CASE 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 alle
viating its revenue. Although several strategies have been introduced like the c
omputerized ticketing and reservation system, introduction of innovative reserva
tion system via telephone, the e-Ticket and the Touch n Go system in reducing the qu
euing 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 i
dentify the problems, taking corrective actions that will enable to lead KTMB ba
ck to profitability. Keywords: Freight services, inter-city passenger services,
commuter train services.
Keretapi Tanah Melayu Berhad (KTMB) is a private limited company, incorporated a
nd domiciled in Malaysia. The company is wholly owned by the Minister of Finance
Incorporated, a corporate body established in Malaysia. The principal activitie
s of KTMB are to operate the railway transportation and the provision of related
railway services in Peninsular Malaysia and Singapore. The company operates the
se activities pursuant to a licence issued by the Minister of Transport. KTMB be
gan its first operation on a 12.8 km stretch between Taiping and Port Weld in 18
85. Today, KTMBs rail network spans 1,661 km from Padang Besar (North) to Singapo
re (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 prop
erty vested with the Federal Land Commissioner and
Faculty of Economics and Management, University Putra Malaysia Graduate School o
f Management, Universiti Putra Malaysia *Corresponding author. Email: mohani@eco
n.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 Gove
rnment for Government funded railway related infrastructure projects. In additio
n, 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, mov
ing passengers, goods and services throughout the railway network in Peninsular
Malaysia and Singapore. Its rail network strategically links and helps to develo
p 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 c
ross-border movements of freight between Singapore, Malaysia and Thailand. KTMBs
mission statement is as follows: KTMB is to be competitive and responsive to mar
ket needs. KTMB must achieve its goals through a highly trained and motivated wo
rkforce using modern technology and process innovation. KTMB must provide reason
able 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 wit
h greatly improved services for both passengers and goods. KTMB is committed to
becoming a respected and significant total land transport solution service provi
der. In this connection, KTMB has pursued strategies in its core competency areas
such as Freight Services, Intercity Passenger Services, Commuter Services and P
roperty. However, its core rail business consists of 3 businesses; namely Passen
ger Train Services, Commuter Train Services and Freight Services.
Development in the rail sector is only relevant in Peninsular Malaysia. Apart fr
om a short tourist line between Tenom and Kota Kinabalu in Sabah, operated by Sa
bah 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 Passe
nger Services and Urban/Sub-urban Passenger Services. The growth of KTMBs Interci
ty 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

Keretapi Tanah Melayu Bhd

underinvestment in both coach rolling stocks and better tracks. In order to attr
act commuters back to rail services, the Malaysian Government has proposed to in
vest in modernizing the entire rail network in stages. KTMB runs 24 Intercity Pa
ssenger Trains daily, consisting of 16 express trains and 8 local trains. In add
ition, there are 206 Commuter Train Services operated daily between Monday and F
riday, 213 services on Saturday and 177 services operated on Sunday and public h
olidays, which serve 39 stations and halt along the Rawang-Seremban and Sentul-P
ort Klang sectors (Table 1). KTMB also operates Freights Trains supporting key m
aritime 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 Trai
n Services 16 Express trains 8 Local trains 206 Commuter Train Services 213 Comm
uter 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 compr
ise 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 Regiona
l Passenger Services account for one third of KTMBs total operating revenue. On M
onday, 6 January 2003 in the Yearly Planning and Management meeting, En. Mohd. S
alleh commented to En. Azman Shaharbi, the Finance & Administration General Mana
ger 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 coac
hes 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 Pas
sengers and the operational limitations resulting from the construction of the R
awangIpoh Electrified Double Tracking Project have made a great impact on the pe
rformance of the Intercity. The situation got worse when the 2 services of the E
xpress 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 a
nd 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 l
osses. The Intercity Passenger Train Services recorded a decrease of 5.28% in re
venue to RM68.35 million as compared with preceding year corresponding period re
venue. En. Mohd. Salleh, murmurred to himself, Ive been wondering if it is a good m
ove for KTMB to continue with its programme of refurbishing the third class coac
hes that ply to the East Coast. Then the programme to construct electrified track
s between Ipoh and Rawang, linking the 2 major urban centres of Peninsular Malay
sia, i.e - Kuala Lumpur and Ipoh, struck his mind. Electrified train services wo
uld be operated between these 2 cities at better frequency and higher speeds. Tr
avelling 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 whe
ther 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 mod
e of public transportation. With the completion of the Rawang-Ipoh Double Tracki
ng Project, further improvement would be made on the quality of services in term
s of speed and reduced the travel time with smooth and comfortable journey. The
provision of public amenities such as lengthening of platforms, facilities for t
he disabled, additional seating facilities at stations and directional signage w
ill be our priority. The passenger traffic statistics of KTMB are shown in Append
ix A. In facing the challenging circumstances, some measures have been implement
ed to enhance its operational efficiency and quality of customer service. Among
the efforts that had been made were the improvements in the computerized ticketi
ng 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 alt
ernative method of purchasing train tickets via Internet, especially popular amo
ng tourists and students. Another important development of Intercity Passenger S
ervices 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 Interna
tional 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 activi
ties were carried out throughout the country. Joint promotions and strategic all
iance 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 destinatio
ns. One such joint venture was launched in September 2002 between KTMB and Impia
na Hotel, which operates a chain of hotels in Malaysia 166

