Delivering Value

Peter Hansford
(photo by NCE)

Peter Hansford is the newly elected President of the Institution of Civil Engineers.

I was fortunate to get a seat in the Great Hall of One Great George Street to listen to his inaugural speech to Engineers. In the speech, Peter challenged Engineers to deliver "more for less". This set the theme of his speech for the next one hour . *Engineers today are locked into a race to find ways to reduce emissions and to produce low carbon solutions for infrastructure. Therefore delivering value is not about producing cheap or low quality work, nor about reducing attention to safety or taking short cuts in protecting the environment.

Delivering value is about achieving the maximum benefit – for society or for investors – from the resources they can afford. This means making every pound, every euro, and every dollar count. It’s also about making every unit of carbon and every job count.

But deliver value of what? This is where Peter highlighted five key areas:

1. Value of INFRASTRUCTURE - essential for economic growth
2. Value for MONEY - as professional obligation
3. Value for CARBON - legacy for the future
4. Value of CIVIL ENGINEERS - always professional and inspiring next generation
5. Value of the INSTITUTION OF CIVIL ENGINEERS - for members and society*

I spoke to the President after his inauguration speech and was thrilled to learn that he will be visiting Malaysia as one of the countries for international mission. He will be presenting on 'Infrastructure development in the tropical environment' for a biennial Asia Pacific Conference in PJ Hilton on 14 January 2011.

I felt honoured he took time to listen to a "small engineer" like me when there were all the "big guys" from the BIG COMPANIES, including my BIG BOSS (the guy at the VERY TOP)!

After sharing his thoughts, he suggested I drop him a line. I followed up with an email to highlight Malaysia's ongoing high value economic transformation plan (ETP). The plan identified nine entry point projects(EPPs) to realise the ETP. These are:

1. Integration of urban mass rapid transit system

2. Revitalising the Klang River into a heritage and commercial centre

3. Greening of Greater Kuala Lumpur

4. Creating iconic places and attractions

5. Creating a comprehensive pedestrian network

6. Attracting the world’s most dynamic firms within priority sectors

7. Attracting the right mix of internal and external talent

8. Connecting to Singapore via high speed rail system

9. Developing an efficient solid waste management and ecosystem.

All of these key points strike a chord with the Presidential Address - delivering value and low carbon infrastructure for the future. There is also a central theme surrounding the nine EPP, which is to make Malaysia more sustainable than ever before and advocating the need to, as the President of the ICE put it, "deliver new things using new ways".

*Information adapted from the Presidential Address

UK Spending Review: Green Investment

The UK is saddled with a huge pile of debt. Interest payment on debt alone is £44bn a year. That's derived from £150bn in government loans to meet the £697bn spending shortfall. £44bn with today's exchange rate will buy Malaysians 36 PLUS north-south expressways EVERY YEAR!

*It has been announced an hour ago that £1bn will be set aside for the “world’s first carbon capture and storage demonstration project”. A further £200M will be set aside for offshore wind, specifically for the development of port sites to allow the construction of turbines.

Osborne, UK Chancellor, has put £1bn into a Green Investment Bank, “the first time anybody has ever been in favour of such a bank”, he said.

More funds would come from the private sector and the sale of government assets, he said. The aim was to make the UK a leader in the green economy.

Overall the government budget on energy and to tackle climate change is trimmed 18%. The axe has also fallen on renewable energy projects seen as "not being strategic" to UK's energy policy like the tidal barrage on the Severn estuary.* The project has been scrapped.

On spending cuts in other areas, Osborne said he would “ruthlessly prioritise” capital spending on transport, green energy and the science base and that no stone would be left unturned in the search for waste.

*Information adapted from BBC News and New Civil Engineer

Biodiesel vs Petroleum Diesel

Once a while, I draw particular attention to biofuels in particular to biodiesel. This was my research interest in Cambridge.

Price tracking of biodiesel and petroleum diesel from 2006 - 2008

Biodiesel has regularly been priced out by cheaper petroleum diesel. International prices for vegetable oil prices have been more expensive than those for diesel for all of the past 15 years, hence producers would earn more by selling the vegetable oil on the international market than by converting it to biofuel.

Some governments have mandated the conversion of vegetable oil to biodiesel, However, under such circumstance it would force its use for a lower value end-use, which is bad for the economy.

When I started the research, prices of crude oil were fluctuating between $60 and $80 per barrel. By the time I completed the research, the price of oil shot up to the $100-mark. This goes without saying that future prices of oil are difficult to predict. Unfortunately, the prices of biofuels rise and fall in tandem with the prices of crude oil.

