Murky practices in rail tenders deter foreign firms, weekly reports

By Lisa J. Ariffin

Malaysian Insider, June 17, 2012

Since the late 1980s, Malaysia has preferred direct negotiations in awarding public works and the construction of infrastructure projects over public tender. — file pic

KUALA LUMPUR, June 17 — International companies are shying away from Malaysia’s rail sector due to less-than-transparent decisions in the tender process, The Edge weekly has reported.

According to an article in the business and investment weekly’s latest edition, “intense lobbying, glitches in the tender process and political favouritism” are among some of the reasons why foreign firms are snubbing rail tenders, a move which could deprive the country of a high-quality rail system.

The Edge reported that the response to open tenders has been poor purportedly due to the unfair selection of large contracts, adding that government officials have acknowledged the problem but have defended it as a relatively new phenomenon.

“It is a learning process, but the government is committed to the open tender system,” an unnamed official from a government transport agency that oversees the country’s rail networks was quoted as saying.

However, the weekly reported that international investors are not convinced of this assurance, with a representative of a company in pursuit of engineering contracts in Malaysia saying: “Most tenders start off well. It is in the evaluation process where things get very murky and you are often left feeling that it is not a level playing field”.

Another foreign consultant pointed out: “Not attracting bids only raises more questions about the tender process”.

The weekly added that since the late 1980s, Malaysia has preferred direct negotiations in awarding “public works and the construction of infrastructure projects over public tender because the government was keen to speed up the development of the country’s infrastructure”.

“But the practice has long been criticised because the awards have often favoured politically well-connected business groups.

“Critics also gripe that the negotiated tender practice is littered with failed projects that have resulted in costly government bailouts,” it reported.

It added that with contracts valued at more than RM1 billion up for grabs in the coming months, the loss of international investors would prove detrimental.

“More than RM70 billion worth of rail projects have been slated for the next decade, including the prized RM50billion Klang Valley MRT project,” it pointed out.

“Industry executives have noted the government needs to quickly deal with the grievances faced by international companies to salvage the open tender system,” it added.

MMC-Gamuda wants extra RM1.5b for rail job

By Shannon Teoh

Malaysian Insider, 21 May 2012

KUALA LUMPUR, May 21 — MMC-Gamuda is due to submit a RM1.5 billion variation order to the government for cost overruns in the Ipoh-Padang Besar Electrified Double Track (EDTP), according to the Business Times.

The financial section of the New Straits Times reported today that the main contractor will also ask for an extension for completion from end-2014 to up to 2016 despite the northern sector EDTP project deadline already extended by two years.

File photo of a train running on a completed section of the double-tracking project. — Picture courtesy of www.malayarailway.com

It quoted sources as saying “there is already cost overrun for the project, which is halfway completed.”

“The civil works are 70 per cent completed, and the systems side, only 30 per cent. There are still land issues and other unresolved matters on MMC-Gamuda JV’s part,” it quoted a source as saying.

MMC, owned by logistics tycoon Tan Sri Syed Mokhtar al-Bukhary, was awarded the contract for RM12.49 billion along with its joint-venture partner Gamuda in December 2007.

The contract comprises the design and construction of the infrastructure and systems works for the entire 329km alignment of the EDTP for this sector.

Originally slated for completion in January 2013, it was delayed due to land acquisition issues, and is part of the troubled EDTP for the entire rail line running from Padang Besar in the north, to Johor Baru down south.

“We think this is going to be another case like the Rawang-Ipoh EDTP, which took more than seven years to complete. The project cost had escalated from RM4.2 billion to RM6.3 billion,”Business Times quoted another source as saying.

Putrajaya has also delayed for over a decade the award of the Gemas-Johor Baru portion of the EDTP despite promising Chinese firms China Railway Construction Corp (CRCC), China Communications Construction (CCC) and state-owned China Railway Engineering Co (CREC) big-money contracts for the 197km link.

The Malaysian Insider had reported last December that Putrajaya has agreed to award a Chinese firm, most likely Chinese Road and Bridge Corporation (CRBC), with local partner Gamuda, the contract worth up to RM8 billion instead of frontrunner CRCC.

Business Times also reported that factors for the variation order claim include “incorrect estimation of the project’s work, the obstacles that the customer or project team discovers that require deviation from the original plan” and additional resources to be added to the project.

The northern sector EDTP is important for loss-making Keretapi Tanah Melayu Bhd (KTMB), the national railway company. Freight is currently KTMB’s biggest money earner, with the northern section contributing over 70 per cent to its revenue.

Once completed, the Ipoh-Padang Besar EDTP will cut travel time from Penang to Kuala Lumpur from nine to three hours.

When contacted by the financial section of the New Straits Times, Transport Minister Datuk Seri Kong Cho Ha stuck to the 2014 deadline.

