C A S E

Asian Journal of Case Research 1(2): 163 182 (2008)

Keretapi Tanah Melayu Bhd

MOHANI ABDULa*, YAAKOB IBRAHIMb AND GOH MING HUNc ABSTRACT

The case discusses problems faced by Keretapi Tanah Melayu Berhad (KTMB) in alleviating its revenue. Although several strategies have been introduced like the computerized ticketing and reservation system, introduction of innovative reservation system via telephone, the e-Ticket and the Touch n Go system in reducing the queuing time for passengers, the KTMB still experiencing hefty losses. Besides an acute price-war in the road haulage industry, KTMB also has to compete with the road transport industries for freight and passenger traffic. Hence it needs to identify the problems, taking corrective actions that will enable to lead KTMB back to profitability. Keywords: Freight services, inter-city passenger services, commuter train services.

Keretapi Tanah Melayu Berhad (KTMB) is a private limited company, incorporated and domiciled in Malaysia. The company is wholly owned by the Minister of Finance Incorporated, a corporate body established in Malaysia. The principal activities of KTMB are to operate the railway transportation and the provision of related railway services in Peninsular Malaysia and Singapore. The company operates these activities pursuant to a licence issued by the Minister of Transport. KTMB began its first operation on a 12.8 km stretch between Taiping and Port Weld in 1885. Today, KTMBs rail network spans 1,661 km from Padang Besar (North) to Singapore (South) and to Tumpat (East). KTMB is principally involved in the business of rail transportation operating, maintaining and managing the system to serve its main business segments. However, KTMB also acts as the manager for railway property vested with the Federal Land Commissioner and
Faculty of Economics and Management, University Putra Malaysia Graduate School of Management, Universiti Putra Malaysia *Corresponding author. Email: mohani@econ.upm.edu.my, Phone: 603-89467645
a&c b

INTRODUCTION

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the Railway Asset Corporation and as the Project Manager cum Adviser to the Government for Government funded railway related infrastructure projects. In addition, KTMB through its subsidiaries and associate companies has business interests in parcel distribution, haulage, property, car parks, cargo terminals and fibre optic telecommunications.

KTMB has always been the nations established player in the logistic industry, moving passengers, goods and services throughout the railway network in Peninsular Malaysia and Singapore. Its rail network strategically links and helps to develop the industrial growth centres in the hinterland to the seaports such as Penang Port, Port Klang, Port of Tanjung Pelepas and Tanjung Pagar. It also connects cross-border movements of freight between Singapore, Malaysia and Thailand. KTMBs mission statement is as follows: KTMB is to be competitive and responsive to market needs. KTMB must achieve its goals through a highly trained and motivated workforce using modern technology and process innovation. KTMB must provide reasonable profit and long-term growth to its shareholders.

STRATEGIC ROLES OF KTMB

En. Mohd. Salleh Abdullah, the Managing Director of KTMB remarked, KTMB continues to focus on providing safe, efficient and reliable integrated rail services with greatly improved services for both passengers and goods. KTMB is committed to becoming a respected and significant total land transport solution service provider. In this connection, KTMB has pursued strategies in its core competency areas such as Freight Services, Intercity Passenger Services, Commuter Services and Property. However, its core rail business consists of 3 businesses; namely Passenger Train Services, Commuter Train Services and Freight Services.

Development in the rail sector is only relevant in Peninsular Malaysia. Apart from a short tourist line between Tenom and Kota Kinabalu in Sabah, operated by Sabah Railways, there are no other rail services in East Malaysia. The rail sector in Malaysia can be divided into 3 main areas: Freight Services, Intercity Passenger Services and Urban/Sub-urban Passenger Services. The growth of KTMBs Intercity Passenger Services has largely been overshadowed by the rapid development of toll highways in Malaysia. This situation has led to 164

CHARACTERISTICS OF MALAYSIAN RAIL TRANSPORT

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underinvestment in both coach rolling stocks and better tracks. In order to attract commuters back to rail services, the Malaysian Government has proposed to invest in modernizing the entire rail network in stages. KTMB runs 24 Intercity Passenger Trains daily, consisting of 16 express trains and 8 local trains. In addition, there are 206 Commuter Train Services operated daily between Monday and Friday, 213 services on Saturday and 177 services operated on Sunday and public holidays, which serve 39 stations and halt along the Rawang-Seremban and Sentul-Port Klang sectors (Table 1). KTMB also operates Freights Trains supporting key maritime industry players in international container movement with the launching of containerized Landbridge Services between Klang Valley and Bangkok.
Table 1 Services Provided by KTMB Types of Trains Intercity Commuter No. of Train Services 16 Express trains 8 Local trains 206 Commuter Train Services 213 Commuter Train Services 177 Commuter Train Services Freight 42 Freight Trains Source: KTMB (year: 2002). Frequency of Services Daily Daily Monday to Friday Saturday Daily Sunday and Public holidays

