From: ASCKN@ASUACAD.BITNET (C. K. Ng)
Newsgroups: soc.culture.asean
Subject: Re: MRT in K.L
Date: 16 Apr 92 02:59:17 GMT
Organization: Arizona State University


  Being a main-stream hardcore fiscal conservative, I'd still support
a project like MRT in KL.

  A project like MRT is a long-term capital investment.  The initial
outlay may be astronomical in magniture, but the (expected) return
can be long into the future.  By expected return, I am referring only
to the monetary return.  In project evaluation like this, the
universally acceptance criterion is simply applying the net present
value (NPV) rule taught in all Principle of Finance classes at
the undergraduate level.  In a netshell, it says that as long as the
present value of the expected net future cash inflow exceeds the initial
outlay, then a positive NPV would result, and the project should
be accepted under non-binding capital rationing.  Of course, if
it's an exclusive project in which ONLY ONE has to be chosen from
a few alternatives, then the one with the highest NPV should be
chosen.  In this case, if we let the alternatives to the MRT to
come in, then the MRT project should be compared to the NPV of the
other alternatives.  However, I'm not advocating such criterion
because the other alternatives are not really comparable solutions
to the traffic conjestion problem.  I say not comparable b'cos:
Other components have to come into the picture.  Buses may be
a competitive rival but they pollute the environment more.  The
initiation of electricity-powered buses is a totally new project
by itself.  So, the improvement over the environment should be
considered as an addition to the expected return equation.

   Next comes the survivability question.  There's a rather
simple solution to this.  Tax!  I am using the word tax here real
loosely.  Tax can come in the following form:  To encourage usage
of the MRT, toll can be collected from cars driven along the same
routes served by the MRT during heavy business commuting hours.
This would discourage business commuters to shun away from driving
their own cars to work everyday.  Of course, there are a bunch of
other implementational tricks we can perform here.  Don't forget
the human side too.  By this I mean the people have to be properly
informed that commuting on the MRT is not something degrading them
in terms of their socio-economic status.  Such attitudinal change
is critical, but difficult to accomplish in a society like M'sia
where one's wealth and hence one's socio-economic status is proxied
by the price of the car one drives.

   Evaluating the project based NPV rule is more meant for commer-
cially oriented projects where the investors are assumed to be
profit maximizers.  However, for a public project like this, the
NPV rule can only be applied to a certain extent.  Other consi-
derations definitely have to be taken into account.  Environmental
improvement, infrastructural improvement, are just two pluses
that come to my mind off hand.  For those of you who have sufficient
training in microeconomics, I guess a project like this can be
anologized to a public good like national defense in which the outcry
of the public to finance it at the inception overshadows their desire
to utilize it upon its completion.

  Hope to hear more from fellow Malaysians on this.  Don't act like
what the Malay "peribahasa" says "Rumah sudah, pahat(?) berbunyi".
                                  ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

  **  Chee-Keong Ng, Ph.D.  **
  Assistant professor in finance and banking