 departures per day. The shift in Malaysia’s economy towards higher value added sectors has resulted in greater urbanisation of the country. Education and rural-urban migration have provided the human capital required to support this shift. By 2020, about 70% of Malaysia’s population will be living in urban centres. This pace of urbanisation shall be enhanced by an increase in the necessary infrastructure to support such a large population, particularly in the area of transportation. Enhancing the public transport infrastructure and increasing its capacity will be the most viable and effective way of supporting urbanisation in a sustainable manner. There is strong correlation between GDP and mobility growth, where increased population, employment and economic activity translates into higher mobility requirements. In this context, a first class land public transport system is especially important given the Government’s goals as outlined in the ETP, Le. to achieve 6.0% annual growth and 3.3 million new jobs by 2020. Travel vehicle demand grew from 13 million trips per day in 1991 to 40 million in 2010. Projections point towards this trend continuing in Malaysia, with the figure expected to reach 133 million in 2030.2 With urbanisation expected to reach 70% by 2020, there is a need to enable an eficient and smooth low of people, which in turn also enables growth of new urban areas through increased connectivity. • The Regional Land Public Transport Master Plan comprises a series of plans for regions that are defined in terms of economic, geographical and demographic needs. The Regional Land Public Transport Master Plan will be used to guide planning authorities in reviewing and prioritising new development areas to ensure developments are close to land public transportation corridors and developed in a way that is receptive to adding density and more land use over time. The provision of a well-planned, integrated bus network forms a central focus of the Regional Land Public Transport Master Plan, especially where bus operators are provided with contractual incentives 2 Source: National Highway Development Plan 2007 31 5. INDUSTRY OVERVIEW (Conf’dj
to improve the quality of the service and to maintain the inherent flexibility of road-based land public transportation systems. The plan outlines the need to move to a revised structure in the delivery of bus services both on the road and in terms of regulation and procurement, to compensate for the existing structure that has limited ability in promoting effective planning. A transition process has been developed to move from the existing service provision within the industry to a new model for regulatory regime, one which will assist in developing and allocating risks and responsibilities to key stakeholders, and minimise the risk of service disruptions from outside influences to ensure effective delivery. In order to move the industry forward, public bus transportation network design will be coupled with effective integrated network planning and fare structures. Most importantly, passengers and potential passengers will be able to recognise a stable network of services provision across all modes and be provided with reliable comprehensive passenger information to plan their travel and which provides assurances during the course of their journey. Further in 2012, the Government of Malaysia introduced the Interim Stage Bus Support Fund (“ISBSF”) with a fund size of RM400 million to improve the delivery and quality of bus services in Malaysia, thereby encouraging passengers to continue using buses as an effective mode of transportation. The initiative acts as an interim measure to cover the shortfalls in daily operations of affected stage bus operators, especially on social routes, where the fund helps stage bus operators by providing subsidy payments for loss-making routes. Under the 10MP, the Federal Government through SPAD, identified four (4) strategies that focused on strengthening the regulatory framework surrounding public transportation in Malaysia. These strategies included increasing transport capacity, promoting seamless connectivity and establishing a robust monitoring and enforcement mechanism. The National Land Public Transport Master Plan (2012 -2030) was formulated to drive regulatory and industry reform. This masterplan sets a 20-year timeline which targets to increase pUblic transport modal share for urban areas from 16.4% in 2011 to 40.0% in 2030 and to improve pUblic transport access to rural areas. The 11 MP lends support, focus and commitment to the National Land Public Transport Master Plan (2012 -2030) which underlines the importance of its implementation in tandem with economic growth. The SBST Programme was introduced under the National Land Public Transport Master Plan (2012 -2030) with a focus on improving operator viability and expanding bus route coverage by migrating from the fare­box revenue collection model to the gross-cost service delivery model. The latter is a business model whereby stage bus operations would be financed by contractual income to be received from the Government based on agreed service level performance. As at August 2016, the SBST Programme has been rolled out in Seremban, Kangar and Ipoh. Key Supply Conditions and Dependencies Implementation of a cohesive and holistic national transportation model promotes and strengthens the delivery of public transportation services A comprehensive national transportation model consisting of integrated and coordinated plans is vital to strengthen agency collaboration in formulating integrated transportation policies. A national multi modal land public transport model will guide the assessment of current and future mobility demand based on trends in economic and demographic indicators. This model will also facilitate assessments for capacity requirements, which provides important data to agencies, local authorities and developers on the types of investments that are needed to deliver the required services. In addition, these plans will also assist 32 5. INDUSTRY OVERVIEW (Conf’dj
ministries and agencies to better analyse land use and its potential effect on transportation system development In optimising land use and transportation infrastructure in urban areas, transit-oriented development should be promoted to generate higher income for pUblic transport operators. Transit-oriented development is designed to optimise the utilisation of space, especially in urban areas and to attract private investment for commercial and residential purposes. Further, transit-oriented development will reduce traffic congestion and improve air quality, thus making cities more liveable. Further, a cohesive and holistic transportation model will identify travel demand for different corridors in urban areas. Based on the travel demand assessment, identification of suitable modes, namely feeder bus, bus rapid transit, monorail, light rail transit, mass rapid transit and/or commuter systems can be appropriately determined for implementation. In Malaysia, the National Land Public Transport Master Plan (2012 -2030) was formulated to drive regulatory and industry reform. The National Land Public Transport Master Plan sets a 20-year timeline which targets to increase public transport modal share for urban areas from 16.4% in 2011 to 40.0% in 2030 and improve public transport access to rural areas. The National Land Public Transport Master Plan will act as a guide for the formulation of regional masterplans and the preparation of policy guidelines in areas such as travel demand management, transit-oriented development as well as integration and interchange development In addition, a new fare policy for all modes of public transport was initiated. In terms of industry reform, the SBST Programme was introduced in 2015 targeting to improve operator viability and expand bus route coverage by migrating from the fare-box revenue collection model to the gross-cost service delivery contract model. As at August 2016, the SBST Programme has been rolled out in Seremban, Kangar and Ipoh. Availability of bus drivers drives the ability for bus transportation services to provide continuous service to the public Licensed bus drivers are hired by bus transport service providers to operate commercial buses that include stage and express buses. Bus drivers are licensed by the Road Transport Department of Malaysia and have to undergo the requisite training and assessments to obtain a license to operate heavy vehicles as well as an additional permit for the operation of public service vehicles. This limits the availability of bus drivers to individuals who have undergone the requisite training and have obtained the relevant qualifications that enable them to operate public service vehicles. The provision of bus transportation services are central to the business of a typical bus operator and the provision of such services are largely reliant on the availability of skilled manpower qualified to operate the assets that enable such services. Similarly, the successful implementation of the expansion of such services be it in the way of frequency of services or new route additions will hinge on the availability of competent bus drivers qualified and capable of carrying out the functions the job entails. Availability of buses are key to the potential expansion of the bus transportation services industry Buses used as public service vehicles by bus operators for stage and express services to the public are governed by the laws and regulations relating to the provision of bus transport services in Malaysia. These guidelines include, but are not limited to, the required permits for imported buses and spare parts, certification by quality assurance authorities of relevant parts, certification of fitness for operation by relevant authorities, and the relevant permits required by the Road Transport Department of Malaysia. 33 5. INDUSTRY OVERVIEW (Conf’dj
Buses are assets critical to the operation of bus services by bus operators and are one (1) of the key constraints in the planning of the frequency of services as well as the distribution of services subject to the limits of concession agreements held by bus operators where relevant. The availability of buses is a key consideration for bus operators when considering route increasing frequency of services, new route additions, or upgrading existing assets earmarked for replacement. Product/Service Substitution The provision of public bus transportation systems involve the provision of public bus services, acquisition and maintenance of bus assets, bus terminal construction, bus terminal operations and management, and network planning and design. Public bus transportation systems compete with other forms of public land transportation systems such as public rail transportation and taxi services. However, public bus transportation is differentiated from other public land transportation systems in terms of location of operations (i.e. terminal and bus stops), range and frequency of bus routes offered, pricing, and strength of asset base. Most stage bus operators are localised in nature, in that they specialise in offering intra-city routes in a single town or city. Express bus operators generally operate regionally where they offer inter-city travel across multiple states or regions. Reliance and Vulnerability to Imports The provision of public bus transportation services in Malaysia is not dependent on imports as public bus transportation services are primarily provided by local bus operators. Nevertheless, stage bus and express bus operators may be dependent on the imports of the bus assets used in the delivery of public bus transportation services. Relevant Laws and Regulations The relevant laws and regulations that govern public transportation service providers in Malaysia include, but are not limited to the following: Commercial Vehicles Licensing Board Act 1987 The Commercial Vehicles Licensing Board Act 1987 provides for the licensing and regulation of commercial vehicles and for matters connected therewith. The Commercial Vehicles Licensing Board Act 1987 does not apply to any commercial vehicle which is subject to any law relating to tourism and the tourism industry. The Commercial Vehicles Licensing Board Act 1987 mandates the establishment of a commercial vehicles licensing board to be known as the Commercial Vehicles Licensing Board Peninsular Malaysia, Commercial Vehicles Licensing Board Sabah and Commercial Vehicles Licensing Board Sarawak. The commercial vehicles licensing board for the Federal Territory of Labuan shall fall under the purview of the Commercial Vehicles Licensing Board Sabah. The Commercial Vehicles Licensing Board Act 1987 governs express bus and stage bus services, where an express bus is defined as a bus plying along the route approved by the Commercial Vehicles Licensing Board, with a timetable and fare table, for the carriage of passengers at separate fares on a service which 34 5. INDUSTRY OVERVIEW (Conf’dj