KTMB operates 24 Intercity and Regional Passenger Services nationwide that comprise 10 services along the West-Coast corridor, 12 services on the East-Coast and 2 services transversing from west to east. Currently, the Intercity and Regional Passenger Services account for one third of KTMBs total operating revenue. On Monday, 6 January 2003 in the Yearly Planning and Management meeting, En. Mohd. Salleh commented to En. Azman Shaharbi, the Finance & Administration General Manager of KTMB, We have made lots of improvements in the Intercity Passenger Trains; we have introduced air-conditioned buffet coaches and the new finest class coaches i.e. KTMBs own hotel-on-wheels. Yet, why did the revenue of Intercity Passenger still declining? En. Azman replied, The completion of the North-South Highway Passengers and the operational limitations resulting from the construction of the RawangIpoh Electrified Double Tracking Project have made a great impact on the performance of the Intercity. The situation got worse when the 2 services of the Express Rakyat was suspended in July 2001 and remained non-operational in 2002. He added on further, The cancellation of the day express service, Express Sinaran and the tough economic and market situation which is too intense to 165

INTERCITY PASSENGER SERVICES

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compete with the road transport along the North-South Highway also lead to our losses. The Intercity Passenger Train Services recorded a decrease of 5.28% in revenue to RM68.35 million as compared with preceding year corresponding period revenue. En. Mohd. Salleh, murmurred to himself, Ive been wondering if it is a good move for KTMB to continue with its programme of refurbishing the third class coaches that ply to the East Coast. Then the programme to construct electrified tracks between Ipoh and Rawang, linking the 2 major urban centres of Peninsular Malaysia, i.e - Kuala Lumpur and Ipoh, struck his mind. Electrified train services would be operated between these 2 cities at better frequency and higher speeds. Travelling time is expected to be reduced to 2 hours based on a route speed of 160 kmph. The new travel times and frequencies would make rail travel between Kuala Lumpur and Ipoh more economical, viable and practical. However, he wondered whether KTMB would be able to compete in the transportation market. En. Azman said confidently, KTMB will continue its effort to turn rail travel as a preferred mode of public transportation. With the completion of the Rawang-Ipoh Double Tracking Project, further improvement would be made on the quality of services in terms of speed and reduced the travel time with smooth and comfortable journey. The provision of public amenities such as lengthening of platforms, facilities for the disabled, additional seating facilities at stations and directional signage will be our priority. The passenger traffic statistics of KTMB are shown in Appendix A. In facing the challenging circumstances, some measures have been implemented to enhance its operational efficiency and quality of customer service. Among the efforts that had been made were the improvements in the computerized ticketing and reservation system and the introduction of innovative reservation system via telephone, e-mail and website which is known as e-Ticket. The e-Ticket is an alternative method of purchasing train tickets via Internet, especially popular among tourists and students. Another important development of Intercity Passenger Services was the opening of the Sentral Station in Kuala Lumpur on 16 April 2001. The Sentral Station is equipped with modern facilities and it is an integrated transportation hub in the city where the Express Rail links trains to KL International Airport (ERL), STAR Light Rail Transit, Putra Light Transit, KL Monorail, KTMB Commuter Services and KTMB Intercity Passenger Services Converge. The Visit Malaysia Rail Pass was relaunched in September 2002, to attract foreign tourists to travel by rail during their vacation in Malaysia. Several promotional activities were carried out throughout the country. Joint promotions and strategic alliance with the players in the tourism industry such as tour agencies and hotels were also held to promote rail services for travel to various tourist destinations. One such joint venture was launched in September 2002 between KTMB and Impiana Hotel, which operates a chain of hotels in Malaysia 166

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and Singapore. To further increase KTMBs participation in tourism industry, Intercity Passenger Services were promoted at several exhibitions and travel marts such as the NATAS Travel Fair/Discovery Malaysia/Lets Go Malaysia in Singapore and the MATTA Travel Fair/Domestic Travel/Cuti-Cuti Malaysia Road Show in Kuala Lumpur. As explained by En. Mohd. Salleh Abdullah in the last meeting, as part of the efforts to upgrade quality-services to meet customer satisfaction, KTMB had invested in improving its facilities at various stations and its on-board trains. KTMBs participation in the Hari Bertemu Pelanggan and the Smile Campaign were some of the examples of KTMBs commitment towards forging better customer and public relations. Additionally, several in-house training programmes, seminars and workshops had been conducted throughout the year.

