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C A S E

5
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.

INTRODUCTION
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, KTMB’s 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


a&c

b
Graduate School of Management, Universiti Putra Malaysia
*Corresponding author. Email: mohani@econ.upm.edu.my, Phone: 603-89467645

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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.

STRATEGIC ROLES OF KTMB


KTMB has always been the nation’s 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.
KTMB’s 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.

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.

CHARACTERISTICS OF MALAYSIAN RAIL TRANSPORT


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 KTMB’s Intercity Passenger Services has largely been overshadowed by
the rapid development of toll highways in Malaysia. This situation has led to

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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 No. of Train Services Frequency of Services


Intercity 16 Express trains Daily
8 Local trains Daily
Commuter 206 Commuter Train Services Monday to Friday
213 Commuter Train Services Saturday
177 Commuter Train Services Sunday and Public holidays
Freight 42 Freight Trains Daily
Source: KTMB (year: 2002).

INTERCITY PASSENGER SERVICES


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 KTMB’s 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. KTMB’s 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 Rawang-
Ipoh 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

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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, “I’ve 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

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and Singapore. To further increase KTMB’s participation in tourism industry,


Intercity Passenger Services were promoted at several exhibitions and travel
marts such as the NATAS Travel Fair/Discovery Malaysia/Let’s 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. KTMB’s participation in the “Hari Bertemu Pelanggan” and the “Smile
Campaign” were some of the examples of KTMB’s commitment towards forging
better customer and public relations. Additionally, several in-house training
programmes, seminars and workshops had been conducted throughout the year.

COMMUTER TRAIN SERVICES


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.

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 Government’s 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.

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FREIGHT SERVICES
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 KTMB’s 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 (BRF’s) and 2 Power Generating
Cars (PFC’s). 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.

KTMB’S FINANCIAL HIGHLIGHTS


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

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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 Intercity Freight Property Commuter


2002 68.36 97.16 31.5 49.76
2001 72.16 101.9 30.41 45.68
2000 75.34 94.76 42.2 39.45
1999 78.2 75.15 28.36 38.91
1998 83.21 71.83 32.38 41.61
Source: KTMB Annual Report Year 2002.

Table 3  Volume of Freight Handled by KTMB (Million tonne)

Financial Year Volume of Freight


2002 3.8
2001 4.15
2000 5.48
1999 4.49
1998 4.35
Source: KTMB Annual Report Year 2002.

En. Mohd. Salleh further questioned, “Why did the Group’s 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).

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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 Group’s haulage
business, operates by KTMB’s 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 Company
2002 2001 2000 2002 2001 2000
Freight service 150,796,388 160,711,324 160,919,277 97,155,135 101,907,682 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 34,353,562 32,862,941 44,387,354 32,139,648 30,792,592 42,218,177

Parcel & mail services 15,161,376 13,876,781 13,830,247 2,667,684 2,280,842 2,109,128

Sales of developments 17,657,608 31,159,338 - - - -


properties
Claims from the 31,280,417 28,387,760 17,985,689 31,280,417 28,387,760 17,985,689
Government for
uneconomic Services
Total 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 2001 2000


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

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Finance costs, net -51,565,051 -55,496,532 -27,349,014


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

DEMAND FOR RAIL PASSENGER TRANSPORTATION


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 KTMB’s 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 1980 – 1990 1990 – 2000 1970 – 2000


First class 0.1105 1.2147 0.0136 0.1282
Second class 1.2821 1.1147 1.0000 1.1766
Third class 0.1612 - 0.4335 - 1.0719 - 0.2096
GDP growth rate 8.3 NA NA NA
GDP per capita at the beginning RM 3,903.65 RM 6,770.07 RM 9,180.45 NA
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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Table 7  Forecast of Rail Passenger Demand Elasticity and GDP per Capita for 2000 and 2037

2000 2037
First class 0.0136 0.001
Second class 1.000 0.2000
Third class - 1.0719 - 1.5000
GDP per capita at the beginning period (2000 constant prices) RM 17,135 RM 75,980

Source: AGN Research Associates Sdn. Bhd.