Keretapi Tanah Melayu Bhd

and Singapore. To further increase KTMBs participation in tourism industry, Inter
city Passenger Services were promoted at several exhibitions and travel marts su
ch 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 Lump
ur. As explained by En. Mohd. Salleh Abdullah in the last meeting, as part of th
e efforts to upgrade quality-services to meet customer satisfaction, KTMB had in
vested 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 rela
tions. Additionally, several in-house training programmes, seminars and workshop
s 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-Seremb
an and Sentul-Port Klang lines. The Commuter System ferries 65,000 passengers da
ily. Commuter rider-ship peaked in 1998 because of the Commonwealth Games. KTM C
ommuter Services have become an increasingly popular mode of travel in the Klang
Valley. It provides reliable and convenient suburban commuting, with comfortabl
e and spacious air-conditioned coaches and in some areas, providing seamless int
egration with other existing Klang Valley rail operators such as PUTRA LRT and S
TAR LRT and also ERL as well as the KL Monorail. The extensions of commuter serv
ice 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 t
o RM22.5 million in 2002. Situated in the central of business district, the Comm
uter Services have minimized walking distances to less than 500 meters to either
shopping complexes or private and public offices located within the vicinity st
ations. In line with the Governments objective to enhance the integration of publ
ic transportation system in Klang Valley, KTMB Commuter has implemented the Touc
h n Go system whereby a prepaid electronic purse system for payment of low value hi
gh volume transactions that will reduce queuing time for passengers buying ticket
s from the counters or the ticket vending machines. 167

Asian Journal of Case Research (AJCR)

KTMB operates approximately 42 freight trains daily with a primary focus on the
maritime container market. The maritime container market is diversified with a m
ixture of goods being shipped by containers. In addition, the Government finance
s railway links to strategic ports giving rail a competitive advantage. As repor
ted by En. Azman Shaharbi in the meeting, the haulage of freight by train, espec
ially of bulk commodities is more cost-effective than by any other modes of tran
sport. 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 Kla
ng, Butterworth and Bangkok. Moving forward, KTMB also aims to effectively posit
ion its freight services locally and regionally through a concerted marketing st
rategy. Greater efforts have been made towards meeting customers needs and requir
ements with a view to forging effective customer relations and business partners
hips. The Freight Division remained as the major contributor to KTMBs total reven
ue in 2002. This was achieved against a backdrop of operational limitations in t
he form of the daily 10 hours line block imposed throughout the year under revie
w because of the Rawang-Ipoh Electrified Double Tracking project. In terms of pr
oduct 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 t
o 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 ha
ulage 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 item
s, to be transported in refrigerated containers.
FREIGHT SERVICES
En. Mohd. Salleh Abdullah expressed his dissatisfaction with the financial resul
ts 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 mi
ght 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 & Adminis
tration General Manager of KTMB, KTMB Group managed to reduce its losses from RM1
63 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-Ipo
h Double Tracking Project. Losses from railway operations were expected to incre
ase mainly due to the reestablishment of deferred maintenance of rolling stock a
nd railway infrastructure. KTMB was facing funding shortfall as a result of defe
rred operating expenditure in addition to loan repayments and capital expenditur
e. En. Azman Shaharbi also explained that KTMB remained severely undercapitalize
d and over-leveraged. Revenue was recognized when it was probable that the econo
mic benefits associated with the transaction would flow to the enterprise and th
e 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, Freig
ht Services, Property and Commuter Train Services; while Table 3 depicts the vol
ume 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 1
01.9 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 RM38
2 million in 2001 to RM364 million in 2002? He was a bit surprised when he saw th
e accounts which were handed by En. Azman Shaharbi (Revenue at the Group and the
Company level is shown in Table 4). 169

