ETP: Companies to modernise and innovate for more dynamic local retail market

KUALA LUMPUR: In building a more dynamic local retail market that will contribute RM165 billion annually to Gross National Income (GNI) by 2020, companies in Malaysia need to modernise and innovate by  applying international retail best practices.

This will further drive retail spending with the wholesale and retail sector being a major contributor to the GNI.

The sector contributed RM57 billion to GNI in 2009 with 500,000 jobs, the government said in the Economic Transformation Programme (ETP) : A Road Map for Malaysia,  launched here, on Monday, Oct 25.

The Roadmap was launched by the Prime Minister Datuk Seri Najib Tun Razak.

The retail National Key Economic Areas (NKEAs), is aimed at contributing an additional RM107.8 billion annually to RM165 billion to the GNI by 2020.

Of this, RM40.4 billion would be contributed by 13 Entry Point Projects (EPPs) across three themes with RM45.2 billion resulting from business opportunities and baseline growth while RM22.2 billion is the result of the multiplier effect.

The Malaysian retail landscape has transformed with modern retails formats such as hypermarkets, supermarkets and department stores increasing in dominance over small shops owned and operated by families.

International retailers like IKEA and Marks & Spencer, hypermarkets like Tesco and Carrefour  and shopping mall managers like CapitaMalls, have all ventured into Malaysia due to globalisation.

"Despite the positive trends and government support, there is much room for improvement to further drive retail spending that results in economic growth.

"There is a need to encourage higher levels of spending by meeting rising consumer expectations and to achieve this, companies involved in retail in Malaysia need to modernise and innovate," says the government.

To achieve targets and aspirations in increasing the retail sector’s role as a key driver of domestic consumption, the government has identified 13 entry EPPs  that are targeted to deliver RM107.8 million to GNI by 2020.

"In addition to the 13 EPPs, that are grouped along the themes of 'modernise, globalise and revolutionalise', there are two confidential EPPs or White Lab EPPs, that will only be discussed at a future date," it explained.

There are five EPPs under the "modernise" theme. It includes, increasing the number of large format stores - 61 hyperstores and 356 supermarkets within departmental stores within the next 10 years.

That  will deliver RM8.5 billion in GNI annually, followed by modernising small retailers via the Small retailer Transformation Programme or Program TUKAR (Program Transformasi Kedai Runcit) which involves the upgrading of at least 10 per cent of the estimated 50,000 small retailers currently.

The third EPP is modernising and amalgamating various local market formats into large-sized Pasar Komuniti followed by increasing quality and service levels of automotive workshops and developing 10 privately managed Makan Bazaars of large, premium, professionally-managed food centers, within the next 10 years.

The "globalise" theme calls for developing more than 20, 1Malaysia Malls, operated by Malaysian players in emerging markets like Vietnam and China which have been identified. It would be populated by at least 50 per cent Malaysian retailers.

Developing a virtual mall would be another EPP decide, which would be an online replication of a brick and mortar hypermarket to be fully implemented in 2012, followed by facilitating local companies to acquire stakes in foreign retail businesses.

The remaining EPPs under  the "revolutionalise" theme are for removing import duties on all finished products, except automotives and so-called "sin products" like tobacco.

The government will remove selected import duties by the end of 2010 and this proposed duty free plan would result in an additional RM3.3 billion GNI annually.

In enhancing medical tourism, the government plans to establish wellness resorts as another EPP, currently identified in Penang, Ipoh and Bandar Utama. Organising a unified Malaysia sales and intensifying transformation of the Kuala Lumpur International Airport (KLIA) into a retail hub are also among the EPPs.

The last EPP is to develop big box boulevards (BBB) or very large, integrated retail outlets for various categories of retailers, concentrated within a single location.

Meanwhile, business opportunities and baseline growth are expected to create around 226,000 additional jobs which would be driven by three distinct economic drivers, with RM187.6 billion of private sector funding and investments required to capitalize on the business opportunities, the road map explained via the roadmap.

The distinct economies are higher retail expenditure per capita due to increased GNI per household by 2020.

Urbanisation will also contribute as the migration from rural to urban areas creates a higher demand for goods and services, including higher value-added products while a population increase would also result in demand for more goods and services.

"Across the 13 EPPs and business opportunities, some common enablers will be put in place to make it easier for retailers to do business and increase the level of competition and choice for customers.

"These enablers are in the areas of access to finance, sector liberalisation, infrastructure and human capital," the government elaborated.

For the 13 EPPs, RM67.1 billion in funding is required, of which less than one per cent would come from the public sector.

According to the government, there are three levels for the governance structure.

The first level is strategic guidance and problem solution with quarterly meetings with the Prime Minister, followed by monitoring and reporting undertaken by the Delivery Management Office (DMO), which will meet fortnightly with EPP owners.

The third level consists of specific project teams who have been tasked with delivering the EPPs. One team for each EPP would report progress to the DMO on a weekly basis. -- BERNAMA