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ETP ANNUAL REPORT 2011 Wholesale and Retail 70 NKEA: Wholesale and Retail Minister’s Message Dato’ Sri Ismail Sabri Yaakob Minister of Domestic Trade, Co-operatives and Consumerism The ETP has undoubtedly improved the quality of life for all segments of society. As one of the NKEA under the ETP, the Wholesale and Retail NKEA has outlined initiatives as big as building 1Malaysia Malls abroad with an estimated Gross Development Value (GDV) of RM4.5 billion and the iconic Mines Wellness City valued at RM3.2 billion to ones as small as providing a RM60,000 soft loan to traditional sundry shop owners to assist them in modernising their business. The Ministry is committed to achieving its Key Performance Indicators (KPIs) this year. To date, we have successfully helped transform 519 sundry shops under the TUKAR programme and 55 automotive workshops under the ATOM (Automotive Modernisation) programme. Under the large growth EPPs, we have envisaged seven new hypermarkets and 13 superstores across the nation. Additionally, for the period of January to December 2011, the implementation of the Duty Free EPP has shown an increase in the value of Cost, Insurance and Freight (CIF) by 64 per cent in comparison to the same period in 2010. We have also identified 20 sites to build shared infrastructure for pasar tani, pasar malam and pasar tamu retailers nationwide which will be completed in 2012. For the first time in 2011, the 1Malaysia Unified Sale was introduced whereby 50 subsectors of the economy, including the services sector participated during the 1Malaysia Mega Sale Carnival, increasing the total spending during to RM21.5 billion. This transformation journey has only just started but we at the Ministry can already feel the impact of the initiatives that have been implemented. I wish to extend my gratitude to PEMANDU and my Ministry officials. I look forward to our projects in the years to come. Photo courtesy of Star Publications (Malaysia) Bhd (Malaysia) courtesyPhoto of Star Publications 71 ETP ANNUAL REPORT 2011 Wholesale and Retail The Wholesale and Retail Sectors is the fourth biggest contributor to the nation’s Gross National Income (GNI) among all 12 National Key Economic Areas (NKEAs). The sector contributed about RM57 billion to GNI in 2009 and RM83 billion in 2010 In achieving our 2020 GNI target, retail will be a key driver of To Revolutionise our Wholesale and Retail sector, we are looking domestic consumption, which in turn will spur economic growth. to deploy concepts and skills that have not been fully harnessed by the industry in Malaysia. This includes the successful removal Within the Wholesale and Retail NKEA, the Entry Point Projects of import duties on all finished goods making shopping more (EPPs) have been grouped along the themes of ‘Modernise, reasonable for both locals and tourists. The inaugural Unified Globalise and Revolutionise’. Malaysia Sales in 2011 brought together various sectors of the retail sphere and service-oriented sectors and will continue to be The EPPs within the Modernise theme address the process and an annual affair. system gaps in the traditional retail outlets. The aim is to modernise this sector with the expansion of modern format stores, improve The Business Monitor International (BMI) Malaysia Retail Report the skills of small retailers in information technology, customer for the fourth quarter of 2011 stated that total retail sales have services, stock management etc. grown to RM182.44 billion (US$51.79 billion) in 2011. A low unemployment rate, rising disposable incomes and a strong To Globalise is to further develop the retail sector for Malaysia tourism industry are key factors behind the forecast growth. through the export of our skills and products. Malaysian mall operators are amongst the best in the region and we are now taking these capabilities across to other countries like Vietnam, China, India, Sri Lanka and Indonesia. We will also seek to offer global exposure to small and medium enterprises via virtual malls and this has already begun in 2011. Retail is a key driver of domestic consumption. Photo courtesy of Star Publications (Malaysia) Bhd 72 NKEA: Wholesale and Retail Overview 2011 Key Performance Indicators Among the 13 EPPs, only six EPPs are outlined for 2011 KPIs. KPIs for the NKEA such as the target of modernising 500 stores by the end of 2011 were closely monitored, with reports submitted to the PEMANDU CEO every week, and to the Cabinet every month. The details of the KPIs are in the following table: Exhibit 4.1 NKEA Wholesale and Retail KPI (Quantitative) NO. KPI Target ActUAL ACHievement (FY) (YTD) MetHOD 1 MetHOD 2 MetHOD 3 % % EPP #2 Number of establishments modernised 500 518 104% 100% 1.0 under the TUKAR programme