The RM44 billion East Coast Rail Link (ECRL) is expected to contribute 2.7 percent to Malaysia’s economic growth, says MIDF Research.
The boost, it said, is expected to kick in from project inception until completion.
"However, the full GDP contribution will depend on the pace of spillover effects to other economic sectors.
"In addition, compensation of employees and net operating surplus are projected to rise by 3.6 and 2.1 percent respectively.
"As the project requires machinery and transport equipment, our estimate shows imported commodities and consumption of fixed capital to increase by 3.3 and 2.1 percent respectively,” it said in a research note today.
Moving forward, MIDF Research said the railway project would affect economic expansion both directly and indirectly over the long run, partly by job creation, opening up new areas, foreign direct investment, increased external trade activities and strengthening domestic demand.
The research firm expected that since 70 percent of the transportation would be for freight purposes, the project would be a catalyst for industries and exporters in Malaysia.
"Plus, it gives Malaysia an advantage in international trade due to the project’s strategic locations to China and Asean nations.
"On the other hand, improvement in transportation and connectivity will assist Malaysia in terms of better resources allocations, upgrade in productivity, increase in mobility and improving socioeconomic developments economies which partly facilitate China’s Belt and Road initiative,” it said.
MIDF Research said the ECRL project would also generate more economic activities in other sectors, hence shifting to a less government-reliant economy, in line with Prime Minister Dr Mahathir Mohamad's idea to downsize the public sector over a period of time through industrialisation.
“This will reduce government operating expenditure, especially on emoluments, which accounted for the largest share of total expenditure at about 30 percent,” it added.