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AUGUST 18 , 2000 VOL. 26 NO. 32 | SEARCH ASIAWEEK 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@web.asiaweek.com
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