Rail industry set to be back on track

Formation of RAC in 1992 as the owner of all KTMB assets is with a mission to chart the future growth of the nation’s rail industry


THE development and growth of the Malaysian rail industry in recent years has certainly gone beyond expectations.

From a simple 13km railway that was opened on June 1, 1885, between Port Weld and Taiping, which was once the heart of the tin-rich Larut Valley in Perak, the rail transport has been getting much attention of late.

In the early days, railways were mainly built to transport tin from mines in the hinterland of the West Coast states of the peninsula to coastal ports.

After over a century, the rail industry has become a primary mode of transportation for Malaysians, a development that was earlier propagated by Keretapi Tanah Melayu Bhd (KTMB).

During its heyday, long distance movements to the northern and southern parts of the peninsula for those who could not afford to fly were mainly via KTM’s Senandung Malam and Sinaran Pagi.

With stations that are positioned at almost all the important locations along the way to Singapore, KTMB had amassed sizeable assets which certainly needed to be managed and primed for further development.

That led to the formation of Railway Assets Corp (RAC) in 1992 under the Railway Act 1991 as the owner of all KTMB assets, with a mission to chart the future growth of the rail industry.

RAC has since remained under the radar for over two decades, shying away from media and public attention.

That is about to change, following a groundbreaking ceremony for its new headquarters in February.

Parked under the Transport Ministry, RAC now controls a staggering RM34.5 billion worth of assets — including rolling stocks, signalling systems, railway land in strategic locations and more than 1,600km of railway tracks currently being utilised mainly by KTMB.

Based on a 2005 valuation, the landbank under RAC alone was valued at RM8 billion and the value could have doubled since.

As part of the takeover deal, RAC had absorbed KTMB’s RM2.1 billion debt to enable the national railway firm to focus purely on improving its operations and efficiency.

Azhar says Malaysia can catch up with the UK and other developed rail industries within the next 10 years if necessary remedies are implemented immediately. (Pic by ISMAIL CHE RUS)

RAC is also tasked to monetise the assets to repay the debt and finance the growth of the rail industry.

However, no significant development is seen to date with only RM420 million of the inherited debt being cleared since.

To take on the challenge is Azhar Ahmad, a former corporate man who was picked by the new Pakatan Harapan government to be RAC’s new GM — the first non-government official chosen to lead the assets-rich corporation.

In his capacity, Azhar can now redesign RAC operations with a holistic approach to the existing business model and organisational structure.

Azhar spoke to The Malaysian Reserve in his first exclusive interview since assuming the position eight months ago, during which he detailed his vision for the rail industry in Malaysia and how RAC can play its role to monetise assets to pour back to the industry.

Opening Up to More Private Players for Future Growth

Azhar said RAC is ready to coordinate interests from multi-rail operators (MROs) to enter the local sector.

MROs will ensure the growth of the rail industry, as well as improve utilisation of tracks which are now solely used by KTMB’s trains. Based on a study conducted by KTMB, the utilisation rate of its railway tracks stands at 55%.

“If you look at countries like the UK and Australia — they have gone into a franchise basis now.

“That means they have opened up to more private MROs to operate in their industry. As a result, they have improved their ridership over the years,” Azhar said, adding that in the UK alone, there are up to nine MROs to date.

Azhar said Malaysia can catch up with the UK and other developed rail industries within the next 10 years if necessary remedies are implemented immediately.

He said the private players’ entry, however, will not impact KTMB — which has been improving its services and efficiency to cater to the growing demand.

RAC will ensure a level playing field for KTMB and private rail operators, Azhar added.

“The industry has to be competitive to all parties and KTMB if we are to use an MRO system.

“It is not a matter of cherry picking. Let’s say if a third party wants to come in and they want a profitable route while the non-profitable to be given to KTMB, we cannot do that. It should be a level playing field,” he added.

New Railway Network Access

One of Azhar’s priorities is to finalise the new access agreement between RAC and KTMB, which has drawn criticism on the corporation for unfair treatment to the national rail entity.

He said the previous Railway Network Access Agreement (RNAA) inked in 2016 will be cancelled after approvals from boards of directors of both KTMB and RAC.

