Contents - SPAD

5.6) Bus Industry Risk Profiles
It is important in determining the regulatory model that the wider risk profiles of the options is
considered in order to determine whether these risks could influence or indeed prevent moving to
a preferred model.
A regulatory regime which sees greater control exerted by the public sector brings wider benefits
associated with: supporting governmental policies and objectives; meeting service standards; and
increasing public satisfaction with bus services. However, it also brings associated risks.
An initial risk matrix has been used to guide development of this plan, but a fully defined risk
matrix should be developed which considers what the risks are and where they should lie (in terms
of organisations). A review of the model options shown in Figure 4.2 would then need to be take
place.
One of the key risks associated with a regime which sees more influence by the public sector, is
that of cost. The Gross cost contracting regime is one which will enable the public sector to fully
plan and define the network, but one which will bear an increased level of funding risk since any
errors in forecasting revenue create risks to the public sector‟s cash flow. This area of financial
risk flows not only from the fact that the public sector would bear the revenue risk of the
operation but also from the fact that poor licensing enforcement – a matter largely under the
direct control of the public sector – could further undermine revenue. Conversely, in accepting
those risks the public sector gains greater certainty, more flexibility and ultimately more
competitive pricing of tenders by operators.
Thus a more centralised and rigorous method of bus service regulation is deemed necessary to
achieve improvements within the industry. In order to develop real change it is fundamental that
the model - in the short to medium term - includes greater state intervention and direct funding.
5.7) RapidKL and Prasarana
In order to properly consider the future for bus service provision in the region, it will be important
to reflect upon the role of the Prasarana and RapidKL within the industry, and in order to support
the proposed regulatory model, consider changing processes relating to the delivery of services by
the organisation.
Previously outlined within Section 2.4, Prasarana is a 100% government owned company that was
set up to own the assets of LPT services in KL. It was established in 1998 to assist in reforming the
rail and bus industries in the GKL/KV region, and took over bus services provision in 2004, thus
establishing the RapidKL bus services division. Over the course of the past seven years, RapidKL has
continued to operate bus services within the region, competing on many services with private
commercial operators.
The current role sees Prasarana managing the assets used by RapidKL and then RapidKL operating
the bus services with access to Prasarana assets and financial support.
This intervention within the industry has caused concern by the commercial operators who consider
that it creates an unfair competitive market. However the arrangements are founded in the recent
history of the performance of both rails based and bus modes in GKL/KV and can be considered a
necessary and measured response to the crises that beset LPT in the late 1990s and the first few
years of this century.
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