Since the Commuter Service started operation on the 3 August 1995, approximately 212 trains operates daily serving 40 stations and halts along the Rawang-Seremban and Sentul-Port Klang lines. The Commuter System ferries 65,000 passengers daily. Commuter rider-ship peaked in 1998 because of the Commonwealth Games. KTM Commuter Services have become an increasingly popular mode of travel in the Klang Valley. It provides reliable and convenient suburban commuting, with comfortable and spacious air-conditioned coaches and in some areas, providing seamless integration with other existing Klang Valley rail operators such as PUTRA LRT and STAR LRT and also ERL as well as the KL Monorail. The extensions of commuter service that have been planned for the future are as follows: Sentul to Batu Caves (7 km) by 2005 Rawang to Tanjung Malim by 2005 A rapid train service will also be added from Rawang to Ipoh by 2005.

COMMUTER TRAIN SERVICES

In 2002, the Commuter Services achieved a record revenue of RM50.2 million since it was launched. Rider-ship had increased by 7.7% from RM20.9 million in 2001 to RM22.5 million in 2002. Situated in the central of business district, the Commuter Services have minimized walking distances to less than 500 meters to either shopping complexes or private and public offices located within the vicinity stations. In line with the Governments objective to enhance the integration of public transportation system in Klang Valley, KTMB Commuter has implemented the Touch n Go system whereby a prepaid electronic purse system for payment of low value high volume transactions that will reduce queuing time for passengers buying tickets from the counters or the ticket vending machines. 167

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KTMB operates approximately 42 freight trains daily with a primary focus on the maritime container market. The maritime container market is diversified with a mixture of goods being shipped by containers. In addition, the Government finances railway links to strategic ports giving rail a competitive advantage. As reported by En. Azman Shaharbi in the meeting, the haulage of freight by train, especially of bulk commodities is more cost-effective than by any other modes of transport. KTMB sees a future in container traffic and is gearing towards capturing a major slice of the container business. One of the moves towards capturing the container business is rendering the Landbridge Freight Services between Port Klang, Butterworth and Bangkok. Moving forward, KTMB also aims to effectively position its freight services locally and regionally through a concerted marketing strategy. Greater efforts have been made towards meeting customers needs and requirements with a view to forging effective customer relations and business partnerships. The Freight Division remained as the major contributor to KTMBs total revenue in 2002. This was achieved against a backdrop of operational limitations in the form of the daily 10 hours line block imposed throughout the year under review because of the Rawang-Ipoh Electrified Double Tracking project. In terms of product segmentation, both the Domestic Container and Landbridge Freight Services remained as the main source of revenue, which recorded a combined percentage of 60% of the total freight revenue. This was followed by Cement Cargo Services (20%) and other services such as Food, Chemicals and Bulk Cargoes (20%). In order to expand the revenue base for freight, KTMB has acquired 195 new Bogie Container Flats (BCF) from a local manufacturer, MMC Engineering Sdn Bhd, to boost its haulage capacity. In a continuous innovative programme, KTMB had also acquired 55 Bogie Reefer Flats (BRFs) and 2 Power Generating Cars (PFCs). The inclusion of the refrigerated wagons into its fleet marked the introduction of a new innovative freight service enabling goods, such as foodstuff and electronic perishable items, to be transported in refrigerated containers.

FREIGHT SERVICES

En. Mohd. Salleh Abdullah expressed his dissatisfaction with the financial results of KTMB as presented by En. Azman Sharbi in the meeting. The financial results of KTMB have not shown much improvement, but continued to face losses and we might miss our yearly bonus in the future. Deep in his thoughts, it would be worst if he was fired. However, according to En. Azman Shaharbi, the Finance & Administration General Manager of KTMB, KTMB Group managed to reduce its losses from RM163 million in 2001 to RM125 million in 2002, but 168

KTMBS FINANCIAL HIGHLIGHTS

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the Group turnover declined from RM382 million in 2001 to RM364 million in 2002. He also added that the operating revenue was expected to decrease largely due to the loss from freight services during the construction period of the Rawang-Ipoh Double Tracking Project. Losses from railway operations were expected to increase mainly due to the reestablishment of deferred maintenance of rolling stock and railway infrastructure. KTMB was facing funding shortfall as a result of deferred operating expenditure in addition to loan repayments and capital expenditure. En. Azman Shaharbi also explained that KTMB remained severely undercapitalized and over-leveraged. Revenue was recognized when it was probable that the economic benefits associated with the transaction would flow to the enterprise and the amount of the revenue could be measured reliably. Table 2 depicts the revenues for the financial years 1998 up to 2002 for Intercity Passenger Services, Freight Services, Property and Commuter Train Services; while Table 3 depicts the volume of freight handled by KTMB for these financial years.
Table 2 Revenue Analysis by Strategic Business Units (RM Million) Financial Year 2002 2001 2000 1999 1998 Intercity 68.36 72.16 75.34 78.2 83.21 Freight 97.16 101.9 94.76 75.15 71.83 Property 31.5 30.41 42.2 28.36 32.38 Commuter 49.76 45.68 39.45 38.91 41.61