The RNAA was supposed to allow MROs to access KTMB’s 1,600km of railway tracks stretching from Padang Besar in Perlis to Johor Baru and the East Coast routes.

The proposal for the RNAA, however, met resistance from the Railwaymen Union of Malaya (RUM).

Azhar said the new RNAA will incorporate opinions of all stakeholders, including the union.

A committee comprising top officials from the Transport Ministry, RAC, KTMB, RUM and the Land Public Transport Agency (SPAD) was formed to finalise the RNAA framework.

“We are coming up with a fresh agreement that will include the potentials of private rail companies and to address legislation issues.

“We expect the discussion to start by April, with a deadline given until the end of 2019 to complete the RNAA,” he said.

Azhar said the legislation has to be amended to allow MROs to come in.

“At the same time, RAC would need to be licensed as an asset operator. KTMB has been licensed by rail operator, but there is no provision under the act that there is an asset operator, so that has to be made first,” he said.

“Then we will improve the framework in respect of the track access charges and making sure there will be (enough) infrastructure maintenance as well as the issue of extension of coaches. Those will be addressed in the framework,” Azhar added.

He said the corporation could expect better revenue should it open up to third-party operators, especially in cargo activities.

“In respect of cargo rail, there is a lot of roles to be played, because there is a lot of movements and as you know that Malaysia’s exports are growing and we need to move a lot of cargoes in logistics, from our road to rail. So, that is where there will be plenty of room for improvement,” he said.

According to statistics, the country’s exports rose by 6.7% to reach a value of RM998.01 billion last year, surpassing the forecast export growth of 4.4%.

ETS Network

The KTM ETS (electric train service) — high-speed electric intercity train network — will reach Johor Baru (JB) in 2022, said Azhar.

Currently, the service only run in the northern region and up to Gemas in Negri Sembilan towards the south. The ETS network has been a game changer for KTMB’s profitability. Azhar said the completion of the double-track project between Gemas to JB is also expected to open up to a lot of potential services including cargo activities.

“Yes, it (ETS) is part of the plan. We can have ETS, komuter and also could improve the cargo activities. When you have the double track, you can improve the efficiency better,” he said.

As of last year, the 197km track reached 20% completion and once completed, train travellers can be connected to and fro northern and southern states.

“We expect it (the ETS) to be done after the completion of the double track which is after 2022. We actually need two years to procure the asset, such as rolling stocks. This is where we are looking to plan for the stations,” Azhar explained.

Based on SPAD’s report in 2017, the intercity rail services have recorded a 14.2% increase of average daily ridership

The new rolling stock order will depend on request from KTMB as the operator, he added.

“We will have to look at the dependency when KTMB comes with the new ETS (coach) this year. So, we will see how is the demand first, by using the existing coach to start.

“Then, moving forward it is up to KTMB if they have a plan (to add more coaches),” he added.

In April 2018, the Barisan Nasional-led government had purchased nine new ETS train sets and 13 diesel multiple units (DMUs) to meet the increasing demand for train services. The 13 sets of DMU are expected to arrive next month.

The purchased trains would add to the existing fleet of 15 cars for the ETS, as well as replacing the old trains for the East Coast region.

As for the East Coast region, Azhar said to date, RAC has not received any indication from the government to expand the tracks in the region.

The government is still mulling on the continuation of the mega East Coast Rail Link (ECRL) project — utilising a completely separate railway track.

KTM’s ETS network has a top speed of around 140km per hour.

Based on SPAD report card in 2017, the intercity rail services — KTM ETS (from KL Sentral to Arau in Perlis) and other intercity trains — have recorded a 14.2% increase of average daily ridership.

Both services catered up to 7.2 million passengers, or 19,835 average daily ridership. KTM ETS performed well in 2017, with a 16.7% ridership increase to 11,363 passengers compared to only 9,740 passengers in 2016, while the KTM Intercity recorded an 11.1% growth of ridership in the same period.

The success has spurred the previous government’s interest to spend around RM1.1 billion to boost ETS assets to 10 trains this year.