contains no fare stages of less than 32 kilometres; and a stage bus is defined as a bus plying along a road approved by the Commercial Vehicles Licensing Board for the carriage of passengers on a service which contains fare stages with separate fares, timetable and schedule of fare for each fare stage. Commercial Vehicles Licensing Board (Amendment) Act 2010 The Commercial Vehicles Licensing Board (Amendment) Act 2010 was passed to amend the Commercial Vehicles Licensing Board Act 1987. Under the Commercial Vehicles Licensing Board (Amendment) Act 2010, the Commercial Vehicles Licensing Board Act 1987 is deemed to be only applicable to Sabah, Sarawak and the Federal Territory of Labuan, and shall not be applicable to any commercial vehicles that are subject to any law relating to tourism or the tourism industry in Sabah, Sarawak and the Federal Territory of Labuan. Upon an appointed date, the Commercial Vehicles Licensing Board Act 1987 shall cease to apply to Peninsular Malaysia and the Commercial Vehicles Licensing Board Peninsular Malaysia will be dissolved. Notwithstanding the non-application of the Commercial Vehicles Licensing Board Act 1987 to Peninsular Malaysia, all subsidiary legislation made or deemed to have been made or having effect under the Act and in force or having effect on the appointed date shall, in so far as they are not inconsistent with the Land Public Transport Act 2010 [Act 715], continue to be in force and have effect in Peninsular Malaysia as if they had been made under the Land Public Transport Act 201 0 until they are amended, revoked or replaced by subsidiary legislation made under the Land Public Transport Act 2010. The powers, rights, privileges, liabilities, obligations and duties which immediately before the appointed date were those of the dissolved Board shall be transferred to SPAD as from that date. All decisions, directions and notifications made or given by the dissolved Board in accordance with the Commercial Vehicles Licensing Board Act 1987 shall be deemed to have been made or given by SPAD under the Land Public Transport Act 2010 and shall continue in force until the decisions, directions and notifications are amended, revoked or replaced or until the date upon which they expire. Suruhanjaya Pengangkutan Awam Darat Act 2010 Please refer to Chapter 3 -Analysis of the Public Bus Terminal Services in Ipoh, Perak, Malaysia­Relevant Laws and Regulations for details of the Suruhanjaya Pengangkutan Awam Darat Act 2010. Land Public Transport Act 2010 [Act 715] Please refer to Chapter 3 -Analysis of the Public Bus Terminal Services in Ipoh, Perak, Malaysia­Relevant Laws and Regulations for details of the Land Public Transport Act 2010 [Act 715]. 5. INDUSTRY OVERVIEW (Conf’dj
6 ANALYSIS OF THE PUBLIC Bus TRANSPORTATION SERVICES MARKET IN THE NORTHERN REGION OF MALAYSIA Industry Performance, Outlook and Prospects The Northern region of Malaysia comprises the states of Perlis, Kedah, Perak and Penang. Total registered buses and passenger ridership serve as indicators of the extent of the development of the public bus transportation market in this region, and also serve as indicators to support the growth in public bus terminal operations services in this region. Total registered buses in the Northern region declined slightly from 13,970 buses to 12,722 buses between 2010 and 2014, where annual growth took place between 2010 and 2012 before dipping, largely attributed to the loss of bus service due to operators cancelling loss-making routes. Nonetheless, a year-on-year growth was witnessed between 2013 and 2014 as total registered buses increased from 12,243 buses to 12,722 buses at a CAGR of 3.9%. In Perak, growth is being driven by socio-economic development that increases demand for a robust public transportation system which creates upside for bus transportation services in the state. Please refer to Chapter 6 -Analysis of the Public Bus Transportation Services Market in the Northern Region of Malaysia -Key Demand Conditions and Dependencies for further information on the growth potential of the public bus transportation services industry in the Northern region. Public bus transportation services market in the Northern region -growth in total registered buses in the Northern region s, b
20142010 2011 2012 2013 a Registered buses in the Northern region include stage buses, express buses, mini buses, school buses, feeder buses, employee buses and chartered buses b Latest available statistics as at 30 August 2016 Source: SPAD 36 5. INDUSTRY OVERVIEW (Conf’dj
Total annual passenger ridership of stage buses in capital cities in the Northern region grew from 21.2 million in 2012 to 26.5 million in 2014 at a CAGR of 11.7%. Key cities in the Northern region witnessed mixed annual passenger ridership growth rates over the period of 2012 and 2014 as Kangar, Alor Setar and Ipoh witnessed contractions, while Georgetown recorded strong annual passenger ridership growth as ridership grew from 10.7 million passengers to 17.9 million passengers over the period at a CAGR of 29.2%. The growth in annual passenger ridership in Georgetown is attributable to the development of transport infrastructure in Penang with the establishment of the Rapid Penang stage bus network boosting public transportation ridership. According to SPAD’s Annual Report 2012, declining bus ridership is attributed to the loss of bus service due to operators cancelling loss-making routes, As such, the declining bus ridership in Kangar, Alor Setar and Ipoh from 2012 and 2014 are similarly impacted by the same factor. Public bus transportation services market in the Northern region -annual stage bus ridership in capital cities of the Northern region a, b 30,000 Total CAGR: 11.7% 26,468 238 W25,000 i o372e20,000 0. ~ ”” 15,000 ~ q, IlJ ~ 10,000 ! 5,000 o 2012
iill’JiiGeorgetown _AlorSetar a The analysis of annual stage bus ridership in capital cities of the Northern region is for the period of 2012 and 2014 due to the availability ofpublicly released data from SPAD and the Economic Planning Unit b Latest available statistics as at 30 August 2016 Source: SPAD, Economic Planning Unit Key Demand Conditions and Dependencies The state of Perak is central to the operations of Perak Transit Berhad, as their stage bus operations are based in Kidd Road Bus Station and express bus services are based in Terminal AmanJaya in Ipoh. Perak Transit Berhad’s stage bus services extend to a catchment area that spans across the Kinta district of Perak, while its express bus services serve Cameron Highlands, Pahang, and Taiping, Perak. In addition to these existing services, Perak Transit Berhad is assessing the potential expansion of its integrated terminal complex operations services to the town of Kampar in Perak. 37 5. INDUSTRY OVERVIEW (Conf’dj
Given the distribution and potential expansion of its services, socio-economic development in the state of Perak impacts the growth potential of Perak Transit Berhad. Projected growth in the Northern region is set to generate a multiplier effect that will benefit the Perak economy and will provide the bedrock for development across industries and sectors within the state. This projected growth trajectory will require supporting infrastructure and services developments such as public transportation services as an enabler for growth. Socio-economic development in Perak creates demand for a robust public transportation system The 11 MP projects an economic growth rate of 5.9% between 2016 and 2020 for Perak. The State Government of Perak has put into place a number of plans to improve infrastructure and to attract investment in a bid to stimulate its economy. Perak Investment Management Centre is the principal investment promotion agency of the Perak State Government charged with providing consultation, facilitation, and implementing investment projects as well as providing investors and businesses assistance. Economic plans and policies initiated by the Perak State Government include the Perak Industrial Development Action Plan, Perak AmanJaya Plan, Strategic Plan 2012 -2016, Perak Structural Plan and Perak Maju 2015. These strategic economic plans were developed in conjunction with Federal Government initiatives such as the New Economic Model, ETP, as well as 1OMP and 11 MP. At a municipal level, plans such as the Ipoh Local Plan 2020 address municipal level challenges in accordance with State Government objectives. The Perak Industrial Development Action Plan is a masterplan that has been designed to work in concert with other State Government and Federal Government initiatives to develop the industrial sector in Perak through a number of strategic approaches. The Perak Industrial Development Action Plan further identifies critical industries for development, including resource-based industries, new technologies such as biotechnology and the automotive industry, marine-based industries, agro-based industries, information and communication technology related industries, foundry and engineering industries, small and medium enterprises (“SME”), tourism industry and services, as well as educational services. The strategic thrusts identified in pursuing the objective include developing industry-specific regulatory framework; upgrading industrial capabilities to enhance participation in global supply networks; resource endowment mapping to ensure efficient allocation of resources; and high impact investment promotion activities. Thus, the Perak Industrial Development Action Plan Strategies aims to strengthen Perak’s comparative advantage via a cluster-based strategy to develop identified industries; strengthen connectivity to global, regional and local markets through the improvement of transportation and communication infrastructure, pursue selective investment promotion in a bid to encourage innovation-driven high value added industries, and implement incentive structures to attract new investment and reward existing industries that remain and continue to expand within Perak. The Perak Industrial Development Action Plan proposes a new public transportation terminal in Meru Raya. This public transportation terminal, namely Terminal AmanJaya, is an integrated transportation terminal, and has since been constructed and operational since September 2012, where it has been gazetted by the Ipoh City Council as a station for public services vehicles (bus and taxi services). In light of these factors and the economic growth potential of Perak, the public transportation sector is expected to benefit and Perak Transit Berhad is well positioned to capitalise on these opportunities. The Perak AmanJaya Plan is a masterplan developed by the State Government of Perak together with Institut Darul Ridzuan. The objective of this plan is to improve the quality of income, opportunity and standard of living in Perak. These objectives are pursued by identifying seven (7) key result areas, namely balanced development and distribution; skilled, knOWledgeable, and ethical society; State and Government as an engine for growth; public services and infrastructure networks; socially active youth demographic; 38 5. INDUSTRY OVERVIEW (Conf’dj
