PRIVATIZATION Privatization in Malaysia, Regulation, rent-seeking and policy failure

Kuala Lumpur Light Rail Transit 121Table 5.05 Kuala Lumpur LRT: Projected and actual daily ridershipOperator Projected Actual (year)STAR 80,000–170,000(projection in 1997)165,000–170,000(projected for 1999)PUTRA 360,000(projection in 1997)KL Monorail 60,000–80,000(projection in 2000)85,900(projection for 2002)181,200(projection for 2008)46,500 (1997)65,000 (end 1997)65,000 (1999)80,000–92,000 (2003)12,000 (1999)125,000 (2000)150,000–160,000 (2003)11,000 (2003)39,000 (2004)Source: Adapted from The Edge (26 August 1996, 12 May 1997, 13 July 1998, 19 July 1999,6 December 2000, 15 January 2001, 20 September 2004); New Straits Times (1 January 1997;31 December 1997, 2 July 1999); Malay Mail (20 December 1997).and actual ridership, these overoptimistic estimates may still have beeninsufficient for a viable internal financial rate of return (Table 5.06).The internal rate of return was 14–16 per cent for STAR and 11 per centfor PUTRA. However, STAR’s high debt–equity ratio of 4.8:1 and lowfarebox ratio of 0.44 meant that it was unable to service its loan and meetoperating expenditure (Halcrow Consultants 1999; The Edge, 19 July 1999).The company began losing money upon commencing commercial operationsin December 1996, and was unable to repay the interest on its RM2.1 billionin bank loans and RM685 million in government support loans since itstarted operations 20 (The Edge, 17 April 2001) (see Table 5.07). Three monthsafter the start of Phase 1, STAR looked into restructuring its debt and subsequentlyrequested assistance from the state Corporate Debt RestructuringCommittee (CDRC). STAR was taken over by Danaharta (the state assetmanagement company) on 1 January 2002, and issued a court order to windTable 5.06 Kuala Lumpur LRT: Daily ridership estimates and actual numbers neededOperator (year) Estimated Needed ShortageSTAR (2000) 200,507 356,185 155,678STAR (2010) 255,108 482,666 227,558PUTRA (2000) 162,126 374,533 212,407PUTRA (2010) 227,625 554,557 326,932KL Monorail (2000) 99,555 102,545 2,990KL Monorail (2010) 195,011 200,862 5,851Source: Adapted from JICA 1998b.