Woodlands move a drain on KTMB

The Woodlands train station is registering a sharp fall in passenger volume after KTM Berhad moved its operations there from Tanjung Pagar in July. 

 

 

New Straits Times, 29 October 2011

 

JOHOR BARU: The shifting of KTM Berhad's railway operations to Woodlands in July following the closure of the Tanjung Pagar railway station has taken its toll on the revenue of the rail company.

Checks showed the company has incurred an average monthly loss of RM1.8 million since July as a result of a decline of between 20 and 30 per cent of passengers using train services to the republic.

KTMB believes most of its customers are instead opting to travel to the republic by express buses, and some by planes, as the Woodlands station is not quite convenient for travellers.

There are seven train services to Singapore daily, and all services stop at the Woodlands checkpoint.
All the trains will make a brief stop at JB Sentral before moving towards Woodlands, which is about one kilometre away.

Industry sources said it is economically not viable to have two stations located too near to each other, more so when both are located near the border of two different countries using different currencies.

In the case of Woodlands, alighting passengers who turned to other modes of transport to reach their destination will have to pay for their fare in Singapore dollars.

For those who travel to the republic by express bus, the problem does not arise.

KTMB president Dr Aminuddin Adnan told the New Sunday Times that there are no plans to stop all seven trips to Woodlands despite the losses.

"It is too early to conclude the whole picture. We will wait and see before planning the next course of action.

"Our customers are basically from the middle-income bracket. We believe those who have abandoned our service are those who do not want any inconvenience throughout their journey, especially when they reach Singapore."

The Tanjong Pagar station became part of KTMB's history following the departure of the last train piloted by the Sultan of Johor at 11.03pm on June 30.

Dr Aminuddin said KTMB is trying to offset the losses by capitalising on the Johor Baru market.

It plans to introduce an additional train service from Tumpat to Johor Baru from next January.

Called the Malayan Tiger, the 14-coach service is believed to be an impetus for the tourism industry in Johor in view that more tourism products are coming up in Iskandar Malaysia.

Meanwhile, Dr Aminuddin said the stripping of the 23km railway track from Tanjong Pagar to Woodlands had been completed.

He said the track weighed a total of about 2,500 tonnes, of which about 70 per cent had been transported back to Malaysia.

The rest, which was still being placed at a temporary storage area in Kranji, will be sent back to the country by the middle of next month.

"We are now demolishing all the locomotive shades and depots and we hope to complete the work by Dec 22," he added.

It was reported that part of the track would be showcased in KTMB museums as a historical exhibit while others would be kept for future use on KTMB tracks throughout the country.

The first museum to display part of the track is the former Johor Baru railway station, which will be turned into a museum soon.

Railway revamp

STAR,  27 October 2011

KTM Bhd (KTMB) will undergo a two-year corporate restructuring programme to turn around the ailing national rail operator and a consultant will be hired to manage this, according to the Treasury, in its reply to the Auditor-General's (A-G) report.

The A-G's report had stated that KTMB posted a loss of RM92.6mil in 2009 compared with RM84.6mil loss in the previous year.

The Treasury said that apart from high operational costs, the losses were also due to a decline in cargo transportation earnings by 50% in 2009.

One of the reasons for this was insufficient train capacity of the State Railway of Thailand to support KTMB's cross-border services.

Insufficient capacity: KTMB does not have enough electric multiple sets to support its commuter train services.

KTMB also did not have enough electric multiple sets to support its commuter train services.

KTMB's associate company KL Sentral Sdn Bhd also saw a 70% decline in revenue during the year under review. KTMB also suffered an asset depreciation charge of RM265mil in 2009.

According to the Treasury, the Finance Ministry has directed KTMB to present its financial and non-financial reports to the Government on a quarterly basis.

The A-G's report also stated that KTMB must tackle its problem of having a high number of outstanding debtors in order to achieve healthy cash flows.

As of end-2008, KTMB had failed to collect debts amounting to RM40.7mil and RM3.8mil more was owed to its subsidiary.

The A-G's report also found that KTMB had not charged any interest on overdue credit extended to its customers.

The report suggested that KTMB institute legal actions against companies or individuals who failed to settle their debt.

However, it acknowledged that part of the problems with KTMB's debt collection was due to its failure to renew its land lease with the Federal Land Commissioner.

It added that the land lease contract had expired and because of this, KTMB was unable to collect debt, rent or take legal actions.

The A-G's report noted that the Transport Ministry, had on April 8 2010, decided that Perbadanan Aset Keretapi (PAK) would become the custodian of all land belonging to KTMB under the Railway Act 1991.
PAK would manage all land matters relating to KTMB, including land rental.

KTMB was also in the process of drafting a new credit agreement (cargo) that will include a clause on interest charges.

The report added that KTMB had begun legal proceedings against some cargo debtors.