vibrant social sector; and environmental consciousness. These key result areas are improved by implementing strategies specific to each area. The Perak AmanJaya Plan identifies integrated public transportation services as a sUb-key result area and suggests an approach that improves integration, access, reliability and comfort to increase its relevance in the public space. This plan recommends the implementation of a public-private joint initiative under the private finance initiative arrangement to ensure high quality services are delivered. The Perak State Government has released the Perak AmanJaya Development Plan, where this development plan comprises a self-contained, integrated, modern and efficient township with commercial, retail, transportation and recreational facilities as well as a centre of administration, to facilitate quality living and tourism activities supported by integrated information and communication technology infrastructure. Terminal AmanJaya is located in Bandar Meru Raya, an area identified for development by Perbadanan Kemajuan Negeri Perak. A total of 1,500 acres of land surrounding Terminal AmanJaya has been allocated for development. Among the notable developments in Bandar Meru Raya are the Hotel Casuarina@Meru and AmanJaya Convention Centre. Several Government agencies have also committed to commence operations in Bandar Meru Raya including Kementerian Hal Ehwal Dalam Negeri, Jabatan Audit Negeri Perak and Jabatan Perhutanan Negeri Perak with potential future developments involving Majlis Amanah Rakyat, Complex Yayasan Perak, Jabatan Arkib and Jabatan Ketua Pengarah Tanah & Galian. Bandar Meru Raya has also been selected as the site for the Movie Animation Park Studio, a joint venture between Perak Corporation Berhad and Sanderson Pte Ltd to develop a 20.8 hectare site as an animation theme park at an estimated investment of RM389.9 million. There is also a commercial centre as well as large hypermarket retailer, Mydin, located within the surrounding area of Terminal AmanJaya. The Strategic Plan 2012 -2016 is a plan developed by the State Government of Perak in conjunction with The Malaysian Administrative and Management Planning Unit, a unit under the purview of the Prime Minister’s Department. The strategic objectives of this plan are to improve the delivery of public services through improved organisation, innovation and creativity; to raise the level of socio-economic development and ensure equitable distribution; and to improve the image of pUblic services. These objectives are pursued through strategies specific to each area. The Northern region of Perak comprising the districts of Hulu Perak, Kerian, Kuala Kangsar and Larut Matang-Selama in addition to Perlis, Kedah and Pulau Pinang is part of the NCER economic corridor. The NCER blueprint encompasses a set of objectives over the 2007 to 2025 period. The Northern Corridor Implementation Authority is tasked with overseeing the implementation of the NCER blueprint. The objectives of the NCER initiative are to maximise economic potential of the region and to close the income between different regions in Malaysia, and to drive further increases in per capita income in the region as Malaysia moves towards higher value-added and knowledge-based economic activities. As the State Government pursues growth in the various areas of industry, infrastructure development has been identified as one (1) of the key areas for improvement within the state. Logistics and transportation services in particular are critical facets of economic growth. The completion of the electric train service railway track from Padang Besar in Perlis to Kuala Lumpur which will pass through Perak’s capital city of Ipoh is one (1) of a number of new infrastructure projects being implemented in the region. Another such project is the West Coast Expressway from Taiping in Perak to Banting in Selangor, which is expected to be completed in 2019. Connectivity and access to these industrial corridors are important for moving human traffic to and from these places as these areas grow in size and importance. Public transportation plays a vital role in creating competitive economies, and liveable, inclusive communities. The most widely accessible modes of public transportation in Perak are stage and express bus services that serve municipal, regional and inter-state boundaries. 39 5. INDUSTRY OVERVIEW (Conf’dj
Please refer to Chapter 5 -Analysis of the Public Bus Transportation Services Market in Malaysia ­Key Demand Conditions and Dependencies for further information on the growth potential of the pUblic bus transportation services industry in Malaysia which are also applicable to the Northern region and Perak. Competitive Landscape Perak Transit Berhad operates its stage bus services in Ipoh from Kidd Road Bus Station. Perak Transit Berhad operates 27 bus routes that begin and terminate at Kidd Road Bus Station with service frequency varying between routes and times. Other stage bus operators operating in Ipoh, Perak, include Perak Roadways Berhad and Permatang Kempas Sdn Berhad. In 2014, Perak Transit Berhad recorded an annual passenger ridership of 6,367,932 passengers for its stage bus services in Ipoh, based on figures submitted to SPAD for subsidies under the ISBSF. When compared to the total annual stage bus passenger ridership in Ipoh of 6,509,000 passengers as recorded by SPAD, Perak Transit Berhad achieved a stage bus passenger ridership market share of 97.8% in Ipoh, Perak. Perak Transit Berhad recorded a revenue of RM74.12 million in the FYE 31 December 2015 and outperformed other providers of public bus transportation providers in Ipoh, Perak. Perak Transit Berhad recorded gross profit margin and profit after tax margin of 44.42% and 25.89% respectively in FYE 31 December 2015, outperforming the industry averages of 36.44% and 8.25% respectively. In FYE 31 December 2015, Perak Transit Berhad’s gearing ratio was 0.95 times, which was higher than the industry average of 0.87 times. During the same period, Perak Transit Berhad had a current ratio of 1.04 times in comparison to the industry average of 1.50 times. In FYE 31 December 2015, Perak Transit Berhad’s return on assets and return on equity were 7.18% and 15.10% respectively, which were above the industry averages of 5.06% and 10.37% respectively. [The rest of this page is intentionally left blank] Company No.: 831878-V 5. INDUSTRY OVERVIEW (Conf’d)
Public bus transportation services market in Malaysia -financiall performance of public bus transportation services providers in Ipoh, Perak –~ ~.~ cn~ W ~~ U; en cf. ?f en 1:,.. :l (,) >-I: .5 lIJ lIJ ~~ en :: en til .l:l ‘S: U. ><._ Cl EE en ,..~~.~ii .~QjrJ) l’J::_ S_ ~ i :eE. a;Q) ~ 1:’ ‘(j)Q;tIl::E :Eeng :E ~S e8 (j)8 E E0 0 ~ C” (U ::SQ.Q.’O ::SC._ ~ cO 0.0=0 ><; _ (‘3 Q)0.. .l:lenEI: 0…!2’lii ‘iii ~9 en” til” :;:: .l!! ~~ I: I:E “iii~Oo ‘E’lii(j) > lIJ::E en::E :::::E 0 “-Cl_ 0 0 o 0.. en 0._ t::o.. til 0:: a: eo:: -of;. “-0.. $ I: I:I: I:U .-Q) .c (I) cn 00 -,.~ -_ ._ Q) … …o’.;;.~.~ =Q, UJ-\J c: U) (‘3 i t .a .a .5 ‘S: :: E .l!! en $ en -lIJ :l lIJ lIJQ:= E lIJl: til e ~ C) ° a: 0::(,) 0 c~ ..I C) “­til ° £l.-Perak IOperations of Operator of 1 74,123.31 I 32,928.39 I 19,188.90 I 44.42 I 25.89 I 0.95 I 1.04 I 7.18 I 15.10I 31Transit Terminal stage bus December Berhad b AmanJaya and express 2015 integrated bus services public in Ipoh, transportation Perak terminal; the provision of public bus services in Ipoh, Perak; petrol station operations and the management of ADO incentive programme Perak ITran.sportation Operator of 733.83 ,-128:951 29.19 I 5.13 I 0.50 I 1.92 1 2.94 1 5.65 Roadways serVices, stage bus Berhad renting out of services in premises, Ipoh, Perak housing 41 150 Company No.: 831878-V 5. INDUSTRY OVERVIEW (Conf’d)
~ ~~VI.m rJ) ?f!. ~ -_ ‘0’ “”0 cng’ ~~~ ~ -.5 ~ ~~~ :ll=:ll.J.2 .0’1: u.. _ ~ .~~ .5 .5 .l!l ~ £: …. ·-ca .~Q)C/) Q) I\’l 0;::_ _ ~ co :::.. :::. Q) “:; >-‘ii)~lija DUll: D ~S egg ra E 0 0l:l 0­lij ::lc..c..’O ::l1:.52 .J.2 1:0 0..0 .2!0 E >< ;: .~ ra III 0.. .Q tn E 0..2 1ti on; ? UJ ‘” .e E e t: c:Q) y’; : E ‘iii~o5 ‘Om~ > iila Ula :=:a 0 … Cl _ 00 o ,9-tn(.)'(j) cnt:c. ~ D:a: ~~ oe:. Q.!.5 c: E: E u (.)!£.22 =8. 0 en-” c: en 10 :0 ~ :; .a .!: ‘> .~ E .!!l Ul .2! Ul -III ::l ~ III0:;: E lIll: ra e ‘0 C) U a: a: (.) 0 CE ..J C) … ra U-Q.
Permatang  Bus and taxi  Operator of  31  560.27  200.07  -35.18  35.71  -6.28  1.18  1.54  N/A C  N/A C  Kempas  operator  stage bus  December  Sdn Bhd  services in  2014  Ipoh, Perak  Industry average I  36.44 I  8.25 I  0.87 I  1.50 I  5.06 I  10.37
a May include revenue derived from other business segments and other geographies, as segmental revenue information is not available from the Companies Commission of Malaysia b Revenuefrombusoperationscomprised RM21,616,OOO, whilerevenuefromintegratedpublictransportationterminaloperations as well as petrolstation operations and the management of ADO incentive programme comprised the remaining RM52,507,OOO. c Not applicable due to loss after tax Source: Perak Transit Berhad, Companies Commission of Malaysia [The rest of this page is intentionally left blank] 42 151 5. INDUSTRY OVERVIEW (Conf’dj
7 ANALYSIS OF THE PUBLIC Bus TRANSPORTATION SERVICES MARKET IN THE EAST COAST REGION OF MALAYSIA Industry Performance, Outlook and Prospects The East Coast region of Malaysia comprises the states of Kelantan, Terengganu and Pahang. Total registered buses and passenger ridership serve as indicators of the extent of the development of the public bus transportation market in this region, and also serve as indicators to support the growth in public bus terminal operations services in this region. Between 2010 and 2014, total registered buses in the East Coast region declined marginally from 5,183 buses to 4,975 buses. Between 2013 and 2014, total registrations witnessed growth at a CAGR of 1.6% based on an increase from 4,898 buses to 4,975 buses. Buses serving the East Coast region ply routes within and between the states of Kelantan, Terengganu and Pahang that have seen investment in its infrastructure in recent years to supplement its importance as an oil and gas hub. In Pahang, diversification of economic activity in the state creates demand for a holistic public transportation system to support economic growth, which creates upside for bus transportation services in the state. Parallel to that, regional development within the East Coast region creates an avenue for growth across the state of Terengganu spurs demand for public transportation as the state houses and links the various growth nodes in the region. Please refer to Chapter 7 -Analysis of the Public Bus Transportation Services Market in the East Coast Region of Malaysia -Key Demand Conditions and Dependencies for further information on the growth potential of the public bus transportation services industry in the East Coast region. [The rest of this page is intentionally left blank] 5. INDUSTRY OVERVIEW (Conf’dj
Public bus transportation services market in the East Coast region -growth in total registered buses in the East Coast region a, b 6,000 5,000 ., ‘E 2-4,000 I/JOJ E ‘C ~ 3,000 15 .~ 2 ~ 2,000 1,000 o

