2. 2
Privatization of KTMB
Keretapi Tanah Melayu Berhad Key Developments
Government Rejects MMC And Gamuda's Plan To Acquire KTMB
Feb 4 14
The government of Malaysia has rejected plan by MMC Corporation Bhd (KLSE:MMCCORP) and
Gamuda Bhd (KLSE:GAMUDA) to jointly acquire operations of Keretapi Tanah Melayu Berhad
(KTMB). Gamuda and MMC are already involved in a joint venture to carry out the double-tracking
railway project from Ipoh to Padang Besar on a design-and-build basis, which is now nearing
completion. It is understood that besides privatising KTMB operations, both parties want to take
control of the landbank parked under Railway Assets Corp (RAC) and build housing and
commercial properties. KTMB has assets and land worth an estimated MYR 50 billion. It is the
operator of the national railway line, while the assets and land are owned by RAC. Although the
assets are parked under RAC, KTMB has a big influence on how the assets are utilised.
According to a source close to MMC, the company now plans to take over the freight business of
KTMB after its proposal with Gamuda was rejected.
Gamuda And MMC Reportedly Mulls To Acquire KTMB
Jan 2 14
Gamuda Bhd (KLSE:GAMUDA) may submit a proposal to MMC Corporation Bhd
(KLSE:MMCCORP) to jointly take over Keretapi Tanah Melayu Berhad (KTMB) operations in a
deal worth more than MYR 5 billion. Sources familiar with the matter said Gamuda and MMC, a
company controlled by Albukhary Foundation, are in discussions over the matter. “An agreement
to jointly privatize KTMB is in the works. Gamuda is awaiting MMC’s response for a partnership to
take over and privatize KTMB. The deal would require investments of more than RM5 billion,” the
sources said. The government is also open to proposals on the privatization of KTMB. MMC did
not outline how it intended to turn around KTMB. They only talked about property development on
KTMB’s owned land. The takeover by MMC was expected to be funded by government-backed
bonds. Abdul Aziz Kaprawi, Deputy Transport Minister of Malaysia, had said there are no plans to
privatize KTMB.
3. 10
East Coast of Malaysia is an
economic region strung along 5
major “pearls” namely, Kuantan,
Kertih, Kemaman, Kuala
Terengganu and Kota Bharu.
Connecting these “5 K’s” with
passenger rail and freight rail
will improve the growth of this
economic region.
Connecting this region to Johor,
KL and Penang through the
east-west rail corridors will
complete the rail network and
bring economic growth
throughout the country.
East – West Rail Corridors
4. 2
The East Coast Economic Region (ECER) covers the states of Kelantan, Terengganu and Pahang, as well as the
district of Mersing in Johor. With an area measuring more than 66,000 sq km, the ECER covers more than half of
Peninsular Malaysia. The ECER's population of about 3.9 million represents 14.5% of the total population of
Malaysia.
A Master Plan was developed and will be the basis for guiding the development of this region over the next 12
years where it will be transformed into a major international and local tourism destination, an exporter of resource
based and manufactured products, a vibrant trading centre, and an infrastructure and logistics hub.
The Master Plan also details measures to eradicate poverty, and improve incomes and distribution in a
sustainable manner for ECER.
The ECER’s distinctive natural resources, culture & heritage will form the basis for transforming the economy into one
that is dynamic and competitive in light of greater regional and global competition and economic liberalization.
East Coast Economic Region (ECER)
10. Current railway assets and services to be divided into 2
separate business operations providing comprehensive rail
services hereon identified as the East Coast Railway Co. &
West Coast Railway Co.
Each Railway Co. will take
over existing operations
and assets along the
eastern & western rail
corridor, currently managed
by KTMB, via a concession
contract for a fix period.
Over this period, the
concessionaire will guarantee
sustainability of the rail business
and continued investments in line
with the nation economic transformation
program.
SRB is proposing to step into the shoes of ECRCo.