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 2011 2021 2037


First class 91,507 92,292 92,752 92,983
Second class 1,681,868 3,158,211 4,767,652 6,560,854
Third class 1,972,697 819,373 354,571 97,367
Total 3,746,072 4,069,877 5,214,974 6,751,204
Source: AGN Research Associates Sdn. Bhd.

DETERMINANTS OF DEMAND FOR INTERCITY PUBLIC


TRANSPORT IN MALAYSIA
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:
• 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

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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 Low (%) Baseline (%) High (%)


2001 – 2010 7.0 7.5 8.0
2011 – 2020 6.0 6.5 8.0
2021 – 2037 5.0 5.5 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 Malaysia’s
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 Population Size (Million)


1990 17.6
2000 22.6
2010 27.7
2020 33.6
2030 39.8
2040 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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Table 11  Population Growth Rates of the 70 Million Population Policy

Year Annual Growth Rate (per cent)


2001 – 2010 2.06
2011 – 2020 1.95
2021 – 2030 1.71
2031 – 2040 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 Malaysia Peninsular Malaysia Annual Growth Rate (%)


2001 22.7 18.1 2.06
2010 27.2 21.7 2.06
2020 33 26.4 1.95
2030 39.1 31.3 1.71
2037 43.3 34.6 1.46
Source: AGN Research Associates Sdn. Bhd.

INTERCITY PASSENGER SERVICES PRICING MODEL


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.

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Table 13  Intercity Passenger Fare Rates for the Year 2003

Class Fare Rates (RM per km)


1 Class
st
0.1500
2 Class
nd
0.0650
3 or Economy Class
rd
0.0369

SUPPLEMENTARY CHARGES FOR INTERCITY PASSENGER SERVICES

Supplementary Charge RM per Pax


Lower berth 1 Class Air-conditioned
st
30.00
Upper berth 1 Class Air-conditioned
st
20.00
Lower berth 2 Class Air-conditioned
nd
14.00
Upper berth 2nd Class Air-conditioned 11.50
Express Seater 4.00
Air-conditioned coach 4.00
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 non-
electrification 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

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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 3,705,888
Motorcycles 4,985,149
Taxis 59,196
Buses 40,358
Goods Vehicles 536,189
Other Vehicles 248,622

Rail - Total railway network – 1700 km


Locomotives 64
Freight Wagons 3,549
Passenger Cars 208

Source: KTMB 2002.

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 country’s 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-carriage-
way 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
Authority’s (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. KTMB’s
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. Park May Berhad – North / South destinations.
ii. Plusliner & NiCE – Luxury express bus service.
iii. Ekspres Nasional Berhad – All destinations.
iv. Foh Hup Omnibus – 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
ii. Persatuan pemandu Teksi Selatan – Serves South
destinations
iii. Persatuan Pemandu Teksi Pantai Timur – Serves East Coast
destinations, etc.

EXAMPLES OF TICKETING PRICES FOR INTERCITY


PASSENGER SERVICES AND EXPRESS BUS TICKETS
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. Azman’s 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?”

ACTIONS TO BE TAKEN
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

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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 KTMB’s 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.

