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MAVCOM Presents Economic Way Forward for the Civil Aviation Industry in Malaysia
Strong institutional framework necessary to further develop Malaysia’s civil aviation industry

KUALA LUMPUR, 11 FEBRUARY 2020 – The Malaysian Aviation Commission (MAVCOM or Commission) has published its recommendations for the development of the civil aviation sector in Malaysia. Work on this recommendation paper was performed following a request by the Ministry of Transport (MoT) in 2016 intended for incorporation into a National Aviation Strategy (NAS), and in line with the National Transport Policy that aims to create a global footprint and an internationalisation of transport services.

The recommendation paper was completed in December 2018 and was produced primarily based on internal research and analyses in consultation with industry stakeholders. The recommendations considered inputs by industry stakeholders throughout including Malaysia’s airlines, airports and ground handlers; ministries such as the MoT, Ministry of Economic Affairs, Ministry of Finance, Ministry of Human Resources, Ministry of International Trade and Industry, and the Ministry of Tourism, Arts, and Culture; agencies such as TalentCorp Malaysia, the Economic Planning Unit and Department of Statistics Malaysia; and regulators including the Civil Aviation Authority of Malaysia (CAAM), Land Public Transport Commission/Agency and Bank Negara Malaysia. 

As the Government of Malaysia in December 2019 decided for MAVCOM to be disbanded and for some of its functions to be transferred to CAAM, the Commission deemed it appropriate for these recommendations to be made available for industry and public consumption, prior to MAVCOM’s dissolution.

Dr. Nungsari Ahmad Radhi, Executive Chairman of MAVCOM, stated “As we exit from our role as the economic regulator of the aviation sector, we wish to share MAVCOM’s views on the industry, and the many possibilities it holds. We trust the recommendations will be given due consideration for the development of the industry and benefit consumers.”

Having identified the maximisation of air connectivity to be a primary goal for Malaysia, MAVCOM outlined three Strategic Pillars to achieve that objective. First and foremost, the establishment and maintenance of a fair and competitive commercial environment. The Commission advocates for a robust competitive environment between industry players to develop a high-performing civil aviation sector, whereby Malaysia’s legal and framework facilitates such an environment. The need to minimise government interference in favour of any particular industry player is essential, while sound competition laws are in place to ensure a level-playing field for industry players. 

Secondly, the availability of appropriate airports infrastructure that is efficient and effective in terms of service delivery and operations. Aside from being a major part of passenger experience during their travels, airports play a major role towards facilitating connectivity for Malaysia. The development of the airports sector in Malaysia should therefore be given appropriate emphasis in charting out the long term direction of Malaysia’s civil aviation industry. The Commission’s development of an airport funding model by way of a Regulated Asset Base (RAB) methodology and our advocacy for greater commercial autonomy for Malaysia’s airport operators, amongst others, have been made pursuant to this objective. 

Thirdly, the establishment of a strong civil aviation-related human capital base to support the development of the sector. Greater air connectivity and airports infrastructure would only be attainable on the back of an effective and efficient human capital. MAVCOM has also proposed strategies to nurture a larger pool of talents for the sector. 

The Commission further highlights these three Strategic Pillars must be underpinned by a strong institutional framework for the civil aviation industry in Malaysia. The Ministry of Transport as the industry’s policy-maker, and the Civil Aviation Authority of Malaysia (CAAM), as the regulator of technical and, in future, economic matters for the industry, should be strengthened to ensure both possess credible expertise, observe good governance practices and are consultative, transparent and respectful of the laws of Malaysia. The Commission further emphasises that CAAM, in resolving its recent downgrade to Category 2 by the United States’ Federal Aviation Administration (FAA), should be made genuinely independent for it to maximise the effectiveness of its role.

Dr Nungsari further adds “The civil aviation industry has been mired by many challenges recently, including air traffic incidents, CAAM’s downgrade, the coronavirus, and allegations of improper conduct. The Commission is nevertheless hopeful the right steps will be taken by the industry, in particular the Ministry of Transport and CAAM, to return Malaysia to its rightful position as a resilient aviation hub that is respected globally. We trust the recommendations we publish today will contribute towards making that objective a reality.”

In addition, the Commission also released its paper on “The Economic Impact and Implications of the Civil Aviation Authority of Malaysia’s Rating Downgrade”. 

The paper on MAVCOM’s Recommendations for the Civil Aviation Industry in Malaysia (2021-2030) can be found here.

The paper on the Economic Impact and Implications of the Civil Aviation Authority of Malaysia’s Rating Downgrade can be found here.