10-year price-tracking of crude oil

The petroleum and agricultural commodity markets have been highly volatile in recent years. The OECD-FAO Agricultural Outlook suggests that a persistent rise in demand for vegetable oils will result in a long-term price trend of these products averaging about 60 per cent higher prices in the 2008–17 period than the average levels in previous years.

This means, if for example, crude palm oil (CPO) prices fell to the levels in 2006 when I started my research, palm biodiesel would still require government support to be economically viable. Otherwise, fossil fuel subsidies, such as those enjoyed by a majority of southeast Asian nations, must come down. In other words, petroleum and biofuel producers must compete on a level playing field if the governments want a meaningful growth in biofuel consumption.

Road pricing in the UK

Imagine one day, the North-South Expressway is toll-free. Imagine seamless travel from Bukit Kayu Hitam to Singapore without having to worry about Touch n Go credits. But also imagine the toll-free condition of the highway during festive and school holiday seasons. Yes, a picture of delight and nightmare.

NSE

This is exactly what the UK is at the moment. The NSE is equivalent to the M1 in the UK. It provides seamless toll-free connection between the north and south of the country. But during festive and school holidays, the M1 is a giant parking lot.

M1 is one of many highways that need to be expanded. The M25 which is equivalent to Malaysia's MRR2, is already expanding sideways in notorious junctions. All of the expansions are funded with taxpayers' money regardless of which part of the country people are living. In Malaysia, the government has conceded that Sabahans and Sarawakians, who live more than 2000km from the capital and across the South China Sea, can't be made to pay for infrastructure they have no access to. So Peninsular Malaysians have to pay for their own.

M1

The British government has not had this problem like us, but unfortunately, it is now broke owing more than £900 billion (or 63.7% of GDP) to the private sector and whoever bought its gilt. It's decided to cut its debt by cutting spending and taxing more. The axe will inevitably fall on road expansion programmes. In short, there is no more money to spend on roads.

There is a critical need to improve and expand UK's road infrastructure as capacity limitation is crippling productivity and growth of the country's economy. The idea to pay for road expansion programmes was first mooted in 2006 by Sir Rod Eddington who did a transport study for the British government. He reported that tolls will be inevitable in future implementation of road expansion programmes.

I attended a briefing two months ago by Stephen Glaister, Director of RAC Foundation who recently published his findings that tolled roads will be the future of UK's spending on road infrastructure.

Coming from a highway toll concessionaire background and project managing one of the most controversial tolled highways in the Klang Valley, I have encountered and seen enough of public outcries the idea could potentially lead to. First, the public will question the need to pay for existing roads they have never needed to pay before; Sprint Highway's Damansara Link and NPE's Dato Harun's section are case in point . Second, the public will demand their income taxes be lowered to reflect public services they no longer pay for.

What is interesting in Glaister's report is the rearrangement of taxes. His idea of road pricing is not a top up of existing taxes that people already pay with their income. His idea of road pricing will come with a reduction of fuel and road taxes. This means taking taxes associated with road usage out of the equation and making motorists pay as they use. Which is a brilliant idea as long as the net effect will result in lower carbon emissions and getting more people to use public transportation. However, this is not always the case as there are many places not reachable by public transport yet. Studies in Glaister's report have found that rail accounts for only 7% of total passenger miles in the UK. So it will be interesting to know how Glaister's idea of road pricing can solve carbon emissions.

The purpose of road pricing must be clear. It must identify if it is new build or building on existing network for capacity enhancement. If it is new build, I have misgivings about private financing initiatives (PFIs) being keen on building parallel roads to UK's established road network. The reason NSE is successful in Malaysia is due to several factors. The alternatives to NSE are the longer route, more dangerous, flood-prone, under-maintained and badly lit trunk roads that motorists would gladly pay to avoid.

However this is not the case for the UK. UK's existing road network is far more established than developing countries like Malaysia. The M1 for example, is of impeccable quality. Any tolled alternatives must top that before motorists will consider paying for using the new M1. The market for new tolled highways is fairly limited to say the least. This leaves me to think that road pricing can only be possible on capacity enhancement and asset maintenance programmes.

And if the government does intend to go ahead with road pricing, I will be most happy to contribute to ideas on plugging toll leakages and designing road schemes that will only lead to one destination - the toll concessionaires.

