When it comes to public transport in 2024, the public is looking for three things: high-speed, efficiency, and eco-friendliness. That is why high-speed rail (HSR) is quickly becoming the preferred infrastructure option in many regions.
While the narrative around HSR usually focuses on their environmental benefits and technological advancements, it’s important for executives, especially in regions like Southeast Asia, to consider their financial viability.
The revived high-speed rail project between Singapore and Kuala Lumpur is a case in point. With Malaysia’s hopes to establish the project on a Build-Operate-Transfer (BOT) basis, it’s important to scrutinize the profitability and longer-term sustainability of such public transport ventures.
Financial Viability: A Global Overview
Public transport systems that run without monetary aid from the government are a rarity. But, nonetheless, systems like Hong Kong’s MTR, Tokyo Metro, Taipei Metro, Singapore MRT, and Transport for London exhibit a semblance of self-sufficiency.
These systems have succeeded in strong markets due to dense populations and efficient operations—all of this coupled with diversified revenue streams beyond fare collection such as property development and retail—have helped them to become the mainstays they are.
But for every profitable venture, there are others requiring continual government subsidization to stay afloat. The pattern is clear: without high demand or strategic ancillary income streams, public transport systems struggle to remain financially self-sufficient.
Given this global context, let’s take a look at what this means for the future of Malaysia’s venture into HSR, and by extension, Southeast Asia.
Challenges in the Southeast Asian Context
The Southeast Asian region presents a unique set of challenges. Population densities vary greatly, and the demand for public transport is not the same everywhere. The success of entities like Singapore’s MRT cannot be readily duplicated in other markets due to differing urban textures and economic landscapes.
The BOT approach, where suppliers provide the system at no upfront cost with a plan to recoup investment over decades through operational income, is also fraught with uncertainties. Project costs often run into billions, and operational income projections can be optimistically unrealistic, as has been the case with many HSR initiatives worldwide.
On top of all of this, the profitability of HSR and Light Rail Transit (LRT) is often hampered by high initial investment costs, long gestation periods before revenue generation kicks in, and operational challenges such as maintenance, which can prove to be higher than anticipated.
The Key to Profitable Public Transport Projects
Profitability in public transport, especially HSR, requires a multi-pronged approach. For the first prong, there is the question of ridership which must be high enough to cover the operational costs. This means that the services must be competitive with other modes of transportation in terms of cost, speed, and convenience.
The second prong is that operational efficiency cannot be overlooked. This involves everything from train frequency to energy consumption. Successful systems globally rely on the latest (and greatest) technology and process optimization to ensure their operations run smoothly.
The third prong is ancillary revenue streams. This includes development rights, commercial retail operations at stations, advertising, and potentially leveraging real estate value increases due to improved accessibility. Hong Kong’s MTR is a very good example of this as it financed a large portion of its operations through property development.
The fourth and final prong is public finance. A level of public finance is often necessary to get these projects off the ground. Governments may need to accept that while the projects might not be profitable in the strictest sense, they can have a multiplier effect on the economy and drive growth that far outweighs the cost of subsidy.
Strategic Considerations for HSR Executives
Executives in this space must think beyond the track and trains because the secret to successful and profitable HSR in Malaysia, Southeast Asia, and beyond lies in making strategic decisions that account for the complete ecosystem of the railway. This includes passenger experience, technology adoption, ancillary services, and long-term urban development planning.
Leaders in this sector must be experienced strategists who are capable of negotiating deals that make sense financially, politically, and socially.
Singapore-KL’s recently revived HSR venture, for example, must be seen as an opportunity to redefine regional connectivity and economic synergy. It requires the will to innovate and integrate various sectors—real estate, retail, technology—to create a sustainable and profitable model.
The Six Skills HSR Executives Need to Succeed
The public transport and HSR sectors present challenges that demand a specific type of executive leadership.
To drive the success of HSR ventures like the Singapore-KL project while grappling with BOT frameworks, executives need a mix of skills and experiences. Below are six traits such businesses should look for in their leadership recruitment efforts:
1. Multidisciplinary Expertise
Public transport and HSR executives must have an understanding of various disciplines including finance, engineering, urban planning, and environmental sustainability. Multidisciplinary skills and experience ensure that leaders can balance the technical complexities of HSR with economic and societal factors.