ECRCo
WCRCo
11. Pengerang
Mersing
10
Rail Services
Freight = Est. 1500km
Intercity = Est. 1500km
- Double track with electrification
- Diesel electric loco freight average speed 50 kmh
- EMU with average speed 120 kmh
- ‘Open System’ rail service on meter guage
High Speed = Est. 500km
- Double track with electrification
- Dedicated high speed line
- EMU with average speed > 250 kmh
- ‘Open System’ rail service on standard guage
12. 10
Resume Kerteh - Kuantan Port
rail freight services. Upgrading
to double tracking and line
extensions.
- see separate proposal
Phase 1
13. 11
Phase 2A
Gebeng-Mentakab-Port Klang
connection would provide both
passenger and freight moving east to
west – port side to port side.
Kuantan's oleo chemical industry can
developed through this, thus increasing
population and GDP of ECER. Traffic will
bring more visitors and goods to the west
coast cities vis-à-vis.
The extension of a direct alignment
tunneled through the mountain range
connects Gebeng to Port Klang via
Mentakab saving both time and cost for
shipping.
Phase 2B
Line extension north through Dungun –
Pasir Putih – Tanah Merah connecting to
existing network at Pasir Mas
Phase 2
14. 11
Phase 3A
Gebeng – Muadzam Shah – Mersing –
Pegerang southern connection would
provide both passenger and freight to the
south.
Support towards tourism and industries
to the south and connection to ports in
Johor. The ‘Pengerang’ petro chemical
development also connected.
Phase 3B
Construction of a dedicated high speed
line form Tumpat to Gemas where line
will connect with KL – Johor high speed
line at Gemas junction. Trains travelling
at more that average speed of 250 kmh
will reduce travelling time and provide
alternative to travelers.
Phase 3
15. 12
Transfer and handling of freight services -
specializing in industrial and hazardous
material safely point to point.
Specialized
17. 1
proposed take over of
East Coast Railway Services
by Scomi Rail Bhd
CONCEPT
PROPOSAL
July - 2014
18. 1. Scomi Rail Bhd (SRB) is a Malaysian registered company with business interest in rail car engineering,
manufacturing and rail systems integration. As part of rail project execution the company is also involved in
operations and maintenance of railway services. Today the company is implementing rail projects in Brazil, India
and Malaysia.
2. The company has identified a discontinued rail service on the East Coast of peninsular Malaysia which it intends to
undertake the revival of the said services. This line is known as the Kerteh – Kuantan Railway Service (KKRS).
During its early operation the said line runs freight services from the petrochemical hub in Kerteh down to the
Kuantan Port. Naturally the goods transported were all petrochemical produce. SRB intends to apply to the
government as concession owner of ECRS with which the company will see through the phased development of the
rail networks proposed.
3. This proposition supports the government’s goals for the Tenth Malaysia Plan 2011-2015 - “CHARTING
DEVELOPMENT TOWARDS A HIGH-INCOME NATION”.
East Coast Railway Services (ECRS)
19. 2
4. KKRS services were discontinued by Petronas in 2010. Not-withstanding the declining state of the assets, all
operating assets of KKRS remains on site. Petronas has decided not to continue the operation and businesses of
KKRS as it is not in sync with the business direction of the company.
5. SRB proposes to optimize use of rail corridor and further promote use of piped utilities to transfer gas, liquids, water,
communication and power to users along the corridor.
6. KKRS will be develop along the lines of the future East Coast Rail Network with railway lines extended north and
south along the coast and east to west across the peninsular.
Kuantan Kerteh Railway Services (KKRS) – continued
20. 10
KKRS is a single railway track from Kerteh
Integrated Petrochemical Complex (KIPC) to
Kuantan Port with Spur Line to Gebeng
Integrated Petrochemical Complex (GIPC).
The overall length covering 76.5KM with
mainline of 73.1KM from Kerteh to Kuantan
Port and spur line of 3.4KM to GIPC.
KKRS started commissioning in July 2004
and ceased operations in Nov 2010 due to
low utilisation by Petronas subsidiaries
because of bad track condition due to ground
problem and efficiency in double handling.
Facilities include 3 yards in Kerteh, Gebeng
and Kuantan Port with a dedicated depot in
Kerteh.
