After Proton, will KTM be next?

After Khazanah sells its 43 per cent stake in Proton to DRB-Hicom (owned by Syed Mokhtar Al-Bukhary), will the government privatise KTM next?

The Edge (16 January) reported that MMC Corp (controlled by Al-Bukhary) had announced that it is proposing to take over KTM. Al-Bukhary again? KTMB has reportedly been asked to assist MMC in conducting due diligence on the rail service to decide whether MMC wants to take it private. The due diligence could could take six months and the entire privatisation exercise could take 18 months.

The railway workers union has naturally expressed concern. It maintains that it won’t be proper for KTMB to be privatised. “KTMB is for the rakyat and should remain as it is today, or returned to the government if necessary,” its president Abdul Razak Md Hassan was reported as saying. “If given to a private party, we can expect the fare of the commuter trains to increase.” According to him, KTM charges 70-80 sen per km for its commuter train compared to more than RM1.00 on the ERL, Putra, Star and Monorail (Business Times).

The Edge asks, “Was there even an invitation to others to put in a proposal to privatise the railway company?”

Why even consider privatising the rail services run by KTM – especially after the double tracking work, which will definitely speed up rail travel, increase the volume of passengers and result in economies of scale for KTM.

Just after the government has spent billions of public money on the double tracking and state-run KTMB is poised to reap the considerable benefits and improve its profitability, along comes a company expressing interest in taking over the railway. So predictable. (By the way, what is Pakatan’s stand on the move to privatise KTMB?)

There is absolutely no reason why KTM cannot be run efficiently and break even as a state-owned entity with the right management and adequate public investment in improving services. There’s actually no need to make a big profit for KTMB as the railway provides an essential public service. Look at how other country’s have improved their rail services without having to privatise. This public service is all the more crucial in the face of dwindling oil reserves for fossil fuel-powered motor vehicles and higher oil prices.

But sadly, our rail services have been neglected all these years, presumably because the BN government felt it had to prop up the ‘national car’ and minimise competition from other modes of transport (while highway concessionaires reap huge profits from tolls).

Regarding the takeover of Proton by DRB-Hicom, the Wall Street Journal reported:

The deal could further add to the influence of DRB-Hicom’s owner, Syed Mokhtar Al-Bukhary, who also bought Khazanah’s 32% stake in national postal company Pos Malaysia for 600 million ringgit when Mr. Najib’s government began its divestiture program. The Malaysian tycoon first rose to prominence in the 1980s and 1990 when the country was led by Mahathir Mohamad, and it was the former premier who first flagged to local media last year that Proton could soon be sold.

Bukhary controls a couple of the largest ports in Malaysia, Port of Tanjung Pelepas and Pasir Gudang port in Johor, as well as Senai Airport.

Syed Mokthar’s Tradewinds gained control of Bernas, which has a monopoly of rice distribution in the country. Tradewinds also controls Central Sugars Refinery Sdn Bhd and Kilang Gula Padang Terap Bhd.

In 2007, Gamuda and Bukhary’s MMC were awarded the northern portion of the rail double-tracking job for RM12.5bn.

In April 2010, DRB-Hicom reportedly received a letter of intent from the government to manufacture and deliver a dozen variants of the Malaysian AV-8 armoured wheeled vehicle.

The tycoon also has an interest in Malakoff Corp, the country’s largest independent power producer.

In December 2010, the Singapore Straits Times noted that Al-Bukhary had emerged as “the single biggest beneficiary of state contracts and concessions worth billions of ringgit, making him Malaysia’s most favoured corporate son and the government’s partner of choice”.