 

2010 2011 2012 2013 2014
a Registered buses in the East Coast region include stage buses, express buses, mini buses, school buses, feeder buses, employee buses and chartered buses b Latest available statistics as at 30 August 2016 Source: SPAO Total annual passenger ridership of stage buses in capital cities in the East Coast region grew from 2.8 million in 2012 to 7.9 million in 2014 at a CAGR of 68.1 %. With the exception of Kuala Terengganu, capital cities in the East Coast region witnessed impressive annual passenger ridership growth with Kota Bahru witnessing an increase from 1.9 million passengers in 2012 to 3.3 million passengers in 2014 at a CAGR of 33.0%, while Kuantan recorded an increase from 0.4 million passengers to 4.1 million passengers over the same period at an impressive CAGR of 217.1 %. The growth in annual passenger ridership in Kuantan is attributable to the development of transport infrastructure in Kuantan with the establishment of the Rapid Kuantan stage bus network boosting public transportation ridership. These annual passenger ridership growth figures reflect the increasing economic activity in the East Coast region and highlights the growth potential for public transportation services to meet the rapid growth in demand for such services in the region. [The rest of this page is intentionally left blank] 5. INDUSTRY OVERVIEW (Conf’dj
Public bus transportation services market in the East Coast region -annual stage bus ridership in capital cities of the East Coast region a, b 9,000 Total CAGR: 68.1% 7,877\ 8,000
~ ~ 7,000 Q) c. o g 6,000 ‘­c. :E ~ 5,000 ‘”0 “Ii: ~ 4,000 5l (f) ~ 3,000 ~ 2,000 1,000 o
2012 2014 ,,,,,,,Kuanlan _Kola lBahru ..Kuala Terengganu -Tolal a The analysis of annual stage bus ridership in capital cities of the East Coast region is for the period of 2012 and 2014 due to the availability ofpublicly released data from SPAD and the Economic Planning Unit b Latest available statistics as at 30 August 2016 Source: SPAD, Economic Planning Unit Key Demand Conditions and Dependencies The economic growth witnessed in Pahang and Terengganu and the promise of economic expansion moving forward makes these states promising markets for public bus transportation services. Through the establishment of the ECER, efforts have been put in place to lay the foundation upon which these two states can leverage to realise their growth potential. The ECER, that covers the states of Kelantan, Terengganu, Pahang and the district of Mersing in Johor, is an economic corridor established to develop the East Coast region over a 12-year period beginning in 2007 under the guidance of the ECER Development Council. The ECER Master Plan, to be implemented by the ECER Development Council, with the involvement of Petroliam Nasional Berhad (PETRONAS), the national oil and gas company, and 101 Group, who are a private sector party primarily involved in the plantation business, was developed to guide the development of the region and aims to transform the region into a major international tourism destination; an exporter of resource-based and manufactured products; a vibrant trading centre; and a hub for logistics and infrastructure. Measures will also be taken under the ECER Master Plan to raise income levels and eradicate poverty by expanding employment prospects through the introduction of high-impact, catalytic projects to spur development in the region. Between 2011 and 2014, the ECER had RM55.5 billion in committed investments, of which RM22.9 billion was realised while generating 23,000 jobs in the region. Five (5) economic clusters have been identified as key focal points for generating economic growth within ECER, namely manufacturing, oil, gas and petrochemical, tourism, agriculture, and human capital development. 45 5. INDUSTRY OVERVIEW (Conf’dj
Pahang is a market identified by Perak Transit Berhad for future expansion of its public bus terminal services in Kuantan and Temerloh as diversification of economic activity and economic growth within the state further supported by the development of the ECER regional corridor creates a platform for an upward growth trajectory for the state of Pahang. Kemaman, a district within the state of Terengganu that is strategically positioned between growth nodes within the ECER and is poised to be an important transportation link in the corridor is another market identified by Perak Transit Berhad for future expansion of its public bus terminal services. These factors create growth opportunities within Pahang and Terengganu and would have an impact on the public transportation system within these states as it is critical to the movement of labour and goods. Diversification of economic activity in Pahang creates demand for a holistic public transportation system to support economic growth Over the course of the 11 MP between 2016 and 2020, the Federal Government projects the Pahang economy to grow by 5.7% underpinned by growth in the services, manufacturing and agricultural sectors that are expected to grow by 6.6%,5.9% and 4.2% respectively over the period. In accordance with these targets, the Pahang State Government has in place a state-level framework to carry out state development programmes to ensure that these targets are on track to complement the regional development strategies driven by the Federal Government. The Pahang State Development Corporation (“PSDC”) was incorporated in 1965 through the Lembaga Kemajuan Negeri Pahang Enactment with the aim of driving economic and social development with a particular focus on suburban areas in the state of Pahang. The PSDC through its Invest in Pahang initiative is focused on promoting business and investment in Pahang through continued efforts and programmes to attract new investment to new growth areas in the state, with special focus on the industrial and manufacturing sectors. Its development objectives include promoting Pahang as a major attraction for investment in Malaysia; widening the industrial base of the state of Pahang through diversification of its industrial activities, supporting the creation of the Bumiputera Commercial and Industrial Community; and increasing the contribution of the manufacturing sector to the state’s GDP. The PSDC aims to pursue these development objectives by adopting a set of strategies to meet these ends that include encouraging the growth of major industries and providing support facilities to complement the comparative advantages the state enjoys, developing industrial estates under the National Development Corridor with an emphasis on the cluster development approach, and upgrading infrastructural services to support growth of industries as well as undertaking investment promotion activities targeted at key industries while increasing regional cooperation. Key industries in Pahang identified for promotion by the PSDC include biotechnology, the chemical and petrochemical industry, the oil and gas industry, bio-fuel, the automotive industry, hala/food, the electrical and electronics industry, ceramics, and wood-based products. The state of Pahang is a beneficiary of development efforts within the ECER where Kuantan is its capital city and is an important part of the ECER Special Economic Zone, which is a stretch along the East Coast region between Greater Kuantan in Pahang and the district of Kerteh in Terengganu. 5. INDUSTRY OVERVIEW (Conf’dj
Public bus transportation services market in the East Coast region -ECER development initiatives in Pahang Cluster  Initiatives  Manufacturing  • Pekan automotive park • Malaysia -China Kuantan Industrial Park • Gambana Halal Park  Oil, gas and petrochemicals  • Gebeng Integrated Petrochemical Complex • Kuantan Intearated Biooark  Tourism  • Pekan heritage tourism development • Kuantan Waterfront revitalisation • Taman Negara • Endau -Rompin National Park • Tasik Chini Biosphere Reserve • Cherating coastal tourism development • Sunoai Lembino mini no heritaae  Agriculture  • Cattle Research and Innovation Centre in Muadzam Shah • Kuantan Fish Processing Park in Tanah Putih • Rompin Integrated Pineapple Plantation • Herbal Integrated Cluster Development in Chegar Perah • Marine Fish Hatchervand Fish Seed Marketina Centre in Merchona  Human capital development  • Agropolitan • Empower ECER • Entrepreneur ECER • ECER Talent Enhancement Programme • Suri@HOME • TERAJU@ECER  ECER Special Economic Zone  • Kuantan Port expansion • Water treatment plant • Water reservoirs • Kuantan Port City road link • Pahang Technologv Park
Source: ECER Development Council Through the identification of the East Coast Corridor and the Central Corridor and several local corridors that are subsets of these two (2) main corridors, the ECER Master Plan has identified a number of projects that are to act as economic enablers in delivering growth within the economic clusters. These key enabler projects include improving access via upgrades to existing road networks, airports and sea ports, mitigating floods and coastal erosion, improving utilities and sewerage, real estate development, and conservation of the environment. Infrastructure and services that enhance connectivity and access are key factors to the success of these industrial corridors as they enable industries to tap into the local workforce. Public transportation will playa defining role in the development of the state of Pahang as it continues its upward trajectory of economic growth. Stage bus services will be crucial to developing towns such as Temerloh, providing mobility and connectivity for skilled and unskilled labour to growth corridors such as Greater Kuantan. 5. INDUSTRY OVERVIEW (Conf’dj
Regional development creates an avenue for growth across Terengganu resulting in demand for public transportation within the region Over the course of 11 MP between 2016 and 2020, the Federal Government projects the Terengganu economy to grow by 4.2% underpinned by growth in the services, agricultural and construction sectors that are expected to grow by 5.8%, 4.3% and 3.8% respectively over the period. The establishment of the Perbadanan Memajukan Iktisad Negeri Terengganu (“PMINT”) through the Terengganu State Economic Development Corporation Enactment 1965 is intended to achieve a set of development objectives to spur economic growth and socio-economic progress. The current objectives outlined by PMINT include poverty eradication within the state of Terengganu, economic growth, development of manpower, accelerating urban and rural development, and to develop an entrepreneurial class of Bumiputra citizenry. These objectives are pursued through its subsidiaries as well as through strategic plans laid out by PMINT such as the PMINT Strategic Plan 2012 -2016 which outlines several strategic thrusts that serve as guidance towards a more developed Terengganu. The Kuala Terengganu City Centre (“KTCC”) is a development that spans 8,000 hectares within the Kuala Terengganu district. The development aims to leverage on the growing urban population in Terengganu and to transform Kuala Terengganu into a key tourism hub within the region. The KTCC development proposes to promote tourism, education, and healthcare as its core offering as it aims to catalyse growth within the state through infrastructure development which will improve connectivity and the attractiveness of the state of Terengganu from an investment perspective. The ECER Master Plan identifies KTCC as part of a key development node which is part of the KTCC-Kenyir-Dungun Triangle within which it outlines several commercial and tourism initiatives to spur growth within the region. Public bus transportation services market in the East Coast region -ECER development initiatives in Terengganu Cluster Initiatives
Manufacturing
• Kemaman Heavy Industry Park Oil, gas and petrochemicals