Passenger Journeys
Year
1st. Class 2nd Class 3rd. Class Total
1980 43,212 1,042,989 5,980,962 7,067,163
1981 43,085 1,080,680 6,232,040 7,355,805
1982 38,699 1,178,205 5,899,951 7,116,855
1983 38,387 1,177,703 5,425,546 6,641,636
1984 48,531 1,552,007 5,033,225 6,633,763
1985 73,544 1,705,904 4,576,554 6,356,002
1986 86,747 1,876,076 4,772,412 6,735,235
1987 89,882 1,764,243 4,717,107 6,571,232
1988 111,894 1,925,967 5,246,795 7,284,656
1989 121,249 1,435,246 6,997,175 8,553,670
1990 137,061 1,211,918 6,670,371 8,019,350
1991 143,277 1,230,410 6,649,410 8,023,097
1992 178,879 1,650,168 5,785,447 7,614,494
1993 162,802 2,100,563 4,246,762 6,510,127
1994 123,864 1,785,362 3,516,695 5,425,921
1995 112,722 1,776,903 3,256,329 5,145,954
1996 130,135 2,000,074 3,722,080 5,852,289
1997 133,326 1,905,138 3,337,135 5,375,599
1998 111,835 1,962,183 2,849,787 4,923,805
1999 96,976 1,607,709 2,639,717 4,344,402
2000 91,414 1,564,528 2,145,151 3,801,093
2001 89,937 1,466,865 1,953,197 3,510,000
2002 88,241 1,468,162 1,880,718 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 Seat
Coach Type Upper (RM) Lower (RM) Windows (RM) Aisle (RM)
Adult Child Adult Child Adult Child Adult Child
ADNFB (Premier Night Standard) 89.00 54.00 97.00 62.00 - - - -
ADNS (Superior Night) 43.00 28.00 48.00 33.00 - - - -
AEC (Economy) - - - - 20.00 11.00 20.00 11.00
ASC (Superior) - - - - 35.00 20.00 35.00 20.00

Origin : TUMPAT
Destination : SENTRAL KUALA LUMPUR
Train Name : EKSPRES WAU

Berth Seat
Coach Type Upper (RM) Lower (RM) Windows (RM) Aisle (RM)
Adult Child Adult Child Adult Child Adult Child
ADNFB (Premier Night Standard) 98.00 58.00 106.00 66.00 - - - -
ADNS (Superior Night) 47.00 30.00 52.00 35.00 - - - -
AEC (Economy) - - - - 29.00 16.00 29.00 16.00
AFC (Premier) - - - - 84.00 44.00 84.00 44.00
ASC (Superior) - - - - 39.00 22.00 39.00 22.00

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Ticketing Prices for Some Intercity Trains from Central Kuala Lumpur to Johor Bahru.

Train Name EKSPRES SENANDUNG MALAM


Berth Seat
Coach Type Upper (RM) Lower (RM) Windows (RM) Aisle (RM)
Adult Child Adult Child Adult Child Adult Child
ADNFD (Premier Night Deluxe) 106 78.00 126.00 98.00 - - - -
ADNS (Superior Night) 37.00 25.00 42.00 30.00 - - - -
AEC (Economy) - - - - 18.00 11.00 18.00 11.00
ASC (Superior) - - - - 29.00 17.00 29.00 17.00
EPLUS (Economy PLUS) - - - - 20.00 13.00 20.00 13.00
EKSPRES RAKYAT
AFC (Premier) - - - - 64.00 36.00 64.00 36.00
ASC (Superior) - - - - 33.00 21.00 33.00 21.00
EPLUS (Economy PLUS) - - - - 22.00 15.00 22.00 15.00
EKSPRES WAU
ADNFB (Premier Night Deluxe) 95.00 57.00 103.00 65.00 - - - -
ADNS (Superior Night) 46.00 29.00 51.00 34.00 - - - -
AEC (Economy) - - - - 28.00 15.00 28.00 15.00
AFC (Superior) - - - - 81.00 43.00 81.00 43.00
ASC (Superior) - - - - 38.00 21.00 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 Destination Adult (RM) Child (RM)


Damai Ekspres Sdn Bhd Johor Bahru 24.00 24.00
Kota Bahru 34.00 34.00
Alor Setar 30.00 30.00
Selat Keris Sdn Bhd Johor Bahru 24.00 24.00
Kota Bahru 34.00 34.00
Alor Setar 30.00 30.00
Transnasional Johor Bahru 24.00 12.00
Kota Bahru 30.90 15.45
Alor Setar 30.10 15.05

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