Source: KTMB Annual Report Year 2002. Table 3 Volume of Freight Handled by KTMB (Million tonne) Financial Year 2002 2001 2000 1999 1998 Volume of Freight 3.8 4.15 5.48 4.49 4.35

Source: KTMB Annual Report Year 2002.

En. Mohd. Salleh further questioned, Why did the Groups turnover decline from RM382 million in 2001 to RM364 million in 2002? He was a bit surprised when he saw the accounts which were handed by En. Azman Shaharbi (Revenue at the Group and the Company level is shown in Table 4). 169

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En. Azman Shaharbi then replied, Oh, this is due to the reduction in revenue mainly from the Intercity and Freight Services. There is an acute price-war in the road haulage industry and this has adversely affected the Groups haulage business, operates by KTMBs subsidiary, Multimodal Sdn Bhd. Further, he added that at the Company level, there was a significant reduction in the net loss from RM189 million in 2001 to RM141 million in 2002. This improvement was achieved despite the slight reduction in revenue from RM278.9 million in 2001 to RM278.6 million in 2002 as shown in Table 5.
Table 4 Revenue at the Group and Company Level for the Financial Year 2000, 2001 and 2002 (RM) Group 2002 Freight service 2001 2000 2002
97,155,135 150,796,388 160,711,324 160,919,277

Company 2001
101,907,682

2000
94,763,382

Passenger & commuter 115,445,745 115,553,932 112,678,462 115,445,745 115,553,932 112,678,462 services Property rental Parcel & mail services Sales of developments properties Claims from the Government for uneconomic Services Total
34,353,562 15,161,376 17,657,608 31,280,417 32,862,941 13,876,781 31,159,338 28,387,760 44,387,354 13,830,247 17,985,689 32,139,648 2,667,684 31,280,417 30,792,592 2,280,842 28,387,760 42,218,177 2,109,128 17,985,689

364,695,096 382,552,076 349,801,029 278,688,629 278,922,808 269,754,838

Source: KTMB Annual Report Year 2002. Table 5 Consolidated Income Statements for Financial Year 2000, 2001 and 2002 2002 Revenue Other operating income Construction cost recognised as expense Changes in inventories Staff costs Depreciation Fuel and energy Other operating expenses Loss from operations 364,695,096 53,774,914 -7,664,222 -8,870,782 -175,514,436 -69,385,993 -34,159,907 -198,908,650 -76,033,980 2001 382,552,076 53,806,885 -12,850,943 13,089,267 -168,156,191 -64,573,545 -34,834,333 -280,994,583 -111,961,367 2000 349,801,029 34,307,773 12,419,895 -152,950,327 -65,082,645 -32,298,112 -203,672,060 -57,474,447

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Keretapi Tanah Melayu Bhd Finance costs, net Share of profits/(losses) of associates Profit/(loss) before taxation Taxation Subsidiaries Associates Net profit/(loss) from ordinary activities Minority interest Net profit/(loss) for the year Source: KTMB Annual Report Year 2002. -51,565,051 7,203,705 -120,395,326 -4,866,960 (2,555,542) (2,311,418) -125,262,286 11,162 -125,251,124 -55,496,532 15,381,941 -152,075,958 -11,128,867 (8,355,852) (2,773,015) -163,204,825 25,823 -163179002 -27,349,014 7,699,738 -77,123,723 -5,646,251 -82,769,974 20,600 -82,749,374

The demand for rail passenger transportation services as explained by En. Azman Shaharbi is chiefly determined by income level, i.e. GDP per capita. In this regard, AGN Research Associates Sdn Bhd has been hired to analyze the relationship between economic growth and passenger rail demand. A 30-year time-series data (from 1970 to 2000) on total passengers by service class was used to compute the growth of KTMBs rail passenger traffic. This series was regressed against growth of GDP to obtain the required elasticity estimates. The demand elasticities are presented in Table 6.
Table 6 Rail Passenger Demand Elasticity, GDP Growth Rate and GDP per Capita 1970 1980 First class Second class Third class GDP growth rate 0.1105 1.2821 0.1612 8.3 1980 1990 1.2147 1.1147 - 0.4335 NA RM 6,770.07 1990 2000 0.0136 1.0000 - 1.0719 NA RM 9,180.45 1970 2000 0.1282 1.1766 - 0.2096 NA NA

DEMAND FOR RAIL PASSENGER TRANSPORTATION

GDP per capita at the beginning RM 3,903.65 period (2000 constant prices) Source: AGN Research Associates Sdn. Bhd.

