What is MRT Corp’s Business Model

Mass Rapid Transit Corporation Sdn Bhd (MRT Corp) Annual Report 2021 shows that its RM56.66 bil accumulated losses supersedes that of the 1Malaysia Development Bhd (1MDB) and Malaysia Airlines.

MRT Corp which prides itself as a developer of Malaysia’s urban rail transport infrastructure incurred loss after tax of RM3.67 bil for its FY2021 ended Dec 31, 2021 (FY2020: RM8.94 bil; FY2019: RM7.3 bil).

Interestingly, the Finance Ministry (MOF)-owned entity behaves like many other government-linked companies (GLCs) in that despite being in the red since FY2016, its financial state does not seem to affect the remuneration of its top brass.

Its key management personnel compensation rose 31% (or RM610,000) to RM2.57 mil from RM1.96 mil previously. The fees and other remuneration for its directors climbed to RM469,000 (FY2020: RM354,000) while that of other key management personnel – namely, group CEO, group chief commercial officer and group chief financial officer – jumped to RM2.57 mil (FY2020: RM1.96 mil).

The first line to be implemented by MRT Corp was the 46km Kajang Line (previously known as Sungai Buloh-Kajang Line) which runs through the city centre of Kuala Lumpur to Kajang. The line was fully operational in July 2017. (Currently, the line may not meet operational costs)

Prime Minister Datuk Seri Ismail Sabri Yaakob launched Phase One of the 57.7km Putrajaya Line (previously known as the Sungai Buloh-Serdang-Putrajaya Line or MRT2) which runs from Kwasa Damansara to Kampung Batu while Phase Two which will cover the remaining line is expected to be operational in January 2023. (Our former PM Najib Razak was guest of honour before the PM launched the line).

On March 7, MRT Corp chairman and director Datuk Wira Azhar Abdul Hamid was reported to have resigned as chairman and director after having “a difference of opinion” on the implementation of the MRT3 Circle Line project. This line will cost approximately RM1 billion per kilometre or RM50 billion under current estimates.

MRT Corp is not a profitable entity and will never be (if it follows its current mode). Its business model is to be a government “parasite” – not self-sustaining and surviving because of Government grants, loans or subsidies. Urban rail is not a profitable venture unless you have cross-subsidy from other sources like property development. This is the Hong Kong (MTR) model. We could copy them and make the burdensome, government guaranteed loan partially reduced. But MRT Corp has not indicated its plans for property development or how it will sustain itself. Operationally it is difficult to meet both operational costs and debt repayment. To have a fare-box ratio of over 1.0 will be ideal. But nothing of that sort is mentioned by the CEO except to explain Najib’s tweet was the reason for his exclusive trip on the MRT 2!

We need transparency on its operations, a plan towards being self-sustaining and an accounting of all grants, loans and subsidies. Is this not the Rakyat’s money or is Najib paying for it?

Reference:

Is MRT Corp’s ballooning accumulated losses part of its investment strategy? Cheah Chor Sooi, Focus Malaysia, 21 June 2022