Sustainable mobility in Kuala Lumpur

According to the statistics of the Road Transport Department in 2008, there were 18 million registered vehicles on the road owned by 11.2 million motorists in Malaysia. This makes up an average of 1.6 vehicles per eligible motorist.

Malaysia has the 4th highest car ownership ratio in Asia Pacific after only New Zealand, South Korea and Australia. In 2006, 67% of persons aged above 18 years in Malaysia own a car. This is more than twice the rate of car ownership in Thailand, 3 times the rate in Singapore, and 5 times the rate in Philippines.

Traffic congestion at Persiaran Kewajipan, USJ

This problem has been particularly pronounced in Kuala Lumpur, where car ownership has increased from 247 vehicles per 1000 inhabitants in 1990 to 994 vehicles in 2002, far beyond the national level of 91 vehicles in 1990, and 210 vehicles in 2002. In the UK, car ownership is at 463 per 1000 inhabitants, which is less than half of ours.

Public transportation in KL comprise only 16% of total motorised travel as compared to 62% in Manila and 80% in Hong Kong.

STAR LRT
Utilisation rate of public transportation in KL is 16%

These numbers are pretty telling of our failure to prioritise investment to public transportation. Basically every inch of land available is given the priority for road capacity enhancement but never a square inch for a dedicated bus or tram lane. The response to the latter is always a two-letter answer.

Capacity enhancement does not always solve the problem. The Kelana Jaya interchange on the LDP is a case in point. Upgraded six years ago, now it is back to its notorious days because more development areas have sprung up.

Capacity enhancement at Kelana Jaya with the addition of auxiliary lanes

Capacity enhancement in the UK with the use of technology instead of constructing more lanes

Clearly the answer to resolving congestion is not by having more lanes. Congestion must be tackled by taking vehicles off the road; not to accommodate more of them. And to take vehicles off the road, we must tackle the root cause of the problem, which is investment in public transportation.

Public transportation provides mass mobility. Motorists are mobile and need to be given the option to reach from point A to B, safely in a considerable time, cost and convenience it used to take.

Let's face it, no one is going to take a bus from Puchong to Sunway if the only way is via central KL which takes 2 hours with multiple bus changes. For those who are not familiar, Puchong to Sunway is only a toll away on the LDP. It takes less than 15 minutes by car.

However, if we want public transportation to fly off shelves, we need to provide a service that is attractive and makes economic sense.

I suggest the definition of "attractive" to be something like a reliable Puchong to Sunway service in the same time, costs RM1.50 and a running frequency of less than 8 minutes.

Puchong and Sunway separated only by a toll plaza

That said, commuters must also be able to take the next LRT/bus/tram to anywhere in the Klang Valley like Cheras or Shah Alam or Ampang and vice versa without hassle. This means improving connectivity between different rail systems and feeder buses in the Klang Valley. New rail lines or expansion of current lines could also be explored, such as a loop LRT line which connects areas round the compass.

RapidKL Bus

Who wouldn't be attracted to 650% of savings in fuel, toll and parking charges, priceless stress-free travel, similar travel time and the possibility of not needing to own a car at all?

The next oil shock is going to make a lot of us fall into fuel poverty. This means many will not have enough to spend or to save. All of these will go to paying off expensive fuel. Yet we will be held by the neck, like it or not, because we haven't had a plan B.

We don't do magic but we can always have a first step. We must first integrate the present transportation system. We need an overaching transport authority that will work closely with the local governments to integrate management of urban mobility. This is liken to the Transport for London’s partnerships with the local boroughs.

That said, sustainable transportation is not necessarily about roads. It is also about other modes of transportation like rail and water. And we might as well use the investment to expand and improve our public transportation system in these two unexplored modes. The good news is it will be cheaper and more sustainable.

Former Prime Minister Tun Abdullah Badawi in Budget 2009 promised to spend RM35billion on improving public transport over a period of 6 years (2009-2014); this is equivalent to RM5.83billion a year, or 1.1% of the 2008 GDP. This figure is low compared to Singapore, our neighbour which already has an established transport system and a much smaller geographical area, but spending $3.149 billion per year, or 1.46% of their GDP on road and public transport infrastructure. Whether or not the budget is sufficient to meet the needs of our public transportation, there is a scope for debate.

KL's public transportation network

But there is hope. The Tenth Malaysia Plan (2011-2015) aims to improve public transport as one of the six key result areas (KRAs). The goal is to increase the percentage of Klang Valley residents taking public transportation from 16% to 25% by 2012. With so little to spend and so much to expect, it would be interesting to see how things will pan out in the next five years. We'll see.