Asian Journal of Case Research (AJCR)

En. Azman Shaharbi then replied, Oh, this is due to the reduction in revenue main
ly from the Intercity and Freight Services. There is an acute price-war in the r
oad haulage industry and this has adversely affected the Groups haulage business,
operates by KTMBs subsidiary, Multimodal Sdn Bhd. Further, he added that at the C
ompany level, there was a significant reduction in the net loss from RM189 milli
on in 2001 to RM141 million in 2002. This improvement was achieved despite the s
light reduction in revenue from RM278.9 million in 2001 to RM278.6 million in 20
02 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 developmen
ts 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 Construc
tion 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 12,419,89
5 -152,950,327 -65,082,645 -32,298,112 -203,672,060 -57,474,447
170

Keretapi Tanah Melayu Bhd Finance costs, net Share of profits/(losses) of associ
ates 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 -163179
002 -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 reg
ard, 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 (f
rom 1970 to 2000) on total passengers by service class was used to compute the g
rowth of KTMBs rail passenger traffic. This series was regressed against growth o
f GDP to obtain the required elasticity estimates. The demand elasticities are p
resented in Table 6.
Table 6 Rail Passenger Demand Elasticity, GDP Growth Rate and GDP per Capita 197
0 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 categorie
s 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.
171

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 Th
ird 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 0.2
000 - 1.5000 RM 75,980
A summary of the forecast of rail passenger traffic (without Double Tracking Pro
ject) is presented in Table 8.
Table 8 Forecast of Rail Passenger Traffic for Selected Years from 2001 2037 200
1 First class Second class Third class Total 91,507 1,681,868 1,972,697 3,746,07
2 2011 92,292 3,158,211 819,373 4,069,877 2021 92,752 4,767,652 354,571 5,214,97
4 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 determ
inants 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 t
he 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 t
argets under the 70 Million Population Policy respectively. In deriving the grow
th 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 Malays
ian 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

Keretapi Tanah Melayu Bhd

contains the growth forecasts that are most likely to be obtained by the Peninsu
lar Malaysia economy. On the basis of the record of the Malaysian Government man
agement 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 2
001-2010 is the OPP forecast.
Table 9 Annual Economic Growth Rate Assumptions for Peninsular Malaysia, 2001 20
37 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, Percet
akan Nasional Malaysia Berhad, AGN Research Associates Sdn. Bhd.
The most ambitious population forecast for Malaysia was made in 1982, the Sevent
y Million Policy (70 MPP). According to the 70 MPP, Malaysia would achieve a tot
al population of 70 million in the year 2100. Thus, the population implied by th
e 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 thi
s period.
Table 10 Population Targets Under the 70 Million Population Policy Year 1990 200
0 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 Developme
nt Planning in Malaysia Working Paper presented at the Training Workshop on Popul
ation, Human Resources and Development Planning, 2 13 May 1991.
173

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 G
rowth 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 tha
t the forecast of the 70 MPP was fairly accurate up to year 2000 (with a 2 % err
or 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 2
037 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 off
ered and supplementary charges. Table 13 summarizes the fare rates and supplemen
tary charges for the year 2003.
INTERCITY PASSENGER SERVICES PRICING MODEL
174

Keretapi Tanah Melayu Bhd Table 13 Intercity Passenger Fare Rates for the Year 2
003 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 Lowe
r 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 Sourc
e: 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. Beca
use of the location pattern of economic activity and population, much of the tra
nsport infrastructure, including the KTMB network is located on the west coast o
f Peninsular Malaysia. The alignment of transport infrastructure means that KTMB
has to compete with the road transport industries for freight and passenger tra
ffic. As commented by En Azman Shaharbi during the meeting, the road transport i
ndustries 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 technic
al limitations on train speed on account of track alignment on the nonelectrific
ation 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 rolli
ng stock limited the route speed for freight services. However, in comparison to
the road network, the market coverage for the KTMB network 175

Asian Journal of Case Research (AJCR)

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 be
nefits such as the number of road accidents and pollution. Table 14 summarizes t
he 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 B
uses Goods Vehicles Other Vehicles Rail - Total railway network 1700 km Locomoti
ves Freight Wagons Passenger Cars Source: KTMB 2002. 64 3,549 208 3,705,888 4,98
5,149 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 comp
onent 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 i
n 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 connect
ed 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 permis
sible 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.
176

