Creating a bus system that works

One of the topics that is dear to the heart of the people at TRANSIT is the bus system and how to make it efficient, well-managed and most of all, effective. That means, how do we create a bus system that is stable (functionally and financially) and reliable, with frequent service that is appropriate to our tropical climate.

All that we have seen over the past few years of studying public bus transport in the Klang Valley, Malaysia and other countries has shown us that, in order for a public transport system or bus transport system to be effective, the government has to become involved in the management and funding of public transport.

In the Malaysian context, the government takes a total “hands-off” approach to bus transport except for the control of permits. However, as you can see from the article below, the “hands-off” approach does not apply to government linked (as in, government-owned) companies, RapidKL and RapidPenang. And that is upsetting a major player in the public transport industry.

Klang Valley bus service needs restructuring (The Star)

Saturday June 26, 2010

The biggest private bus operator, Datuk Mohd Nadzmi Mohd Salleh, talks about the challenges in the business and what needs to be done to overhaul bus service

RUNNING a private bus operations in the Klang Valley today is not a viable business, says Datuk Mohd Nadzmi Salleh, the biggest private bus operator. Nadzmi, who had bought the privatised Kumpulan Kenderaan Malaysia Bhd (KKMB) from Mara Holdings in 1997, says he has suffered “millions of ringgit of losses” in the running of public “stage” and express buses.

“I regret venturing into this business,” says the chairman of Konsortium Transnasional Bhd (KTB) in a candid interview with StarBizWeek recently.

Among the factors that has made bus operations non-profitable over the years is the escalating cost of operations including purchase of buses and rising staff salaries.

The government-imposed cap on ticketing prices has been another issue why it is difficult to sustain the business.

However, he reckons that the biggest blow to private operators is the situation since 2004 when RapidKL ventured into the business of operating buses. “In almost all our the routes that we ply in the Klang Valley, we are up against RapidKL,” says Nadzmi, who is also chairman of Proton Holdings Bhd since January this year.

To be sure, it has long been the grouse of operators like Nadzmi that they are in a disadvantageous position, having to compete with the government-owned RapidKL

RapidKL, or Rangkaian Pengangkutan Intergrasi Deras Sdn Bhd, is owned by Syarikat Prasarana Negara Bhd, which in turn is 100% owned by the Finance Ministry.

Another significant problem is the lack of drivers, as there are so many companies wanting to hire them as well as lack of controls over how ticket sales is managed, says Nadzmi.

Nadzmi says the Government [TRANSIT: Which government? Federal, State or Local?] should tender out specific routes to private companies, with the most suitable candidates chosen. In return, the operator is paid a fixed fee per km that they run, which includes the operators’ cost plus a profit margin.

[TRANSIT: Or, the government can just operate the service directly as an arm of the government and skip the need to pay operator costs and profit margin.]

Ticket sales on the other hand should be entirely in the hands of the Government, using prepaid tickets.

“All revenue should go directly to the Government. While the Government may not necessarily make a profit from this (after paying the operators’ fixed fee) it would certainly not be making the losses Prasarana is enduring today. So the Government will be paying less to subsidise public transport.”

[TRANSIT: That would of course depend on how much costs Nadzmi or other operators would claim, as well as how much they would want in profits.]

To ensure that operators provide a high quality of service, certain key performance indicators or a customer service index can be created to ensure that bus companies do their jobs well.

Interestingly, Nadzmi’s plans are not too different from those of the recently-formed Land Public Transport Authority or SPAD.

[Or TRANSIT, for that matter! See our proposals in our Ideas page!]

But Nadzmi had earlier expressed his disappointment about not being included in the urban public transport laboratory that had come up with plans to revamp the public bus sector.

Nadzmi has also played a key role in the development of the Express Rail Link service and has been the executive chairman of ERL Sdn Bhd since its started operations in 2001. The ERL remains the only major private sector-driven public transport project that does not needed to be bailed out by the Government.

[TRANSIT: Interestingly enough, we recall an “investigation” of sorts by The Sun newspaper which noted that ERL receives a piece of the Airport fees paid by every passenger who uses KLIA – even if they are not using the ERL. So that, plus the reasonably good fares, might explain why ERL has not needed a government bailout.]

TRANSIT Says:

We have always wondered why, despite so many people thinking “the same way” the only notable improvements to public transport in the past few years has been a revival of an old fare system (Touch n Go based payment), new flexible payment options, and a bus service (RapidBET) that carries an extra 1500 passengers per day but is trumpeted as a major success by the government.

The idea that enters our mind is that, while everyone privately agrees that the existing system is not working, few of us have the guts to admit it in public – and even fewer have the guts to do what it will take to unravel the existing mess and change the system from within.

Even when a government is interested in taking a more active role (yes, we’re talking about Malacca) they have the wrong idea about how to implement an effective, government-managed public transport system – not to mention, the operators are sending the wrong message too!

Fortunately, public transport researcher and blogger Dr. Paul Barter has done some of the necessary research and his interesting findings and summary can be found on his blog, Reinventing Transport. Of particular interest to this topic is one of his older postings, Bus Systems that Work. We at TRANSIT think it is definitely worth reading.