SEA Globe: Full steam ahead

Philippe Beco, SEA Globe, Jun. 21 2011

“I have been 34 years, six days a week, 16 to 18 hours a day just doing railways,” says David Kerr, CEO of Cambodia’s railway operator, Toll Royal Railway – and he has been doing it at all levels.As a young man in Australia, Kerr started off cleaning locomotives. He then became a driver on Victoria’s state railways and from there climbed a long and winding career ladder that led him to his current position in Phnom Penh.

Playing a part in the redevelopment of Cambodia’s moribund railway system is no simple task. Just recently, the Ministry of Public Works and Transport, in charge of rehabilitating the tracks, announced that the completion of the link between Kampot and Sihanoukville would be deferred to August 2011 due to a delay in subcontracted earthworks.

Big projects don’t seem to frighten Kerr, 48. “Some companies may say it is a go or no-go decision, whereas we say where there is a challenge, there is an opportunity,” he says. “We do everything on a risk-based approach. Thanks to our experience in similar international projects, we have the ability to identify risks and take steps to eliminate or mitigate them.”

However, the man admits the engagement of many social and economic stakeholders in the project – from the Cambodian government and development bodies to villages and communities affected by the project – has been one of his biggest challenges. “You have to be patient and respect everyone,” he says.

For Kerr, past international experience is the key to bringing such a complex project to fruition. “Someone recently asked me how to be successful. I said it’s like Felix the Cat, the wonderful cat who reaches in his bag of tricks when he’s got to fix something. Quite often when I am asked how to solve a problem I find myself saying: ‘Well, actually I don’t know the answer, but I can find out,'” he says.

“It’s a question of constantly checking and monitoring what we have done historically because we can take on board all the management experience gained in China, Africa, India and other developing countries where Toll operated similar projects in the past.”

Meeting Kerr at his workplace takes you back in time. The company’s offices are located in Phnom Penh’s historic railway station, built by the French in the 1930s. Part of Toll’s job is to restore the building as well as Cambodia’s old locomotives and rolling stock. There are more than 200 vehicles, some of which lie on the tracks just behind the station building. “Rolling stocks and conceded assets were in a significant maintenance deficit,” Kerr says, “but we have been doing a great job.”

Among them are just a handful of coaches for passengers, which will initially be used for official ceremonies only. “The provision of passenger services will require much more discussion and negotiation with the government. Primarily our focus is on freight and the value added services as warehousing and pick up and delivery services,” Kerr explains.

“The amount of demand outlines all our expectations,” he says of the first months of operation on the Phnom Penh-Kampot line, which opened last October. So far, trains travelling the route have mainly carried cement, but as the network further extends to Sihanoukville and later to the Thai border, more commodities and container traffic will be added. Fish, cars, coal, machinery, coffee, salt, fuel and rice are on top of the CEO’s list. “We don’t want to turn away from all these business opportunities of course, but accommodating them all in such a short period of time is in itself a challenge,” he notes.

There must have been figures somewhere regarding Toll’s expected annual revenues and break-even point, but Kerr says they remain unpredictable. “We are still working this out,” he explains. “It is challenging to put a number on that at the moment. It will depend on a number of factors such as the customers demand, the development of business with Thailand and also tax considerations.” So far most of the assets operated by Toll are not owned by the company, but if demand exceeds initial expectations, as Kerr foresees, the operator may have to purchase more new or second-hand assets. A different tax regime would apply to the latter, altering the company’s initial financial model and making it difficult to accurately predict revenues for the next few years.

The Cambodian railway refurbishment has also experienced its share of controversy. Late last year, two children drowned at a resettlement site linked with the project in Battambang province. Toll and the Cambodian government both came under fire from housing rights advocates, who said the site was in dire condition and lacked water and power.

When asked about the controversy, however, Kerr said there had been confusion about the company’s role. “We are asked this question all the time, but there has been a lot of misunderstanding regarding our role. Our concession is limited to operating and maintaining the railway. The resettlement and compensation issues are managed by the ADB [Asian Development Bank], according to their principles and guidelines, the government’s Inter-ministerial Resettlement Committee and by the Ministry of Economy and Finance for the funding. These issues are totally out of our scope.”

Safety is a word often on Kerr’s lips. As every train movement takes 54 trucks off the road, he stresses the project’s favourable impact on security. More than this, Kerr considers safety to be a central part of the group’s culture. “Australia has a very highly regulated safety environment. We have been able to transpose the safety aspects of the Australian railway network into Cambodia by adopting principles similar to those of the Australian Rail Track Corporation. That’s something Toll is quite proud of,” he says. As well as implementing high safety standards in the workplace, the company provides its staff with training on a wide range of issues, including personal finance and HIV/Aids awareness.

Efficiency through workforce motivation is one of his main mottos. “By making our people proud of what they and the company do for the development of the country, we have been able to have everybody adopt high quality work practices.” It is perhaps his most valuable trick.