Keretapi Tanah Melayu Bhd

With growing affluence and booming local automobile industry, the automobile pop
ulation in Kuala Lumpur has increased very rapidly over recent years. The signif
icant increase in vehicle ownership coupled with declining public transport usag
e has resulted in an inefficient and ineffective utilization of road space in th
e city. The situation is further aggravated by the fact that many of the roads a
nd 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 se
vere traffic congestion during peak hours. The overall total vehicles using high
ways under Malaysian Highway Authoritys (MHA) supervision until December 2001 inc
reased 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 per
centage 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 o
ccurred were 279,641 with 5,886 deaths compared to 1996 with 189,109 road accide
nts.
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 KT
MB network is the 785 km west coast line from Butterworth to Tanjung Pagar in Si
ngapore. KTMB network links 4 of the 5 principal ports with their respective hin
terlands, 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 followi
ng are examples of bus companies providing passenger services in Peninsular Mala
ysia: i. ii. iii. iv. Park May Berhad Plusliner & NiCE Ekspres Nasional Berhad F
oh Hup Omnibus North / South destinations. Luxury express bus service. All desti
nations. North destinations, etc.
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There were 6 taxi companies, which are in operation serving the North, South, Ea
st 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 Persatuan pemandu Teksi
Selatan Serves North destinations Serves South destinations Serves East Coast d
estinations, etc.
ii.
iii. Persatuan Pemandu Teksi Pantai Timur
As requested by En. Mohd. Salleh in their last meeting, En. Azman Shaharbi prese
nted some ticketing prices for express bus compared to ticketing prices for inte
rcity passenger services to the Board of Directors (Appendix B). En. Zakaria, th
e 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. A
zmans face. Azman, do you have any idea how to attract more people to use our serv
ice? Definitely we have to offer better service for their money. We have to provid
e quality service, but ... unfortunately, we do not have enough employees. The nu
mber of employees in the Group was only 5073 at the end of financial year 2002 a
nd 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 programme
s, seminars and workshops have been conducted throughout the year in ensuring ou
r officers and staff are kept abreast of the latest information, knowledge and d
evelopments in rail operations, business management and customer service. With r
egards to total number of employees .. En. Mohd. Salleh paused and continued, How a
re we going to hire more employees with the current financial situation?
EXAMPLES OF TICKETING PRICES FOR INTERCITY PASSENGER SERVICES AND EXPRESS BUS TI
CKETS
On Monday 6 January 2003, at 4.00 pm, the Board of Directors and the Senior Mana
gement 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 o
f the meeting, We are now at the crossroads where we have to 178
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Keretapi Tanah Melayu Bhd

make serious decisions as to which path to take in order to bring KTMB back to p
rofitability. We have gone through in detail KTMBs financial standing and operati
ons matters and the transportation industry today and we all know where KTMB sta
nds financially today. And KTMB financial future does not look good. En. Zakaria
said, Rapid and efficient service is an important criterion for any public transp
ortation system, particularly rail service. With a good road system, cars and bu
ses tend to travel faster than trains. If KTMB wants to reduce its losses, it ha
s to offer better and efficient service, including faster travel time. At this po
int, the Chairman, Y.Bhg. Tan Sri Dato Thong Yaw Hong said, It is now early Januar
y 2003, I have been analyzing the financial reports as a whole and I am very con
cerned on the hefty losses. The problems could be more severe and complex than w
hat 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 s
aid, I want you to resolve this problem by identifying the issues and then sourci
ng for a comprehensive and integrated solution to lead KTMB back to profitabilit
y.
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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 89,882 111,894 121,249 137,061 143,277 178,879 162,802 123,86
4 112,722 130,135 133,326 111,835 96,976 91,414 89,937 88,241 2nd Class 1,042,98
9 1,080,680 1,178,205 1,177,703 1,552,007 1,705,904 1,876,076 1,764,243 1,925,96
7 1,435,246 1,211,918 1,230,410 1,650,168 2,100,563 1,785,362 1,776,903 2,000,07
4 1,905,138 1,962,183 1,607,709 1,564,528 1,466,865 1,468,162 3rd. Class 5,980,9
62 6,232,040 5,899,951 5,425,546 5,033,225 4,576,554 4,772,412 4,717,107 5,246,7
95 6,997,175 6,670,371 6,649,410 5,785,447 4,246,762 3,516,695 3,256,329 3,722,0
80 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 N
ight) 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) AF
C (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 3
0.00 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 29.0
0 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 Lowe
r (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 Joh
or Bahru Kota Bahru Alor Setar Johor Bahru Kota Bahru Alor Setar Johor Bahru Kot
a 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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