Part 1: A reply to Rosli Khan's article titled : Return railway land and assets to KTMB

Part 1: A reply to Rosli Khan's article titled : Return railway land and assets to KTMB

I refer to an article written by Rosli Khan in Free Malaysia Today (FMT) titled "Return railway land and assets to KTMB" [1]. The article that was written by Rosli to be honest, contained some irregularities and distortion of information that needed to be corrected for the benefit of the readers of FMT. 

In his article, Rosli had written that:

Over the years, instead of pursuing the objectives of privatising KTMB operations for better customer service and to reduce government expenditure, the politicians in charge at that time conveniently “privatised” some of the lucrative railway lands under RAC instead.

KL Sentral and Sentul railway land are two prime examples of how railway land located in strategic areas of KL have gone into the private sector’s hands.

Though these two sites are impressive, the developers instead of KTMB, were the ones that raked in massive profits.

The statement above by Rosli is not entirely true. Based on available information in the public domain, the land sales conducted by KTMB for KL Sentral, Bukit Kiara and Sentul lands – valued at almost RM 1 billion – was concluded directly between KTMB and private developers. RAC was NOT involved in the lucrative transaction. The monies from the sale of these prime lands in strategic locations went straight to KTMB. And yet, despite these land sales, KTMB still declared cumulative financial losses year on year. 

Furthermore, although Rosli got it right by mentioning that revenue from ticket sales were increasing yearly, he got it wrong by relating increase in revenue due to increase in demand as per below:

Revenue from ticket sales, even though increasing yearly due to increase in demand, has not been sufficient to pay for the operating expenditure which includes track maintenance, the latter of which, by right, should be borne by RAC which directly owns the assets.

As a matter of fact, overall ridership for KTM Komuter and KTM Intercity has been steadily decreasing since 2010. KTM Intercity has seen a 73% drop in ridership from 2.35 million passengers in 2010 to 618,000 passengers in 2016 http://www.mot.gov.my/en/resources/rail-statistic . Thus the increase in demand as mentioned by Rosli is inaccurate and factually wrong. 

Furthermore, Rosli needs to be honest in his assessment of KTMB and look deeper into his analysis of KTMB to identify what are the problems with this company (KTMB) rather than blame RAC for the failures of KTMB. Just take an example of the financial performance of KTMB and its subsidaries:

1. Despite a 44% increase in revenue from 2010 to 2016, KTMB’s accumulated losses from 2000 to 2015 totalled RM1.87 billion. 

2. These losses are despite the continuous cash injections being pumped in by the government.

3. And almost 60% of revenue goes towards KTMB staff costs.

4. Poor management is also evident in the management of KTMB’s subsidiary companies. Based on 2016 financial statements, three out of four subsidiaries suffered after tax losses. Only Multimodal Freight was profitable, with a RM2.98 million profit from RM74 million in total revenue for 2016. In contrast, KTM Distribution suffered a RM2.25 million loss from RM22.5 million in revenue, KTM Car Park suffered a RM89,195 loss from RM2.8 million in revenue and KTM MMC suffered a RM322,327 loss from RM2.151 million in revenue. 

Rosli in his article also conveniently failed to mention the following important points and action taken by the government to assist KTMB which are:

1. The Railway Network Access Agreement (RNAA) was originally signed between KTMB and RAC on 22 December 2016.  The RNAA is aimed at providing a clear demarcation of roles between RAC as the Rail Asset Owner (overseeing asset maintenance) and KTMB as a Rail Operator (overseeing asset operations). 

2. As part of the Agreement, the government also transferred all of KTMB’s debt and liability in the amount of RM1.763billion to RAC.

3. These steps were taken in order to make KTMB financially secure and focus only on operations, and on providing the best train services for the rakyat.  

Thus, for Rosli to write in his article that:

It is rather unfair that the operating company KTMB, which provides public services, is losing money whereas the assets holding company, RAC, is freely making money on the side, without having the responsibility of any contribution to the rail maintenance costs.

Is clearly misleading and done with bad intent. RAC had absorbed RM 1. 763 billion of KTMB debts when the RNAA was signed and both RAC and KTMB scopes were clearly demarcated as pert the agreement. KTMB's role is to provide the best train services for the rakyat and RAC as the caretaker and business planner to govern and interpret railway assets into valuable property capable of generating continuous income for the Government.

Source [1]: https://www.freemalaysiatoday.com/category/opinion/2020/05/04/return-railway-land-and-assets-to-ktmb/

Part 2: I will write further on how the RAC & KTMB model is not unique in Malaysia but also adopted throughout the world so that readers will have a better understanding on how railway assets and operations are managed in Malaysia.