• Kerteh Integrated Petrochemical Complex
• Kerteh Biopolymer Park Tourism
• KTCC
• Dungun Town Coastal Tourism Development Agriculture
• Sheep Breeding and Innovation Centre in Kuala Berang
• Multiplier and Commercial Goat Farm in Telaga Papan

 

• Herbal Integrated Cluster Development in Pasir Raia Human capital development
• Agropolitan
• Empower ECER
• Entrepreneur ECER
• ECER Talent Enhancement Programme
• Suri@HOME
• TERAJU@ECER

 

Source. ECER Development Council Kemaman is a district of Terengganu that is located to the south of Kerteh and lies in the southern region of Terengganu that borders the state of Pahang. It lies within the Kerteh-Chukai/Kemaman-Cherating local corridor under the ECER which has been earmarked to be a growth centre for the tourism and oil, gas and petrochemical industries. Kemaman also falls within the larger ECER Special Economic Zone which stretches from Greater Kuantan in Pahang to the district of Kerteh in Terengganu. Given the strategic location of Kemaman between the growth nodes of Kuantan in Pahang and Kuala Terengganu in Terengganu within the ECER, Kemaman is ideally placed to benefit from economic growth 48 5. INDUSTRY OVERVIEW (Conf’dj

 

SMITH ZANDER
in both of these growth nodes. As development in both regions spillover through the corridor, increased trade and demand for manpower will spur the local economy and generate demand for public transportation services throughout the region, as increased economic activity spurs population mobility. Please refer to Chapter 5-Analysis of the Public Bus Transportation Services Market in Malaysia­Key Demand Conditions and Dependencies for further information on the growth potential of the public bus transportation services industry in Malaysia which are also applicable to the East Coast region and Pahang. [The rest of this page is intentionally left blank] 5. INDUSTRY OVERVIEW (Conf’dj
8 ANALYSIS OF THE RETAIL MARKET IN MALAYSIA Introduction This chapter provides an analysis of the retail market in Malaysia, as Perak Transit Berhad leases out commercial space at Terminal AmanJaya to retail tenants. The outlook and prospects of the retail market will serve as an indicator to the rental prospects of commercial space within Terminal AmanJaya. Definition and Segmentation The retail sector in Malaysia is an integral component of the nation’s economy and the fourth largest contributor to GDP after oil and gas, agriculture and manufacturing. The retail landscape in Malaysia has transformed in the last decade with modern retail formats increasing in dominance over small family-owned and operated shops. The launch of large shopping malls has increased the lifestyle elements of shopping in Malaysia, with retail concepts carefully chosen to target specific consumer groups. Globalisation has also brought foreign players, franchises and new retail concepts into the retail market in Malaysia. In the Asia Pacific region, Malaysia has the largest share of foreign grocery retailers on its shores, with retailers such as Tesco and Aeon Big (formerly known as Carrefour), being the mainstays of the sector following the positive effects of Iiberalised business policies implemented in 1995. The retail sector in Malaysia is led by large chains of hypermarkets and supermarkets, who are typically grocery retailers, which collectively contribute to approximately 15.0% of total retail earnings. The grocery retail segment also includes traditional retailers such as independent small grocers, and food, beverage and tobacco specialists. Major non-grocery retailers include mixed retailers and specialists providing apparel, health and beauty, home and garden, electronics and appliances and leisure and personal goods. Today, there are over 120 hypermarkets, 110 superstores and 110 departmental stores owned by local and foreign companies located nationwide in Malaysia. Technology has also been a key factor affecting retail sales and has broadened distribution channels, with internet-savvy youths and young adults contributing to growth in online retail transactions through various electronic commerce (He-commerce”) platforms. Internet retailing is appearing as a significant retail channel for non~grocery products and there are a large number of internet retailers that carry out business transactions via social media channels such as Facebook. Several large and established retailers are also responding to the growth of e-commerce by adding internet retailing as a distribution channel. By 2020, approximately 54.0% of Malaysia’s population will be below the age 30, alluding to the fact that a large percentage of the population would have been raised in an environment where online transaction is the norm. Despite the developments and transformation of the retail sector, retail spending per capita in Malaysia is still at a low RM3, 154 (USD964) compared to South Korea (USD2,995), Taiwan (USD3, 115) and Singapore (USD3,423), indicating its significant growth potential. While this disparity is partially due to differing income levels, it also indicates a need to encourage higher levels of spending by meeting rising consumer expectations, through modernisation, innovation and application of international retail best practices. 5. INDUSTRY OVERVIEW (Conf’dj
Retail market in Malaysia -market segmentation
Market Performance, Outlook and Prospects The retail market in Malaysia, measured by the value of retail sales, grew from RM142.4 billion in 2009 to RM177.1 billion in 2014 at a CAGR of 4.5%. Store-based retailers comprised 94.6% of total retail sales in 2014, having recorded a growth from RM135.2 billion to RM167.6 billion between 2009 and 2014 at a CAGR of 4.4%. Non-store retailing comprised a smaller 5.4% of total retail sales and grew at a rate of 5.7% between the same period of 2009 and 2014. Retail sales in Malaysia is expected to grow from RM177.1 billion in 2014 to RM192.8 billion in 2017 at a CAGR of 2.9% with store-based retailing continuing to remain a key component of retail sales. Retail sales in Malaysia have been growing cautiously since the global financial crisis in 2008/09 as economic recovery boosted retail expenditure albeit at a slower pace with the majority of consumers exercising more prudence on non-essential household expenditure. Consumers are seen to be more price sensitive with regards to non-grocery items and purchasing decisions for these products are largely stimulated by sales and promotional activities organised by retailers. Thus, grocery-retailers in Malaysia have witnessed stronger retail sales growth despite economic fluctuations owing to the nature of grocery products being necessities. Internet retail continues to witness strong growth as the number of consumers gaining access to the internet via various service providers has risen. Several large retailers have added internet sales as a distribution channel in an effort to reach time-pressed and internet-savvy consumers, changing the landscape of traditional retail sales in the country. Internet sales are still very much limited to non-grocery products which are non-perishable. Internet sales benefit consumers and retailers alike, allowing consumers to compare prices and widens purchasing options, while also allowing retailers to compete in product and channel categories in which they have not been traditionally involved in. While the outlook for internet retailing will continue to be positive over the forecast period, internet retailing will not overtake the dominance of store­based retail sales, rather remaining as a supplementary channel for retailers to secure sales. 51 5. INDUSTRY OVERVIEW (Conf’dj
The Government continues to intervene in the retail sector through various programmes aimed at aiding retailers and addressing consumer concerns regarding the rising cost of living. The Small Retailer Transformation Programme (“TUKAR”) was initiated by the Government in 2011 under the ETP to aid small grocery retailers to increase competitiveness through the adoption of modern technology and efficient business processes. Under this initiative, large and major retailers such as Mydin, Tesco and Aeon Big have been drafted to share expertise and knowledge with participating “mom and pop” sundry shops nationwide. TUKAR aims to upgrade 5,000 small retailers by 2020. According to the Performance Management and Delivery Unit (“PEMANDU”), an agency under the Prime Minister’s Department, 305 sundry shops were transformed nationwide in 2014, bringing the total of number of stores transformed by the TUKAR programme to 1,914 since it was launched in 2011. In addressing consumer concerns regarding the rising cost of living, the Government has established the Kedai Rakyat 1Malaysia (“KR1 M”) under the 1Malaysia Initiative to assist the lower and middle income population. KR1 M are operated as mini markets and offer over 250 basic necessity grocery items at discounted prices. KR1 M serves the same consumer segment as hypermarkets and acts as a conduit for the Government to control prices and reduce the monopoly of products traditionally dominated by multinational manufacturers. Most of the items retailing in KR1 M are packed in smaller pack sizes, thus ensuring its affordability among the lower and middle income consumers. KR1 M also focuses on products manufactured by SMEs, and acts as a platform for the Government to support, enhance and expand SME profile in retail. There are presently over 80 KR1 M outlets nationwide, largely concentrated in the west coast of Peninsular Malaysia. The rising cost of living is driving more consumers to be cost conscious and thrifty spenders. As a result, private labels have emerged as a growing segment nationwide for grocery and non-grocery products. Private label products are largely available in major grocery retailers, where hypermarkets and supermarkets have the largest range of private labels that offer consumers economically priced products. [‘Jon-grocery retailers such as department stores are also expanding their brand options to include private labels to target consumers with different needs. The perception and acceptance level among consumers with regards to private labels is gradually shifting as many no longer perceive private labels to be inferior and cheap compared to the more well-known and popular multinational brands. The growing demand for private labels impacts pricing strategies for manufacturers of branded goods, driving down the prices of these goods as these branded goods manufacturers strive to remain competitive and appeal to a larger consumer segment. The retail market in Malaysia is traditionally fragmented, with retail sales in rural areas largely taking place in traditional retail channels such as independent grocery outlets while modern retail channels such as hypermarkets and supermarkets are more dominant in urban areas. However, this is gradually changing as a result of urbanisation, with retailers opening larger format outlets on the fringes of city centres in a bid to widen reach and respond to the increased demand for convenience by consumers. The broader Klang Valley region is anticipated to register significant growth in retail space with 40 new malls anticipated to come onstream by 2020. Of this 40 new malls, 12 of them will have an estimated 1.0 million square feet and above of net lettable area. 5. INDUSTRY OVERVIEW (Conf’dj
Retail market in Malaysia -growth in retail sales a