EPP #3 Percentage of completion for 20 sites 100 49.5 50% 50% 0.0 EPP #4 Number of workshops modernised 50 55 110% 100% 1.0 EPP #9 Percentage increase of Cost, Insurance and Freight 15% 64% 427% 100% 1.0 (CIF) for 328 selected imported finished products EPP #11 Number of programmes implemented 1 1 100% 100% 1.0 Number of sub-sectors involved in 1Malaysia 50 50 100% 100% 1.0 Unified Sale EPP #7 Operational by 2012 1 1 100% 100% 1.0 141% 93% 86% Method 1 provides a reflection of the actual KPI achievement. If a KPI surpasses its targets significantly, the final results will be presented as a large percentage, surpassing the 100 per cent limit. Method 2 has been formulated to accommodate for KPI achievements with significant quantitative results. Under this method, any achievement above 100 per cent is capped. Method 3 represents a simple reflection of the KPI achievement. KPI targets that were met or exceeded are graded 1, those achieving over half of their targets are graded 0.5, and those with less than half their targets are graded 0. 73 ETP ANNUAL REPORT 2011 Entry Point Projects The 13 inclusive EPPs that have been outlined for the retail system gaps in the way traditional retail operators manage sector will contribute RM48.6 billion in GNI and create their business. ‘Globalise’ aims to bolster exports of our 428,000 jobs by 2020 via implementation by the private products, services and skills in the retail sector. ‘Revolutionise’ sector with government support. These EPPs are clustered deigns to deploy concepts, skills and experience to break new into three different themes, namely Modernise, Globalise and ground in opportunities within the retail sector that have not Revolutionise. The ‘Modernise’ theme addresses process and been fully exploited. Exhibit 4.2 These are grouped into three themes and prioritised in terms of impact to rakyat and ease of implementation Within 36 months Within 18 months 1 TUKAR 2 Pasar Komuniti – PAKAR High 3 Automotive Workshop Modernisation 10 4 Makan Bazaar 11 MODERNISE 5 Large Format Growth 2 12 1 AT KY 9 5 RA 3 6 1Malaysia Mall TO 4 7 Virtual Mall T 7 OBALISE 8 Foreign Brand Acquisition AC GL 6 IMP 8 9 Wellness Resort 13 10 Duty Free Malaysia 11 Unified Malaysia Sales Med UTIONALISE 12 Big Box Boulevard Med Ease of Implementation High 13 KLIA Retail Hub REVOL Legend: Modernise Globalise Revolutionalise Exhibit 4.3 Wholesale and Retail NKEA A Wholesale and Retail NKEA will deliver RM38.2 billion B This will accrue from 13 specic EPPs TUKAR 5.6 GNI in 2020 (RM billion) Pasar Komuniti 8.8 Automotive workshop modernisation 1.1 38.2 F & B Makan Bazaar 0.2 Large format growth 8.5 45.2 1Malaysia Mall 2.2 145.4 Virtual Mall 0.8 Foreign brand acquisition 1.0 62.1 Wellness resort 2.7 Duty free Malaysia 3.3 Unified Malaysia Sales 1.8 Base Business Lab 2020e Big Box Boulevard 1.2 Opportunities EPPs KLIA Retail Hub 1.0 Estimated net GNI gain is RM83.4 billion Total 38.2 Source: Euromonitor. Wholesale & Retail Lab. Provectus analysis 74 NKEA: Wholesale and Retail EPP 1 EPP 1 Increasing the Number of Large Format Stores The growth of the large format retail sub-sector has today seen 121 hypermarkets, 113 superstores and 133 department stores run by local and foreign players, bringing better quality, wider choice, lower product costs, greater product availability and new retailing technology and skills. This EPP will see the establishment of 61 hyperstores (i.e. stores 5,000 square metres and larger), 163 superstores (i.e. stores of 3,000 to 5,000 square metres) and 356 supermarkets within departmental stores (i.e. stores of 2,000 to 3,000 square metres) within the next 10 years. These numbers will result in 50 per cent more floor space than that of today’s current base of 1.4 million square metres. With RM17.4 billion in investments, the implementation of this project is expected to contribute RM8.5 billion to GNI and create 68,600 jobs by 2020. Achievements Working hand in hand with the Ministry of Domestic Trade, EPP 1 hopes to increase large format stores such as Tesco Cooperative and Consumerism and local authorities, in 2011, 10 hypermarkets and 17 superstores were identified and are at various stages of development. The progress of this project has Moving forward been positive as indicated in the following table: The target to have five hypermarkets (5,000 square metres each) and 13 superstores (3,000 – 4,999 square metres each) to be Exhibit 4.4 operational in 2012 has already been achieved in 2011 itself, in fact it was beyond the target with additional two hypermarkets. No. Operator Site Hypermarkets 1 Mydin Bukit Jambul, Pulau Pinang 2 Tesco Setiawan, Perak 3 Tesco Putra Nilai, Negeri Sembilan 4 Tesco Kulim, Kedah 5 Tesco Scott Garden, Kuala Lumpur 6 Tesco Tanjung Pinang, Pulau Pinang 7 Tesco Stargate,