[sustran] fwd: Klang Valley transit system financial woes

[SUSTRAN Resource Centre]

>From Asiaweek magazine
http://www-cgi.cnn.com/ASIANOW/asiaweek/magazine/2000/0818/biz.transport.html
AUGUST 18 , 2000 VOL. 26 NO. 32 

New Trains, Old Problems
The government may buy all the losing players

By ARJUNA RANAWANA Kuala Lumpur 

For Mazidah Ali, Kuala Lumpur's mass transit system is a dream. From her
apartment near the University of Malaya to work in a not-too-central bank
takes about 30 minutes on the gleaming Putra light rail train. She is
lucky. The Malaysian capital has not one but two new mass transit lines up
and running and a third line that connects the city to the suburbs, but
many commuters are finding the trains to be expensive, inconvenient or just
plain irrelevant. Forty percent of the city's office workers are employed
within the Golden Triangle of downtown Kuala Lumpur. Despite the three rail
lines — owned and operated by different private companies — there is only
one stop in the area. A fourth line, projected to be a monorail, was
specifically meant to serve the dense downtown. On-again-off-again
construction started in 1998. It last shut down in August 1999.

While some commuters complain the system is incomplete, others say the lack
of coordination when the rail systems do intersect is a bigger problem.
Travelers wanting to change lines must physically leave one station and
walk into another. Add to this the lack of coordination between rail and
two public bus systems and you begin to understand a system that is
downright inhospitable to commuters — not to mention seriously unprofitable.

Every main player in the city's transit business is losing money. Putra,
the most technologically sophisticated of all the systems, lost $22.6
million in the first nine months of its current fiscal year, which ended
June 30. The red ink, coming on sales of just $8 million, suggests how
deeply troubled the operation is. The line was built for $1.2 billion and
projected to carry 140,000 passengers a day along its 29-km run. Traffic
has recently reached 125,000 per day but that was accomplished only by
slashing fares as much as 60%. Putra, which stands for Projek Usahasama
Transi Ringan Automatik, announced last November that it was defaulting on
interest payments to service its $526 million construction loan. Putra is
owned by Renong, a sprawling, well-connected conglomerate.

The city's other commuter rail line born in 1998 is called STAR, Sistem
Transit Aliran Ringan. That system carries fewer passengers than Putra and
is known to be losing money, though exact figures are not available.
Finally, the KTM (Keretapi Tanah Melayu) commuter system, an electrified
railway that links the capital to towns in the heavily populated Klang
Valley, lost about $15 million in the fiscal year ended June 30. The
monorail that represents the important unfinished piece of Kuala Lumpur's
transit puzzle ran out of money in the middle of construction. The owner,
Vincent Tan, recently landed another loan and construction could resume
soon. The original completion date of mid-2000, however, is out of the
question. The two bus companies have done no better. Park May, the older of
the two, lost $5.3 million in the first three quarters of the fiscal year.
The other, Intrakota, is losing an undisclosed amount. 

The answer to both the operating and profitability problems, according to
the state's Corporate Debt Restructuring Committee, is to consolidate all
the pieces under government ownership. In the case of KTM, such a move
would reverse an earlier privatization. In 1992, KTM was created to run the
railway network covering most of peninsular Malaysia. Buying all these
loss-making private transit companies is potentially controversial. Renong
owns the Park May bus line as well as Putra. Intrakota is owned by another
well-connected company, DRB-Hicom. And Renong and DRB both own pieces of
KTM. But analyst Tan Beng Ling of the Internet investment advisory site
Surf88.com says the government has no choice: "This is not the time to
debate whether there should be a government role or not. Government
involvement is necessary."

Tan warns that consolidating the various ownerships is not a sure-fire
solution. She notes that each of the five main players sometimes act like
private fiefdoms with no outside responsibilities. "Bringing together the
five operators who have been competing against each other is hard. All of
them have been like kings of their project. Now they'll have to make
compromises."

Another danger in the public buyout is that the sale would be used as a
pretext to help out politically connected companies. "Conceptually [the
government buyout] is the right thing to do," says one transportation
analyst who asks to remain anonymous. "The government will have to step in
and take over because these systems are providing an important public
service. However, the government will have to use taxpayer money, and it
should pay only a fair value. It shouldn't pay a premium and bail out
troubled companies." Another lesson in getting from here to there. 

Write to Asiaweek at mail at web.asiaweek.com 
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Distributed for the purpose of education and research.

A. Rahman Paul BARTER
SUSTRAN Resource Centre
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