The KTM Debate: Should the railway sector be opened up to “competition”?

TRANSIT took note of this interesting letter by C.R. of Kuala Lumpur, who discusses the recent protest by the Railwaymen’s Union of Malaya (RUM), which included warnings of a “work-to-rule” campaign & potential disruption of Balik Kampung / Hari Raya Aidilfitri travel.

C.R. argues that it might be time to open up the Railway sector to increased competition.

TRANSIT will tell you what we think about the proposal, but first, read the letter:

Railway services: Time to open up sector (NST)
2011/08/11
C.R., Kuala Lumpur

THE government has invested billions of ringgit in the double track project to enhance the capacity of Keretapi Tanah Melayu Berhad’s operations.

The recent threat by the Railwaymen’s Union to work to rule, therefore, is cause for concern.

The government should not be held to ransom by a small group of union members.

Perhaps it is time to change the law in order to curb unnecessary union provocation and actions.

[TRANSIT: Perhaps it is the time to ask the question of what is driving the Union leadership’s dislike of the KTMB President]

If that cannot be done, then KTMB should be reorganised. It should outsource the services if it fails to meet its Key Performance Indicators.

[TRANSIT: Outsourcing is always talked about as a solution but sometimes it makes things more complicated – as anyone who has had a problem with their Touch n GO card will attest.]

The public have been crying for an efficient public transport system for a long time.

Better still, with the new additional track capacity, the government should consider liberalising the railways by opening it up to other operators who can provide better service than KTMB.

It is possible that there are many parties out there who are interested in running the high-speed train, the commuter service and even a premium service between SkyPark and KL Sentral.

[TRANSIT: It is possible that there are many parties interested … but as private corporations they would also be interested in making a profit. How would the profits be covered except by raising fares or cutting costs … or service? Unless these operators are limited to offering ‘premium services’ that complement the existing ‘basic’ services?]

For instance, YTL Corporation can already be considered a second operator since it has been operating the E&O services between Singapore and Bangkok via Kuala Lumpur for quite some time.

[TRANSIT: YTL is also a major shareholder in Ekspres Rail Sdn. Bhd., and has proposed a KL-Singapore High Speed Rail link in the past. Perhaps they might be interested in providing an Air Rail Link to Subang Airport/Skypark? Or an ERL to, say, Sentul, where they have a major development? Or between Sg. Buloh & Kajang?]

If KTMB is frequently bogged down with union problems, it is time to offer the extra capacity to other independent parties.

[TRANSIT: Really, how “frequently” are they “bogged down” as C.R. writes? There have been 2 protests in 2 years, and a recent threat (so far only a threat) of work-to-rule. And if service is affected by work-to-rule, would we really notice the difference?]

Now that the union has called for work to rule, it shows that KTMB is vulnerable to such actions and that is not good for the paying public.

[TRANSIT: The real issues are the day-to-day service & maintenance problems that are affecting customers, not the threat of work-to-rule. KTMB needs to deal with those day-to-day problems as well.]

Thus, it is time that the government provides alternatives as it has done before, such as allowing AirAsia to grow and the establishment of highway concessionaires.

The public can then choose whatever kind of transport system they want to use.

As there is no industrial dispute in KTMB, I cannot understand the threat by the union.

I understand that the government has given union members a good deal in the collective agreement even though KTMB is running at a loss.

We need a credible service. If the union chooses to cripple the service, I urge the government to quickly appoint two or three operators to run the rail services.

[TRANSIT: But what Malaysian contractors are qualified to operate a rail service beyond RapidKL (Prasarana-LRT), KLStarrail Sdn. Bhd. (Prasarana-monorail), and YTL Corporation (ERL)? It would take time to build more home-grown railway operators. Would the government be willing to consider international contractors like Veolia Transportation and First PLC, or contractors from our near neighbours like SMRT, SBS Transit or maybe PT Keratapi?]

Since a precedence is there for the airlines, this is the opportune time to do it for the railway industry.

TRANSIT Says:

We have to agree with C.R. that this is the time to start considering the future of the railway industry. But first of all, we want to make it clear that there is a big question that needs to be asked in Malaysia’s railway industry … especially in Peninsular Malaysia. That question is: What do we want our “national railways” to do for us? The various answers to that question comprise what TRANSIT likes to call the “KTM Debate”.