….Store·based _Non’store –Total a Latest available statistics as at30 August2016 Key Demand Drivers Increasing disposable income of the population signifies growth potential for retail sales Malaysia is an upper-middle income developing economy with aspirations to achieve developed status by the year 2020. GOP per capita increased by 19.3% from approximately RM28,733 in 2010 to RM34,284 in 2015 while PPP per capita income increased by 29.4% from approximately US020,336 to US026,315 during the same period. This increase in disposable income is leading to a rise in a more affluent population that has greater spending power, creating demand for basic necessities and non-essential products. The ETP (2011 -2020) was launched in an effort to promote Malaysia into an inclusive and sustainable high-income country by the year 2020. The ETP is a comprehensive initiative comprising 131 high impact projects under 12 economic focus areas that have the potential to stimulate economic growth. The implementation of the ETP will allow Malaysia to be closer to achieving its goal of raising the per capita disposable income of the population to approximately RM48,000 (US015,000) by 2020. Malaysia’s economy registered a 6.0% growth in 2014 supported by resilient domestic demand and augmented by a recovery in exports. Private investment, in particular, surged 13.0% to RM78.7 billion during the first half of 2014 with its share to total investment increasing to 68.9%. In order to achieve a per capita income of RM48,000, the Government intends to attract RM1.4 trillion in investments which is expected to create 3.3 million jobs, of which 60.0% are expected to be in high value sectors under the 12 economic focus areas under the ETP 0 53 5. INDUSTRY OVERVIEW (Conf’dj
The Government is keenly aware of the challenges faced especially by the middle income population, and has set forth initiatives and policies in favour of this group. Apart from tax cuts announced under Budget 2014, concrete efforts have been taken through the implementation and increases in real property gains tax to curb speculation in the property sector which has historically pushed prices to unaffordable levels, and the launching of affordable housing schemes. These concrete efforts are significant in the move to increase incomes and reduce living costs, both of which are goals of the Government and the ETP. The increasing disposable income of the population has the potential to contribute to higher retail sales in the country. Retail market in Malaysia -growth in disposable income
20,336 E~ 0 .$ 20,000 .~ …·t 15,000 :t:t Q. ro <>t15,000 0.. ~ Q.f5 10,000 0.. 0.. 10,000 0.. 5,0005,000 o 0 2010 2011 2012 2013 2014 2015 –GDP per capita -4-PPP per capita income Source: International Monetary Fund Higher tourist arrivals coupled with tourism receipts boost retail sales Malaysia has a reputation as a leading tourism destination globally and tourism is the nation’s fifth largest industry after oil, gas and energy, financial services, wholesale and retail and palm oil. Tourist arrivals increased from 24.6 million arrivals in 2010 to 25.7 million arrivals in 2015 at a CAGR of 0.9%, while tourism receipts have witnessed growth over the same period, increasing from RM56.5 billion to RM69.1 billion, registering a CAGR of 4.1 %. The Government targets to grow tourist arrivals and tourism receipts to 36.0 million and RM168.0 billion respectively by 2020 under the Malaysia Tourism Transformation Plan 2020. Malaysia is in a prime position to boost its tourism sector which is large and fast growing with a strong global competitive position. Malaysia’s tourism growth has historically been predominantly reliant on growth in the number of tourist arrivals as opposed to yield per tourist. The yield per tourist in Malaysia of approximately RM2,260 is currently lower than its neighbouring countries, whereby Singapore registered RM3,106 and Thailand registered RM3,785. This is largely attributed to the lower average stay of tourists and lower spend per day in Malaysia, and Malaysia’s dependence on arrivals from short-haul markets who 54 5. INDUSTRY OVERVIEW (Conf’dj
ultimately spend less in the country. In this respect, the Government targets to increase yield per tourist to RM4,675 by 2020. In addition to targeting tourists from affluent countries, several other methods have been identified under the ETP to boost tourism growth potential. These efforts, among others, include positioning Malaysia as a duty-free shopping destination for tourist goods; establishing new premium outlets in Malaysia; establishing dedicated entertainment zones; expanding sports tourism offerings beyond event hosting; enhancing connectivity to priority medium-haul markets; improving rates, mix and quality of hotels; and establishing Malaysia as a leading business tourism destination. The Government’s efforts to boost tourism are bearing positive results as yields are gradually improving from the RM1,891 registered in 2004 to RM2,359 in 2011, the first year of ETP implementation, and RM2,544 in 2013. Greater growth in tourism arrivals and particularly tourism receipts will significantly and positively impact the retail market in Malaysia as retails sales are expected to increase on account of greater spending by tourists visiting Malaysia. Retail market in Malaysia -growth in tourist arrivals and tourism receipts 80 28 72.0
69.1 2870 27 58.360 56.5 ~ 27 0
~ s:>. 26 §
!Ii!! 25.7 26 j{J. ~ of:25 ‘” 1i5 25 ‘i:24.7 :l24.6 {? 24 10 24 o 23 2010 2011 2012 2013 2014 2015 …..-Tourism receipts -‘>-Tourist arrivals Source: Malaysia Tourism Promotion Board (“Tourism Malaysia’; Greater Government-driven initiatives to propel the retail market in Malaysia and boost retail expenditure The retail and wholesale sector is a major contributor to Malaysia’s GNI and thus has been identified as one (1) of the 12 key economic focus areas under the ETP. The ETP (2011 -2020) was launched in 2010 with the goal of promoting Malaysia into an inclusive and sustainable high-income country by the year 2020. The ETP is a comprehensive initiative comprising 131 high impact projects under 12 economic focus areas that have the potential to stimulate economic growth. The  retail  sector  is  a  key driver of domestic  consumption and plays a significant role in promoting economic growth.  55
5. INDUSTRY OVERVIEW (Conf’dj
Despite recent developments in the retail market, retail expenditure in Malaysia (RM3, 154 or USD964) is lower compared to that in countries such as South Korea (USD2,995), Taiwan (USD3,115) and Singapore (USD3,423). While this disparity can be partially attributed to differing income levels, the Government of Malaysia intends to drive retail spending in achieving the targets under ETP. In achieving the GNI targets for the retail sector, the Government intends to improve access to finance, liberalise the retail sector through the opening up of restricted markets, streamlining set-up and expansion requirements, upgrading transportation infrastructure, and growing human capital. SMITH ZANDER views positively initiatives taken by the Government of Malaysia via various economic plans and policies to boost the retail market in Malaysia. Retail market in Malaysia -selected retail sector projects identified under ETP Project ‘ Target(s) Highlight(s) Increasing the  •  To increase available floor space by 50%  •  In 2014, five (5) new hypermarkets and  number of large  from the current base of 1.4 million  six (6) superstores were set up  format stores  square metres, to establish 61  nationwide by domestic and foreign  hypermarkets (5,000 square metres or  players, meeting the yearly target.  more) and 163 superstores (3,000 to  4,999 square metres) within the next ten  (10) years.  •  Target GNI by 2020: RM8,514.2 million  Facilitating local  •  To develop the retail sector further by  •  Two (2) foreign brands have been  businesses to  facilitating the acquisition of stakes in  acquired since December 2010, with  acquire stakes in  foreign businesses. This will allow local  Bonia Corporation Bhd acquiring a 70%  foreign retail  retailers to retain a portion of the profits  interest in JECO Pte Ltd, a licensee of  businesses  from foreign brands in Malaysia, as well  Pierre Cardin leather goods in Singapore  as expand into international markets.  and a master licensee for Renoma in  •  Target GNI by 2020: RM1 ,031 million  Singapore, Indonesia and Malaysia.  Making Malaysia  •  To become Asia’s premier shopping hub  •  Since the launch of ETP in 2010, the  duty-free  and attract more foreign visitors, the  import duty on 328 goods, including  Government is working towards removing  apparel, shoes, jewellery, handbags and  import duties on goods that have high­ perfumes was abolished in 2011.  elasticity and pent-up demand. This will  •  The value of cost, insurance and freight  capitalise on the growth potential for  on 328 goods reached RM6.972 billion  average tourist spend, as well as provide  as at December 2014, driven mainly by  more retail choices to both tourists and  the strength of domestic consumption.  locals.  •  Target GNI by 2020: RM3,258.3 million  Organising unified  •  To bring together more sectors of the  •  The 2014 1Malaysia Unified Sale  Malaysia sales  economy -from retailers to food and  featured 60 sub-sectors comprising 942  beverage, hotels and travel providers ­ companies and 8,702 outlets and was  through the annual 1Malaysia Unified  held in conjunction with the mid-year  Sale to benefit consumers and the retail  Malaysian Mega Sales.  sector.  •  Target GNI by 2020: RM1 ,776.9 million
Source. ETP, PEMANOU Budget 2015 aimed to emphasise a balance between the capital economy and the people’s economy. The services sector will continue to be the key driver of growth under the 11 MP where growth in the sector is expected to increase significantly by 6.9% per annum, increasing its share of the GDP from 53.8% in 2015 5. INDUSTRY OVERVIEW (Conf’dj
to 56.5% in 2020. The sector is expected to record broad-based growth across all subsectors. The wholesale and retail subsector will continue to be the main contributor, expanding by 5.8% per annum, supported by strategies to modernise the subsector as well as enhance the efficiency and effectiveness of the supply chain. Retail market in Malaysia -measures under Budget 2015, specific to the retail market Measure Implementing Goods and Services Tax (“GST”) Price uniformity and KR1M Description – .­• The Government agrees to widen the scope of items that will not be subjected to GST as follows:
• All types of fruits whether local or imported;
• White bread and wholemeal bread;
• Coffee powder, tea dust and cocoa powder;
• Yellow mee, kuey teow, laksa and meehoon;
• The National Essential Medicine covering almost 2,900 medicine brands. These medicines are used to treat 30 types of diseases including heart failure, diabetes, hypertension, cancer and fertility treatment;
• Reading materials such as children’s colouring books, exercise and reference books, text books, dictionaries and religious books; and
• Newspapers.
• The Government has also agreed that the retail sale of RON95 petrol, diesel and liquefied petroleum gas (“LPG”) be given relief from payment of GST. Through this measure, consumers and targeted groups will not have to pay GST on the purchase of RON95 petrol, diesel and LPG.
• With the implementation of GST, the Government will be able to reduce the tax burden of the rakyat as follows:
• For year of assessment 2015, Individual income tax rates will be reduced by one (1) to three (3) percentage points. With this measure, 300,000 individual taxpayers will no longer pay tax liability;
• Tax payers with family income of RM4,000 per month will not have tax liability for year of assessment 2015;
• For year of assessment 2015, individual income tax will be restructured whereby the chargeable income subject to the maximum rate will be increased from exceeding RM100,000 to exceeding RM400,000. The current maximum tax rate at 26% will be reduced to 24%, 24.5% and 25%. This will result in the existing taxpayer enjoying a tax saving of at least 5.3%;
• For year of assessment 2015, cooperative income tax rate will also be reduced by one (1) to two (2) percentage points. In addition, secretarial fees and tax filing fees are allowed as deduction;
• For year of assessment 2016, corporate income tax rate will be reduced by one (1) percentage point from 25% to 24%; and
• For year of assessment 2016, income tax rate for SMEs will also be reduced by one (1) percentage point from 20% to 19%.
• The Government is committed to implementing various initiatives including price uniformity scheme, transport subsidy and establishing more KR1 M. Among the measures that will be implemented by the Ministry of Domestic Trade, Co-operatives and Consumerism include:
• Establish another 20 KR1 M in Peninsular Malaysia;
• Set up price watch team comprising consumer associations; and
• Strengthen GST Enforcement Unit with 2,270 personnel, Price Monitoring Unit with 1,300 personnel and Consumer Squads with 202,800 volunteers as well as involve 579 mukim and village heads.

