http://www.shahrir-umno.com/Source/article.asp?Article=LRT

RM 6 BILLION FOR THE LRT?

By Datuk Sharir A Samad

As if to show that RM 1.7 billion was just small change amidst charges of bailing out Tajudin and Naluri Bhd., the government announced a RM 6 billion takeover of the two LRT systems operating in KL. It was necessary so that KL can at last have an integrated transportation system, according to Datuk Mustaffa Mohamed, the man charged with the tough job of achieving it. For a start, he seemed to have a budget that would have been the envy of any city manager (transport section, that is).

No words of objection were recorded over the amount of RM 6 billion. It seems that it was an accepted practice that the government should pay the exact amount of the cost to build the two systems as reported by its owners. No bargaining at all? If anyone is to pick up distressed assets, should not he expect a discount on the price ? Danaharta does it, so why doesn't the Adviser to the Ministry of Finance do it as well ? Is there something else which we all missed ? Malay interests again ? National strategic interests? Again ?

I was Federal Territory Minister when the KL Master Plan was ready for the Cabinet's consideration and it was this Master Plan which proposed a light rail transport system as a solution to KL's impending traffic/transportation problems. Even then, back in 1984, we had foreseen that the LRT was not a viable proposition and it would need government financial backing if it was to be implemented. I had proposed, and it was accepted by the Cabinet, that the government, by utilising the territory's land assets (which were to be sold by auction so as to fetch higher prices), could build the track and lease it to a private operator which would provide the rolling stock or the trains. It would very much be like the bus companies which did not have to pay for the roads and the bus stops even

Implementation of my proposal got stuck in the politics subsequent to Dato Musa Hitam's resignation, the furore over Penang bridge, as well as the more profitable private exploitation of KL's land resources. And apparently politics can change the economics as well as the cost of a project. Soon after I was out of the government in 1987. Amidst the euphoria of privatisation, the LRT projects got off the ground. An important business lesson to be learnt : a project becomes viable enough to be privatised, provided that it costs a whole lot more.

In my time as Federal Territory Minister, I had to contend also with the proposed Aerobus system. Unfortunately, this project was personally proposed by Dato' Seri Dr. Mahathir, who was already Prime Minister and I was in his cabinet. Practically everybody knew that the Aerobus was not a viable urban transport system, but then, who is to tell the boss? As usual it was left to me since it came with the portfolio. Fortunately, at the same time the Datuk Bandar of Kuala Lumpur was one of those who would say yes, especially to the PM, even before the PM can finish his question. And so I decided that I should say to the PM that the Aerobus was viable enough to be privatised, and I must say this in the presence of the Datuk Bandar. The opportunity for me to do so did come. I said to the PM that his favourite Aerobus project is viable and can be profitable enough to be privatised, asked the Datuk Bandar to confirm, which he willingly did so as to impress the PM, and before I knew it, the project was no longer a government project since it was decided that it should be privatised. That was the only way to kill it, by praising it as a privatisable project and get a confirmation from someone who quickly says yes, Prime Minister.

Only that today, the government is going to pay the full price for the privatised LRT systems to bail out their concessionaires so that, ostensibly 'KL's transportation system can be fully integrated.' Why the full price, when everybody knows that the RM 6 billion includes upfront costs and full construction margins enjoyed by the concession companies and its contractors. Why should anyone pay the full price ? And again it is shown that those who had bravely ventured into privatisation need not worry because the government will bail them out at full costs, i.e. full cost plus full profits, since the government does not fault them for them for believing that privatisation is viable. After all, as Dr. Mahathir often has said, the government is a full partner with the private sector. For those who are bailed out, that's a truth to be relished.

And what about those guys at the EPU ? The ones who makes all those decisions, approving or rejecting a privatization proposal. Don't they take responsibility for anything at all ? I can still remember how they certainly sounded very powerful when they could ignore a state government's protest over some of their decisions. Didn't they study the viability of the LRT first as it was proposed to be built and operated by the private sector. Where was the common sense then, and where is the common sense now?