Table 7 provides the expected rail passenger demand elasticity for all categories of rail services. The elasticity is assumed to linearly decrease over time and reaches the specified elasticity in the year 2037. GDP per capita is forecasted to increase to RM75,980 in the year 2037.

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Asian Journal of Case Research (AJCR) Table 7 Forecast of Rail Passenger Demand Elasticity and GDP per Capita for 2000 and 2037 2000 First class Second class Third class GDP per capita at the beginning period (2000 constant prices) Source: AGN Research Associates Sdn. Bhd. 0.0136 1.000 - 1.0719 RM 17,135 2037 0.001 0.2000 - 1.5000 RM 75,980

A summary of the forecast of rail passenger traffic (without Double Tracking Project) is presented in Table 8.
Table 8 Forecast of Rail Passenger Traffic for Selected Years from 2001 2037 2001 First class Second class Third class Total 91,507 1,681,868 1,972,697 3,746,072 2011 92,292 3,158,211 819,373 4,069,877 2021 92,752 4,767,652 354,571 5,214,974 2037 92,983 6,560,854 97,367 6,751,204

Source: AGN Research Associates Sdn. Bhd.

It was also noted that income and population are among the most important determinants of demand for transport. Thus, in forecasting rail passenger traffic, one must be able to forecast the gross domestic product (GDP) and the increase in the population size of the market. Table 9 and Table 10 provide the Annual Growth Rate Assumptions for Peninsular Malaysia for year 2001 to 2037 and population targets under the 70 Million Population Policy respectively. In deriving the growth prospects for the Peninsular Malaysian economy, the following considerations had been taken into account:

DETERMINANTS OF DEMAND FOR INTERCITY PUBLIC TRANSPORT IN MALAYSIA

The Third Outline Prospect Plan, OPP3 (2001-2010) has forecasted that the Malaysian economy will grow at 7.5 % p.a for the 10-year period of year 2001 2010. The Vision 2020 forecast of GDP growth for the year 2001-2020 is 7.0 % a year.

Hence, the annual growth rate assumptions for the Peninsular Malaysian economy, under 3 different scenarios are shown in Table 9. The baseline scenario 172

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contains the growth forecasts that are most likely to be obtained by the Peninsular Malaysia economy. On the basis of the record of the Malaysian Government management of the economy and taking into account of the current policy initiatives, the growth rates postulated in the baseline scenario appear to be attainable. In the baseline case, the growth rate of 7.5 % a year is assumed for the years 2001-2010 is the OPP forecast.
Table 9 Annual Economic Growth Rate Assumptions for Peninsular Malaysia, 2001 2037 Period 2001 2010 2011 2020 2021 2037 Low (%) 7.0 6.0 5.0 Baseline (%) 7.5 6.5 5.5 High (%) 8.0 8.0 7.0

Source: For 2001 2010, The Third Outline Perspective Plan, for 2011 2037, Percetakan Nasional Malaysia Berhad, AGN Research Associates Sdn. Bhd.

The most ambitious population forecast for Malaysia was made in 1982, the Seventy Million Policy (70 MPP). According to the 70 MPP, Malaysia would achieve a total population of 70 million in the year 2100. Thus, the population implied by the 70 MPP for a few selected years is shown in Table 10. Since the annual growth rates implied by the 70 MPP appears fairly accurate and similar to those assumed in the OPP3, these figures can be used to forecast Malaysias population for the period 2001-2037. Table 11 provides the estimated population of Malaysia for this period.
Table 10 Population Targets Under the 70 Million Population Policy Year 1990 2000 2010 2020 2030 2040 Population Size (Million) 17.6 22.6 27.7 33.6 39.8 46.0

Source: Tey Nai Peng (1991) The Malaysian Population Policy Setting for Development Planning in Malaysia Working Paper presented at the Training Workshop on Population, Human Resources and Development Planning, 2 13 May 1991.

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Asian Journal of Case Research (AJCR) Table 11 Population Growth Rates of the 70 Million Population Policy Year 2001 2010 2011 2020 2021 2030 2031 2040 Annual Growth Rate (per cent) 2.06 1.95 1.71 1.46

Source: AGN Research Associates Sdn. Bhd.