5. INDUSTRY OVERVIEW (Conf’dj
Budget 2016 further expanded those measures previously introduced under ETP and Budget 2015, such as further improvements to the GST with the aim of prospering the people. Retail market in Malaysia -measures under Budget 2016, specific to the retail market Measure Improving the GST I Description • The Government agrees to widen the scope of items that will not be subjected to GST as follows: • Soybean and organic-based infant and children milk formula;
• Chickpeas, mung beans and white beans;
• Lotus root and water chestnut;
• Mustard beans;
• Brown sugar;
• Dry mee kolok.
• Annual sales turnover threshold for registration of Flat Rate Scheme under GST for small-scale farmers is reduced to RM50,000 from RM100,000 where small-scale farmers can impose an additional 2% on sales value;
• Maintenance, repair and overhaul companies allowed to participate in the Approved Trader Scheme and exempted from paying GST on imported goods;
• GST relief for reimportation of goods that were exported temporarily for the purpose of promotion, research and exhibition;
• GST relief for oil and gas industries on reimportation of equipment that was temporarily exported for the purpose of rental and lease such as oil platform equipment and floating platforms;
• GST relief for procurement of teaching materials and equipment by skills and vocational training providers under the National Skills Development Act 2006; and
• Rebates equivalent to the amount of GST paid on prepaid mobile phone cards will be credited directly to consumers effective from 1 January 2016 to 31 December 2016.

TUKAR • The expansion of TUKAR. Source: Minislry of Finance Malaysia [The rest of this page is intentionally left blank] 5. INDUSTRY OVERVIEW (Conf’dj
9 PROSPECTS AND OUTLOOK FOR PERAK TRANSIT BERHAD Malaysia As Malaysia moves towards its goal of becoming an inclusive and sustainable high-income country by the year 2020, the demand for pUblic transportation services is expected to increase. With a greater proportion of the population living in cities today than ever before, urban areas are expanding to include the fringes of city centres. Sustainable connectivity and ease of access are important considerations as these areas grow in size and can best be addressed with the implementation of a holistic public transportation infrastructure and services. Public transportation and infrastructure such as buses, mass rapid transit systems, roads, railways, ports and utilities are key pillars as the country strives towards developed nation status by 2020. Additionally, certain urban areas have been identified for large scale development and pUblic transportation systems upgrades indicating further growth potential for public transportation infrastructure and services. The most widely accessible modes of public transportation in Malaysia are stage bus and express bus services that serve municipal, regional and inter-state boundaries. Total registered buses and passenger ridership serve as indicators of the extent of the development of the regional public bus transportation market in Malaysia, and also serve as indicators to support the growth in pUblic bus terminal operations services, where: • In 2014, the highest new registration for buses was witnessed in the express bus and stage bus categories with 433 new registrations and 404 new registrations respectively; and
• The annual ridership of stage buses in capital cities increased from 208.8 million passengers in 2012 to

224.7 million passengers in 2014 at a CAGR of 3.7%. Key drivers that have influenced the growth in new registrations for express bus and stage bus services are the growth in passenger movement arising from increased economic and travel/leisure activities, greater urbanisation in small towns as well as Government initiatives to develop and regulate the pUblic bus transportation system in Malaysia. The demand and outlook for pUblic bus transportation and public bus terminal services in Malaysia are positive, where key factors that influence growth prospects include socio-economic growth that creates demand for a robust and holistic public transportation system; growth prospects of the manufacturing and service industries that drive demand for public transportation systems and infrastructure; economic growth corridors that enhances the need for comprehensive public transportation systems and infrastructure development; increase in investments driving overall economic growth, and subsequently, demand for public transportation systems to increase mobility and accessibility; and Government initiatives to develop a holistic public transportation system in Malaysia. The development of integrated transportation terminals which are equipped with various supporting infrastructure such as ticketing and pUblic transport information, park and ride facilities as well as other public amenities and ancillary services are intended to provide comfort, safety, access to improved travel information and notification, as well as enhanced transportation network for passengers. Further, revenue from retail tenancies occupying integrated transportation terminals provides an additional revenue stream to terminal operators, supplementing income from the transportation business. The retail market in Malaysia, measured by the value of retail sales, grew from RM142.4 billion in 2009 to RM177.1 billion in 2014 at a CAGR of 4.5%. Store-based retailers comprised 94.6% of total retail sales in 2014, having recorded a growth from RM135.2 billion to RM167.6 billion between 2009 and 2014 at a CAGR of 4.4%. 59 5. INDUSTRY OVERVIEW (Conf’dj
Retail sales in Malaysia is expected to grow from RM177.1 billion in 2014 to RM192.8 billion in 2017 at a CAGR of 2.9% with store-based retailing continuing to remain a key component of retail sales. Under the 10MP, the Federal Government through SPAD, identified four (4) strategies that focused on strengthening the regulatory framework surrounding public transportation in Malaysia. These strategies included increasing transport capacity, promoting seamless connectivity and establishing a robust monitoring and enforcement mechanism. The National Land Public Transport Master Plan (2012 -2030) was formulated to drive regulatory and industry reform. This masterplan sets a 20-year timeline which targets to increase public transport modal share for urban areas from 16.4% in 2011 to 40.0% in 2030 and to improve public transport access to rural areas. The 11 MP lends support, focus and commitment to the National Land Public Transport Master Plan (2012 -2030) which underlines the importance of its implementation in tandem with economic growth. The SBST Programme was introduced under the National Land Public Transport Master Plan (2012 -2030) with a focus on improving operator viability and expanding bus route coverage by migrating from the fare­box revenue collection model to the gross-cost service delivery model. The latter is a business model whereby stage bus operations would be supported by contractual income to be received from the Government based on agreed service level performance. As at August 2016, the SBST Programme has been rolled out in Seremban, Kangar and Ipoh. Northern Region Connectivity and access between cities and areas of economic importance is important for moving human traffic between them as these areas grow in size and importance. Public transportation plays a vital role in creating competitive economies, and liveable, inclusive communities. Connectivity and access to these industrial corridors are important for moving human traffic to and from these places as these areas grow in size and importance. The most widely accessible modes of public transportation in Perak are stage and express bus services. The state economy is projected to achieve a growth rate of 5.9% between 2016 and 2020 as outlined by the 11 MP. In line with these projections, the State Government of Perak has highlighted its commitment to the development of public transportation as a key growth pillar in the Perak AmanJaya Plan and the Perak Industrial Development Action Plan. The Perak AmanJaya Plan identifies integrated public transportation services as a sub-key result area and suggests an approach that improves integration, access, reliability and comfort to increase its relevance in the public space. This plan recommends the implementation of a public-private joint initiative under the private finance initiative arrangement to ensure high quality services are delivered. Total registered buses and passenger ridership serve as indicators of the extent of the development of the public bus transportation market in the Northern region, and also serve as indicators to support the growth in public bus terminal operations services in this region, whereby: • Total registered buses in the Northern region increased from 12,243 buses in 2013 to 12,722 buses in 2014 at a CAGR of 3.9%; and
• Total annual passenger ridership of stage buses in capital cities in the Northern region grew from 21.2 million in 2012 to 26.5 million in 2014 at a CAGR of 11.7%.