2. Strategic Vision and Innovation
Public transport and HSR leaders need to have the foresight to understand long-term market trends and the ability to innovate. The creation of a transport system is, at the heart of the matter, the creation of a future landscape of travel. Strategic vision is important to develop sustainable models that meet future demands.
3. Negotiation and Relationship Building
Given the international nature of HSR projects, executives in this sector should ideally excel in negotiation and diplomacy. They need to be capable of building and sustaining governmental relations and public-private partnerships. Relationship-building is especially important with stakeholders including suppliers, contractors, policymakers, and the public.
4. Financial Skills
The role of an HSR executive demands a clear understanding of complex financial structures to make sure that projects, like the BOT model, are not just operationally viable but also financial engines for growth. Knowledge of structuring deals, understanding market risks, and capital management will come into play here.
5. Resilience and Flexibility
HSR executives must have the resilience to manage the risks and setbacks inherent in large-scale infrastructure projects. Flexibility in adapting to changing circumstances while keeping the project on track (pun intended) is a trait that cannot be overstated.
6. Technological Proficiency
An understanding of the latest technological trends and how they can be used to increase efficiency, reduce costs, and enhance the customer experience is important for HSR executives, too. Proficiency in data analytics and digital transformation is particularly needed.
Five Challenges in Executive Search for the HSR Sector
Finding the right talent for executive roles in the HSR and public transport sector comes with its own set of challenges, namely:
1. Scarcity of Skills
The combination of skills required for leadership in HSR is highly specialized. The pool of candidates with the right mix of experience and expertise is limited.
2. Competing Industries
The skills valuable to HSR are also in high demand in other industries. Executives with experience in large-scale project management, financial structuring, and technological integration are highly sought after in sectors like renewable energy and technology. This creates a competitive global market for top leadership talent.
3. Global Talent Pool
HSR and public transport projects often require leaders with international experience or at least an understanding of global standards and practices. Tapping into this global talent pool means that you need deeper search capabilities. When it comes to the HSR market in Southeast Asia and Malaysia, you also need the ability to “sell” the allure of working in a dynamic and emerging market to candidates.
4. Reluctance to Engage in Emerging Markets
To continue on my previous point, candidates from established markets may be hesitant to transition to regions perceived as higher risk or less developed in terms of infrastructure and governance frameworks. This calls for the help of executive search specialists who understand the complexities of emerging markets, and who can explain the potential they hold to suitable candidates.
5. Leadership Adaptability
The ability for leaders to adapt to a different culture, regulatory environment, and market dynamics is important when looking for an HSR executive in a global market. The executive search must therefore prioritize not only the candidate’s track record and skill set but also their adaptability and cultural fit.
HSR Projects Need Top Leadership—Here’s Where to Find It
The viability of HSR projects like the Singapore-KL line in Malaysia and Southeast Asia should not be measured solely in terms of direct profit. Instead, they are investments in the region’s future, connectivity, and long-term economic prosperity.
HSR companies looking to hire executives to drive growth and lead these kinds of projects need to look for individuals who not only understand and are passionate about aiding the region’s overall development but can also approach these ventures with vision and creativity. An ideal executive for an HSR company needs to develop models that synchronize profitability, practicality, and progressive urban planning.
At Stanton Chase, we have been helping leading global companies to find this kind of leadership for more than 30 years.
We are passionate about the HSR and public transport sectors not just because of the economic benefits and the success they can bring to our client companies, but also because we believe that better public transport—greener, more efficient, and more in line with modern needs—can lead to a better world.
If you are looking to hire a world-class HSR or public transport executive, we would love to connect with you. Click here to reach out to one of our consultants.
About the Author
Ingo Schmittmann is the Managing Partner of Stanton Chase Kuala Lumpur, Stanton Chase’s Global Subsector Leader for Railway, and Global Subsector Leader for Aviation, Space, and Defense.
He offers his clients more than 25 years of human resources and management experience in the aviation, railway, infrastructure, communications, and engineering industries.
He began his career as a Project Manager, then moved on to Finance and Controlling and has held Chief Financial Officer and General Manager positions in which he was responsible for sales, manufacturing, purchasing, finance, IT, and HR.
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