The actual population size in the year 2000 was 22.2 million. This indicates that the forecast of the 70 MPP was fairly accurate up to year 2000 (with a 2 % error margin). Using the above figures and assuming exponential growth provides the annual growth rates of population for Malaysia. These are shown in Table 12.
Table 12 Forecast of Population in the Year 2001-2037 Year 2001 2010 2020 2030 2037 Malaysia 22.7 27.2 33 39.1 43.3 Peninsular Malaysia 18.1 21.7 26.4 31.3 34.6 Annual Growth Rate (%) 2.06 2.06 1.95 1.71 1.46

Source: AGN Research Associates Sdn. Bhd.

The fare rate for KTMB Intercity Passenger Services is Government regulated and is based on the distance between originating and destination stations, class offered and supplementary charges. Table 13 summarizes the fare rates and supplementary charges for the year 2003.

INTERCITY PASSENGER SERVICES PRICING MODEL

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Keretapi Tanah Melayu Bhd Table 13 Intercity Passenger Fare Rates for the Year 2003 Class 1 Class
st

Fare Rates (RM per km) 0.1500 0.0650 0.0369

2 Class
nd rd

3 or Economy Class

SUPPLEMENTARY CHARGES FOR INTERCITY PASSENGER SERVICES Supplementary Charge Lower berth 1 Class Air-conditioned
st

RM per Pax 30.00 20.00 14.00 11.50 4.00 4.00

Upper berth 1 Class Air-conditioned

st

Lower berth 2 Class Air-conditioned

nd

Upper berth 2nd Class Air-conditioned Express Seater Air-conditioned coach Source: KTMB 2002.

COMPETITION WITH INTER-CITY PASSENGER SERVICES Comparison between Rail and Road Network
The investment in transport has provided Peninsular Malaysia with a diversified and extensive transport system in which the road network is most important. Because of the location pattern of economic activity and population, much of the transport infrastructure, including the KTMB network is located on the west coast of Peninsular Malaysia. The alignment of transport infrastructure means that KTMB has to compete with the road transport industries for freight and passenger traffic. As commented by En Azman Shaharbi during the meeting, the road transport industries are the most pervasive source of competition to the services of KTMB. Further, train speeds on the KTMB network are low. Journey and haulage times on the KTMB thus compared unfavourably with those of road transport. As reasoned by him, this could be due to some problems. Firstly, KTMB was essentially a single-tracked system which resulted in frequent line blocks and secondly, the technical limitations on train speed on account of track alignment on the nonelectrification of the rail network. Shortages of resources such as locomotives and crews were also contributory factors for the low average train speeds. The constraints of narrow 1 meter track gauge (width of railway track is 1 meter) and old rolling stock limited the route speed for freight services. However, in comparison to the road network, the market coverage for the KTMB network 175

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was restricted and from technical perspectives such as train speed, KTMB had its shortcomings as compared to road transport. In the meantime, KTMB also had some advantages over the road transport industries in terms of the socio-economic benefits such as the number of road accidents and pollution. Table 14 summarizes the Road and Rail Network Statistics in Peninsular Malaysia for the year 2000.
Table 14 Table of Rail and Road Network of Peninsular Malaysia for the Year 2000 Size of Network Road Total Road Network 49,137 km Motorcars Motorcycles Taxis Buses Goods Vehicles Other Vehicles Rail - Total railway network 1700 km Locomotives Freight Wagons Passenger Cars Source: KTMB 2002. 64 3,549 208 3,705,888 4,985,149 59,196 40,358 536,189 248,622

Road Network

In the past decade, the road network had expanded by 8,100 km, from just over 41,000 km in 1990 to slightly more than 49,000 km in 2000. The most important component of the countrys road system is the 864 km 2/3 lane North-South Expressway (NSE), which stretches from Bukit Kayu Hitam on the Thai border to Johore Bahru in the South. All the major economic centres are linked to one another and to the ports by a network of good roads. The rural and outlying areas are also connected to the main inter-urban road grid. The federal and state roads in the country together with the privatized roads thus constitute an extensive and nation-wide road system for Peninsular Malaysia. The average speeds on the roads are quite high due to the double-carriageway and triple-carriage-way roads. Maximum permissible speed for motorcars are between 90 to 120 kilometres per hour; whilst for buses and trucks, the corresponding range is 80 to 90 kilometres per hour.