KKRS - Overview
21. KKRS – Proposed Plan Phase 1
Part 1
• Negotiations
• Letter of undertaking
• Due diligence
• Government Approvals
• ECR concessionaire
• KKRS acquisition
6 months 12 months 99 years
Negotiations Rehabilitations
Part 2
• Extension of Track to Kuantan Port
Wharf
• Final design for Kuantan-Port Klang
corridor
Part 3
• Revenue service for
leasehold tenure
• Maintenance done by
Scomi
Operations
2 years soft
operations
22. Benefits to Stakeholders
Benefits to the Rakyat
Increase safety for Rakyat using the road
Provide job opportunities
Enhance conveniences for Rakyat
Cleaner environment with less air pollution
Benefits to the State Government
Reduce lorry haulage on the public road
Reduce road maintenance cost
Revenue from the right of use and land lease
Reduce the risk of accidents on the road
Reduce air pollution caused by lorry haulage
Reduce road congestion
Benefits to the ECER/Federal Government
Promote safe goods transportation to the investors
Stimulate economy growth
Promote a reasonable consumption of energy which minimize environment impacts
Promote safe and reliable mode of transportation of goods
Help ECER provide complete transport solution at SEZ
23. Incentives offered by ECER
Tax Incentives:
❖ Income tax exemption of 100% for 10 years commencing from the year
company derives statutory income;
Or
❖ Investment tax allowances (ITA) of 100% on qualifying capital expenditure for
5 years.
Other Fees:
❖ Stamp duty exemption on instruments of acquisitions;
Or
❖ Leasing of property relating to Industrial Park.
Non Fiscal Incentives in Special Economic Zone (SEZ):
❖ Companies undertaking activities in SEZ will also enjoy a set of non fiscal
incentives such as competitive utility tariffs, land premium and accessibility to
grants based on merit of each case;
Grants here is
“Facilitation fund”
which is reimbursable
10% of the cost
incurred. This is
granted based on
customised
application and merit
of each case.
24. ECR – SWOT Analysis
Strength
Dedicated Service specifically for goods
transportation from Kertih terminal and Gebeng
Terminal to Kuantan terminal.
Capable of transportation of goods in bulk over long
distance ie. 76km
High Service life of locomotive & wagon which would
be able to run the service up to 30 years
Capable to increase the headway and frequency to
meet the demand
Supported by State Government and ECERDC
The only rail services in SEZ which capable of
facilitating the needs of transporting goods
Supported by Petronas PetChem subsidiaries
New development for industries along east coast
corridor – South to North.
Untapped economy and market segments of the east
coast population.
Weakness
Present last stop for rail is Kuantan terminal. Multiple
handling of containers be overcome with the proposed
rail extension to Kuantan Port wharfs.
Insufficient throughput from Kertih petchem. To be
overcome with new user industries at Gebeng.
High maintenance of locomotive which require
overhaul in every 5 years & wagon in every 8 years
Land Lease & right of use fees charged by State
Government
Current services is not supported by the most of the
PetChem industries due to inadequate infra and safety
conditions.
Kuantan Port connection and facilities being limited.
Government today has already invested RM1.5b to
expand breakwater and wharfs – WIP.
25. ECR – SWOT Analysis
Opportunities
New customers if line extended to Kuantan Port’s
wharf especially Petronas PetChem industries and as
well as Non Petronas Pet Chem
The 3 terminals can be used as temporary storage for
containers in the open yard and warehouse
To reduce the cost to be competitive with the lorry
haulage
To comply with the PetChem international standard of
dangerous goods transportation
New potential customers i.e. Lynas, Palm Oil
Industrial Cluster, Malaysia China Kuantan Industrial
Park, etc.
Threat
Lorry haulage
Introduction of highway that contribute to faster
travelling time for lorry haulage
Cheaper cost using lorry haulage
Limited growth in petrochemical industry
26. 21st Century economy is about
Connectivity!
Trans-Asian Railroad; a 5600 km freight
line that originates/terminates in Singapore
and Kungming (China)
