The future of mass transit in Thailand: Interview with the managing director of Bangkok's subway concession holder 

By Jon Fernquest

Today's article is about the future of Bangkok's subway. One sentence says it all:


Will this "extension of lines" happen soon?

It all depends....

The loans that could make this happen are ready to go.

A loan of more than 79 billion baht with an interest rate of just 0.2% has already been arranged with the Japan International Cooperation Agency (JICA).

But there may be legal problems with the loan. 

This loan might violate a 1999 Thai law on bids because it requires "Japanese firms to play a key role in the construction" and that "at least 30% of the construction materials must be bought from Japan."

This is called tied foreign aid and is quite common (See pie chart to the right).

There are probably even more gotchas but most would probably agree, it would be a pity if an essential part of Thailand's modernization was held up on technicalities.


Mass transit in Bangkok has had a tumultuous history. Here are some of the articles during the last couple of years:


Here is today's article in full:

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EXECUTIVE Q & A

BMCL ready to tap new opportunities

By ShareInvestor
23/01/2009

Bangkok Metro Plc (BMCL) was established on Feb 18, 1998, with initial registered capital of one million baht and Ch. Karnchang Plc as its major shareholder, to bid for the concession for Thailand's first underground rail system. On Aug 1, 2000, the company entered into an agreement with the Mass Rapid Transit Authority (MRTA) for the initial Chaloem Ratchamongkol Line, which began service on July 3, 2004. BMCL was listed on the SET on Sept 21, 2006. Dr Sombat Kitjalaksana, the BMCL managing director, discusses the company's progress.


1. Please explain BMCL's business model.

BMCL is currently in the fourth year of a 25-year concession by the MRTA to operate the Blue Line of the subway. Our three largest shareholders are the MRTA with 25%, Ch. Karnchang (CK) with 24.61% and Bangkok Expressway Plc (BECL) with 11.93%. The Thai government, via the MRTA set up the investment policy to fund the civil work, including stations, tunnels and ventilation systems, while BMCL funded the moving parts, such as rolling stock, signalling equipment and ongoing mechanical and electrical maintenance.

In addition, the MRTA sets up the fare structure and how the fares will be adjusted in the future. BMCL is responsible for the operation and maintenance as well as ridership. We are the sole agent that collects farebox and non-farebox revenue. This business model is very bankable and viable under certain assumptions such as the extension of the lines but due to the delays of the extensions, BMCL currently is experiencing some issues.


2. How is the progress on the extension of the mass transit lines?

In 2009, the line that we are most confident of being built by the MRTA is the 23-km Purple Line from Bang Yai to Bang Sue. The funding has been secured and once the terms of reference for the operation contract are available, BMCL will bid for the operations.

Our business strategy would be slightly different with the Purple Line as BMCL would have a service agreement with the MRTA and thus would not face any ridership risk. Through this strategy, BMCL directly benefits because the Purple Line will have a direct interchange with our Blue Line and serve as a feeder line to BMCL. The other lines still under discussion are the Blue Line extension, the Green and Red lines, and we hope that within the next six to nine months, BMCL can bid for the operating contracts of these lines as well.


3. Has BMCL seen an increase in usage in 2008?

We have indeed seen an increase in our ridership in 2008. If you compare our ridership numbers from the same period in 2007, passengers per working day have increased 2.65%. Currently, we are experiencing normal growth: the metro system is not fully developed or integrated, and we are relying on property developments by the private sector along the Blue Line. And if you can imagine further metro lines opening, BMCL should experience a big jump in ridership.


4. What is the average daily usage and maximum capacity?

Currently our average ridership on weekdays is approximately 200,000, on Saturdays 150,000 and on Sundays 100,000. With our current number of trains, our maximum capacity is 330,000 users. However, if we see more demand we can easily increase our capacity as the platforms are built for six cars per train and currently we use three. Our aim is to have more than one million passenger trips per day.


5. Advertising and retail space should be a more prominent percentage of BMCL's revenue. What plans does BMCL have for this?

Commercial retail and advertising represent 10% of revenue and we are merging our three subsidiaries that handle our non-fare revenue streams into one subsidiary in order to improve synergies between each entity and provide a one-stop service for advertising, telecommunications and retail services to our clients. In this new subsidiary, BMCL will own 65%, but our focus is first still firmly on increasing ridership.

FINANCIAL PERFORMANCE:

1. BMCL's cash position decreased from one billion baht in 2007 to 100 million as of the third quarter of 2008. Are there plans to raise additional equity or debt in the near future?

Thankfully, our creditors understand the situation that we are faced with today and have extended our grace period for principal repayment on our debt.

MISCELLANEOUS:

1. What do you feel are the biggest risks facing your business today?

Our biggest risk is the delay of the extension of future lines. We hope that with the settlement in politics and the stability that will come from this, BMCL will be able to prosper in the near future.


2. How have the global recession and local politics affected BMCL's business?

Local politics has affected us as I noted earlier; the global recession has not had much of an impact yet because we still have sustainable growth.


3. Where do you see BMCL in five years from now?

In five years from now we aim to be operating at an international standard with a high quality of service, be financially profitable and provide safe, fast, convenient, reliable and punctual mass-transit system for the public use.


The Executive Q&A Series is presented by ShareInvestor, Asia's leading financial internet media and technology company, and the largest investor relations network in the region with more than 400 listed clients. The interview is conducted by Pon Van Compernolle, managing partner of GVC Capital, an investment advisory firm focused on small-mid caps in Thailand. For more information, e-mail pon@gvc-capital.com or howard@shareinvestor.com or visit http://www.ThaiListedCompany.com

(Source: Bangkok Post, business, EXECUTIVE Q & A: BMCL ready to tap new opportunities, Shareinvestor, link)

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