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10 reasons why we don’t need RM55b east coast rail link

A QUESTION OF BUSINESS | Why does the country need a double-tracked, electrified East Coast Rail Line (ECRL) from Port Klang on the west coast of Peninsular Malaysia to Kuantan and Tumpat on the east coast - 688 kilometres, to be built at a massive cost of RM55 billion?

Especially since the earlier double-tracking project from Padang Besar, Perlis to Johor Bharu costing a massive RM36 billion is already one of the greatest, if not the greatest, infrastructure failures in Malaysia ever?

Proceeding with such a dubious project raises many questions over the competency and integrity of the government which awarded this project without a tender process to the China Communications Construction Company (CCCC), a China state-owned company which was barred from World Bank projects in 2009 because of alleged fraudulent practices in other countries.

Also, by now, China’s efforts to further its own interests under the One Belt One Road (OBOR) project is now well-known. Many, including this writer, consider it to be a thinly disguised plan using Chinese and other concessional financings which will strengthen China’s role in international trade, industry and connectivity, often at the expense of other countries.

China’s vision for the ECRL seems to be for the link to provide connectivity via rail between Port Klang and Kuantan for cargo to be moved back and forth which will save transport costs for goods headed to and out of China. But at RM55 billion, the number of goods moved has to be astronomical for it to be economically feasible.

Here are 10 reasons why that ECRL project should absolutely not proceed.

1. Economically not feasible. At RM55 billion, it’s the largest infrastructure project ever for Malaysia. If we assume a required 10 percent rate of return on the investment, the ECRL has to generate an income, not revenue, of RM5.5 billion a year. Assuming income is even 20 percent of revenue, then revenue needs to be a massive RM27.5 billion! The impossible task ahead is illustrated by this: In 2016, Singapore’s port had a turnover of S$3.7 billion (RM11.7 billion) and a profit of S$1.2 billion.

2. Earlier RM36 billion double-tracking has failed spectacularly. Let’s look at the utter failure of the RM36 billion double-tracking venture initiated under the Mahathir regime. Rail operator KTM is expected to have had a revenue of between RM500-RM600 million last year, according to a report in October 2016 quoting its chairman Nawawi Ahmad. Its last available annual report is for 2012 where revenue was RM454 million, losses amounted to RM240 million and operating cash flow was in deficit by RM107 million. For a 10 percent return on double-tracking costs of RM36 billion, cash flow needs to rise to RM3.6 billion a year from non-existent now. That is a near impossible task in the foreseeable future. This is for the backbone north-south route of Peninsular Malaysia. How is the ECRL going to fare any better?

3. Expensive. Not only is the ECRL extremely expensive in absolute terms, it is also very expensive in terms of cost per km at RM80 million compared to the Gemas-Johor Bharu double-tracking stretch of RM45 million per km. However, this is not strictly comparable given that the ECRL goes over hilly terrain. But analysis is seriously hampered by the lack of information.

4. Unnecessary. Such a large investment can only be justified if there is a great economic benefit. Economically it will depend on one major customer - China - which is looking to export and import goods more cheaply by ferrying goods between Kuala Lumpur and Kuantan via a rail to cut shipping costs.

5. Does not serve the country’s purpose. Such a move does not serve the country’s purpose but instead represents the diversion of badly needed and scarce resources to a project that could potentially fail and fail big and will benefit China...

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