Aug 5, 2011

Many investors interested in the privatisation of the circular train service

The Ministry of Rail Transport’s plan to privatise Yangon’s circular commuter service is on track after a meeting with 90 interested businesspeople was held in Nay Pyi Taw on July 26.

The Minister for Rail Transport, U Aung Min, said Yangon’s circular train network operates at a loss and the government is unable to hike fares.

“We want to upgrade the circular train service in Yangon but it is operating at a loss. The government wants to reduce those losses by raising fare prices but we know people wouldn’t like this,” he said during the meeting.

“But it doesn’t matter if a private company raises the price, especially if the service improves,” U Aung Min said.

Fares are set according to the distance travelled by commuter – K10 (about 1.3 US cents) pays for up to 15 miles; tickets for destinations beyond 15 miles are K20. U Aung Min said the circular trains carry about 100,000 commuters a day, with average monthly operating costs of about K260 million (US$325,000).

However, monthly revenues are barely K42 million ($52,500) – K29 from ticket sales and K13 from the leasing of shops and properties along the line, U Aung Min said.

“An authorised agent [private company] wouldn’t agree to keep fares at K10 but K65 would be a break-even point that would cover all costs. But a minimum fare of K75 or K100 would ensure a profit,” U Aung Min said.

The minister added that rail fares countrywide are kept low.

Businesspeople present at the meeting said they expected that whichever company or group took over the operation of the service would also be given the right to run related businesses such as taxis, restaurants, hotels and shops around stations.

A businessman who attended the meeting said he expected that operating the circular train service would mean accepting losses in the short term.

“I’m interested and attended the meeting to learn what I could. If I was allowed to operate the train service I would want to have a long-term contract because I think the authorised agent would lose money on it for the first five years,” said U Zaw Zaw Aung, director of Global Development Enterprise.

Another businessman said: “The minister said another meeting will be called within two weeks or a month” on how the privatisation would proceed, he said.

The Deputy Minister for Rail Transport, Thura U Thaung Lwin, said a feasibility study was needed for the businesspeople who are interested in operating the circular train.

“If you are interested in the service, you need to consider the possible risks because once a company takes it over we won’t allow them to stop if there are difficulties,” the deputy minister said.

Yangon’s circular train service operates 22 trains that run 200 loops around Yangon a day

Source: Myanmar Times