COMMENT | At a cost of RM55 billion, with a mere seven-year grace period in which no interest needs to be paid before the repayment kicks in for the next twenty years or 240 months, Malaysia is in for a tough ride with the East Coast Rail Link (ECRL) between now and 2045.
Assuming the periods mentioned above are right, given the east coast passenger load and at an interest rate of 3 percent per annum, the break even unsubsidised ticket price between Kuala Lumpur and Kota Baru will be about RM3,586, a return economy class air ticket to Siberia, Russia.
Surely the ticket price cannot be at that level, hence subsidies will kick in. So much of doing away with subsidies!
That's practically what Malaysia gets for agreeing to the ECRL that snakes its way from Port Klang through the mountain range of Titiwangsa to Pahang, Terengganu and onwards to Kelantan.
Malaysia does not need such projects because the projected contribution to national growth is merely 1 percent to 1.5 percent. Prime Minister Najib Abdul Razak himself admitted this recently.
Malaysia's gross domestic product is less than US$300 billion. Theoretically, that's a per capita income of US$10,000 per person. But the average debt of a Malaysian is US$5,000 and counting, due to the inability of the Federal government to manage the national debt.
Between 2002 and 2016, Malaysia's per capita income remained at US$5000. In other words, under the premierships of Abdullah Ahmad Badawi and Najib, Malaysia has remained sordidly stagnant.
Thus, what is the value of a railway project that traverses Peninsular Malaysia, when the economies of the east coast remain mired in poverty, oil and gas, and local agricultural produce?
Just as the Padang Besar and Pasir Gudang double-track railway economy has been a grotesque failure, wasting close to RM36 billion, the ECRL looks likely to satisfy the supply chain of China alone...