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With growing affluence and booming local automobile industry, the automobile population in Kuala Lumpur has increased very rapidly over recent years. The significant increase in vehicle ownership coupled with declining public transport usage has resulted in an inefficient and ineffective utilization of road space in the city. The situation is further aggravated by the fact that many of the roads and intersections built in the city during the earlier days were not well planned and too narrow to accommodate the increasing volume of traffic, resulting in severe traffic congestion during peak hours. The overall total vehicles using highways under Malaysian Highway Authoritys (MHA) supervision until December 2001 increased from 640 million vehicles to 700 million vehicles. The growth percentage of the total vehicles travelling along the expressway tolls in 2001 as compared to the year 2000 was 9%. This shows that there was an increase in the growth percentage of vehicles between year 2000 to year 1999 by 17%. The increasing number of vehicle usage in Malaysia also contributed to the increasing number of road accidents, especially during festive seasons. As in 2002, total road accidents occurred were 279,641 with 5,886 deaths compared to 1996 with 189,109 road accidents.

Rail Network

The rail network in Peninsular Malaysia is about 1,700 km in length. KTMBs track infrastructure is a narrow-gauge system. As presented by En. Mohd. Salleh in the last meeting, being only 3% the size of the road system, the market outreach of KTMB in comparison to road transport, is very small. The main segment of the KTMB network is the 785 km west coast line from Butterworth to Tanjung Pagar in Singapore. KTMB network links 4 of the 5 principal ports with their respective hinterlands, the only exception being Kuantan Port.

Other Passenger Road Transports

There are 67 bus companies operating and offering inter-city and urban passenger services to almost all destinations throughout Peninsular Malaysia. The following are examples of bus companies providing passenger services in Peninsular Malaysia: i. ii. iii. iv. Park May Berhad Plusliner & NiCE Ekspres Nasional Berhad Foh Hup Omnibus North / South destinations. Luxury express bus service. All destinations. North destinations, etc.

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There were 6 taxi companies, which are in operation serving the North, South, East Coast of Peninsular Malaysia and Genting Highlands as their destinations for passenger services. The following are some examples of taxi companies, which are in operation: i. Persatuan Pemandu Teksi Bahagian Utara Serves North destinations Serves South destinations Serves East Coast destinations, etc.

ii. Persatuan pemandu Teksi Selatan iii. Persatuan Pemandu Teksi Pantai Timur

As requested by En. Mohd. Salleh in their last meeting, En. Azman Shaharbi presented some ticketing prices for express bus compared to ticketing prices for intercity passenger services to the Board of Directors (Appendix B). En. Zakaria, the Head of Malaysian Centre for Transport Studies (Mactrans) commented, I think we should focus our strategy to the targeted customers and tailor our strategy to match with their needs and expectations. We have to do something, otherwise we are going to lose the battle. En. Mohd. Salleh paused and looked straight into En. Azmans face. Azman, do you have any idea how to attract more people to use our service? Definitely we have to offer better service for their money. We have to provide quality service, but ... unfortunately, we do not have enough employees. The number of employees in the Group was only 5073 at the end of financial year 2002 and 5053 for the Company. En. Azman replied We have done our best in equipping our officers and staff. En. Mohd. Salleh recalled. Several in-house training programmes, seminars and workshops have been conducted throughout the year in ensuring our officers and staff are kept abreast of the latest information, knowledge and developments in rail operations, business management and customer service. With regards to total number of employees .. En. Mohd. Salleh paused and continued, How are we going to hire more employees with the current financial situation?

EXAMPLES OF TICKETING PRICES FOR INTERCITY PASSENGER SERVICES AND EXPRESS BUS TICKETS

On Monday 6 January 2003, at 4.00 pm, the Board of Directors and the Senior Management Team of KTMB were almost at the end of the Yearly Planning and Management Meeting for the new Financial Year 2003, when En. Mohd Salleh said in closing of the meeting, We are now at the crossroads where we have to 178

ACTIONS TO BE TAKEN

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make serious decisions as to which path to take in order to bring KTMB back to profitability. We have gone through in detail KTMBs financial standing and operations matters and the transportation industry today and we all know where KTMB stands financially today. And KTMB financial future does not look good. En. Zakaria said, Rapid and efficient service is an important criterion for any public transportation system, particularly rail service. With a good road system, cars and buses tend to travel faster than trains. If KTMB wants to reduce its losses, it has to offer better and efficient service, including faster travel time. At this point, the Chairman, Y.Bhg. Tan Sri Dato Thong Yaw Hong said, It is now early January 2003, I have been analyzing the financial reports as a whole and I am very concerned on the hefty losses. The problems could be more severe and complex than what Zakaria thinks that only by offering better service, including faster travel time, can KTMB improve its performance. He then looked at En. Mohd. Salleh and said, I want you to resolve this problem by identifying the issues and then sourcing for a comprehensive and integrated solution to lead KTMB back to profitability.