In Perak, growth is being driven by socio-economic development in Perak that creates demand for a robust public transportation system which creates upside for bus transportation services in the state. As the State Government pursues growth in the various areas of industry, infrastructure development has been identified 60 5. INDUSTRY OVERVIEW (Conf’dj
as one (1 )of the key areas for improvement within the state. Logistics and transportation services in particular are critical facets of economic growth. The state of Perak is central to the operations of Perak Transit Berhad, as their stage bus operations are based in Kidd Road Bus Station and express bus services are based in Terminal AmanJaya, an integrated transportation terminal in Ipoh. Perak Transit Berhad’s stage bus seNices extend to a catchment area that spans across the Kinta district of Perak, while its express bus services serve Cameron Highlands, Pahang, and Taiping, Perak. SMITH ZANDER notes that: • Perak Transit Berhad operates its stage bus services in Ipoh from Kidd Road Bus Station. Perak Transit Berhad operates 27 bus routes that begin and terminate at Kidd Road Bus Station with service frequency varying between routes and times;
• In 2014, Perak Transit Berhad recorded an annual passenger ridership of 6,367,932 passengers for its stage bus services in Ipoh, based on figures submitted to SPAD for subsidies under the ISBSF. When compared to the total annual stage bus passenger ridership in Ipoh of 6,509,000 passengers as recorded by SPAD, Perak Transit Berhad achieved a stage bus passenger ridership market share of 97.8% in Ipoh, Perak;
• Terminal AmanJaya has been gazetted by the Ipoh City Council as a station for public services vehicles (bus and taxi services) with effect from 31 July 2012;
• In 2014, SPAD released “Pekeliling Suruhanjaya Pengangkutan Awam Darat Bil. 02 Tahun 2014: Operasi Perkhidmatan Bas Ekspress di Bandaraya Ipoh -Mengambil dan Menurunkan Penumpang Di Terminal AmanJaya’: This Circular was released as part of SPAD’s goal of transforming land transportation and further improving the delivery of public transportation services to the public. By centralising express bus operations in Terminal AmanJaya, it is anticipated that passengers will be able to benefit in terms of comfort, safety, have access to improved travel information and notification as well as enhanced public transportation network;
• Terminal operations at Terminal AmanJaya began in September 2012, with the recording of passenger data commencing in March 2013. The total number of passengers recorded at Terminal AmanJaya, based on the number of ticket-purchasing passengers, was 573,022 passengers from March to December 2013. During the same period of March to December 2015, the total number of passengers at Terminal AmanJaya increased to 709,411 passengers at a CAGR of 11.3%; and
• Perak Transit Berhad’s segmental revenue for its integrated terminal complex operations has also demonstrated significant growth, rising from RM13.5 million in the FYE 31 December 2013 to RM29.5 million in the FYE 31 December 2015, at a CAGR of 47.7%.

Given the distribution and potential expansion of its services, socio-economic development in the state of Perak impacts the growth potential of Perak Transit Berhad. Projected growth in the Northern region is set to generate a multiplier effect that will benefit the Perak economy and will provide the bedrock for development across industries and sectors within the state. This projected growth trajectory will require supporting infrastructure and services developments such as pUblic transportation services as an enabler for growth. 5. INDUSTRY OVERVIEW (Conf’dj
East Coast Region Total registered buses and passenger ridership serve as indicators of the extent of the development of the public bus transportation market in the East Coast region, and also serve as indicators to support the growth in public bus terminal operations services in this region, whereby: • Between 2013 and 2014, total registered buses in the East Coast region increased from 4,898 buses to 4,975 buses at a CAGR of 1.6%; and
• Total annual passenger ridership of stage buses in capital cities in the East Coast region grew from 2.8 million in 2012 to 7.9 million in 2014 at a CAGR of 68.1 %.

These annual passenger ridership growth figures reflect the increasing economic activity in the East Coast region and highlights the growth potential for public transportation services to meet the rapid growth in demand for such services in the region. The economic growth witnessed in Pahang and Terengganu and the promise of economic expansion moving forward makes these states promising markets for public bus transportation services. Through the establishment of the ECER, efforts have been put in place to lay the foundation upon which these two (2) states can leverage to realise their growth potential. Buses serving the East Coast region ply routes within and between the states of Kelantan, Terengganu and Pahang that have seen investment in its infrastructure in recent years to supplement its importance as an oil and gas hub. In Pahang, diversification of economic activity in the state has also created demand for a holistic public transportation to support economic growth, which creates upside for bus transportation services in the state. Through the 10MP period of 2010 to 2015, the Pahang economy is expected to grow by 5.4%. Over the course of 11 MP between 2016 and 2020, the Federal Government projects the Pahang economy will grow by a further 5.7%, underpinned by growth in the services, manufacturing and agricultural sectors that are expected to grow by 6.6%,5.9% and 4.2% respectively over the period. In accordance with these targets, the Pahang State Government have in place a state-level framework to carry out state development programmes to ensure that these targets are on track to being achieved to complement the regional development strategies driven by the Federal Government. The state of Pahang is a beneficiary of development efforts within the ECER with Kuantan being an important part of the ECER Special Economic Zone, which is a stretch along the East Coast region between Greater Kuantan in Pahang and the district of Kerteh in Terengganu. Over the course of 11 MP between 2016 and 2020, the Federal Government projects the Terengganu economy to grow by 4.2%, underpinned by growth in the services, agricultural and construction sectors that are expected to grow by 5.8%, 4.3% and 3.8% respectively over the period. Kemaman is a district of Terengganu that is located south of Kerteh and lies in the southern region of Terengganu that borders the state of Pahang. It lies within the Kerteh-Chukai/Kemaman-Cherating local corridor under the ECER which has been earmarked to be a growth centre for the tourism and oil, gas and petrochemical industries. Kemaman also falls within the larger ECER Special Economic Zone which stretches from Greater Kuantan in Pahang to the district of Kerteh in Terengganu. Given the strategic location of Kemaman between the growth nodes of Kuantan in Pahang and Kuala Terengganu in Terengganu within the ECER, Kemaman is ideally placed to benefit from economic growth in both of these growth nodes. As development in both regions spill over through the corridor, increased trade and demand for manpower will spur the local economy and generate demand for public transportation services throughout the region, as increased economic activity spurs population mobility. Infrastructure and services that enhance connectivity and access are going to be key factors to the success of these industrial corridors as they will enable these industries to tap into the local workforce. Public 62 5. INDUSTRY OVERVIEW (Conf’dj
transportation will playa defining role in the development of the states of Pahang and Terengganu as these states continue their upward trajectory of economic growth. Stage bus services will be crucial to developing towns and urban areas as these developmental initiatives will attract manpower from surrounding areas to the growth corridors.

Summary In light of these factors and the economic growth potential, the pUblic transportation sector is expected to benefit and SMITH ZANDER believes that Perak Transit Berhad is well positioned to capitalise on these opportunities, particularly considering Perak Transit Berhad’s strong presence in the public transportation market in Ipoh, Perak, where: • Terminal AmanJaya has been gazetted by the Ipoh City Council as a station for public services vehicles (bus and taxi services). SPAD has further released the “Pekeli/ing Suruhanjaya Pengangkutan Awam Darat Bil. 02 Tahun 2014: Operasi Perkhidmatan Bas Ekspress di Bandaraya Ipoh -Mengambil dan Menurunkan Penumpang Di Terminal AmanJaya”which identifies Terminal AmanJaya as the location where all express bus services operating in Ipoh are mandated to pickup and drop off passengers, except in selected circumstances with written consent from SPAD;
• The total number of passengers recorded at Terminal AmanJaya, based on the number of ticket­purchasing passengers, was 573,022 passengers from March to December 2013. During the same period of March to December 2015, the total number of passengers at Terminal AmanJaya increased to 709,411 passengers at a CAGR of 11.3%;
• Perak Transit Berhad’s segmental revenue for its integrated terminal complex operations has also demonstrated significant growth, rising from RM13.5 million in the FYE 31 December 2013 to RM29.5 million in the FYE 31 December 2015, at a CAGR of 47.7%; and
• In 2014, Perak Transit Berhad recorded an annual passenger ridership of 6,367,932 passengers for its stage bus services in Ipoh, based on figures it submitted to SPAD for subsidies under the ISBSF. When compared to the total annual stage bus passenger ridership in Ipoh of 6,509,000 passengers as recorded by SPAD, Perak Transit Berhad achieved a stage bus passenger ridership market share of 97.8% in Ipoh.

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