KTMB is in a very tight & confusing situation designed to hamper things as much as possible. In other words, KTMB is caught between the proverbial “rock and hard place”

Decades ago, KTM was a government service (Malayan Railway/Keretapi Tanah Melayu) run through the Ministry of Transport. Not too long ago it was corporatized and turned into a limited company (KTMB) owned by the Ministry of Finance. Administrative oversight for things like major capital purchases are handled by the Ministry of Finance, but KTMB is still nominally under the Ministry of Transport in terms of services provided.

KTMB is also stuck in that it is expected to provide low, “affordable” fares for its intercity, Komuter and ETS services, but does not have enough trains to reach a reasonable economy of scale (and handle the passengers).

Another issue is the corporate structure of KTMB, which has 4 operating “divisions”, namely freight, intercity, Komuter and ETS, as well as a number of minor subsidiaries (a carpark operation, a package delivery operation, etc). ETS was originally planned to be a corporate subsidiary of KTMB but apparently this was shelved due to the first RUM protest.

So what is the future for KTMB?

Well, the first and most obvious thing is that it needs to be in a “state-of-good-repair” with proper facilities and enough trains operating so the major service troubles on KTM Komuter can be dealt with. This is slowly happening.

With that taken care of, the next most important thing is to ensure that services are available to meet with the needs of past, current and future expansions such as:

• past extensions of Komuter service to Tanjung Malim & Batu Caves;
• recent extension of Komuter service to Sg. Gadut, and ETS service to Seremban, as well as;
• any future extensions (ETS to Butterworth) or new expansions (new Komuter-type services in Penang and Iskandar-JB)

That is also being taken care of, although TRANSIT would like to see more investment in rolling stock, service expansion in the Klang Valley (rather than extensions) and better customer service management.

But the above concerns deal mainly with the “state-of-good-repair” and service issues, both of which are actually part of a backlog that KTMB is facing thanks to its corporatization and lack of timely government investment in maintaining and expanding railway services by ensuring that there is enough “rolling stock” (that is, enough trains) for service needs to be met.

Beyond that, KTMB also needs to figure out what its future is going to be in Peninsular Malaysia.

Should KTMB go back to being a government railway service? Should the government and KTMB maintain the status quo (albeit with more regular investment and possibly some additional ‘premium services’)? Or should something more radical be considered for KTM railways?

And of those radical solutions, what should be considered?

• Should KTMB outsource some of its non-core services like the carpark & package delivery to outside operators?
• Should the government require KTMB to turn over the local “Komuter” service to Prasarana (serving the “Klang Valley” from Sg. Buloh to Kajang and Klang to Batu Caves/Selayang) leaving KTM to operate “commuter-type” services with an expanded ETS?
• Should the government spin off the ticketing system to a local “Klang Valley” public transport organizing authority, and encourage contractors to compete & provide services on the existing rail tracks?
• Should the government restructure KTMB to turn it into a Holding Company, like Kumpulan Prasarana Negara Berhad, with ETS, Freight, Komuter and Intercity as its Sdn. Bhd. subsidiaries?
• Should the government do a complete restructuring of KTMB, leaving it as a company that simply owns the railway, stations & wayside systems (power, signalling), leaving the ticketing, rolling stock & actual services for other operators to deal with?
• Or should the government totally privatize KTMB, allow competition, and let the stock market & passengers decide how successful or not KTMB would be?

All of the above options, from the least radical to the most radical, have been tried, with varying degrees of success, in railway systems throughout the world.

In most cases whatever happens the trains still run, people still get from place to place, and the cost of providing service does not increase or decrease that much beyond “inflation”. But in some cases, there are situations where service failures occur … often through deferred maintenance, reduced training, and other forms of cost cutting. And in those cases, the government is required to step in, find & provide alternatives, and sometimes even provide the service themselves, or take over the companies involved.

Now, it stands to reason that whatever solution is chosen for KTMB, the status quo is not working. The expansion of railway track, as C.R. points out, is going to provide new opportunities, both for KTMB and other providers, should they be interested.

So…should they be interested?