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APPENDIX A
KTMB INTERCITY PASSENGER STATISTICS FOR THE YEAR 1980 2002. Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Passenger Journeys 1st. Class 43,212 43,085 38,699 38,387 48,531 73,544 86,747 89,882 111,894 121,249 137,061 143,277 178,879 162,802 123,864 112,722 130,135 133,326 111,835 96,976 91,414 89,937 88,241 2nd Class 1,042,989 1,080,680 1,178,205 1,177,703 1,552,007 1,705,904 1,876,076 1,764,243 1,925,967 1,435,246 1,211,918 1,230,410 1,650,168 2,100,563 1,785,362 1,776,903 2,000,074 1,905,138 1,962,183 1,607,709 1,564,528 1,466,865 1,468,162 3rd. Class 5,980,962 6,232,040 5,899,951 5,425,546 5,033,225 4,576,554 4,772,412 4,717,107 5,246,795 6,997,175 6,670,371 6,649,410 5,785,447 4,246,762 3,516,695 3,256,329 3,722,080 3,337,135 2,849,787 2,639,717 2,145,151 1,953,197 1,880,718 Total 7,067,163 7,355,805 7,116,855 6,641,636 6,633,763 6,356,002 6,735,235 6,571,232 7,284,656 8,553,670 8,019,350 8,023,097 7,614,494 6,510,127 5,425,921 5,145,954 5,852,289 5,375,599 4,923,805 4,344,402 3,801,093 3,510,000 3,437,121

Source: KTMB 2002.

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APPENDIX B
TRANSPORTATION VIA TRAIN Ticketing Prices for Ekspres Langkawi from Kuala Lumpur to Alor Setar. Berth Coach Type ADNFB (Premier Night Standard) ADNS (Superior Night) AEC (Economy) ASC (Superior) Upper (RM) Seat

Lower (RM) Windows (RM) Aisle (RM) 20.00 35.00 11.00 20.00 -

Adult Child Adult Child Adult Child Adult Child 89.00 54.00 97.00 62.00 43.00 28.00 48.00 33.00 -

20.00 11.00 35.00 20.00

Origin Destination Train Name

: TUMPAT : SENTRAL KUALA LUMPUR : EKSPRES WAU Berth Seat

Coach Type ADNFB (Premier Night Standard) ADNS (Superior Night) AEC (Economy) AFC (Premier) ASC (Superior)

Upper (RM)

Lower (RM) Windows (RM) Aisle (RM) 29.00 84.00 39.00 16.00 44.00 22.00 -

Adult Child Adult Child Adult Child Adult Child 98.00 58.00 106.00 66.00 47.00 30.00 52.00 35.00 -

29.00 16.00 84.00 44.00 39.00 22.00

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Asian Journal of Case Research (AJCR) Ticketing Prices for Some Intercity Trains from Central Kuala Lumpur to Johor Bahru. Train Name Coach Type ADNFD (Premier Night Deluxe) ADNS (Superior Night) AEC (Economy) ASC (Superior) EPLUS (Economy PLUS) AFC (Premier) ASC (Superior) EPLUS (Economy PLUS) EKSPRES SENANDUNG MALAM Berth Upper (RM) 106 Adult Child Adult Child Adult 78.00 126.00 98.00 18.00 29.00 20.00 64.00 33.00 22.00 28.00 81.00 38.00 37.00 25.00 42.00 30.00 Seat Aisle (RM) Adult Child Child 11.00 17.00 13.00 36.00 21.00 15.00 15.00 43.00 21.00 Lower (RM) Windows (RM)

18.00 11.00 29.00 17.00 20.00 13.00 64.00 36.00 33.00 21.00 22.00 15.00 -

EKSPRES RAKYAT

EKSPRES WAU ADNFB (Premier Night Deluxe) 95.00 57.00 103.00 65.00 ADNS (Superior Night) AEC (Economy) AFC (Superior) ASC (Superior) 46.00 29.00 51.00 34.00 -

28.00 15.00 81.00 43.00 38.00 21.00

APPENDIX C
TRANSPORTATION VIA BUS The Fare for One Way Trip from Kuala Lumpur to Some Major Cities by Some Express Buses. Bus Company Damai Ekspres Sdn Bhd Destination Johor Bahru Kota Bahru Alor Setar Johor Bahru Kota Bahru Alor Setar Johor Bahru Kota Bahru Alor Setar Adult (RM) 24.00 34.00 30.00 24.00 34.00 30.00 24.00 30.90 30.10 Child (RM) 24.00 34.00 30.00 24.00 34.00 30.00 12.00 15.45 15.05

Selat Keris Sdn Bhd

Transnasional

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